Good morning, and thank you for joining us. It's Laurence Alexander with the Jefferies Chemicals team. With me today is management from Albemarle to discuss current trends and structural setup in the lithium markets. We have two speakers today. Eric Norris is the President of Albemarle's Lithium Global Business Unit. He joined Albemarle in 2018 after stints at FMC, managing both the lithium business and the health and nutrition business. With us today is Dr. Glen Merfeld, who is the Chief Technology Officer for lithium at Albemarle. He had, prior to joining Albemarle, a 20-year stint at GE in their research division. Before we begin, a couple of housekeeping measures. First, if you have any questions, please enter them through your interface or by emailing me at lalexander@jefferies.com. Again, lalexander@jefferies.com. We will have an opening presentation, then we will move on to a Q&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 deign 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, Laurence, 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. Glen Merfeld will then cover ways to concentrate and convert those resources into battery-grade products. Finally, I'll cover recent lithium projects and closing remarks before turning it back over to Laurence for Q&A. We have a slide deck that accompanies this, as usual, you'll see on pages two legal disclaimers and on page three non-GAAP reconciliations. They're also available on our website. We'll turn first to slide four. Just as a brief background, put everybody on the same page. Albemarle is a global specialty chemicals business and a leader in three core businesses, lithium, bromine, and catalysts.
Of the three, 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, Albemarle's 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. Albemarle Lithium has access to a geographically diverse portfolio of some of the largest, highest concentrated resources in the world. 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.
Battery-grade products, in fact, make up about 60% 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 five. For the better part of the last decade, Albemarle 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 maintain 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.
We've built our own IP and know-how around novel extraction techniques. 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&A and resource development strategies over the past years and will do so into the future. Now to this 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 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 three key drivers that determine technical and economic viability. The first is grade.
That's the concentration of lithium in the resources that are available to be extracted. Second is size and the long life length of that resource over time and the economies of scale it could provide. The third, 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 lithium to 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 we need to find a way to work around to extract the lithium. Of course, there are 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 infrastructure and no rule of law is going to be a challenge.
A smaller resource with good infrastructure and access to low-cost energy could be very successful. As you look at this chart, we've given two examples, a low-quality rock resource and a high-quality rock resource. As we've noted here on this slide, resource grade, resource scale, and resource chemistry really are the differentiators that drive that high-quality rock for to being commercially viable. Why don't we now then dive into, on slide six, these two factors, grade or concentration, and scale or size. If we go to the next slide, this chart shows key lithium 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. Lithium is not rare. Commercially and economically viable scale-up has thus far only been successful in the two types I just referenced.
Spodumene, this is a hard rock resource which we extract in Australia and process in China. In the future, we'll process in Australia. Lepidolite, this is a softer clay-like material 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. Jadarite, polylithionite, zinnwaldite, petalite. Resources vary greatly in terms of grade, chemical structure and impurities. As you look at this chart, there are a couple points to make. First, you can see we identified the resources that Albemarle has or operates. First, you see that the Greenbushes 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.
Second, you can see that 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 U.S. The only clay resources actually producing today are lepidolite resources in China. None of the other clays are producing assets today. Glen 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 grade and size. The more economically low-cost resources are going to be up and away to the right of this chart. Now let's look at brines. Similar chart, same thing. Size and concentration of lithium varies widely by resources.
Where mineral resources tend to be located in Australia and the U.S., brine resources tend to be located largely in South America, especially Chile and Argentina. You can see those two countries' names mentioned all over this chart. Impurities, the presence of other minerals are critical to the potential of these resources, as is certainly the concentration of lithium depicted on the vertical axis here of this chart. Tailored chemical technology is required to manage the impurities in that brine. Those impurities, just to throw out some names, are things like sodium, potassium, magnesium, calcium, boron, et cetera. This impacts cost competitiveness, throughput, and final product quality.
Co-products and the production of co-products is a way to monetize and potentially support the economics of a project, but management of those can be both challenging technically and commercially, given size of markets for those co-products in the various geographies in which one might operate. Here again, you can see that the Salar de Atacama in Chile is a world-class asset in terms of size or scale and grade up and to the right of this chart. Albemarle has been operating successfully in this environmentally sensitive region for 40 years. We are proud that we've been able to successfully produce the 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 the resources tend to be in that sort of 400- 800 PPM range and a lot smaller scale than those identified here that Albemarle participates in. That's the resource picture. That's just the beginning of what it takes to bring lithium to market and in particular bring high-grade battery-grade lithium to the market. I'm going to turn it over to Glen now to walk us through those next steps and how the minerals and brines are further processed. Glen?
