Have been looking for some answers on why Tianqi (worlds largest spodumene miner + convertor) has able to improve their margins so much in the face of huge established brine players, and why any major investment bank worth their salt is so bullish on the company's future.
One theory / reason I suspect is the cost / ease of producing what is known as "Four 9" 99.99% Lithium Carbonate from Spodumene VS Brine sources and the reduction in battery performance from certain impurities in brine based Lithium Carbonate such as boron. Means that Spodumene concentrate production and conversion is more defensible as a business model than previously thought or widely touted, and therefore future earnings are very bullish and not in fact at risk of a "brine resurgence".
Another interesting point for me was seeing a major producer of Cathode material for BYD and Panasonic (ShanShan), (I think may also linked to the BOA partner PLS has contracted - anyone?) who has been very publicly complaining about Tianqi price rises and the premium they charge VS imports of Lithium Carbonate from Chile. Why not just buy the product from Chile? Well.. I suspect the reason is that SQM battery grade is 99.5%, FMC is 99.5% and the remaining 0.5% contents may just not be suitable for cathode material production for EVs, as they cause performance issues.
Note the above are my "theories', and have been trying to find "evidence" for this, wanted to ask if anyone has some information to disprove or prove this? Also to share some of my finds so far:
Commentary in Patent Filing "Process for the purification of lithium carbonate"
"The commercial production for battery grade lithium requires spodumene-derived lithium carbonate to obtain the desired lithium purity and even then requires further purification during the transformation of lithium carbonate to lithium chloride. The alternative source of lithium values are brines which produce lithium carbonate at a lower cost but at a lower purity than mineral sources. To produce lithium chloride of high purity, the carbonate is first transformed into lithium hydroxide before chlorination to give battery grade lithium chloride, a comparatively expensive process."
"There are, however, other impurities such as carbonate, sulfate and borate, which, while not significantly affecting the purity of the lithium metal produced, they do affect the performance of the electrochemical cell, by increasing the consumption of the carbon anodes by the oxidation of these species at the anode, resulting in the production of carbon dioxide and by decreasing the current efficiency of the metal production. This effect is well known in molten salt electrolysis, though poorly understood. They are also known to adversely affect the current efficiency of both lithium and magnesium cells, though the mechanism is not known."
Interesting exercise was following the number of patents for improving purity of Lithium Carbonate from brine, and how each mentions the other patents are not economical processes. Note there are still processes being piloted to solve this problem, but I can't find any currently in production.
Quote from article by CRU (well respected research group)
"Despite their higher operating costs, hard rock mines have less impurity variations than brines, which is attractive in the current market as LIB manufacturers are demanding higher battery grade material. We expect the latter to gain importance as battery demand surges and technology continues to advance in the race to develop lower cost and even more efficient LIBs."
(Pricing is quite dated but note the premium for pricing of 99.95% and 99.99% as a percentage to 99.5% battery grade)
From Galaxy Research done in 2010, interesting evidence for the deleterious effects of brine carbonate to batteries mentioned in the patent posted above:
So no concrete conclusions yet, but plenty of "leads".
I believe most supply and demand analysis has been done without considering the actual demand and supply per different purity of Lithium Carbonate - i.e 99.5 / 99.9 and 99.99. If EV are the driver of lithium demand, and EV need highest purity, and highest purity is from spodumene.... Getting more confident in my core theory that spodumene is the best way to get direct exposure to the EV boom.
1 - spodumene as the current commercial / best source for high purity carbonate for high performance EV batteries (still more research required)
2 -spodumene miners have very little exposure to prices of co-product revenues like potash
Then following that, its not hard to pick the best spodumene prospect to invest in as there are very few quality options.
Appreciate any opinions with supporting information, I acknowledge my research and theories are still very patchy.
PLS Price at posting:
62.0¢ Sentiment: Buy Disclosure: Held
(20min delay)