America’s Battery-Powered Car Hopes Ride on Lithium. One Producer Paves the Way.

America’s Battery-Powered Car Hopes Ride on Lithium. One Producer Paves the Way.

14:45 - The rolling hills of North Carolina’s Piedmont region are an unlikely setting for a next-generation technology transformation that has become a national priority.

Lamont Leatherman, a 55-year-old geologist who grew up here, is its unlikely instigator. A decade ago, he combed the woods near his childhood home in search of lithium, a soft, white metal he believed would be crucial to the burgeoning industry of electric vehicles.

Now, the company he helped found five years ago to explore the region, Piedmont Lithium Ltd. PLL 21.71% , has deployed drilling rigs throughout the 2,300 acres it owns or controls to map out deposits. The company is preparing to launch one of the first big new lithium mines in the U.S. in decades.

Lithium is an increasingly crucial material, central to the rechargeable batteries that power cellphones and electric cars. These batteries are becoming a disruptive force in the energy sector as well. Demand, especially from vehicles, is expected to surge, and controlling the resources that power them is the 21st-century version of oil security.

For now, the U.S. remains largely reliant on China and other countries for lithium, having fallen far behind in mining and refining it. Piedmont is at the leading edge of efforts to build an American supply chain for the highly conductive, ultralight metal—and its fate will be a sign of whether the U.S. can succeed.

The modern lithium-mining industry started in this North Carolina region in the 1950s, when the metal was used to make components for nuclear bombs. One of the world’s biggest lithium miners by production, Albemarle Corp. , is based in nearby Charlotte. Nearly all of its lithium today, however, is extracted in Australia and Chile, which have large, accessible deposits of the metal.

Only about 1% of global lithium output is both mined and processed in the U.S. China, with a huge chemical industry and low costs, unearths about 10% and processes about two-thirds of what’s dug up.

Scientists say switching from fossil fuels to batteries will be crucial to reducing carbon-dioxide emissions, a key contributor to climate change. Although it’s a messy process, increasing domestic production of lithium is vital for the U.S. to support its auto industry and meet its climate goals, analysts say.

President Biden signed an executive order in late February calling for a review of supply chains for critical materials, including those needed for electric cars, such as lithium. The government has said that relying on overseas sources for these materials creates a “strategic vulnerability” to the U.S. economy.

Piedmont is still about two years away from pulling lithium out of the ground in North Carolina. Last September, it announced a deal to supply lithium to Tesla Inc. once its mine comes into operation. The company plans to spend more than $500 million to build a pair of plants to extract lithium.

“We’re going to build a big business here,” said Chief Executive Keith Phillips, a former mining banker for firms such as JPMorgan Chase & Co.

Piedmont’s U.S.-listed shares recently hit $80, up from $11 before the company unveiled the Tesla deal. The surge briefly gave the company a market value above $1 billion.

Exploration is well under way. In January, a small team of workers bored tubes hundreds of feet into the earth to map the deposits of lithium several miles north of the original mine that produced lithium for bombs. Spodumene, the mineral that contains lithium, is abundant in what’s known as the Carolina Tin-Spodumene Belt.

While Piedmont is one of the farthest along, exploration efforts by others are under way in Nevada, California and Arkansas.

Although lithium deposits can be found all over the world, it’s difficult to turn them into the chemicals that power batteries. Refining the metal involves large amounts of equipment and intricate chemical processes that can cause water and soil pollution without proper controls. It can take five or more years for a new lithium-mining operation to produce battery-grade materials, experts say.

Australia was the biggest lithium producer last year, with nearly 140,000 metric tons, according to Benchmark Mineral Intelligence, which tracks products in the lithium-ion battery supply chain. Chile was the second-biggest, with almost 100,000 tons, followed by China at about 35,000.

The U.S. produced roughly 3,000 tons, but it has among the largest resources in the world, according to the U.S. Geological Survey. The trouble is that at today’s prices, much of that American lithium is too expensive to pull out of the ground.

Much of the lithium mined in the world today comes from two sources: a salty brine that’s pumped out of the ground, in countries such as Chile, and spodumene, the mineral contained in hard rocks found in places such as Australia and North Carolina. Chemical processes are then used to make the compounds that go into batteries.

Processing plants, which can cost several hundred million dollars, are about half as expensive when they’re built inside China. The country also has looser environmental regulations for mining and chemical processing than in much of the Western world.

Piedmont is betting government support, demand from electric-car makers and a solid supply of raw materials close at hand can make its processing plants profitable. It and other lithium companies are wagering that soaring demand will push up lithium prices.

While China powers many of its plants with coal, Piedmont plans to use solar and natural gas. Like most startup exploration companies, it will likely need a deep-pocketed partner or lender to help develop the mine site itself.

Piedmont might be one of the few new sources of lithium world-wide with enough investment to come to market in the next two to three years, analysts say. That constraint is a major reason Benchmark sees supply only doubling from this year to 2025, even as demand rises more quickly.

Once it’s operational, Piedmont expects to produce 160,000 tons a year of concentrated spodumene, yielding 22,700 tons of refined material. That could represent several times more output than current U.S. production, but still not nearly enough to meet expected demand.

Rich veins
Piedmont got its start more than a decade ago, when Mr. Leatherman heard about a boom in lithium prices at a conference in Toronto. Prices for gold, one of his specialties, were plunging due to the global financial crisis.

Mr. Leatherman thought back to the green-striped rocks in the yard of his childhood home in North Carolina. The rocks contained rich veins of lithium. “I had no idea they were going to be special,” he said.

