Good morning and thank you for joining us. It's Lawrence Alexander with the Jefferies Chemicals team. And with me today is management from Alvaro to discuss our current trends and structural setup in the Lithia markets, with 2 speakers today. Eric Norris is the president of Albemarle's lithium Global Business Unit. He joined Albemarle in 2018 after stints at FMC as, managing both the lithium business and the health and nutrition business.
Also with us today is Doctor. Glenn Murfield, who is the, chief technology officer for lithium at Albemarle. He and he had prior to joining Albemarle a 20 years stint at GE in in a their research division. Before we begin, a couple of housekeeping measures. First, for if you have any questions, please enter them through your interface or by emailing me atlalexander@jeffree.com.
Again, lalexander@jeffree.com. We will have an opening presentation and then we will move on to a Q And A session. Secondly, just a compliance reminder, please do not try and solicit any material non public information. If you do attempt to do so, then, the speakers can, refuse to, or Dane not to answer any questions at their sole discretion. Without any further ado, let me pass it over to Eric and we'll get started.
Thank you, Lawrence, and thanks to Jefferies for hosting us today. On the call today, I'll quickly introduce, Albemarle and our businesses, and how we think about different lithium resources around the world. Glenn Murphy will then cover ways to concentrate and convert those resources into battery grade products. And finally, I'll cover recent lithium projects and closing remarks before turning it back over to Lawrence for Q And A. We have a slide deck that accompanies this.
And as usual, you'll see on pages 2, legal disclaimers and on page 3, non GAAP reconciliations, and they're also available on our website. So we'll turn first to slide 4. Just as a brief, background, Alba, put everybody on the same page. Albaol is a global specially lift chemicals business and a leader in 3 core businesses, lithium, bromine, and catalyst. Of the 3, lithium is the largest represented here on this slide by revenue and is expected to be the highest growth business for the foreseeable future.
At a high level, our model strategy is to invest in and grow our lithium business and fund the growth of that business with cash flows from our other more mature businesses. Historically, we've actively managed our portfolio to generate shareholder value, and we'll continue to do so. We'll also continue to maintain a disciplined approach to capital allocation. Al Marl lithium, has access to a geographically diverse portfolio of some of the largest We are vertically integrated from resources, specialty products, and we have the expertise in extraction, concentration, conversion of lithium, to offer our customers a wide variety of products, including industrial grade, specialties grade, and importantly battery grade. Batter grade products, in fact, make up about 60 percent of our revenues and are the key growth driver for our business.
Our battery grade products are essential to the transition to green energy and carbon free mobility. Let's now take a look at Slide 5. For the better part of the last decade, Almirall has had a comprehensive effort to closely monitor, lithium resource landscape and analyze many complex considerations, which are depicted here on this slide when it comes to resource development. Just as a bit of a background. Over that time, we've assembled a team of expert geologists, mining, and process chemical experts and engineers focused on resource development.
We've maintained a comprehensive database of brine and mineral resources, We've assessed these resources, and these resource sites. We've evaluated known extraction technologies to extract the lithium from the minerals or brines at these sites And we built our own IP and know how around novel extraction techniques. And finally, we've created models to quantify the technical and economic factors of new resources as they become known to us. All of this work has guided our understanding of alternative resources and extraction processes compared to the ones we own and operate today and has informed our M and A and resource development strategies over the past years and will do so into the future. So now that it's chart, this chart is a simple way, a spider diagram, to boil down that complexity to, a simple framework.
While each of the factors on the on the points of this diagram is important to the success of a project, As noted here on the left hand side in bullet form, there are really 3 key drivers that determine technical and economic viability. The first is grade. That's the concentration of lithium and the resources that are that are available to be extracted. Secondest size and and and the and the the length, the long live length of that resource, over time and the economies of scale it could provide And the 3rd and importantly is chemistry. Each resource is different.
And so one has to tailor the technology or know of a technology or possess a technology that can be used to convert that lift into high quality battery grade materials and manage the associated impurities. Think of impurities as all the other things that are in that resource that aren't lithium that, that we need to find a way to to work around to extract the lithium. Of course, learn a lot of trade offs, and that is exactly what this chart is trying to show. For example, a large high grade resource with no structure and no rule of law is gonna be a challenge. A smaller resource with good infrastructure and access to low cost energy could be very successful.
Now if you look at this chart, we've given 2 examples. A low quality rock resource and a high quality rock resource. And as we've noted here on on this slide, resource grade, resource scale, and resource chemistry really are the differentiators that drive that high quality rock for being commercially viable. Why don't we now then dive into on Slide 6, these 2 factors, greater concentration and scale or size? So if we go to the next slide, this chart shows key Lithia mineral operations and projects around the world Mineral here refers to Hard Rock or spodumene, often, and soft rock or clays.
We'll talk about both in this chart. The lithium is not rare. Commercially and economically viable scale up has thus far only been successful in the 2 types I just referenced. Spodumene. This is a hard rock resource, which we extract in Australia.
And process in China and the future will process in Australia. Lepedalite, this is a softer clay like material that that we are not involved with, but that is commercially extracted and processed in parts of China. There are many other types of lithium resources that are known. Leatherite, polylithianite, Zen walnut, petalite, resources very greatly in terms of grade, chemical structure, and impurities. As you look at this chart, there are a couple points to make.
1st, you can see we identified the resources that Al Marl has or operates. First, you can see that green bushes in the upper right hand quadrant, It's a world class asset. It's large in scale, high grade quality, located in a country of Australia with good access to energy and infrastructure. And a mining friendly jurisdiction. 2nd, you can see that there are no there are many known clay deposits and this has been a subject of discussion quite a bit recently here in the U.