Great. Thank you, Eric. We actually have just two charts here. The first one is really meant to just set the table, talk about a little bit of the nomenclature at a macro level. Then we'll get really into more substance in chart number nine, where we'll talk about some of the chemical pathways. What we're highlighting here on chart eight are some views of conventional processing and allows you to look at both hard rock 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 brine both, those lithium resources are relatively dilute in their natural resources. The quality of those vary, as Eric showed on the prior charts. With hard rock, you'll find lithium in the form of lithium hydroxide. We go through a crushing and a flotation, a real mechanical process to bring those up to a lithium oxide equivalent concentration of five to seven. You see that there on the chart in the dark blue right below that. Brines 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 where we're depicting what is most predominantly done commercially is using pond systems to achieve that higher level of concentration. Simultaneously, you actually benefit by removing some impurities through that pond system.
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 usually need to do some work to open it up to be able to liberate those lithium ions. 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 up, it's often done with calcination. It's a high temperature process that takes the form of the crystals, it makes them more open so you can more readily access the lithium. You can see depicted there, downstream, 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 that opens up different opportunities to purify through the train that's shown there on the bottom part of the chart. Similarly, there's different crystallization routes that we'll highlight. Most commonly, you'll find with brines, we drive that towards a lithium carbonate. Then further, in a secondary process, you can take those carbonates, and you can further process them on to lithium hydroxide. That again, is the general framework, and we'll flip to slide nine now, and we'll get a little bit more detail about the specific chemical pathways. Now, what I want to introduce here is some constructs on the slide to make it a little bit easier to discuss.
First of all, you'll notice we've broken this down into three different rows, if you will, that represent spodumene, and then you have brine, and then you have clay. Within each of those chemical pathways, you'll notice some darker filled-in blocks. Those represent the established, mature, demonstrated chemical processes. With spodumene, you see that in the dark blue, with brine in a lighter blue, and in clays, all the way to the bottom, you see that's illustrated with the green color. You'll also notice in each of these pathways we highlight there are some pilot or concept technologies that are worth consideration in this comparison. Lastly, what I'll point out 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 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 want to keep in front of us in terms of energy and water, fresh water consumption, specifically. Maybe to start the conversation then, let's take a look at spodumene in the top row here. This, by far, is the preferred route or the most prevalent route today to get to lithium hydroxide. I should mention, we put all of these on a common lithium hydroxide parity point. All of these processes we're driving to lithium hydroxide for this comparison. You'll see in spodumene, we go through the concentration steps that I alluded to before.
Once you get into the conversion and you've gotten the calcined spodumene available, you have a number of different options available to extract that lithium. It's leaching. The route that we practice and is practiced commercially by others today is using sulfuric acid. That's a very efficient way to access the ions. It also makes it amenable to downstream purification by precipitation, ion exchange type processes. The topmost level, though, downstream that we practice at a large degree is this crystallization with a caustic, a conversion using sodium hydroxide to get all the way to the lithium hydroxide that we desire. You can see the basis case that we're establishing for that path. We represent at that basis, that reference as all pluses in that table to the right. Now relative to that, you have some other options.
Practice to a lower degree is going through a crystallization process with a soda ash. That's interesting because you can get to a lithium carbonate, which can allow you to feed certain application spaces. Then you can subsequently crystallize that with lime or convert it with lime to your hydroxide. A lot of chemical details there. What I should point out is, 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. That's what we're trying to highlight here in the darker blue. Now, what I also want to 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 alkaline type process to get access to those lithium ions.
It's certainly technically possible. What's interesting about this is that technology has been pretty well established and known dating back to the 1960s. 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 put some temperature with them to make up for that weaker reagent. You'll see that noted in our relative figures of merit table off to the right, that there's some penalties that you have to recognize when you lower your yield because of 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 an energy and water intensity standpoint, there's some challenges that would need to be addressed. That's something we keep on our radar screen, and I think it's something of merit to note. I think by point of comparison, and it's worth contrasting that to brines. You'll see noted there in the solid blue, light blue. The predominant way of taking brines and concentrating them is through solar evaporation. There is some work done with adsorption, as you're probably well aware of. Downstream from that, there's a number of different ways you can purify this, and it's highly dependent, as Eric mentioned, on what impurities you have in there.
