This North Carolina lake sits on top of one of the
largest hard rock lithium deposits in the US. Kings Mountain, we believe, to be a top tier, top
quartile resource capable of supplying at least a million, if not more,
electric vehicles with its feedstock. What we're going to be doing is producing a
spodumene concentrate. We're going to crush it up and we're going to
figure out a way to get just the green crystals out. Those green crystals are then processed into
lithium hydroxide. Albemarle is the world's top producer of this
critical metal and operates mines in Australia, Chile, and the only active lithium mine in the
US. Demand for lithium, a key component for electric
vehicle batteries, is expected to surge from 500,000 metric tons of lithium carbonate in
2021 to 3 to 4 million metric tons by 2030. Never in my career have I seen this rate of
growth, but I think even relative to some of the cell phone growth rates,
it's been even faster. The difference really between North America and
Chile and Australia is the demand is here. And fortunately for North America, there is
resource here. Albemarle's clients include the world's top
battery producers and auto companies like Tesla, in addition to its extraction business. And it's more than a dozen processing plants
across the globe, Albemarle is also developing improvements to its lithium-based
compounds that will make batteries that are longer lasting and more efficient. The challenges for the whole industry are many,
and they really start with some of our lithium salts. Really understanding the impact of things
like particle size and purity on the final performance of the cathode. The entire lithium ion battery chain from mine to
market is expected to grow more than 30% annually from 2022 to 2030, where it could
reach $400 billion. But despite that growth, Albemarle faces
a number of potential headwinds along the way, including a possible economic
downturn that could slow the demand for EVs, new battery chemistries that could reduce the need
for lithium, battery recycling and additional competitors. Tesla began construction of a lithium refinery in
Texas in 2023. And ExxonMobil just purchased rights to an area
in Arkansas that could begin drilling for lithium in the coming months. And not everyone agrees that expansion of mining
is the best way forward for a sustainable future. What our research shows is that we could get to
zero emissions with much less mining if we make some of these changes to public
policies, to consumer habits, rather than just try to electrify the status quo
of like really large cars and everyone needing to own an individual
car in order to get where they need to go. To better understand how lithium, known as white
gold, is extracted, the challenges involved and where production is moving next, CNBC got a
behind the scenes look at Albemarle's operations in Chile and the US. Albemarle, based in Charlotte, North Carolina, got
its start in 1887 as a paper company and opened its lithium division in 1953. Before batteries, lithium was primarily used for
glass, ceramics and pharmaceuticals. It moved further into its chemical business in
the 1960s with its purchase of Ethyl Corporation and with its acquisition of Dow
Chemicals bromine business in 1987. But a bet on batteries and a $5.7 billion
purchase of Rockwood Holdings, including its lithium assets
in Chile and Western Australia in 2015, may have had the biggest impact on the
company. Albemarle's stock price has skyrocketed since
then. Decades ago most of that energy storage was in
non-rechargeable batteries such as the the coin cell batteries you'd see in a calculator
or in the back of a watch that contain lithium. A little over 167,000 electric vehicles were sold
in the US in 2013. The US is on track to sell a million EVs in
2023. Maybe five years ago think people were sitting on
their heels a little bit. We weren't certain was it really going to take
off? But I think at this point in time there's no
doubt that the electrification of the world is happening. In 2017, the company acquired two lithium
processing plants in China. Two years later, it purchased a 60% stake in the
Wodgina hardrock lithium mine in Western Australia, one of the largest hard rock
lithium deposits in the world. If you see an electric vehicle on the road,
there's a high probability that Albemarle's lithium is inside of it. Albemarle, along with its main competitors SQM and
Pilbara, control about 40% of the world's lithium supply. Albemarle currently is in the high teens market
share, so it is a market leader, but it is not an extremely
dominant one, right? So there are several big ones. There are major competitors in China such as
Guangfeng, Tianqi. There are major competitors outside of China such
as SQM, but also companies that were not really big players,
let's say 4 or 5 years ago but they are influential right now,
such as Pilbara. The Inflation Reduction Act, signed by President
Biden in 2022, has helped accelerate the shift to EVs. In 2022, Albemarle had net sales of $7.3 billion
120% higher than the previous year. The main reason is that lithium prices shot up
last year. Albemarle's lithium business made up 68.4% of net
sales, followed by its bromine segment, which includes fire safety
solutions and catalysts which refer to products for the oil refining industry. The strength is really that probably they're going
to have the most de-risked growth pipeline because they're not
dependent on one mine or one region. At Albemarle's brine mine in the Salar de Atacama
in the Atacama Desert, one of the driest places on earth, lithium is extracted from beneath the
surface by pumping extremely salty water into large evaporation pools. That salty water, known as brine, is then
transferred among 15 different ponds over a period of 18 months, leaving behind high
concentrations of lithium. About a third of the world's lithium comes from
Chile. So we use this power of the sun to concentrate the
lithium from 0.02%, concentrate to 6% at the end of this
process. That concentrate is then trucked to Albemarle's
processing plant 150 miles away, where it is turned into battery grade lithium carbonate. Albemarle says its brine mining process is not
only cost effective, but brine has limited other uses and is not the same as water. For those who are concerned about our lithium
extraction that's brine ten times saltier than seawater, it
can't be used for human consumption. It can't be used for agriculture. Chile's lithium industry has faced criticism from
various constituencies, including indigenous communities, who have traditionally
opposed mining expansion. Globally, over 50% of lithium production is
concentrated in areas with high water stress levels. So we're talking about, I don't know, it's an
immense millions of liters of water that evaporate every day to produce one ton of lithium. And that's have an effect. I mean, we cannot say that have any effect when
it's part of the of the water cycle. It's impossible to say that have any effect. What directly how is something that has to be, I
think, understand and researched even more. Well, mining has intervened in all ecosystems, right?
