@pastperfomer. That’s correct. Also, to get our hands on their chemists. There’s years of knowledge and R&D that Livent chemists will have built up that will be very valuable to downstream operations in the merged entity. There’s a reason that the companies that can do it keep saying “This is specialty chemical processing”. Also, as best as I can work out from the 2023 Hombre Muerto exploration report, there seems to be some potential for deep drilling to upscale the resource like Olaroz was as it seems that they haven’t hit bedrock in the middle of the Salar yet.
There’s many reasons why our and Livent’s brine should be considered more valuable than hard rock. The negatives are political risk and large capex for expansions. The following will just use ballpark figures because I don’t have time to dig through each report to pull out minor details.The main positives of our brines are:
1) The enormous lithium brine resources of the merged entity. Olaroz, Cauchari, SDV, Hombre Muerto main (Livent), plus the likely takeover of GLN for Hombre Muerto West, have a similar amount of LCE as Greenbushes, Pilgangoora, Kathleen Valley, Wodgina, and Mt Holland put together. See LTR capital raise presentation for their LCE estimates. Recovery of lithium from hard rock and our brine both seems to be around the 60-70% mark. I’m not convinced that the market understands the size of these brine resources. These truly are multigenerational assets. Olaroz-Cauchari and Hombre Muerto will either support production for up to 100 years or will allow massive expansion.
2) Opex for Hombre Muerto and Olaroz operations is seriously cheap. Conversion costs for spodumene to hydroxide are usually quoted somewhere between US$4000-6000 per tonne. Add mining costs on top then compare this to SDV estimated costs, which were ~US$4500/tonne for battery grade lithium carbonate. There’s simply no conceivable future lithium market where these brines aren’t profitable. Hard rock cannot compete with these costs.
3) Flexibility in production. You can make lithium hydroxide, carbonate, or chloride, and if needed ship concentrated lithium brine to processing plants elsewhere. e.g somewhere at sea level.
4) The low impurities and relatively high lithium content in the Hombre Muerto Salar, and I believe to a lesser extent in Olaroz/Cauchari, are a huge advantage. Brine processing chemistry is incredibly complex, and owning resources where you can use evaporation ponds and AKEs style of precipitation is their economic moat. From my reading there’s very very few brines worldwide that are as good as Hombre Muerto. Atacama brines may be the only better ones. If there does happen to be a breakthrough in direct lithium extraction, then Arcadium will still be able to produce LCE cheaper, because our brines are “cleaner”. The cleaner brine means that less complex or fewer chemicals are needed for production. If Rio or Exxon (most likely) do happen to have a DLE breakthrough and can produce large quantities of LCE for say sub US$10k/tonne, this could destroy hard rock. We’ll still most likely be able to produce cheaper than any DLE competitors and hence are relatively immune to DLE threats.
I think that the analysts don’t really understand brine processing due to its complexity and so lump most brines with a resource together, there’s been too many broken promises of DLE by companies with poor quality brine resources, the analysts have taken the view that evaporation ponds are an old and outdated technology (whilst failing to realise that the high brine quality means that the simpler processing through evaporation ponds is what provides our cost advantages), and SQM in the Atacama is embroiled in the political risks of not having a firm outcome in negotiations with Codelco.
In the latest quarterly Q&A, Martin told an analyst that the company can make any mixture of battery grade and technical grade product that customers demand. I think this is probably true. There’s now been years and years of data and experience that the chemists will have gained. That knowledge will be critical to their production success. Livent brings more.
