The Exchanges

Q and nationalization. There's, and then there's obviously a China thing. There are other countries that are relevant as well, but those two feel like the big The big geopolitical movers here. So let's start with Chile, because that one's kind of interesting. As we've talked about, Chile's the largest brine producer in the world, the second largest producer overall behind Australia. Um, what happened in Chile a couple years ago?

A Yeah, I was actually in Santiago the night that, uh, President Gabriel Boric announced on national television that he was essentially going to take steps that would nationalize the country's lithium industry. Now, the word nationalization obviously has a loaded connotation, especially in parts of Central and South America, but what he was saying is, is that the lithium in Chile belongs to the Chilean people, uh, and that should be controlled by Chilean state-backed companies, and so we just actually saw Let me take a step back. There are two main companies right now that produce in Chile, Albemarle and SQM. They produce in the Salar de Atacama, which is this sort of massive Salar. Salar is a salt flat, and they've been there for decades. Albemarle's contract goes until at least 2040 or 20 42, right around there. Uh, SQM's phases out in 2030, so they had, uh, a bigger interest in this announcement, and so, um, actually SQM has just made a deal with Codelco, the state mining company, uh, to essentially partner on developing, um, other salars in the country, as well as fold in its operations in the Atacama. And so, uh, that's been closely watched by investors in Albemarle, of course, and others. Uh, so the government essentially is saying we want to develop more salars. We want to have a Chilean state backed company partner with private entities in a minority role, uh, to produce …

AI assessment note: “President Gabriel Boric announced on national television that he was essentially going to take steps”

Q All right, let's talk lithium. Starting with, I guess, where we get it from. Can you talk to me about brine, talk to me about hard rock, where, where do we get our lithium?

A I thought you'd never ask. Boy, it's great to talk about one of my favorite metals here. Um, lithium, obviously, extremely important for our global economy right now, and there's a huge focus on where and how it's produced. Right now, there's two main source Uh, rock, if you will, or sources, uh, as you say, brine or hard rock. Brine typically, um, is found in huge parts of western South America. Uh, brine is essentially salty water, and it, um, is teeming with lithium, with calcium, with magnesium, depending on the deposit, and the main way that it's produced right now is large evaporation ponds, so you might have seen photos, uh, from northern Chile's Atacama Desert, where you see these Big, huge acres, hundreds of acre-sized ponds that are each sort of different hues of blue. You got cyan and maybe some light purple, et cetera, et cetera. That's because there's a chemical step taken to remove those different metals from that brine. And lithium, of course, being a main one that Chile produces there. So that's sort of the main way that brine is produced right now. There's also a hard rock. Spodumene is typically the type of source rock that Both of them can be found in, and this is very abundant in parts of Australia, parts of the western, parts of the eastern United States, excuse me, uh, and parts of Africa, and that production process is more akin to what you would think of…

AI assessment note: “Right now, there's two main source Uh, rock, if you will, or sources”

Q Has it worked so far from what we could tell?

A Well, so the legislation's been out for a little more than two years, and we have seen anecdotal evidence where some Western miners are saying that yes, some manufacturers are beginning to come to them more for deals to source These raw materials. Graphite is a great example. We're seeing some graphite miners in Quebec, um, charge a premium for their graphite that's produced in North America to battery makers. Graphite is the largest metal by volume in an EV battery. Uh, it typically goes into an anode, whereas lithium, which we've been talking about, goes into the cathode. Uh, and so right now China is the world's largest producer of graphite as well, and so if you've got a North American source of graphite and you've got a manufacturer that wants that EV tax credit tied to the IRA, We have seen graphite miners, uh, strike deals that are actually at premiums. Um, and that's obviously huge for the graphite industry, not necessarily great for the EV industry, which already has razor thin margins. So where will that go moving forward? I think we're going to have to, to sort of see where that goes. Um, with the IRA, we've seen a lot of money and, and, and with the IRA and related pieces of legislation, we've seen a lot of money be doled out to Uh, prospective U.S. lithium projects. Um, there's two in Nevada that have gotten some, there's some recycling projects as well. Those proj…

AI assessment note: “we have seen anecdotal evidence where some Western miners are saying that yes”

Q there? Was it, um, buyers, you know, was there a frenzy to lock up supply because there was a fear that there would be undersupply, and it turns out that that undersupply was, was a mirage, or was it There actually was under supply, and then a bunch of new supply came online in the past couple years. Like, what caused such a spike and a crash? Do we know?