In the cultural sphere, our own culture, our heritage, tends to disappear. Under an agreement with the Atacama Indigenous
Council, Albemarle contributes 3.5% of its Chilean revenue to Indigenous groups
that live near the Salar. The company also pays the Chilean government
annual royalties that range from 6.8% to 40% of the lithium export price. This year, 2022, we will have paid the Chilean
government over $600 million in commission. And it has faced additional challenges. In April, Chile announced plans to create a state
owned lithium company and laid out a future for the country in which private companies will be
required to partner with the government on future projects. Chile's new lithium policy will honor
the contract Albemarle has in place with the government. Chile has a long history of respecting the rule of
law. I would expect us partnering with the government
and to expand our operations or to get additional mineral rights and to expand
the lithium production in Chile and do that in partnership with the government. Similar to its brine operations in Chile. Albemarle has operated Silver Peak in Nevada
since 2015. It produces about 1% of the world's lithium, but
an expansion to double capacity is underway. Albemarle also aims to bring another
domestic mine on line in 2027, Kings Mountain. That mine, currently covered in 150ft of water,
was previously open from the late 1930s until the 1980s, when mining in Chile was
seen as more cost effective. When we are done, it will look very similar to
what it looked like before. There will be trucks and shovels. There will be a limited amount of blasting and it
will be a conventional hard rock mining operation. Unlike brine mining in Chile or at Albemarle
Silver Peak operation that relies on the sun at Kings Mountain, Hard Rock will be broken,
crushed and turned into a concentrate resembling sand. We need to get the green stuff out and that will
produce what's called a spodumene concentrate. That concentrate will run about 6% lithium oxide. So the intent there is to produce that
concentrate. That will be what we give to conversion
facilities. That concentrate will be transported to
Albemarle's soon to be built $1.3 billion processing facility in South Carolina, where it
is turned into battery grade lithium hydroxide. The plant will support the
manufacturing of 2.4 million electric vehicles annually and will be able to process
lithium from recycled batteries. It's the nature of mining. You don't know exactly how big these projects are
going to be until you get them fully explored, studied, and then permitted. Before that happens. One challenge is removing the massive amount of
rainwater that is built up inside. It's not like we've got a big, you know, billion
gallon tank to pump this into and wait. So our permitting process right now is basically
to take this water, which we've done plenty of testing on and we are in
permitting with all relevant regulatory agencies to ensure that we can discharge this into
waterways and into places that they tell us that we can put it. The town's mayor has said that the community,
while eager for the high paying jobs, has expressed concern over the impact to the water
table. Worrying about wells running dry, pollution of the
groundwater as well. They're fairly lucky that we're close to town and
most city water is connected all around the mine anyway. Albemarle claims the water is clean, saying it has
been tested and citing the wildlife that lives on the surface as proof of its purity. The town is supportive, the governments been
supportive to date, but we still need to get all the permits in order. The US was the world's largest lithium producer in
the 1990s, accounting for more than a third of global production. Today, Australia, Chile and China collectively
make up about 90% of lithium mine production, while the US only accounts for about
1%. Albemarle's stock price reached $325 in November
2022, roughly the same time the price of lithium carbonate
soared to a new high. There are two main lithium compounds that
Albemarle sells for use in electric vehicles. Lithium carbonate and lithium hydroxide. Those are the breadwinners. So there's the ones that really carry most of the
weight today. In Albemarle's battery lab, chemists and
scientists study and test those compounds in an effort to improve battery performance. We're not developing new batteries, but we're
developing the materials that go into the batteries. So we're trying to make our customers
batteries more stable, more efficient, cleaner operating, longer life. In this lab, we'll take the lithium hydroxide or
lithium carbonate and combine it with other transition metal oxides to make those cathode
materials. And we do this at a relatively small scale to
really understand what is important about our materials for our customers. In general, lithium ion batteries work like this. Batteries are composed of an anode or cathode, a
separator between the two electrodes and an electrolyte that fills the remaining space. Energy is stored and released as lithium ions
travel between these electrodes. Today, lithium is primarily stored in the cathode
side of the battery, but that could change as improvements in technology shift focus towards
more lithium heavy battery chemistries. The promise of the future is having lithium in
both sides of that cell and you'll have significantly more energy density for lower cost. We're not just trying to optimize today's
materials, but we're inventing tomorrow's materials. And that includes lithium metal
anodes. Those have the potential of taking a cell that's
this size and turning it into a cell that's this size. So get the same driving range for half the
volume. Moving from conventional graphite battery anodes
to lithium metal could double energy density and reduce costs by as much as 50%. Recycling could also play a bigger role in the
coming years, too. Today we are really looking at what opportunities
there are within recycling to bring, at the very least, the lithium back into the
ecosystem and potentially even a broader look to to understand how we can
participate, bringing not just the lithium but other transition metals. Lithium ion batteries on average last 12 to 15
years in moderate climates and 8 to 12 years in extreme climates. But despite those efforts, questions remain about
how much lithium is needed to power the transition to electric vehicles. And we're still early in the technology curve for
the lithium ion batteries. I think most people are working on or working on
becoming more efficient, higher energy density, longer ranges or smaller batteries, and then
ultimately that will move toward solid state. So you're using lithium metal. And from our standpoint, that's good because it
uses more lithium, but it's a safer operation. It will be more range, it'll charge faster.
