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Sunday, September 30, 2012

Electric Vehicle Boom Spurs Lithium Production From Salty Water

Lithium demand, seen doubling in the next eight years on sales of batteries used in electric vehicles, is spurring a U.S. company to build a factory to extract the metal from brine in California.

Simbol Materials LLC’s proposed Imperial Valley plant near the Mexican border would slash the time and cost needed to extract lithium from salty water, Chief Executive Officer Luka Erceg said in an interview. The closely held, Pleasanton, California-based company may boost output from an initial 8,000 tons a year to as much as 64,000 tons by the end of the decade, Erceg said, equal to 21 percent of projected global demand.

Simbol is among prospective lithium producers that are trying to break into a market dominated by four companies including Princeton, New Jersey-based Rockwood Holdings Inc. (ROC) The price of the lightest metal, used to make long-lasting batteries for laptops, power tools and now electric vehicles, jumped 35 percent in 18 months, according to Jonathan Lee, an analyst at Byron Capital Markets in Toronto.

“Electric cars are eventually going to become a bigger part of auto sales, and given that they require hundreds of times the amount of lithium needed for laptops, that’s going to really increase demand,” Chris L. Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said yesterday in a telephone interview.

Hybrid Demand

Global demand will double to 300,000 tons by 2020, according analysts at Dahlman Rose & Co. Sales of 1 million electric vehicles a year would more than double battery-grade lithium use which is currently 40 million pounds (18,144 tons), Rockwood Chief Executive Officer Seifi Ghasemi said Sept. 11 in a presentation.

Each electric vehicle uses about 50 pounds of lithium and hybrids each use about 20 pounds, compared with about 0.1 ounce for a mobile phone and about 1 ounce for an iPad, Ghasemi said. About 40,000 electric vehicles and hybrid plug-ins were sold globally last year, according to the EV City Casebook, a report published on the International Energy Association’s website.

By 2020 there will be annual sales 3.9 million hybrid vehicles, 1.4 million plug-in hybrids and 2.8 million fully electric plug-in vehicles, Erceg said.

While lithium is mined from ore, brine evaporation is the lowest-cost source. Simbol’s technology takes brine from geothermal power plants and extracts minerals via a so-called reverse osmosis filtration system in a process that takes 90 minutes to 2 hours. Conventional methods using evaporation can take 18 months, Erceg says.

Evaporation Process

Brian Jaskula, a mineral commodity specialist for the U.S. Geological Survey, said Simbol’s method could be a breakthrough.

“If they can eliminate the evaporation process, they can produce at a much lower price point, which would be great for the industry,” he said.

Toronto-born Erceg, 41, has a master’s in business administration degree from Rice University in Houston and a law degree from South Texas College of Law. He worked at El Paso LLC, CenterPoint Energy Inc. and Philip Services Corp. for 15 years before co-founding Simbol.

The company’s other founders are Carol J. Bruton and Brian R. Viani, who previously worked at the Lawrence Livermore National Laboratory, and M. Scott Conley. The four are shareholders in Simbol, alongside Itochu Corp., Firelake Capital Management LLC and Mohr Davidow Ventures.

Erceg said he expects construction on the first California plant to begin at the start of 2013. He declined to disclose the cost of the project.

Quebec Mine

“Our intent is to build multiple products and multiple plants concentrated in one region,” he said.

Other companies are also planning more lithium capacity. Canada Lithium Corp. expects to start mining 20,000 tons annually in Quebec next year, said Olav Svela, a company spokesman. Perth, Australia-based Galaxy Resources Ltd., which started mining in 2010 and processing at a Chinese plant in April, is developing a lithium and potash project in Argentina. Rockwood, in addition to its own expansion plans, agreed last month to acquire Australian lithium miner Talison Lithium Ltd. for about C$724 million ($743 million).

Rockwood, Talison, Soc. Quimica & Minera de Chile SA and FMC Corp. (FMC) control about 90 percent of the global market, analysts at Jefferies & Co. said in a report in June. Rockwood has about 50 percent of the $900 million market for lithium, excluding Talison, Ghasemi said in his presentation.

Rising demand allowed Rockwood to raise prices for lithium carbonate, the processed form of the material that’s used in lithium-ion batteries, by 20 percent in July 2011 and another 22 percent a year later, Ghasemi said.

‘Berserk’ Industry

Whether Simbol and other companies planning to enter the market will break the dominance of the largest four producers depends on whether they execute their business plans and disregard price to focus on gaining market share, John McNulty, an analyst at Credit Suisse Group AG who has a buy rating on Rockwood, said in an interview.

Erceg says high prices are unsustainable in the long term and that companies like Simbol using new technology will cut production costs.

There are 23 new projects and expansions for lithium, which could turn a tight market into an oversupplied one, said Keith Evans, a retired geologist who worked in the lithium business for three decades. The industry has gone “berserk” with new projects since a report six years ago anticipated a shortage, and if all the companies produce as planned, global output will climb to as much as 642,000 tons a year by 2020, Evans said.

Complex Product

“Some of the new projects are quite good, but there’s no room for them at the moment,” Evans said in a telephone interview from San Diego. “They’ll just have to exercise patience and hope the demand after 2020 will increase dramatically.”

Erceg says he’s not concerned about oversupply of lithium. He says that in 2009, he counted 72 companies talking about getting into the lithium industry, while now there are probably five -- including Simbol -- who have a chance of doing so.

“Most companies, we don’t think they’re going to get there,” he said. “Lithium is not a smile-and-dial product, it’s a complex product.”

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