S. They're highlighted here in red. They're not relegated just to the we're actually producing today are La Petalite Resources in China. None of the other clays are producing assets today. Glenn will get into a bit more details in a moment.
But clearly, as you look at this chart, you can see the factors here of kind of grade and size. The more economically at low cost resources are gonna be up and away to the right of this chart. Now let's look at, brines. Similar similar chart. Same thing.
Size and concentration lithium varies widely by resources, where mineral resources tend to be located in Australia, in the U. S, brine resources tend to be located largely in South America, especially Chile and Argentina. And you can see those, those two countries names mentioned all over this chart. Inpurities, the presence of other minerals are potential are are critical to the potential of these resources as is certainly the concentration of lithium depicted on the vertical axis here of this chart. Taylor Chemical Technology is required to manage the impurities in that brine.
And those impurities, just to throw out some names of things like sodium, potassium, magnesium, calcium, moron, etcetera. This impacts cost competitiveness, throughput, and final product quality. Now co products and the production of co products is a a way to to monetize and potentially support the economics of a of a of a project, but management of those can be both challenging technically and commercially. Given size of markets for those co products and in the various geographies in which one might operate. Here again, you can see that Salarda out of common Chile is a world class asset in terms of size, or scale and grade up into the right.
Of this chart. Outmall has been operating successfully in this environmentally, sensitive region for 40 years. We are proud that we've been able to successfully produce a lithium that is needed to combat climate change while minimizing our environmental footprint and maximizing the benefits for all stakeholders. You can also see that the bulk of all their resources tend to be in that sort of 400 to 800, PPM range and somewhat small or a lot smaller scale than those identified here, that Almar participates in. So that's the resource picture.
But that's just the beginning of what it takes to, bring, lithium to market and, in particular, bring high grade battery quality lithium to the market. I'm gonna turn it over to Glenn now to walk us through that those next steps and how the minerals and brines are further processed. Glenn?
Great. Thank you, Eric. We actually have we have just two charts here. And the first one is really to just set the table, talk about a little bit of a nomenclature at a macro level. And then we'll get really into more substance in in chart number 9.
We'll talk about some of the chemical pathways. But what we're highlighting here on Chart 8 are some views of conventional processing and it allows you to look at both, hard rock on the, on the top part of the graph and the analogy to brine on the lower part. The first thing that we really want to point out is there are really two blocks of consideration when you think about, conventional processing. You have a first stage, which is concentration. And then a downstream stage, which is your conversion.
Analogously, hard rock and, and Brian, both, those lithium resources are relatively dilute in their natural resources. The quality of those vary as Eric showed in the prior charts, but with Hard Rock, you'll find lithium in the form of lithium hydroxide, and we go through a, crushing and a flotation, a real mechanical process to bring those up to a, lithium oxide equivalent concentration of 5 to 7. You see that there on the chart in the dark blue, right below that, blinds tend to be a little bit more dilute in their concentration of lithium as low as 0.01% as high as 0.3%. Similarly, we go through a concentration process here. We're, we're depicting, what is most predominantly done commercially is using PON systems to, to achieve that higher level of concentration.
Simultaneously, you actually, you benefit by removing some impurities through that pond system. Now when you go downstream to the conversion, this is where things look a little bit different, when you're dealing with rock versus brine, What's worth pointing out is with a rock, you you usually need to do some work to open it up to be able to liberate those lithium ions. And this is true whether you're dealing with a spodumene hard rock or if you're dealing with a clay, a relatively softer rock, you need to open it and that's often done with calcination. It's a high temperature process that that takes the form of the crystals, and it makes them more open so you can more readily access the lithium. You can see depicted there.
Downstream then purification, filtration, crystallization steps that we go through to achieve the battery grade products there on the right hand margin? Analogously, depending on the source of your brine, you can carry in different types of impurities. And and that opens up different opportunities to purify through the the train that's shown there on the bottom part of the chart. Similarly, there are reactive precipitation. There's different crystallization reps that we'll highlight.
Most commonly, you'll find with brines, we we drive that towards a lithium carbonate, and then further in a secondary process, you can take those carbonates and you can further process them on to lithium hydroxide. So that, that again, is the general framework, and we'll flip to Slide 9 now and we'll get a little bit more detail about the specific chemical pathways. Now, what I wanna introduce here is some constructs on the slide to make it a little bit easier to discuss First of all, you'll notice we, we've broken this down into 3 different rows, if you will, that represent spodumene and then you have brine and then you have clay. Within each of those those chemical pathways, you'll notice, some darker filled in blocks and those represent the established mature demonstrated chemical processes. So with spodumene, you see that in the dark blue with brine and a lighter blue and in clays all the way to the bottom, you see that's that's illustrated with the the green color.
You'll also notice in each of these pathways, we we highlight, there are some pilot or concept technologies that, that are worth consideration in this comparison. And lastly, what I'll point out in by way of introduction of this chart, all the way on the right hand margin, we wanted to provide some relative figures of merit. Eric mentioned before We have really high fidelity physics based models of these chemistries. We also have detailed economic models those are behind some of these these relative comparisons. You'll notice that table includes not only economic figures of merit, but the last two, in particular, really highlight some of the sustainability attributes that we wanna keep in front of us, in terms of energy and water, fresh water consumption, specifically.