If you're purifying 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 materials with soda ash, and then ultimately, if we want it to come to a like for like basis of comparison, we'd recrystallize that and convert it with lime to a hydroxide. We do want to give a nod to some of the advanced technologies that are noted with brine. There's things like adsorption and nanofiltration, ion exchange, solvent extraction, sophisticated membrane technologies that are very interesting. Definitely technically, you can do some pretty interesting things in recovering your lithium.
The challenge there really is the cost of those additional materials, the energy that you need, for example, to pump to high pressures to use a membrane, or the heat that you need to use to regenerate an adsorption type material. Those are the considerations that we're referencing here when you look at the relative figures of merit in the rightmost table. Lastly, at the very bottom of the chart, it's worth hitting this a bit. The discussion around clay is very analogous to spodumene. It's a rock. You have to do some work to get access to it. Admittedly, clays 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 taking lepidolite clays and using sulfate and roasting through the process that's shown there to get to 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 lithium ion. The thing that I would point out is if those processes open up the use of an aqueous media to get the leached lithium ion, you essentially then transfer that leachate into a brine type process downstream. That's what we tried to highlight here. The challenge that I do want to point out, though, with clays generally is, as we mentioned previously, that they tend to be more dilute in concentration naturally. You do have to do quite a bit more work in getting the lithium concentrated, and in the process, you're carrying a lot more tailings and byproducts that you need to address. That hits you on your cost, it hits you on your capital.
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, fresh water in particular, are you using to get access to those materials. Well, hopefully, this gives you a flavor in a fairly highly simplified summary that captures this essence of how we marry the resource type, its concentration with how you convert it downstream. We're really continuously evaluating, testing, even piloting potential technology advancements while simultaneously working on ways to improve our current processes.
Thanks, Glen. My suspicion is that while highly simplified, we may be coming back to slide nine during the Q&A 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 current start date. We track these around the world, and this table outlines them. We put them in two categories, mining only projects and integrated projects that include both the mining or the extraction and the further processing. What's important to note is this list is the same list that we put forth in the 2017 Investor Day. You really have to think of this as from the early 2000s onwards.
Anything that's commercial prior to that, which would certainly include the Atacama, it would include Greenbushes, it would include Hombre Muerto in Argentina, is not on this list. These are the ones that have been developed since. As you look at them, you can see that mining capacity has been faster to bring to online and proven easier to get to market than the integrated projects are. If you look further, you'll see that some of the earlier start date projects in spodumene took up to 10 years, but we've seen more recently for some of the projects started in the mid, say, 2014- 2016 timeframe, closer to about a four-year average to come to mine. 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 from firsthand how hard it is to bring on integrated mining capacity. Of the integrated projects 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. We estimate, in fact, that it probably takes up to 12 years to bring an integrated production, including exploration, permitting, mine design and construction, process plant design, and production ramp-up to market. 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 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. 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 Glen just walked through. Now turning to our closing remarks and last slides, and then I'll give it over to Laurence. First, just to summarize. As a market leader, Albemarle 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 U.S.
We are vertically integrated with experience in extracting and converting 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-19 and the inventory build that has occurred in the channel. We are seeing green shoots. Automotive OEM production is largely back online. European EV sales have been strong year- to- date and getting stronger as each month has passed recently, supported by regulatory changes to address climate change. EV sales in China and the U.S. are rebounding from low rates of earlier this year. Just recently, I saw that the IHS, in fact, has upgraded its forecast for EV production in both 2020 and 2021.
Another positive sign we believe that the significant inflection in EV growth is now emerging. With all that, now I'll turn it over to Laurence to begin Q&A.
Thank you. Just as a reminder, either enter your questions through the web interface or pop them as an email to me at lalexander@jefferies.com. I've had quite a few come in, so I'm going to try and structure them, but if you want to follow up, please feel free to ping us and we'll try and fit it in. Can we go back to slide nine? 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? What's the benchmark that we should be thinking about that this is telling us about some of the potential technologies?
Yeah. I'll let Glen answer that. The upfront sort of disclaimer I want to give is this is very hard to do, right? These processes, for one resource, a common resource, you can make comparisons. I can make comparisons between Greenbushes and the Atacama and do pluses and minuses. If now I use another spodumene resource that is less concentrated than Greenbushes when you compare to Atacama, some of that skews. They are generalized to be sure. Glen, you just want to comment on how you thought about it?
