Lithium burst onto investors’ radar in the early 2020s when prices for this silvery-white metal skyrocketed as demand from electric cars and battery storage makers sharply overtook demand. Although prices have retreated since then the fundamental story behind why we need lithium – global demand for electric cars and green energy transition – not only remains in place but will continue to become stronger over the years ahead.
One of the issues that has plagued the production of this metal that is used to de-carbonise transport and electricity generation is that extracting it from the earth tends to leave a large carbon footprint.
Explorers and miners with a production process that is light with its environmental impact are rare finds and in much demand. One such company is London-listed CleanTech Lithium AIM:CTL. Operating in the mining jurisdiction of Chile, the company aims to produce material quantities of battery grade lithium carbonate by 2027 to supply European, North American and other markets just as the supply deficit has been forecasted by several analysts.
Committed to net-zero, CleanTech’s mission is to become a new supplier of battery grade lithium using direct lithium extraction (DLE), a faster, more efficient and environmentally promising alternative to traditional lithium extraction methods and open pit hard-rock mines. Not only environmentally heavy, traditional methods are also relatively time consuming with extraction from brine sources potentially taking up 18 months, not conducive to meeting immediate market needs.
Chile, where the company operates, is one of the world’s largest lithium producers. The Salar de Atacama, or the Atacama Salt Flat, located in Northern Chile is the largest producing brine deposit in the world. Most of the projects that are operational here use evaporation pounds where the water from the aquifer is evaporated, depleting water resources in an already arid area.
“We are different,” explained CleanTech’s executive chair Steve Kesler. CleanTech plans on using the direct lithium extraction technology “We pump the brine from the aquifer, remove the lithium from the brine onto an absorbent and reinject the brine back into the aquifer.”
That way there is no water depletion from the aquifer. In addition, to keep its environmental impact low, the company aims to use renewable energy to power its production. Chile has one the largest national grids supplied by sources of renewable energy.
Kesler has over 45 years of executive and board roles in the mining sector across all the major capital markets including AIM. In terms of his direct lithium experience, he was the CEO/Director of European Lithium and Chile experience with Escondida and was the first CEO of Collahusi. He has also held senior roles at Rio Tinto and BHP.
Battery grade lithium
Not all lithium can be used to make rechargeable batteries. Battery-grade lithium products must be of the highest quality and purity, which makes them more complex to produce. New refineries tend to start by producing lower-quality, technical-grade lithium not suitable for batteries.
In CleanTech’s case a scoping study completed in 2023 shows that once operational the company could potentially produce 20,000 tonnes of battery-grade lithium carbonate equivalent (LCE) a year with very robust economics. Its operating costs of around $4,000/tonne are at the low end of the cost curve and compare favourably with market prices of between $10,600/tonne and $11,000/tonne.
Kesler noted that drilling over the last few years showed significant JORC compliant resource estimate of 1.63 million tonnes of LCE and that number is likely to rise as the company conducts more drilling. This resource equates to a multi-decade operation.
Laguna Verde Pre-Feasibility Study release and dual listing in Australia
The AIM-listed explorer developer has a portfolio of lithium brine projects in Chile led by Laguna Verde which is in the most advanced stage. The pre-feasibility study (“PFS”) on Laguna Verde is scheduled for the end of the first quarter of 2025. The company plans to start producing LCE by 2027.
One of the milestones this year will be the dual listing on the Australian Stock Exchange planned in the early part of this year, a move that was encouraged by CleanTech Lithium’s largest institutional shareholder, Regal Funds.
“They believe that when people see the quality of our project, we will see a rotation from hard rock (lithium) projects into our brine project and that we will see a rerating of our price. We are in the final stages of preparing a prospectus and are ready to go for the ASX in the next few months,” said Kesler.
In preparation for the listing CleanTech Lithium has completed a £2.4m book building exercise with strong support from institutional shareholders including Regal Funds, Athos and APAC and other sophisticated natural resource investors. The broker option included in the raise will allow additional existing shareholders to participate, with details to be announced in the RNS. The company plans to use the funds to progress its lithium projects. Existing retail shareholders also have the ability to acquire further shares through their intermediaries.
Chile, where CleanTech’s projects are based, considers lithium a strategic mineral reserve and is keen to develop some a number of salars. The country has identified 26 salars which could potentially be exploited and has put six onto a high priority, among those CleanTech’s Laguna Verde.
By the end of March, the government will announce whether the projects meet the criteria to go forward to direct negotiations on the terms of the operating contract.
“We believe we meet those terms, we made our application and there will be an announcement at the end of March,” Kesler said.
In the last month the company’s pilot plant has been producing very high-grade 99.78% lithium carbonate which exceeds the standard 99.5% requirement for battery-grade material. Over the coming months the company is expected to produce more of the material and to start providing larger quantities to potential offtake customers.
Once that is all done (production, PFS) the company will be in a good place to start substantive negotiations with strategic partners who can come into the project and take an equity participation, as well as bringing in the finance that is required to bring the project into construction and production.
Why lithium matters now
Another important factor is that governments are encouraging motor and battery manufacturers not just to decarbonise car manufacturing but to make sure that the supply chains of materials going into those batteries also come from sustainable sources.
Some of the hard rock projects in Australia and Africa are not only of inherently higher carbon intensity but also have to ship carbonate to China for processing, using largely coal-fired power.
CleanTech Lithium is in the position to be able to produce battery-grade clean lithium without leaving Chile, to feed into European and North American markets with the advantage of Chile having a free-trade agreement with the US.
Rising demand for lithium
Lithium demand from batteries has risen spectacularly over the last decade, expanding from only about 20% of total lithium demand in 2010 to now accounting for the use of over 85% of the lithium produced globally.
A lot of investors will be familiar with the use of lithium in EV batteries and the rising demand for electric cars but the other key area of lithium consumption, that of power storage, makes for less catchy headlines and is therefore frequently unjustly overlooked.
Energy storage is an area that is really taking off as we saw recently when China’s BYD Energy Storage, the sister company of EV maker BYD, signed the world’s largest grid-scale energy storage project with Saudi Electricity Company. The deal for 12.5 gigawatt hours is 15 times bigger than the largest battery storage currently in use and will be used to provide storage for Saudi Arabia’s renewable energy production which the country wants to multiply by 2030.
There is currently relatively ample supply of lithium available in the market which is also reflected in the price levels which are closer to what we have seen before 2020. However, the combined implication of EV and battery storage will continue to change that dynamic with tightness of supplies expected in two to three years’ time. According to analysts from Wood McKenzie the demand fundamentals “remain excellent, driven by the global push to decarbonise.”