So maybe to start the conversation, then let's take a look at Spigeman in the top row here. This by far is the preferred route or the most prevalent route today to get to lithium hydroxide. And I should mention we put all of these on a a common lithium hydroxide perity point. So all of these processes were driving to lithium hydroxide for this comparison. So you'll see in in spodumene, we go through the the calibration steps that I alluded to before.
But once you get into the conversion and you, you, you've gotten the calcigned spodumene available, you have a number of different options available to to extract that that lithium. It's leaching. So the route that we practice in is is practice commercially by others today is using sulfuric acid. That's a very efficient way to access the ions. It also makes it amenable downstream purification by precipitation, ion exchange type processes.
The top most level though, downstream that we practice at a large degree is this crystallization with acoustics, a conversion using, sodium hydroxide to get all the way to the lithium hydroxide that that we desire. And you can see the basis case that we're establishing for that path, we represent it at that basis that reference as all pluses in that table to the to the right. So now relative to that, have some other options. And practice to a lower degree is going through a crystallization process with a soda ash. And that's interesting because you can get to a, to a lithium carbonate, which can allow you to feed certain, application spaces.
And then you can subsequently crystallize that with lime or convert it with lime through your hydroxide. So a lot of chemical details there, what what I should point out is, you know, if you really wanted to expand this out, there's literally tens, if not more, different chemical pathways, but only a few that are, commercially relevant. And that's what we're trying to highlight here in the darker blue. Now what I'll I also wanna put, reference to is some alternative ways to do that leaching process. You can use, what I would characterize as weaker reagents like a soda ash or an alkyne type, alkaline type process to, to get access to those lithium ions.
It it's certainly technically possible. And what's interesting about this is that technology has been been pretty well established and known dating back to the 19 sixties. So it's it's chemically very relevant, from that standpoint. The challenge that you can probably appreciate is because those are weaker reagents, you have to do a little bit more work with them. Many times you combine pressure with those processes or you you put some temperature with them and and and sort of make up for that weaker reagent.
And so that's that you'll see that noted in our relative figures of merit table off to the right that, there there's some there's some penalties that you have to recognize when you when you lower your yield because of that, those, concerns that I just mentioned. You pick up some additional costs the capital that you need to do it tend to be more expensive. And, certainly, from a energy and water intensity standpoint, there's some some challenges that that would need to be addressed. So, you know, that's something we keep on our radar screen, and I think it's something of of merit to note. I think then by point of comparison, then it's worth contrasting that to brines.
You'll see note it there in the solid blue, white blue, know, the predominant way of taking brines and concentrating them is through solar evaporation. There is some some work done with absorption as you're probably well aware of. Downstream from that, there's a number of different ways you can can purify this, and it's highly dependent, as Eric mentioned, on what impurities you have in there. So if you're purifying a a brine from, the atacama in Chile versus what you're trying to do from Argentina or elsewhere in the world, you really have to have that expertise to tune it to that resource. That's what we do.
We crystallize our our materials with so so to ash. And then ultimately, if we wanted to come to a like for like basis of comparison, we we'd recrystylize that and convert it with lime to a hydroxide. We we do wanna give, a nod to some of the advanced technologies that are noted with brine. There's things like absorption and nanofiltration, ion exchange, solve an extra action, sophisticated membrane technologies that are very interesting, definitely technically. You can do some pretty interesting things recovery in your lithium.
The challenge there really is the cost of those additional materials, the energy that you need, for example, pump to high pressures to use a membrane or the heat that you need to to use to regenerate, an absorption type material. And those are the considerations that we're we're referencing here when you look at the relative figures of merit in the the rightmost table. Lastly, at the very bottom of the chart, it's it's worth hitting this a bit. And it's the discussion around Clay is very analogous to spodumene. It's a rock.
It's it's you have to do some work to to get access to it. Admittedly, clays are are softer. So usually the upfront mining and crushing and collection, tends to be less expensive. As Eric mentioned before, There are some commercial demonstrations of you, of taking a lepivadide clays and using sulfate and roasting through the process that's shown there to get that hydroxide. There are some other, areas of interest that you could potentially use sulfuric acid, or there's other, means to open up that clay material to get access to the the luke in my the thing that I would point out is if if those processes open up, the use of an aqueous media, to get the the leached lithium ion, you know, you essentially then transfer that leachate into a brine type process downstream.
So that's what we tried to highlight here. The the challenge, that I I do wanna point out though with Clays generally is, as we mentioned previously, that they tend to be more dilute in concentration naturally. So you do have to do quite a bit more work in getting the the lithium concentrated And in the process you're carrying a lot more tailings and byproducts, you have to need to, you need to address. So that hits you on your cost, it hits you on your capital. And I think the thing that you really need to keep an eye on, when you have to do more work potentially to get access to that, how much energy you're using and how much water, freshwater, in particular, are you using to get access to those materials?
So I hope this gives you a a flavor in a fairly highly simplified summary that captures this essence of how we marry the resource type, it's concentration with how you convert it downstream. We're really continuously evaluating, cascading, even piloting potential technology advancements, while simultaneously working on ways to improve our current processes.
Thanks, Glenn. My suspicion is, is that while highly simplified, we may be coming back to Slide 9 during the Q and A, but but very helpful. Appreciate that. As part of our resource effort, that I earlier described, we tracked announced projects around the world and here they are anonymously tracked we've got country, resource type and start and projected start date or or current start date. We track these around the world, and this table outlines them.