There are higher fidelity models behind this in dollars and cents and tons that we are taking into account here. Particularly, I thought the question was specifically about clays, if I remember correctly. The challenge there, and this is where even the lepidolite resources that were referenced there in China, they're particularly challenged with the amount of energy that it's taking to recover those materials and the water intensity, the fresh water intensity. That's the basis for which you're seeing 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. There's regions that are willing to pay that deficiency and work it forward, but it becomes very limited, we think, in the ability to scale those approaches.
There's opportunity, of course, for innovation and improvements. It's starting from a pretty challenged position because just by the nature of 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 to battery-grade products is a lot more heavy lifting than when you would compare it to a spodumene type resource.
I guess maybe just because I can tell that sort of is stirring the pot, can you translate the 50% to 2x? Are you speaking about total CapEx, total OpEx, or just the economics on the conversion cost? I guess people are wrestling with 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 except for in the wildest scenarios. What is the message that you're trying to calibrate here?
I'll be honest, and tell me if I'm wrong, Glen, 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. 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 anybody has the full picture on CapEx, because these, as they are piloted processes, they've never been scaled.
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, given the amount if I need to do evaporation, given the size of the concentration, the amount of evaporation I have to do, I can ballpark that I think the capital intensity is X. We're not able to confidently come out to you and say that one of these clay processes is more capital-intensive than the other. We just don't have that degree of precision, but we feel stronger about the operating benefits or the operating relative comparison and merits. Is that fair, Glen?
Yeah, I think that's exactly fair. Across the board here, most of these operations, in a classical sense, they're well established. If we're talking about derivatives or deviations from maybe the upper part in the spodumene route, we can make pretty good confident comparison in contrast of alternative ways to this, like the non-sulfate routes, for example. We've looked at those, we've built pilots, we've tested those sort of technologies. I think our confidence on this relative ranking is good. I understand that people would love to see the decimal points behind our analysis. Once we get into that fidelity, that's really the bread and butter of why we are who we are and how we are differentiated, so we're going to be a little bit protective of those sort of details. The sentiment of the question, I think, is fair.
Once you get into these areas where we've gone through. Let's take a look at lithium yield, the conversion. That across the board is probably your most dominant factor. 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 upfront concentration part. If you don't do it very well, you got to work even harder up there and downstream. Similarly, if you're not good at getting good high efficiencies and recoveries in your conversion, it penalizes you on your variable cost of all your reagents. It penalizes you in terms of you need bigger equipment now to process more non-lithium sort of co-reagents and co-materials that you're carrying along.
You can imagine, just generally, if you're going to a process where you just have to work harder because the resource is lower quality, you pay the penalty in energy and freshwater. These are the areas where hypothetically or theoretically, there are hundreds of chemical pathways. Very few of them are commercially relevant. 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 a colleague of mine shared with me and reminded me again early this morning. The assets we acquired in China, which are now part of our spodumene hydroxide supply chain, 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 asset marketed in the merchant market its spodumene, 6%, as we know, spodumene, highest grade quality in the world, that was provided to these sorts of converters, including the one that we ultimately acquired in China. When spodumene from Talison was no longer available because it was going to be used for the internal consumption purposes of its JV owners, many of these assets had to explore other alternatives. In many cases, they were looking at local Chinese lepidolite, which they could run through the same process.
They were not able to get the same concentration. It might've been half to 60% of the concentration of lithium oxide, so three to four versus the six that they're getting. That was the limits of the process at that point, as I understand, at least for that source of clay that they were buying at the time. Their capacity was less than half, obviously. They derated the plant. When you think about capital intensity then, and you think about China being under $10,000, in some cases close to $5,000 a metric ton capital intensity, and now you run a lower grade through it, you've doubled it, right? If you derate the capacity to get the same capacity, you're going to have to spend twice as much, right? 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 people have seen estimates from $1,500-$3,000 per ton for different companies. What makes the difference? Are there one or two choke points? Also, what does the learning curve look like? Should that spread get wider or narrower over time?
I think, as you know, there's a spread. I think part of it is scale and experience. That is the learning curve you're referring to. Those that tend to have larger plants, 20,000-plus ton per annum plants that have operated for a while, you're going to 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. That's an obvious one. Beyond that, in terms of the process steps, it really comes down. There's fundamentally two parts to the process that Glen has described here. There's what we call the front end and the back end, just informally. The front end is the thermal process to where the product is run. The 6% rock is passed through this kiln, hit with sulfuric acid, and converted to lithium sulfate.