He obtained decades-old U.S. Geological Survey maps that detailed lithium deposits in the region. Braving ticks and snakes in the forests and hills nearby, Mr. Leatherman cracked open rocks with his hammer to expose the lithium inside.

Lithium’s boom-and-bust cycles have made it an unforgiving commodity to produce. The price soon fell, and Mr. Leatherman set aside his maps and eventually turned to blueberry farming on Vancouver Island, off Canada’s west coast. He also pursued a gold project in South Carolina.

Prices had begun to rise again when Taso Arima, an Australian with a background in coal-mining finance, contacted him in 2016. Mr. Arima had moved to the U.S. a year earlier to develop a coal project in Kentucky, but he was worried the fossil fuel faced a long-term decline.

“The writing was on the wall for coal,” said Mr. Arima, 36.

Looking to transition toward clean-energy materials such as lithium, he came upon a news article about Mr. Leatherman’s earlier prospecting work. Soon Mr. Leatherman was leading him on a tour of the area that he’d surveyed years before. Lithium-bearing rocks were just laying on the ground, Mr. Arima said.

Mr. Arima helped arrange investments through an Australian shell company, which raised several million dollars in seed capital to launch the firm.

Mr. Leatherman began meeting with nearby landowners to negotiate agreements to explore on their property. Being a local helped, he said. Now the company’s chief geologist, he splits his time between Vancouver Island and North Carolina.

In 2017, Piedmont hired Mr. Phillips as CEO, giving the company a direct line to financiers on Wall Street.

Lithium prices grew. Benchmark’s price index that tracks prices of several different lithium chemicals used in batteries peaked in early 2018. Then came the inevitable bust, as producers, lured by high prices, flooded the market. By the end of last year, prices were down by about two-thirds. Industry analysts say that of the roughly 200 companies in the lithium business when prices peaked, nearly all of them have failed.

Few are predicting another bust. Analysts expect the growth of electric cars will cause lithium demand to triple in the next five years, far outpacing current supply. Lithium prices this year notched their two biggest monthly increases ever, rising about 33% from the end of 2020, according to Benchmark’s index.

Average prices for one battery chemical, lithium carbonate, have risen to around $9,000 per metric ton, from $6,000 at the end of last year, buoyed by Chinese demand. They peaked at $17,500 in 2018.

Years of low prices and weak investment in new mining projects have now set the stage for a possible scarcity, executives say.

“What we have today is this really dangerous place for the growth forecasts of the EV industry,” said Paul Graves, CEO of Philadelphia-based Livent Corp. , one of the largest producers in the world, with operations in North Carolina, Argentina and China. “There will be a massive shortage of lithium at some point.” Livent is a supplier to Tesla and recently announced a supply agreement with BMW AG .

EV shift
For the auto industry, plentiful lithium is crucial to the shift to electric cars. Electric vehicles are expected to account for about 50% of all vehicles produced in the world by 2030, according to UBS Global Research, up from about 3% to 4% today.

Batteries account for between 30% and 40% of the cost of most electric cars, and a surge in lithium prices could slow the decline in prices necessary to make them attractive to a swath of consumers.

To keep supply coming, Tesla Chief Executive Elon Musk last year announced an unprecedented move by an auto maker into commodities markets, including lithium. The auto maker has pledged to produce its own lithium in the Nevada desert.

Lithium Americas Corp. , a Canadian mining company, in January raised $400 million, part of which it said will help fund a Nevada project to extract lithium from clay deposits.

Albemarle said it’s considering reopening some long-mothballed lithium mining assets in Kings Mountain, N.C., but it doesn’t currently have firm plans to do so. Eric Norris, president of Albemarle’s lithium business, said the company has spent more than $30 million over the past few years to assess the area. It is investing between $30 million and $50 million to expand production at a lithium project in Nevada.

Investors including Warren Buffett’s Berkshire Hathaway Inc. and a fund run by Bill Gates are also backing companies seeking new ways to extract lithium as part of a global rush of firms trying to break into the sector.

There is no public market to bet on higher lithium prices in the future like there is for commodities like oil and gold, so investors have bet on the stocks of lithium miners. Shares have been volatile lately as investors retreat from hot stocks tied to electric cars, but Albemarle has still gained about 60% since the end of September. Shares of Livent have added 80%. The market value of Lithium Americas, which is also trying to produce in Argentina, approached $3 billion in January before a recent retreat.

To meet expected demand, said Robert Mintak, CEO of Standard Lithium Ltd., “you’re going to need not just one success story.” The company is working with a German company to produce lithium chemicals in Arkansas, where it has a test plant already in place.

Mr. Mintak recently counted 140 lithium-ion batteries in his home from his family’s current and old electronics. He used to run a lithium firm trying to produce in Nevada that reached a supply agreement with Tesla in 2015. The company still hasn’t finished its project.

One risk to lithium miners is that demand doesn’t materialize, or a new battery technology reduces the amount of lithium needed.

“You can still paint a lot of scenarios in both directions,” said Mathew Lazarus, managing member at New York-based hedge fund Red Hook Asset Management LLC, who invests in lithium companies.

Mr. Arima of Piedmont Lithium said he isn’t concerned. As competition among nations for control of the lithium-ion battery supply chain ramps up, he expects more resources, and investors, to pour in.

“We need to do it here in America,” he said. “It’s part of our future. We can’t rely on overseas supply chains.” es un sitio web oficial del Gobierno Argentino