We put them in 2 categories, mining only projects, and integrated projects that include both the mining or the traction and the further processing. What's important to note is this this list is the same list, that we put forth in the 2017 investor day. This would really have to think of this as from the early 2000s onwards. So anything that's commercial prior to that, which would certainly include the Atacama, It would include green bushes. It would include Umbo in Argentina is not on this list, but these are the ones that have been developed since.
So as you as you look at them, you can see that mining capacity has been faster to bring to online and proven easier to get to to market than the integrated projects are. And and if you look further, you'll see that some of the earlier start date projects in spodumene took up to 10 years. And, but we've seen more recently for some of the projects started in the mid, say 2014 to 16 timeframe. Close about a four year average to come come to mind. Keep in mind, keep in mind, though, that mining only still requires upgrading and salt derivative capacity in order to add meaningful supply to the demand in the marketplace.
From our own experiences, we know how hard from a first first hand, how how hard it is to bring on integrated mining capacity. Of the integrated project listed here, you'll note that only one has come online. It's the first one listed. It's a brine project. Started in 2007 came on in 2016.
New players have struggled to bring on capacity. Exploration, permitting, mine design, and construction, process plant design, and production ramp up to market. And in fact, this timeframe has probably elongated even over the past couple of years. This same list, as I said, was presented in our 2017 Investor Day, And we had a projection number instead of a a hard production date, and we had many of those that are TBD or a collection of them already in the market now. And yet they are still not in the market.
So it goes to illustrate how challenging it is to bring projects to market, which is certainly another consideration and is reflected in some of the complexity that that, Glenn just walked through. Now turning to our closing remarks and last slides, and then we'll I'll give it over to Lawrence. But, first, just to summarize, As a market leader, Almirall is well positioned to benefit from the long term secular growth of the lithium industry. We have access to diverse low cost resources in various geographies, including Australia, Chile, and the US. We are vertically integrated with experience in extracting inverting lithium from multiple types of geological deposits, Our technical expertise provides the ability to provide a wide variety of products today and help our customers and customers customers develop next generation materials.
The near term outlook remains uncertain given the recent economic downturn related to COVID-nineteen and the inventory build that's occurred in the channel, but we are seeing green shoots. Automotive OEM production is largely back online. European EV sales have been strong year to get date and getting stronger as each month has passed recently, supported by regulatory changes to address climate change. In ED sales in China, in the US are rebounding from low rates of earlier this year. Just recently, I saw that the IHS, in fact, has upgraded its forecast EV production in both 2020 2021, another positive sign we believe that the significant inflection in EV growth is now emerging.
So with all of that, Now, I'll turn it over to Lawrence to begin Q And A.
Thank you. And, just as a reminder, either enter your questions through the web interface or pop them as an email to me, l atlalexandrajeffreys.com. I've had quite a few come in, so I'm gonna try and structure them. But if you wanna follow-up, please feel free to, ping us and we'll try and finish that as any. Can we go back to Slide 9?
And I guess the question, maybe if we can start with the pluses and minuses, can you give us a sense for what the scale of the difference? Are you talking orders of magnitude, north of 20% changes in CapEx like what's the benchmark that we should be thinking about that this is telling us about some of the potential technologies?
Yes, I'll let Glenn answer that. The the upfront sort of disclaimer I want to give is, this is very hard to do, right? Because these these processes, for one resource, a common resource, you can make comparisons. So I can make comparisons between green bushes and the atacama and do pluses and minuses. But if now I use another spodumene resource that is less concentrated than Greenbush, just in fair data comments, some of the, some of that skews.
So they are generalized to be sure Glenn, you just want to comment on how, how, how you've thought about it?
Yeah. Yeah. So, you know, there are higher fidelity models behind us and some cents and and tons that we are taking into account here. Particularly, I I thought the question was specifically about clays, if I remember, correctly. And the challenge there, and this is where even the the ltdidodite resources that were referenced there in China the particularly challenged with the amount of energy that it's taking, to recover those materials and the water intensity, the freshwater intensity, So that's the basis for which you're seeing, you know, double to triple minuses relative to the reference state.
We're talking about things that in some instances are at least 50%, if not 2x, out of step with what we would say is world class today. And that's a there's regions that are willing to pay that deficiency and, and we work at 4, but it becomes very limited, we think, and the ability to scale those approaches. So this opportunity, of course, for innovation and improvements, it's starting from a pretty challenged position because just by the nature of the the clay materials, the amount of work, as we talked about before, the potential amount of, chemistry that you have to do to get those 2 battery grade products is is is a lot, a lot more heavy lifting than you when you would compare it to a spodumene type resource.
And I guess maybe just because I can tell that sort of is, during the pot, can you translate the 50% to two times Are you speaking about, like, total CapEx, total OpEx or just the economics on the conversion cost? I guess people our rate are wrestling with, you know, it it are are, you know, at at at what How can we extrapolate from the pluses and minuses to an indication of whether something is either difficult or prohibitively expensive that it wouldn't happen in, you know, except for in the wildest scenarios. I mean, just, what's the message that you're trying to calibrate here?
So, I mean, I I'll be honest. When we when and tell me if I'm wrong, Glenn, but as we think about this and thought about preparing for today and putting our knowledge on a piece of paper like we have here, particularly once you get into those gray bars, the pilot and concept, we're generally thinking that model we refer to is an operating model. So we're thinking about operating expense, OpEx. We have some ideas on CapEx, but I'll be honest with you, I don't know that every anybody has the full picture on CapEx because these, as there are piloted processes, they've never been scaled. And o one can only start to just schematically on a piece of paper, say, given the amount of material handling, given the amount of energy, given the amount of water, this, given the amount, if I need to do evaporation, given the size of, of the concentration, the amount of operation I have to do, I can ballpark that I think the capital intensity is active, but that we're not we're not we're not able to confidently come out to you and say, that that a clay process that's one of these clay processes is more capital intensive than the other.