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 1,000 degrees. There are modifications one can make for efficient use of energy. In our case, we've made those investments. We've also made investments in using natural gas instead of coal. That gives us a sustainability edge in how we operate our plant in China, as an example. The things there. On the back end, which is really the value-added tuning of converting, first a simple chemical conversion from lithium sulfate to using caustic to get to lithium hydroxide. There's a lot of know-how and efficiency around the purification and crystallization. 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 can get lower yields. That area can really start to drive up your cost. I think there's a real, to your point, there's a real experience curve there that's important, for sure. Does it get narrower? Look, 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 companies, new companies, projects coming in. There's a proliferation and a subsequent consolidation, right? That happens in every industry that I think that's ever gone through a maturation process. Those that end up being the leaders in the industry do go down that experience curve and gets to that lower end because of their knowledge they've built in those respective areas I've just described.
As the industry moves down the curve and becomes better at extraction and conversion, can existing sites be retrofitted? Is there going to be a 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. A kiln is, as an example, a very expensive piece of equipment. You're not necessarily going to change out and build a whole new kiln at a plant. You will continually optimize the asset you have to bottleneck it. It's not unusual for, in this industry or any other one, that a market that business that Albemarle is involved in or any other one I've been involved in my experience to see over time, debottlenecking of 10%-20%. To see over time costs dropping 10%-20%, that's just the continuous improvement efforts of being able to run that asset better.
What you're doing when you go through that continuous improvement, particularly in a growing industry like ours, is incorporating the learnings there into the design of the next plant. You will think of this much like you think of software, I think, of version 1.0, version 2.0, et cetera. The key is to get enough scale on each one of those versions as you build, such that you can drive down the cost and the speed to get those assets to market. That's a very big part of Albemarle's focus right now is to build that horsepower.
So maybe-
And maybe-
Go ahead.
Maybe just to add on to that, I realize that question and the preceding one really, I think, tried to divorce the conversation around what's the quality of the resource from what it costs for downstream. That's a fair question. The thing that Eric addressed, and I want to just augment along, is that it's what you have to do to get rid of all the things you don't want. We characterize resources most readily by how much lithium is there. The chemist and the geologist think about additionally what else are you bringing into it, the aluminum, the silicates, all the other contaminants. Those are factors that you got to address in that economic equation. I think I understand the nature of productivity improvements that we're going to continue to bring to the market and others are bringing those as well.
The nature of mining, though, I think is fair to say that you typically go after your highest quality resources early. As you start reaching farther and farther into sort of what I consider a merit stack, you start pulling in other, perhaps lower quality resources. When you're trying to address the question that you're asking there, which is a great one, you have to also consider what you're feeding into your process over time likely is not going to be as good as what we have today. 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.
If you look at the sort of the lessons learned and the economics on clay resources in China, which are actively producing, what does that tell us about the framework for making U.S. resources economic? I guess I'm getting questions on both sides. One is obviously what 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 the incentive structure between China and the U.S.? I think there's going to be a political discussion that comes next.
Yeah. Laurence, you asked it in clays, but you also asked it in terms of U.S., so I'll answer both angles of that question. 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 last step into the country, right? We haven't done that to date. That's something we can think about. We're also thinking about the resources we have. If we were to bring a resource, and this is a part of our planning, so 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 the market. That is the best spodumene resource in North America. It has the highest concentration, so a little over 1.3% lithium oxide concentration. It's actually slightly higher, believe it or not, than Wodgina, not as large as Wodgina. A jurisdiction that's quite as familiar with mining as Wodgina, and in a more densely populated area than Wodgina. There's some other challenges on that spider diagram we talked about earlier that speak to that, but it is the most attractive resource. We've spent tens of millions of dollars, in excess of $30 million over the past couple of years, going back and reconfirming all the information I've given to you. It's, like I said, the best resource in North America.
To clays. For us, clays are a lower concentration resource. Nevada is a more mining-friendly jurisdiction, more accustomed to this and less populated. In terms of the other things that are on that spider chart, there's some advantages there. We know that operating Silver Peak in that part of the world. The key components here were size. Well, you saw there's a lot of it in the ground on that chart. It was on the right-hand, lower right-hand side, but also grade. It's a low grade. What we would be looking for, and this is part of our efforts in the industry, we have collaborations 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?
