The lithium race

May 19, 2023

Lithium has been the subject of a global race in recent years between countries such as Chile, Argentina, Australia and China, which have led the way in producing the mineral. This is leading to a growing demand in the manufacture of lithium-ion batteries that power electronic devices, electric cars and renewable energy storage systems.

Brazil has great potential for lithium exploration, especially in the Jequitinhonha Valley in Minas Gerais, where the country's largest reserves are located. Last week, the Brazilian Mining Institute (IBRAM), the government of Minas Gerais and the Ministry of Mines and Energy (MME) organised the "Vale do Lítio" initiative to attract international investment in the creation of a lithium exploration and industrialisation hub in the region. The region has attracted the interest of two mining companies listed on Nasdaq (National Association of Securities Dealers Automated Quotations), the world's second largest stock exchange. These mining companies are Sigma Lithium (NASDAQ: SGML) and Atlas Lithium (NASDAQ: ATLX). Other companies are also developing projects in the region, such as Lithium Ionic (TSX: LTH), listed on the Toronto stock exchange, and Latin Resources (ASX: LRS), listed on the Australian stock exchange, and the Brazilian Lithium Company (CBL). The aim is to turn the region into one of the world's leading lithium producers.

OVERVIEW OF LITHIUM IN BRAZIL

In Brazil, pegmatites are the main source of lithium, found in the crystalline structure of some minerals. From these minerals, lithium is concentrated in the form of lithium hydroxide and lithium carbonate. Lithium carbonate is mainly used in the production of aluminium and in the glass industry. Lithium hydroxide is used in the production of lithium-ion batteries and greases.

According to data from the United States Geological Survey (USGS) Mineral Commodities Summary 2023 report, Brazil is responsible for 1.7 per cent of the world's lithium production and approximately 1 per cent of the world's reserves. Brazil's reserves are mainly specialised in Minas Gerais (in the Jequitinhonha Valley), Ceará, Rio Grande do Norte, Paraíba, Tocantins, Goiás and Bahia.

Mapa mostrando a distribuição das áreas de pegmatitos mais importantes do Brasil

One of the largest active lithium mines in Brazil is owned by Companhia Brasileira de Lítio (CBL), which operates its underground mine, called Mina da Cachoeira, located in Araçuaí - Minas Gerais. The site extracts lithiferous pegmatite, which is processed into spodumene concentrate. The ore is extracted using the sublevel stopping method. Currently, the galleries at the Cachoeira Mine are up to 180 metres deep and up to 5 kilometres long. Mining is carried out in retreat, i.e. from the ends of the body to the centre of the level, where the connecting cross-cut between the gallery and the ramp is positioned. Production capacity is 30,000 tonnes per year and the chemical plant is located in the municipality of Divisa Alegre, around 180 km from the Cachoeira Mine.

Until 2022, only two companies produced lithium in Brazil: Companhia Brasileira de Lítio (CBL) and AMG Brasil. However, in 2023, Brazil entered the battery lithium market once and for all, with Sigma Lithium starting production at the Grota do Cirilo mine in the Jequitinhonha Valley (MG). The company expects to produce 270,000 tonnes per year of lithium for batteries and increase this to 768,000 tonnes in the second year of the project.

Mapa com as empresas mais importantes do Vale do Jequitinhonha

The regions highlighted on the map are in what has recently become known as the "Lithium Valley", characterised by the presence of the highest concentrations of lithium in Brazil. This has attracted the interest of several companies, both national and multinational, which are investing significantly in mineral exploration and research in search of deposits. Some of the companies prospecting in the region are Companhia Brasileira de Lítio (CBL), Sigma Lithium, Latin Resources, Atlas Lithium and Lithium Ionic. With the discovery of several deposits, the region is now part of the global competition for lithium.

Lithium in northern Minas Gerais

The lithium deposits in the north and northeast of the state of Minas Gerais are associated with the pegmatites found in the Eastern Brazilian Pegmatite Province, particularly in the Araçuaí Pegmatite District. Spodumene is the predominant mineral, presenting several varieties and being associated with five stages of crystallisation in pegmatite evolution. Stage I, which is the main stage for industrial purposes, is formed at higher temperatures (700 - 350 °C), while the secondary stages develop at lower temperatures (350 - 50 °C).

According to data from the National Mining Agency, the municipalities of Araçuaí and Itinga, in the Jequitinhonha Valley, have 136 applications for research authorisations and mining concessions for lithium. These two cities account for approximately 21% of all lithium exploration requests registered in the state of Minas Gerais until April 2023.

Ilustração dos processos de lítio em Araçuaí e Itinga

The presence of major investments in the Jequitinhonha Valley could bring various benefits to this region, which is one of the poorest and most deprived in the country. For example, Sigma Lithium plans to invest around R$3 billion in its green lithium project and three other companies (Latin Resources, Lithium Ionic, Atlas Lithium) are planning to invest around R$1.5 billion in projects in the cities of Salinas, Araçuaí and Itinga.