We just don't have that degree of precision, but we, we feel strong about the operating benefits. Is that or the operating relative comparison in merits? Is fair, Glenn?
Yeah. I think that's exactly fair. And, and, you know, across the board here, most of these unit operations In a classical sense, they're they're well established. So if it's we're talking about derivatives, deviations from, you know, maybe the the upper part in the spodumene route, we we can make pretty good confident comparison in contrast of alternative ways to to to this. Like, the the non sulfate routes, for example, we've looked at those.
We've we've built pilots. We've tested those sort of technologies. So I think our confidence on this relative ranking is good. I understand that people would love to see, you know, the decimal points behind our analysis. You know, that once we kind of get into that fidelity, that's really kind of the bread and butter of of why we are, who we are, and how we are differentiated.
So we're we're gonna be a little bit protective of those sort of details. That the sentiment of the question, I think, is is fair. And, you know, once you get into these areas where we've gone through and let's take a look at lithium meal, the conversion, that across the board is probably your most dominant factor. You know, your ability to get access to that lithium ion how efficiently you're using that resource hits you on two sides. It hits you on how much work you have to do on that up front concentration part.
And if you don't do it very well, you gotta work even harder up there and downstream. Similarly, if if you're not good at getting good high efficiencies and recoveries in your conversion, you know, it it penalizes you on your variable cost of all your reagents. It penalizes you in terms of you need bigger equipment. Now to a process more non lithium, sort of, Cobre agents and co materials that you're carrying along. And then you can imagine, just generally, if you're going to process where you just have to work harder because the resource is lower quality, you pay the penalty in energy and in freshwater.
These are the areas where hypothetically or theoretically, there are hundreds of chemical pathways. Very few of them are commercially relevant. And I think that's really what's driving the basis of us trying to offer these points of comparison.
I can offer one example that that a colleague of mine shared with me is, and it reminded me again earlier this morning. You know, the assets we acquired in China, which are now part of our spodumene to hydroxide supply chain were, were was a Chinese local company that was a converter with no resource for many years until, Talison became part of both Tianqi and, Albemarle, that, that asset marketed and in the merchant market, it's it's spodumene, 6%, as we know spodumene, high grade quality in the world that was provided to these sorts of converters, including the one that we ultimately wired in China, pre when when spodumene from calcium was no longer available because it was going to be used for the internal consumption purposes of if it's of its JV owners, many of these assets had to explore other alternatives. In many cases, they were looking at local Chinese with petalite, which they could run through the same process. They were not able to get the same concentration. It might have been a path to 4 to 60% of the concentration of of of lithium oxide, versus, so 3 to 4 versus the 6 that they're getting.
And that was the limit of the process. At that point, as I understand, at least for that source of clay that they were buying at the time, and their their capacity was less than half, obviously. They derated the plan So when you think about capital intensity then and you think about China being under 10,000, in some cases close to 5000, dollars a metric ton of capital intensity. And now you run a lower grade 3, you've doubled it. Right?
If if you've derayed the capacity to get the same capacity, you're gonna have to, you know, you have to spend twice as right? So I mean, that's one way of thinking of the factors around, resource quality and its impact on capital intensity.
What are the key determinants for conversion costs from spodumene to lithium hydroxide? I guess, POC as far as I've seen estimates from $1500 to $3000 per ton for different companies. What makes the difference? Or like, are there 1 or 2 choke points And also, what does the learning curve look like? Or should that spread get wider or narrower over time?
So I think that as you know, there's a spread. I I think part of it is scale and experience. So that that is the learning curve you're referring to. So those that, tend to have larger plants, 20,000 plus ton per annum plants, that have operated for a while tend you're gonna tend to see them closer to the lower end of that range that you referenced. Those that are operating plants that are smaller at higher.
So that's an obvious one. Beyond that, in terms of the process steps, it really comes down. There's a fundamentally 2 parts to the process that that that that Glenn has described here. There's what we call the front end and the back end, just informally. The front end is, is the thermal process to, what will the product is run the the 6% rock is put past through this kiln, hit with sulfuric acid and converting lithium sulfate.
There are a lot there's a lot of, believe it or not, know how around how to do that well and how to do that better. Efficiencies of the kiln, such that it's a very energy intensive process. You might imagine to get a kiln up to a 1000 degrees. So if there are there are their modification one can make for, efficient use of energy. In our case, we've made those investments, was also made investments in and using, natural gas instead of coal.
So that gives us a sustainability edge in how we operate our plant in China as an example. So the things there on and then on the on the back end, which is is really the value added tuning of converting first a chemical chemical conversion from from lithium sulfate to, using caustic to get to lithium hydroxide. There's a lot of know how and efficiency around the purification crystallization. And for us, that's a lot of our proprietary know how. That's an area where if you don't do it well, you have to recycle you get low, you can get lower yields.
Those that area can really start to drive up your cost. And so I think there's a real to your point. There's a real experience curve there. That's important for sure. So does it does it get narrower?
I mean, I look, I my guess is if I was a prognosticator, I would assume over a decade long period this industry grows, there are a lot of young young companies, new companies, projects coming in, there's a proliferation and a subsequent consolidation, right, that that happens in every industry that I think that's ever gone through a maturation process And those that end up being the leaders in the industry, do go down that experience curve against that lower end because of their knowledge they've built in those respective areas I've just described.