There is yet another factor that could come into play. If we extrapolate out to 3 TWh for Tesla alone by 2030, you're going to need those clay resources at that point. It will 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. They're going to have to be as a lower quality resources price will have to be significantly higher to support that. The market migration of pricing, if you will, said from a cost curve standpoint, the movement of marginal cash costs even higher than the $6-$7 we say it is today, will be necessary to bring that supply into the market, barring technology innovations.
We're very focused on that as well. I think you know that from their pronouncement, Tesla is doing the same. They view that technology as being the key there. There's more work to go. Conceptual at this point. A lot to be proven. We're very engaged in that pursuit.
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 level of incentive pricing changed? If so, why?
Well, it's changed in the past 10 years.
I meant compared to the last four or five years, what we saw in the most recent kind of set of projects. 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 not going to be a spike, right? It's going to come in stages. We have only a fraction of Talison we're operating, right? 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, though, that are required to support growth in this industry are going to be at a higher cost. As a result, it's gradually increasing. As these projects come to market and can economically compete, either because they're able to prove out their technology or because pricing has come up to a point that they're now economic, the return thresholds are going to go up from there, right?
It's gradually increasing because in the end, going back to your efficiency point, everybody can make improvements in their processing costs. In the end, the cost curve is driven by that resource grade, right? In the end, it's the resource cost. As a result, as you bring on higher cost resources like clays, the price for economic incentive to expand is going up.
How does that sort of perspective then also factor in vertical integration, by the OEMs. Several have discussed it. Tesla's obviously been the noisiest about it.
Yep.
Obviously, they sort of cut out the profit margin component on the conversion steps.
That's right.
How do you think about what that does to the cost stack and how does the industry adapt, or does that just mean you delay projects? How do you adapt to that?
It obviously all depends on the extent to which that comes to pass. There aren't many examples in sort of the chemical industrial world where backward integration has been sustained. It's often been a part 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 Sherwin-Williams and many other companies may have been backward integrated, but have since given that up to focus on their core business. It's hard for me to imagine it's pervasive, that that trend becomes pervasive. I can understand wanting to do it to 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 going to give you a competitive advantage. You're right. It does erase the margin.
It doesn't change the cash cost of production or marginal cash cost of production. It obviously now, a Tesla doing it, is going to look at their entire profit in the channel to justify return on entire investment, as opposed to the return the way we look at it, which is the difference between our cost and our selling price today, right? I don't know if I'm fully answering your question the way you want, Laurence, but that's how I think about it.
When you think about slide nine, I guess slide nine really did stir people. It was a good slide. The economics were tied to Is this kind of perspective tied to conventional electricity prices or a normalized electricity price? Did you also try and adjust for differences in electricity prices in regions in different scenarios?
Well, as I said, these are generalized numbers. Glen, you want to comment?
Yeah, electricity prices there.
The ones we're offering in this table are certainly more industry average.
Perfect.
For example, when we're looking at alternative advanced ways potentially to consider how we want to process our brines, for example, in the Atacama, we certainly would consider the local cost of electricity. The thing I would point out, though, when we're talking about energy, electricity is certainly a component, and that's as you mentioned, if you're running a pump or another process that depends on electrons. Really a larger component of your energy many times is heat. As we talked about, the need to heat or to open up your resource to get access to the materials. It's more than just electricity. Some instances, it's about your cost of natural gas, and certainly, 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?
I'm not clear about your second. Let me answer the first question first, then we'll come to clarify the second one to make sure we answer what you're asking. On the first question, this goes back before Albemarle owned Rockwood. Albemarle spent a lot of time and effort looking at the Smackover brines. I assume that's what you're referring to as opposed to Silver Peak, right? Geothermal or oil field brines. Yeah, I think the challenge there comes to one of chemistry. It's kind of like clays. You can say there's an abundance of lithium there. That isn't the whole answer. That's only one node on that spider diagram. In some cases, the concentration is not, the PPM level concentration is not far off of some of all those resources that were clustered in the left corner or the left-hand side of that chart.
We had a bunch of Argentina names, for instance. In some cases, the concentrations can be reasonable. The challenge is that it varies. It can be variable. The level of concentration can be variable. The further challenge is the presence of all these impurities, which are significant in the case of oil field brine. Again, it's possible with chemistry and technological innovation and a selling price that supports that kind of investment that it could make sense. To date, relative to all the other things we're looking at, we would prioritize that down. We have access, right? Because we operate our bromine business in those brines. We prioritize that down the list for those reasons. Glen, would you add anything?
