Lithium mining techniques increasingly under ESG scrutiny – report

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According to Fitch, ESG-minded investment principles will take center stage and change the way lithium producers do business.

More than half of the world’s lithium reserves are found in what is known as the “lithium triangle”, covering parts of Argentina, Chile and Bolivia. Historically, the extraction in the salt works of the triangle of lithium has been very water intensive, requiring approximately two million liters of water per tonne of lithium extracted.

This poses a significant risk of water scarcity for future agricultural needs in a region that already has a reputation for being one of the driest places in the world, Fitch said.

Car makers operating inside the EU have already started investing in more sustainable mining techniques, putting pressure on lithium producers

Added to the water shortage in the main lithium-producing regions, Fitch argues that the threat of pollution of local water supplies will lead to a persistent risk of social unrest and a growing risk of opposition to lithium operations and new projects.

Large evaporator pools, which typically last over a year, can leak toxic chemicals and contaminate bodies of water.

Fitch cite two examples.

In Tibet, a chemical leak from the Ganzizhou Rongda lithium mine in 2016 damaged the Liqi River ecosystem and resulted in massive fish deaths. The local community, in turn, protested against lithium mining. Within the lithium triangle, indigenous communities have spoken out against lithium mining.

In October 2019, indigenous Chileans from the Atacama salt marshes blocked access to local lithium operations, supporting protests against social inequalities and protesting the environmental impacts of lithium mining within their community.

“We expect that consideration of local communities will become a non-negotiable element in lithium developments in the medium to long term, as ESG funding requirements tighten.” Fitch said. “This could present challenges for countries looking to increase lithium production during our forecast period against a backdrop of growth in the sector. For example, the Fernández administration in Argentina aims to increase annual lithium carbonate production from 40,000 tonnes currently to over 230,000 tonnes by the end of 2022. “

As part of the European Green Deal, the European Commission proposed in December 2020 that from July 2024, only rechargeable electric vehicles (EVs) and industrial batteries with a declared carbon footprint be allowed in the EU.

ESG investing is more and more common. In November 2020, the Partnership for Carbon Accounting Financials rolled out the Global Green House Gas Accounting and Reporting Standard for the financial sector, putting emissions associated with the lending and investing activities of banks and investors at the forefront of attention. public.

Automakers operating inside the EU have already started investing in more sustainable mining techniques, putting pressure on lithium producers.

In January, BMW announced that it had commissioned a study from the University of Alaska at Anchorage and the University of Massachusetts at Amherst to analyze water use by various lithium mining techniques in South America. The results of the study should be available in the first quarter of 2022 and will increase transparency regarding the environmental impact of different technologies.

Existing lithium producers are already responding to emerging concerns about their extraction techniques. Chilean state-owned lithium producer Sociedad Quimica y Minera (SQM) has pledged to reduce the use of fresh water. In October 2020, the SQM pledged to reduce the use of fresh water in the Salar de Atacama saline by 30% immediately from 2019 levels and by 50% by 2030.

Meanwhile, new players are advancing mining techniques that have the potential to increase lithium supply. Lake Resources and Standard Lithium have developed direct lithium extraction (DLE) techniques that claim to reduce environmental impact compared to traditional evaporation methods.

“We expect DLE technology to dominate the future lithium mining industry in geothermal brines in Europe and the UK, as well as in salt marshes in South America,” says Fitch.

Meanwhile, Fitch postulates that geothermal lithium mining techniques will gain popularity among Western consumers. Geothermal lithium mining has a much smaller carbon footprint than hard rock and brine mining methods, as well as reduced water consumption.

In turn, carbon-free lithium products will sell for a higher price than hard rock mines.

While geothermal lithium mining will dominate lithium production in the future, which mining technique will be the second most popular will depend on technological readiness and demand for lithium carbonate relative to the market. lithium hydroxide.



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