And as you as the industry moves down the curve and becomes better as extraction and conversion, can existing sites be retrofitted, or are sites, or is there going to be natural drift of older sites moving up the curve relative to newer facility designs. How flexible is this industry going to be?
I don't know. This is any different than any other chemical process, meaning that you're not going to and necessary kiln's a very, as an example, very expensive piece of equipment. You're not necessarily gonna change out and build a whole new kiln, at a plant. You will continually optimize the asset you have and to bottleneck it. It's not unusual for, in this industry or any other one that, a market that business that I'm also involved in or any other one.
I've been involved in my experience to see, oh, over time, the bottlenecking of 10 to 20%. To see over time cost dropping 10 to 20 percent, and that's just the continuous improvement efforts of being able to run that asset better. But what you're doing when you learn do it through that continuous improvement, particularly in a growing industry like ours is incorporating the learnings there into the design of the next plant. So you you will think of this much like you think of software, I think, of version 1.0, version 2.0, etcetera. The key is to get enough scale on each one of those versions as you build.
Such that you can drive down the costs and the speed to get those assets to market. And that's a very big part of Almirall's focus right now is to is to build that that horsepower.
So
maybe just to add on to that, I realized that question in the preceding one, really, I think, tried to divorce the, the conversation around what's the quality of the resource from what it costs for, for downstream. And, and, and that's a fair question. But the the thing that Eric, addressed, and I wanna just talk augment along is that it's it's what you have to do to get rid of all the things you don't want. You know, we'd characterize resources most readily by how much lithium is there. The chemist and the geologist, think about, additionally, what else are you bringing it to it, the aluminum, the silicates, the all the other contaminates.
So those are factors that, that you got to address some, that economic equation. And then I think I understand the nature of productivity improvements that we're gonna continue to bring to the market, and others are br bring those as well. The the nature of mining, though, I I think, is fair to say that you typically go after your highest quality resources early. So then as you as you start reaching farther and farther into sort of what I consider a merit stack, you start pulling in other perhaps lower quality or resources. So when you're trying to to address the question that you're asking there, which is a great one, you have to you have to also consider what you're feeding into your process over time.
Likely is not gonna be as good as you is is what we have today. And this is part of our strategy really right now to secure those resources that are higher quality so that we can try to maintain that advantage.
So if you look at the sort of is the lessons learned in economics on clay Resources in China, which are actively producing. What does that tell us about the framework for for making US Resources Economic. And I guess I'm getting questions on both sides. You know, one is obviously what it would be the incentive, environment for Albemarle to look at moving the U. S.
Up the stack, but also for somebody who doesn't have your quality resources as options, how do we evaluate kind of the incentive structure between China and the U. S. And I think there's going to be a political discussion that comes next. So
Yes. So Lawrence, you asked it in Clade, but you also asked it in terms of U. S. So I'll answer both angles of that question. But I'll start with as we look at the world and we look at the U.
S, and we look at the emerging trend for a lot of reasons, which politically we could discuss around, localization of supply chains. What's important to note is that any one of the resources we're talking about this in Chile or Australia can have a localization component, right? We can bring the final asset closer to the customer. We can bring the the the last step into the country. Right?
We haven't done that to date. That's that's something we can think about. But we're also thinking about the resources we have. And if we were to bring a resource and when it is a part of our planning, so it's not a, it's not a, hypothetical. I think we'll plan to bring a resource as the market grows and as the economics warrant, we would look at bringing Kings Mountain.
To to the market, the the market. That is the best resource spodumene resource in North America. It has a concentration. It's the highest concentration. So a little over 1.3% lithium oxide concentration.
It's actually slightly higher, believe it or not than than Wazna, not as large as Wazna, not as in quite as, a jurisdiction is quite as familiar with mining, as as as wa as Wagner. And in a more densely populated area in Washington. So some other challenges on that spider diagram we talked about earlier that speak to that, but it's it is the most attractive resource And we've spent tens of 1,000,000 of dollars in excess of $30,000,000 over the past couple of years going back and and re and reconfirming all the information I've given to you. And it's and it's, like I said, the best resource in North America. Now so to Clays, for us, clays are a lower concentration resource.
Nevada is a more mining, friendly jurisdiction, more accustomed to to this. And and less pop less populated. So in terms of the other things that are on that spider chart, there's some ad advantages there. And we know that operating silver peak in that in that part of the world. However, the key key components here were size.
Well, you saw there's a lot of it in the ground on that that chart. Was on the right hand lower right hand side, but also grade, a low grade. So what we would be looking for And this is part of our, efforts in the industry, part of our, we have collaborations that I that are confidential I can't speak to in the industry. We have technology efforts we're doing. We will look at whether know how technology can overcome resource deficiency in this case, right?
Now there is yet another factor that could come into play if we extrapolate out to 3 terawatt hours for Tesla alone by 2030, you're going to need a you're going to need those quite resources at that point. Now it will it will potentially it will not potentially, it'll come at a lot higher cost. Therefore, selling prices will have to be a lot higher to support investment in it than they are today. Today's selling prices aren't even sufficient to support nearly all the resources that are in play already. So they're going to have to be, as a lower quality resources price, they'll have to be significantly higher to support that.
But the market migration of pricing the, if you will, said from a cost curve standpoint, the higher marginal the movement of marginal cash costs even higher than the $6 to $7 we say it is today, will be necessary to bring that supply into the market. Barring technology innovation. So we're very focused on that as well. And and I think you know that, from their pronouncement, Tesla is is doing the same. They they view that technology as being the key there.