No.
I just add this. In the area of technology, this is a space where we have a dedicated team who does technology reconnaissance and intelligence, and we get our hands dirty with this technology. 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 adsorption technology or a solvent extraction or a membrane technology, what levels of performance would you need to achieve before we would find relevance in the merit stack? This is something that we consider when we're looking at our forecast out to the 10 year horizon beyond. If anything we can do to break through those levels of performance sooner, I think we're in a good position to bring that technology into the portfolio.
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 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 relatively low. I think in the next 5- 10, maybe seven years, just to pick a number, there's going to be this notion of what we described earlier of Albemarle and Albemarle's competitors who have the know-how and scale to do so, driving down that cost curve. Getting better, more efficient. You mentioned a range of $1.50-$3 a range, driving that average further down. It's going to be more incremental. There are, Glen could comment on it, there are some technologies that, if proven effective, could be disruptive and enabling. On the other hand as well, for resource, electrodialysis is one. It's what Nemaska attempted, and has not succeeded at, both as a technology and in their case, as a company. However, that doesn't mean it's not a potentially viable technology. There's a lot of work to be done there.
Membranes are sensitive things to work with. We've had some discussions about that recently. Glen, I don't know if you'd add anything.
No, I think you nailed it. I think those are the key truths.
I guess then a last one that came in is can you give some perspective on where mica might fit on the cost curve? The prospects of lithium projects in either Europe or Africa becoming material on the 10- 20 year horizon.
If I am not mistaken, I don't have the data in front of me. I know you sent a link, and I was preparing last night on mica, and I clicked on it, and Albemarle wouldn't let me access the site. I probably need to try it on my own iPad, so I apologize. It was during while I was watching the debate. I was trying to multitask. My recollection, so we'll treat it as a recollection for the moment, I don't know if Glen has anything to add, is that those are still below 1% lithium oxide concentrations. You're bound by the same challenges of I've got to process a lot more mica. I'm going to have a lot more mica by-products 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 heavy that is. Because we talk about rock, spodumene being quite heavy in that regard. There's dynamite that's used. There's drilling, and then there's big, heavy equipment. Clay is softer, easier to get to. Mica, I don't know where it falls on that spectrum. Maybe it's somewhere in between. Glen, do you have any further knowledge?
Yeah, I think you got it. It's probably somewhere in between a spodumene and a clay when it comes to hardness. There's many forms of mica, so it's even hard to generalize that. You can look up the hardness and you'd see. You're going to have to do a little bit more work, just mechanically, to get it out of the ground, more likely. You have to think about how contiguous the resource itself is. The downstream conversation remains the same, is you still got to find a way to open up those particles, the crystal structure. The amenability of that to either using acids or temperature or mechanical means of opening up those materials is the same conversation that we're having just generally on clays and generally on hard rock.
I guess just lastly, because you mentioned the debate, some questions came in around the political landscape, and I guess I'm curious on maybe if we narrow it down to two topics. One is, are there regulatory hurdles for project developments in the U.S. that need to be clarified or resolved? 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. I'm sorry, the first one was?
Are there regulatory hurdles?
Yes. I would say that what our experience here is to date is, here being North Carolina, as I sit here, is that it varies by state. I think there's some opportunities to improve in jurisdictions, that states that haven't been involved with mining, to streamline the process, for sure. The timelines can be extremely long. They are for good reasons, to protect the environment. I'm not unconvinced there's opportunities to improve efficiency. Still get the right environmental outcomes and conclusions, but get faster time to market. As we all know, this curve happens like we believe it will. Getting resources to market's going to be key, and you can't tolerate three, four-year waits for a permit. I think that's a big area. We haven't seen, to date in the U.S., certainly it 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 organizations part of that, to focus on technology routes. Focus on electrodialysis, for example, is one of those routes. We have a grant there. My hunch is it's going to be more indirect subsidies. They're in both continents, both the U.S. as a country, and then in the continent of Europe and the EU, there's a very big focus on strategic minerals, critical raw materials. We'll have to see where that goes, 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, Eric and Glen, for doing this today. If there's any follow-ups, please either ping me or Meredith, and we can help you sort through this.
Thank you all very much. Have a safe day.