A Well, let's remember the global context in which we were in 2021. I mean, we were in sort of the first full year of a global pandemic. Um, there was a lot of attention on sort of the future economy where we as a planet were going to go, not just for transportation, but just electronics in general. There was a lot of focus on the future in the United States. Uh, the next year the Inflation Reduction Act was signed. So this 2021, 2022, we saw a huge interest in just renewable technologies in general continue to grow. And I think that fueled a huge focus around junior miners, not just in the United States, but globally on new ways to, uh, to produce lithium. So that led to a lot of, um, strong interest in the space from retail investors. And so you started to see equity valuations surge that were out there. We also, at that point started to see, we hadn't yet seen a lot of supply come online. So yes, there was a lot of hopeful potential that there was going to be huge demand for this metal moving forward. We saw a lot of predictions by, uh, A lot of, um, consultants and analysts on where lithium demand is going. So that had a correlating effect on the price. And so, of course, we saw the price go up. Now we have seen some more supply, a lot more supply come online in the ensuing years. Uh, we've also, um, had a huge geopolitical, um, I should say realignment in the past few months…

AI assessment note: “Now we have seen some more supply, a lot more supply come online”

Q Yeah, I want to come back to DLE and, and talk a little bit about clay, but as it stands today, like, what's the breakdown? How, how much of world lithium production is brine versus hard rock?

A I mean, right now, there's definitely more lithium production in the world from hard rock than there is from brine. That's due to a host of factors, not the least of which is just speed. It's faster to take this hard work out of the ground, crush it, and then use chemical processing to make lithium than it is to evaporate lithium out of brine, a process that can take many, many, many months and needs to be done in a place where it obviously doesn't rain. Uh, so northern Chile and the Atacama Desert, one of the driest places in the world, it makes sense that companies like Albemarle and SQM are producing it there where there's very little precipitation. They wouldn't be able to do that and say, Germany or Arkansas or other places that have large brine deposits, but have lots of precipitation. So the big trend definitely is, is for more hard rock out there now. That's due to a host of factors. Um, one of them is because it's easier to make lithium hydroxide from spodumene produced lithium, uh, than it is from brine. Uh, there's an extra step needed if you were to take lithium from brine and then to turn it from lithium carbonate into lithium hydroxide.

AI assessment note: “there's definitely more lithium production in the world from hard rock than there is”

Q lithium either out of brine or out of hard rock, and then there's basically two pathways, lithium carbonate, lithium hydroxide. Can you talk through what are the different use cases, I guess, for each of those two? Like what drives demand for one versus the other? And then maybe, as you said, walk through which ones, uh, come from which path predominantly, the brine path or the hard rock path?

A Yeah, I mean, I think the operative word you used there, uh, subconsciously was, was drive the demand, too. I mean, different automakers have different needs depending on the type of battery they want to produce. So BMW, for instance, likes lithium hydroxide because it's, uh, basically a higher performing type of lithium. It can, um, uh, help extend a range for a battery. Granted, there are a lot of factors that go into a battery's range, but hydroxide can be better. Hydroxide's better in certain weather conditions. Uh, so if you're operating in cold climates, you might want hydroxide. Um, it also tends to be more expensive. Uh, because it has these higher performing, uh, characteristics. So if you're making something that does not necessarily need to have high performing characteristics, like a watch battery, for instance, um, you might go with carbonate or sort of a basic, um, device powered by a simple lithium ion battery, you might go with carbonate. Um, so depending on the type of end product that you're using, you're going to use a different type of lithium there. And, um, there's also different qualities there. So battery grade, Lithium tends to be more highly processed than a more simple version there. So I guess the point I'm trying to make here is not all lithium is created equal or processed equally. You do have, as you say, lithium carbonate and hydroxide, and then …

AI assessment note: “BMW, for instance, likes lithium hydroxide because it's, uh, basically a higher performing”