So there's more work to go. Consexual at this point, lots to be proven. We're very engaged in that pursuit.
So if we look at, sort of, the legacy pricing dynamics, And then the incentive pricing that you think is needed for the industry to invest, going forward, has the incentive level of incentive pricing changed? And if so, why?
Well, it's changed in the past 10 years. Because compared
to the last 4 or 5 years, you know, what we saw in the most recent kind of series of projects. I mean, like, coming out of the crisis, in the new environment? Is the incentive pricing level needed for new projects? Is that moving higher or lower?
It's moving higher because it's it's it's it's it's not gonna be a spike, right? It's gonna come in stages. We have, only a fraction of Talison we're operating, right? So the next that we double triple the size of Talison. We're doing that at the same sort of cost curve we were before.
The same sort of returns we were for Albemarle. A lot of the new projects that are required to support growth in this industry are going to be at a higher cost. So as a result, it's gradually increasing as they become necessary projects come to market, and can economically compete, either because they're able to get the proof out their their technology or because pricing has come up to a point that they're now economic. Then then the return thresholds are gonna go up from there. Right?
So it's gradually increasing because in the end, going back to your efficiency point Everybody can make improvements in their processing costs, but in the end, the cost curve is driven by that resource grade. Right, in the end, it's the resource cost. So as a result, as you bring on higher cost resources like clays, the incentive, the price for economic incentive to expand is going up.
And then how does that sort of perspective than also factoring vertical integration by the OEMs. I mean, several have discussed it. I mean, Tesla's obviously been a noise about it. You know, obviously then they sort of cut out the sort of profit margin component on the conversion steps.
That's right.
How do you think about what that does to the cost back and how feasible? How does the industry adapt, or does that just mean you delay projects how do you adapt to that?
That's, that's, I mean, it all obviously all depends on the extent to which that comes to pass. There there aren't many examples in sort of the chemical industrial world where backward integration has been sustained it's it's often been a part of a of a business, but it hasn't been sustained. I think about markets I've been in, like, coatings where there was a point in time where Sharon Williams and and and many other companies may have been backward integrated, but I've since given that up to focus on their core business. So I I it's hard for me to imagine it's pervasive, but that trend becomes pervasive. I can understand wanting to do it secure supply.
I can understand wanting to do it because you don't feel there's enough coming to market, or you feel it's gonna give you a competitive advantage. But you're right. I mean, it does erase the margin. So it doesn't change the cash cost of production or a marginal cash cost of production. But it obviously, now a Tesla doing it is gonna look at their entire profit in the channel.
To justify return on entire investment as opposed to the return that the way we look at it, which is the difference between our costs and our selling price today, right? So That's obvious. I I don't know if I'm fully answering your question the way you want, Lawrence, but that's how I think about it.
And so when you think about slide 9, I guess slide 9 really did or people, it was a good slide. The, the economics were tied to, did you just use some sort of Is this kind of perspective tied to conventional electricity prices or a normalized electricity price? Or did you also try and adjust for electricity differences in electricity prices in regions and different scenarios?
Well, as I said, these are generalized numbers. So Glenn, do you want to comment?
The ones we're offering in this table are certainly more industry average. Perfect. But for example, when we're looking at, alternative advanced ways potentially consider how we wanna process our brines, for example, in the Atacama, we certainly would consider the local cost of electricity The thing I would point out that when we're talking about energy, electricity is certainly a component and, you know, that's, as you mentioned, if you're running a pump or or, another process that depends on electrons, but really a larger component of your energy, many times, is heat as we talked about, you know, the need to heat or to to open up your resource to get access to the materials. So it's it's more than just electricity. Some instances, it's about your cost of natural gas.
And certainly, that's you can factor that into your analysis and you should depending on which region of the world you're considering.
Can you give a perspective on brine extraction in the U. S? I believe you've looked at that before and also an update on the new brine extraction technology that you were looking at rolling out in Argentina and could that be applied in the U. S? Or is this a different technology path?
Let me, I'm not clear about your segment. Let me first question first and then we'll come to clarify, so I want to make sure we answer what you're asking. On the first question, this goes back before Al Marlin Rockwood. Almost spend a lot of time and effort, looking at the smack over brines. And so I I assume that's what you're referring to as opposed to Silverpeak, right, geothermal or oilfield brines.
Yeah. I think the challenge there comes to one of chemistry. It it it's it's kind of like clays. You can say there's an abundance of lithium there. But that isn't the whole answer.
That's only one node on that on that spider diagram. You, in some cases, the concentration is not you know, the PPM level concentration is not far off of some of the all those resources that were clustered in the in the left corn or sort of the left left hand side of that chart, we had a bunch of Argentina names, for instance. It there, in some cases, the concentrations can be reasonable. The challenge is is that that it varies it it can be variable. The the the level of concentration can be variable.
And the further challenge is the presence of all these impurities, which are significant in the case of of oilfield brine. So that again, it's possible with chemistry and technology technological innovation in a in a in a in a selling price that supports that kind of investment that it could make sense. But today, relative to all the other things we're looking at, we would prioritize that down. And we have access, right? Because we we we operate our bromine business in those brines.
We prioritize that down the list for those reasons. Glenn, would you add anything?
You know, hey, I just had to see, you know, So in the area of technology, this is a space where we actually, we have a dedicated team who does technology reconnaissance and intelligence. And we, we get our hands dirty with this technology. We, we develop pilots. We use that to inform our models. I think the right question that perhaps you're asking there is what would need to be true in terms of enhancements of these technologies, whether it's an absorption technology or a solvent extraction or a membrane technology what would need what levels of performance would you need to achieve before they we would find relevance in the Merit stack?
