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Precious metal: Is Nevada on the verge of a lithium rush?

LAS VEGAS (AP) β€” About five years ago, prospectors rushed to Nevada seeking a key component of the batteries that power the modern economy, one reliant on cellphones and laptops. The rush made sense, at first. The state was home to the only active lithium extraction operation in North America....

LAS VEGAS (AP) β€” About five years ago, prospectors rushed to Nevada seeking a key component of the batteries that power the modern economy, one reliant on cellphones and laptops.

The rush made sense, at first. The state was home to the only active lithium extraction operation in North America. Unlike in other regions with known lithium deposits, like South America and Australia, Nevada's deposits are easier to reach for executives at mining companies, most of which are headquartered in Canada. The state also has a stable regulatory process, according to Vegas Inc. (

But when it comes to lithium, Nevada has been a double-edged sword. The quality of the lithium here is believed to be higher than in other areas, but the concentration of it is lower, making it more difficult to obtain large quantities through conventional extraction methods.

Without new technology, firms have been constrained to sourcing lithium through a solar evaporation process. Companies pump saline groundwater, containing lithium that has leached from surrounding rock, into ponds. Solar evaporation leaves behind concentrates, which are eventually processed into the lithium used in products. That method can be less effective here than in other desert areas where lithium has been found, because, believe it or not, it rains less in those places.

So given those risks, many of the companies bolted not long after they arrived.

"What happened five years ago was that a lot of companies flocked into the same areas and most of them didn't do anything," said Warren Stanyer, CEO of Nevada Sunrise, a Canada-based mining company.

But over the past year, a new wave of lithium prospectors has hit Nevada, hoping to capitalize on high demand and bullish projections that lithium-reliant electric vehicles and energy storage will become increasingly popular. Forty-five lithium deals were announced in 2015. Nearly half were located in Nevada, research company SNL Financial reported in March. Nevada Sunrise and other companies exploring projects in the state believe this period of speculation will end differently.

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Several company leaders said electric car company Tesla, which is building a massive battery plant near Reno, was responsible, in part, for triggering new interest in Nevada's potential supply of lithium.

Tesla never came to Nevada because of lithium, said Steve Hill, who directs the Governor's Office of Economic Development, the agency at the heart of the deal to lure the company to the state. Legislators granted Tesla about $1.3 billion in tax incentives.

Yet Tesla's activities have been at the center of the global conversation about lithium. It plans to use lithium in its car batteries and Powerwall batteries, which are designed to store electricity from rooftop solar panels or be used to make utilities more efficient. And Tesla plans to use a lot of it.

The company's mass-market car, the Model 3, has attracted about 276,000 pre-orders since it was unveiled last week. Tesla expects to produce 500,000 cars per year, and that requires more lithium β€” which, Tesla CEO Elon Musk says, means more of it must be supplied.

"In order to produce half a million cars a year . we would basically need to absorb the world's entire lithium-ion production," Musk said at the unveiling of the Model 3 March 31.

Tesla, looking to source North American materials, signed a deal last September with one company developing a lithium operation in Nevada. The agreement is contingent upon the mine coming online.

Industry leaders said Tesla fit into a narrative about demand for lithium, which many analysts call the "new gasoline." Amid hype around the potential of electric cars and energy storage, lithium prices and demand are high, a fact that presents a lucrative opportunity for prospectors.

"There has been a fundamental shift in the lithium market in the last 12 months that has seen demand from the battery sector surge with very little new supply," Simon Moores, managing director at London-based Benchmark Mineral Intelligence, wrote in an email.

Dana Bennett, president of the Nevada Mining Association, said Tesla brought excitement to the state, highlighting the role Nevada's mining industry could play in advanced manufacturing.

"There is an opportunity in Nevada," Bennett said, arguing that the recent influx of deals represents companies working their way through the extensive maze required to bring an operation online.

. . .

Opening any mining or extraction operation is a multimillion-dollar effort that can take years.

To compete in Nevada, most analysts agree that entrants to the lithium market must develop new mining technologies to bring down costs and increase the amount of lithium that is extracted. Pure Energy Minerals, for instance, is testing a technology that would reduce Nevada's competitive disadvantage in brine operations by increasing the amount of lithium that is recovered during the process. The technology would eliminate the solar evaporation process by pumping saline groundwater into enclosed tanks and separating lithium with a solvent. This would speed up the recovery process, deflect weather issues and increase the mineral's purity.

"With newer technologies, we believe that barrier of entry can be mitigated," said Patrick Highsmith, CEO of Pure Energy Minerals, the potential Tesla supplier. "That's the stage of work we're at."

LiTHIUM X, a company based in Vancouver, is one of the firms looking to new technology to "crack the code," as its CEO Brian Paes-Braga says. The company is in the first phase of exploring land in Clayton Valley, adjacent to Silver Peak, an active lithium operation that sits in unincorporated Esmeralda County and about 35 miles from Tonopah.

He predicted technology would grow with demand, as it has in other sectors of the mining industry, including with oil and gold.

LiTHIUM X, with a team that includes a founder of Lionsgate Films and former North Las Vegas Mayor Mike Montandon, has raised millions and hopes to work with Nevada institutes to develop its technology.

"It's one of the toughest businesses in the world," Paes-Braga said of the risks in exploration. "But when it works, it works."

The company also has a project in South America.

Several other firms are exploring areas around Clayton Valley, including Pure Energy Minerals. Ultra Lithium has claims at Big Smoky Valley 16 miles away. Lithium Corp. has claims at Fish Lake Valley, 22 miles away. Nevada Energy Metals is looking at Alkali Lake, roughly 7 miles away.

Some analysts, such as Robert Baylis, a managing director at Roskill, a mineral research firm in London, argue that early-stage firms often face a challenging uphill battle. Such firms often lack the financial and technical resources of their larger competitors that control the majority of the lithium supply.

"If the scale can be increased and new extraction methods developed, perhaps Nevada will play a part in future supply growth, but in reality the deposits are not first choice," he wrote in an email, listing Argentina, China and Australia as development leaders.

. . .

Then there's the argument that Nevada presents some opportunity for emerging companies.

The only active lithium operation in the Clayton Valley is Silver Peak. It is operated by Albemarle, one of four large corporations that control the vast majority of the world's lithium supply. In 2014, one industry estimate said the four vendors controlled 90 percent of the global supply.

If a competitive early-stage company could bring lithium to market at a lower price, it could reap significant financial rewards, analysts said, or sell its operation to one of the larger firms.

An early-stage company's presence might encourage a large battery manufacturer like Tesla to negotiate better prices with developing operations. As part of its agreement with Tesla, Pure Energy Minerals is contractually required to give Tesla a supply of lithium below market prices for five years.

If the early-stage operations are successful, the Nevada suppliers could also have value as a domestic source, since the United States is reliant on importing for most of its lithium.

"There's a lot of interest in finding and developing domestic supplies," said Bennett, of the Nevada Mining Association.

But it's a gamble, and a potentially costly one. All of the firms exploring in Nevada are at least three years out from an active operation and most of them are looking at even longer timelines. They must raise funding, and although the regulatory environment is more predictable in Nevada than in other places, there's still a labyrinth of red tape to be unraveled here.

Even then, a prospecting company could flop entirely if it doesn't find the lithium it's seeking, or finds less than expected. Prospecting for the metal is an inexact science because every potential pocket β€” even those close together β€” have a different chemical makeup.

"These are largely chemistry experiments," said David Talbot, a Toronto-based research analyst.


Information from: Las Vegas Sun,