The lithium undersupply is truly historic.
Demand for batteries is forecast to far outstrip the lithium industries ability to supply the raw materials needed over the next 8-10 years.
However, the ingenuity of humanity always seems to find a way and new lithium extraction technologies may be the solution.
Grizzle sat down with Koby Kushner, Lithium analyst at Red Cloud Securities to discuss the latest extraction technologies and what it will mean for lithium supply/demand and most importantly prices.
Three Types of DLE Lithium Extraction Technology
Economics of DLE
Koby pointed out the economics of DLE are nuanced such that a higher resource grade doesn’t always equal a higher return.
The most important factor is deliverability – if you can get high flow rates form your wells.
If you can really produce a lot it will have a significant positive impact the economics of your project.
For example, say Project A has double the flow rate as Project B, which has double the grade. Even though Project B has double the grade – you’ll need to drill 3x the number of wells to reach the ideal 20, 000 tonnes per year production rate for lithium brine.
All these wells will eat into a project’s CAPEX.
In western Canada this constitutes approximately $3 million. Poor deliverability will increase costs for maintenance, permit fees and additional costs that can kill a project.
Outlook for Lithium Prices
We’re in a multi-year lithium bull market. Koby does not expect a price crash, but a settling of prices from elevated levels could be possible.
Looking at the cost curve, prices are up 7 times in only a year and are way above the production cost curve which is making investors nervous.
However, a price rise this rapid really tells you how undersupplied the lithium market truly is. Higher prices are the markets way of saying “we need way more lithium, get drilling”.
With supply the demand for electric vehicles and related technologies in only growing.
The introduction of a sudden amount of new supply would cut prices, and there aren’t enough lithium mines planned to meet.
A supply shock in the short term can really only come from a new technological innovation that leads to a flood of new lithium supply.
Otherwise, supply is so tight, a slowdown in battery sales may be required.
To learn more about Red Cloud Securities please visit their website HERE
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.