And this is something that we consider when we are looking at our forecast out to the, you know, the 10 year horizon beyond. And if anything we can do to break through those, all those are performance sooner. I think we're in a good position to bring that technology into the portfolio.
And, Eric, I think you mentioned earlier, sort of actively looking for, sort of step changes to reduce the conversion economics. What's your sense of the probabilities on a 5 or 10 year horizon that the industry or the chemical provide other chemical companies working with the industry could deliver something that would be a dislocation rather than just a incremental move down the learning curve?
I think they're they're they're relatively low. I mean, I think in the next 5 to 10, maybe 7 years, just to pick a number, you know, there's going to be this notion of what we described earlier of of Albemarle and Albemarle's competitors who have the the know how and scale to do so driving down that cost curve, right, getting getting better, more efficient You mentioned a range of 1, a buck 50 to a buck 30 or, excuse me, about $50 to $3 a range. Who, you know, driving that average further down. So it's going to be more incremental. There are, and Glenn could comment on it, there are some technologies that have proven effective could be disruptive and enabling, on the other hand, as well, for resource.
Electric dialysis is 1 right? It it's it's what Nebraska attempted, and has not succeeded at, both as a technology and, and in their case, as a company. And however, it doesn't mean it's not a viable, a potentially viable technology. There's a lot of work to be done there. Membrains are are sensitive things to work with.
We've had some discussions about that recently. And so, Glenn, I don't know if you'd add anything.
No. I I think you nailed it. I think those are the key truths
And then, I guess then a last one that came in is, can you give some perspective on where Mika or Micah might fit on the cost curve, and the prospects of lifting projects in either Europe or Africa? Are becoming material on the 10 to 20 year horizon?
If I am not mistaken, I don't have the the the the data in front of me. I know you sent a link on, and I was preparing last night. I'm like, and I clicked on it, and Almar wouldn't let me access the site. So I probably need to try it on my own iPad, but So I apologize. It was during the while I was watching the debate.
I was just trying to multitask. But my recollection we'll treat it as a recollection for a moment. I don't know if Glenn has anything to add, is that those are still below 1% lithium oxide concentrations. So you're bound by the same challenges. Right?
I've gotta process a lot more, Micah. I'm gonna have a lot more Micah byproducts when I get to the lithium. So material handling's a lot larger. I will have to profess. I am not familiar, although people in our organization are, with the mining, so that front end that we talk about, how how heavy that is.
The difference between, you know, because we talk about rock, spodumene being quite heavy in that regard, right, there's dynamite that's used. Right? Then there's, then there's drilling and then there's big heavy equipment, you know, in clay's softer, easier to get get to, I, Mike, I don't know where falls in that spectrum. Maybe it's somewhere in between. Glenn, do you have any further knowledge?
Yeah.
I think you you got it. It's really, it's totally somewhere in between, and, a a spod spodumene and, clay when it comes to hardness. So you know, there's, and there's many forms of Micah. So it's, it's even hard to generalize that, but you can look up the hardness and you see, so you're going to have to do a little bit more work mechanically to get it out of the ground more more likely. You have to think about, you know, how contiguous the the resource itself is.
But then, you know, the downstream conversation remains the same is you still gotta find a way to open up those those particles, the the crystal structure The aminability of that, to either using assets or temperature or mechanical means of opening up those materials is the same conversation. That we're having just generally on plays and generally on hard rock.
And I guess then just lastly, but you mentioned the debate, questions that came in around the political landscape. And I guess I'm curious on maybe if you narrow it down to 2 topics. One is, are there regulatory hurdles for project developments in the US that need to be clarified or resolved. And where do you see do you anticipate movement on direct subsidies for lithium projects in the U. S?
Or is it more just the indirect support for the EV industry?
We'll have to see on the last one. On on the on the, I'm sorry, the first one was
Are are the regulatory hurdles or Yes. Yeah.
I I would say that what what our experience here is to date is here being North Carolina, as I sit here, is that it varies by state, right? So I think there's some opportunities to improve in jurisdictions that states that haven't been involved with mining to to streamline the process, for sure. The timelines can be extremely long. And and and they are for good reasons to protect the environment. But I'm not unconvinced there's opportunities to improve efficiency.
Right? They're still get the right environmental outcomes and and conclusions, but get faster time to mark it. As we all know, this curve happens like we believe it will. It getting getting resources to market is gonna key and you can't tolerate 3, 4 year weights for for a permit. Right?
So I think that's a big area. We haven't seen, to date in the US, certainly it's more might be more possible in Europe direct subsidy support for our projects. There are quite a few grants we've gotten from DOE, DOD, various other sort of the organization as part of that to focus on technology routes. Well, some of the focus on electrodial dialysis, for example, is one of those routes. We have a grant there.
So my my hunch is it's gonna be more indirect subsidies, but they're in both Continents, both the North America, the US, as a country, and then in the continent of Europe and the EU, there's a very big focus on strategic minerals. A critical raw materials, we'll have to see where that goes. And and I think clearly there'll be different incentives depending on who our next president is. Great.
I think on that note, we will see how things unfold over the next few months. Thank you everyone very much for participating. Thanks for all the questions. Thank you again for doing this today. If, yeah, if there's any follow ups, he's either seeing me or Meredith and we can, help you, work through this.
Thank you all very much. Have a safe