Mapa dos depósitos de lítio em Minas Gerais

The lithium market in the region has been hot in recent months, especially after the acquisition of Neolit Minerals by Lithium Ionic (TSX: LTH.V). The Canadian company, listed on the Toronto stock exchange, acquired 100 per cent of Neolit Minerals in March this year. Neolit Minerals controls 40 per cent of the Salinas project, in Minas Gerais, and Lithium Ionic has the right to increase its stake to up to 85 per cent upon the fulfilment of certain mineral exploration commitments. In addition, Sigma Lithium announced last month that it had successfully and safely completed the commissioning of Phase 1 of its Greentech Plant at the Grota do Cirilo project. This made it possible to obtain the first production of Green Lithium in the region, representing an important milestone for the company and for the lithium market in Brazil.

NEW LITHIUM PROJECTS IN BRAZIL

Applications for research authorisations for lithium rose from 35 in 2017 to 417 in November 2022. According to the Brazilian Mineral Yearbook, the total number of processes for research authorisations and mining concessions in Brazil reached 1079 in April 2023.

Apresentação dos processos de lítio no Brasil

In the map above, a significant portion of the processes are located in the north of Minas Gerais, which is the leading state in lithium production in Brazil. In this context, we can highlight some projects under development in Minas Gerais, such as Atlas Lithium, which is developing and advancing its hard rock lithium project, consisting of 52 mineral rights spread over 227 km², around the municipality of Araçuaí, in Minas Gerais. In addition, the company owns 100 per cent of a second lithium project located in the states of Paraíba and Rio Grande do Norte.

Mapa mostrando a localização do projeto de lítio de Salinas

In 2022, the Australian company Latin Resources (ASX: LRS) raised 35 million Australian dollars to invest in the Salinas Lithium project. This project, located in the north of Minas Gerais, comprises two prospecting areas: Vale do Bananal, with 1,250 hectares; and Salinas Sul, with 4,088 hectares. Also in 2022, a new lithium discovery was announced at the Salinas project. According to the company, the most recent results of the diamond drilling campaign at the site confirmed several pegmatites containing a high lithium content.

In 2023, Lithium Ionic, a Canadian mineral exploration company, signed a contract with Clésio Alves Gonçalves Mineração e Comércio to purchase lithium mining rights on land in the Jequitinhonha Valley in Minas Gerais. The acquisition, which covers around 1,000 hectares, is considered strategic for Lithium Ionic, which now owns a total area of 7,700 hectares of land for drilling and research.

In the central region of Minas Gerais, between the municipalities of Nazareno and São Tiago, with a mine in Volta Grande, AMG produces lithium associated with tantalum, making it possible to exploit two minerals in a single rock. In addition, the company has an advance sales contract for 200,000 tonnes of lithium concentrate over the next five years. The planned investment is R$838.9 million.

Bahia has also been making a name for itself, as the largest Chinese producer of electric vehicles, BYD, has announced that it plans to set up a lithium and iron phosphate processing plant in the state to manufacture batteries, with production expected to start in 2024.

One of the factors that could boost lithium production in Brazil is Decreen°11.120announced by the federal government on 5 July 2022, which makes foreign trade in the mineral more flexible. The decree exempts lithium exports from authorisation by the National Nuclear Energy Commission (CNEN), correcting a distortion that dates back to the 1970s, when the mineral was considered to be of nuclear interest. With this change, Brazil will continue to attract several foreign companies to mine in the country.

WORLD LITHIUM OVERVIEW

There are three categories of economically viable lithium deposits: pegmatites, continental evaporite brines and hectorite clays. The most relevant deposits are evaporite brines, containing the world's largest lithium reserves, and pegmatites, characterised by various lithium minerals such as lepidolite, amblygonite, petalite and spodumene, which have a well-established beneficiation chain and varied global distribution.

According to the United States Geological Survey, the countries with the largest lithium resources are: Bolivia, with 21 million tonnes, followed by Argentina, with 20 million and Chile, with 11 million, together these three countries form the lithium triangle, in addition to these three countries there is also the United States with 12 million tonnes.

In 2022, operations in Australia (61,000 tonnes), Chile (39,000 tonnes), China (19,000 tonnes), Argentina (6,200 tonnes) and Brazil (2,200 tonnes) accounted for most of the world's lithium production. In addition, smaller operations in Canada (500 tonnes), Portugal (600 tonnes) and Zimbabwe (800 tonnes) also contributed to world lithium production, as can be seen in the table below.

WORLD LITHIUM OVERVIEW

Produção Mundial de Lítio em 2021 e 2022

According to the United States Geological Survey report (USGS-2023), identified lithium resources have increased substantially worldwide and total around 98 million tonnes, 730,000 tonnes of which are located in Brazil.

The global lithium market is expanding and several countries are investing in research in the search for new deposits. In March, Iran announced the discovery of a reserve that could make the country the fourth largest holder of lithium reserves in the world, if initial estimates are confirmed. Located in Qahavand, Hamadan province, the deposit has the potential to generate 8.4 million tonnes of lithium. However, the government has not yet revealed which companies will be the first to explore the region.

Mapa de localização da província de Hamadã no Irã

The supply of lithium has become a priority for technology companies in Asia, Europe and the United States. Therefore, strategic alliances between technology companies and mining companies are being established to guarantee reliable and diversified lithium production for battery suppliers and vehicle manufacturers.

Lithium Triangle

Situated in the Andean Altiplano, between the eastern and western Andean mountain ranges in northern Chile, Argentina and part of Bolivia, is the so-called Lithium Triangle, an area that is home to more than half of the world's lithium reserves. The main lithium deposits are found in the Salar de Uyuni in Bolivia, the Salar de Atacama in Chile and the Salar del Hombre Muerto in Argentina.

Cartão no qual o triângulo de lítio é rotulado.

Série ‘Triângulo de Líitio’, do fotógrafo alemão Tom Hegen. Foto: Tom Hegen

Lithium extraction in the triangle takes place in salt flats located in the Atacama Desert and neighbouring areas. The extraction process begins with the drilling of the salt crust and the subsequent extraction of brine, which is then taken to evaporation pools. During this process, the brine is exposed to evaporation for months, creating a salty slurry that contains a mixture of various elements, including manganese, potassium, borax and lithium salts.

This mixture is transferred to another open-air evaporation pool where, after a period of 12 to 18 months, it is distilled to extract lithium carbonate, the main raw material used in the manufacture of lithium-ion batteries.

This high concentration of lithium in South America has attracted the attention of the United States and China. Both powers are seeking to obtain strategic metals for the energy transition. In addition, more and more Chinese companies are moving into South America with major investments in mining, boosting the growth of the "triangle" countries in the sector.

Nationalization of lithium

With the significant increase in demand for lithium in recent years, many countries with reserves of this mineral are taking steps to nationalise its production. This allows these countries to have greater control over their resources and lithium production. Some countries have already begun the process of nationalising production, including Bolivia, Chile and Mexico.

Bolivia: its lithium nationalisation process began in 2008 under President Evo Morales. The measure was part of a policy to recover the country's natural resources. In 2017, the government created a state-owned company specifically dedicated to the sector, YLB (Yacimientos de Lítio Bolivianos). In 2023, YLB signed an agreement with a consortium of Chinese companies to explore, refine and process lithium and produce batteries from 2025. Bolivia is the country with the largest lithium resources, but it is not yet among the world's largest producers.

Mexico: In April 2022, the Mexican Congress approved a reform of the law declaring lithium a national asset and prohibiting new private concessions to exploit the mineral. The reform also establishes that the exploration and use of lithium will be the exclusive responsibility of the state, through a state-owned company. However, these measures create uncertainty about the possibility of the government expropriating companies already operating in the country.

Chile: Chilean President Gabriel Boric recently announced a plan to nationalise its lithium industry. The plan calls for the state to become the main player in the national market, through the state-owned company Codelco. The company will be responsible for all lithium production initiatives in the country, through public-private partnerships. In new exploration projects, the government must be the majority operator, i.e. have more than 50 per cent of the operation. Existing contracts with private companies will remain valid until they expire, and the companies will be able to renew them as long as they include the state in the business.

The nationalisation of lithium involves major challenges and risks for both lithium-producing and lithium-consuming countries. One of the main challenges is the high investment cost needed to develop the lithium production chain, from extraction to the manufacture of batteries and other products. The state-owned companies set up by countries don't always have enough resources to invest in this sector. In addition, the nationalisation of lithium could create uncertainty for private companies already operating in these countries, especially in Chile, which is the world's second largest producer. These companies could face difficulties renewing their concessions or having to pay higher royalties to the state. Nationalisation could also provoke a negative reaction from consumer countries, especially those leading the electric vehicle industry, such as China and the United States, which could lead to a search for alternative sources of lithium in countries such as Brazil and Australia, which still have no plans to nationalise lithium production.

FUTURE PROSPECTS FOR LITHIUM

Increasing demand for electric vehicles around the world is expected to continue driving the lithium market in the coming years, and more manufacturers are looking for reliable sources of raw material for their batteries. Another important factor for future prospects is the growing importance of renewable energy around the world.

As the demand for renewable energy increases, the demand for lithium batteries for energy storage is also expected to rise, opening up new opportunities for the market.

Several countries are investing in subsidies for the energy transition, to enable sustainable development with the use of renewable energies. In addition, World Bank estimates suggest that demand for lithium could grow by 965% by 2050, further increasing the prospects and opportunities for companies and countries with large lithium deposits.

Want to know more about lithium? Readherethe article by DMT about the characteristics of this important element.