|
Cypress Development Corp (TSX-V:CYP), the micro-cap company with a HUGE
lithium resource in Nevada’s Clayton Valley, has reached another milestone
with the announcement of high lithium recoveries achieved during the process
of leaching lithium from claystones using sulfuric acid.
Currently in the prefeasibility stage of developing the Clayton Valley Lithium
Project into a mine, Cypress has partnered with Lilac Solutions out of
Oakland, CA, to extract lithium from the clay leachate using Lilac’s patented
ion exchange process.
Following initial engineering work on the Cypress leachate, Lilac was able
to recover a high percentage - over 80% - of the lithium. (More detail
provided below)
“Lilac’s results are promising and offers us another path forward to
effectively recover lithium from our process solutions,” said Cypress’ CEO,
Dr. Bill Willoughby, in a news
release. “Our project is a significant potential source of domestic lithium
and we are pleased to be working with Lilac in applying their ion exchange
technology.”
This announcement is important to AOTH subscribers and shareholders of
CYP, because it is a significant de-risking event. Between them Cypress and
Lilac appear to have cracked the code regarding the technical challenges
associated with extracting lithium from claystones - laying out a
clear path to commercial production of lithium carbonate and lithium
hydroxide - two crucial ingredients of lithium-ion batteries needed to power
electric vehicles, and also used in power tools and small electronic devices
like cell phones.
This article takes readers through the metallurgical process and
also puts Cypress’ accomplishment into perspective, as we show how the
United States is finally starting to build a “mine to battery” supply chain
for making electric vehicles.
Lithium claystones
There is a cheaper longish easy way way to make lithium carbonate or
lithium hydroxide - both of which can be used as the battery cathode in an EV
- and an expensive hard way.
The easier way is through lithium brine mining, the harder way is trying
to get lithium hydroxide from spodumene - a mineral that hosts lithium.
Brine producers in Chile and Argentina, and Albemarle’s Silver Peak Mine
in Nevada, produce battery-grade lithium through evaporation. Here’s
how the process works mining lithium from brines versus spodumene.
In brine operations, when lithium chloride reaches optimum concentration,
the brine is pumped to a recovery plant and treated with soda ash,
precipitating lithium carbonate. The carbonate is then removed through
filtration, dried and shipped.
The high expense and complexity of processing spodumene means that most
hard-rock or “pegamite” mines ship it to China for further refining.
Those that do this receive $900 a tonne at best for their low-grade (6%)
concentrate; brine lithium miners receive around $16,000 a tonne for lithium
hydroxide and $12,000 a tonne for lithium carbonate. Which business would you
rather be in?
There is another type of lithium deposit that is neither a pure brine
operation nor mined from pegamites. Last year we identified Cypress
Development Corp. (TSXV:CYP, OTCQB:CYDVF), a company with a very large
non-hectorite claystone lithium deposit close to the Silver Peak lithium mine
in Nevada.
The mine would be neither a hard-rock nor a lithium brine
operation, but rather, would process the lithium from clays in Nevada’s
Clayton Valley by leaching with sulfuric acid.
While there are large resources of lithium claystones in the
United States such as Cypress’ deposit in the Clayton Valley, the extraction
process has yet to be commercialized. If Cypress and Lilac continue to get
lab-scale success, followed by a pilot plant, commercialization will be the
next step.
The
Balance points out a number of approaches are available for
extracting lithium from clays. The US Bureau of Mines has reportedly
investigated lime-gypsum roast and chloride roast from spodumene and
amblygonite, which occurs in pegamite deposits. Extraction
techniques being explored include water disaggregation, hydrothermal
treatment, acid leaching, acid baking-water leaching, alkaline roasting-water
leaching, sulfate roasting-water leaching, chloride roasting-water leaching
and multiple-reagent roasting-water leaching.
A successful separation method such as that being pioneered by Cypress and
Lilac would be a lithium industry disruptor of huge significance. In fact the
prefeasibility study is being carried out at a very interesting time in the
industry, with a number of companies showing their willingness not only to
manufacture domestic EVs - the transportation technology of the future - but
also to make lithium-ion batteries and to mine lithium, in the
United States.
Need for local lithium
That’s key because currently, the US is about 70% dependent on foreign
companies for getting the lithium necessary for the cars of the future. Most
of the world’s lithium comes from Chile and Argentina, via brine operations,
and Australia’s hard-rock mines.
In 2008 the National Research Council saw lithium as potentially becoming
a critical mineral due to the expected growth of hybrid vehicle batteries.
Two years later the US
Department of Energy’s Critical Materials Strategy included lithium as one of
16 key elements.
Lithium is also among 23 critical metals President Trump has deemed
critical to national security; in 2017 Trump signed a bill that would
encourage the exploration and development of new US sources of these metals.
According to the USGS, the United States last year imported around half of
48 minerals last year and 100% of 18 minerals - including 100% of rare
earths, graphite and indium.
Benchmark
Mineral Intelligence calculates the US only produces 1% of global
lithium supply and 7% of refined lithium chemicals, versus China’s 51%.
The US government recently introduced bipartisan legislation, led by
Republican Senator Lisa Murkowski, to secure local mineral resources
including battery metals lithium, graphite, cobalt and nickel.
The
Newswheel reported that the pending bill, called the American
Mineral Security Act, “would help boost domestic production of minerals used
in making EV batteries” such as GM’s objective of “expanding its
battery-production facilities so it can introduce 20 new EV models by 2023.”
Buy American
This is excellent news for US-focused lithium juniors like Cypress
Development Corp. Protectionist President Donald Trump has even put the ball
in motion that will kick the door open to American manufacturers - albeit at
the expense of non-American companies.
On Monday Trump signed
an executive order, predicated on the 1933 Buy America Act, demanding
that 75% of any components that say ‘Made in America’ must be sourced in the
United States. Previously the American-content percentage was 50%. This means
“American-made” EVs and EV components must be three-quarters produced in the
US.
The order targets the steel industry, in that a higher content, 95% of the
iron and steel used in any public contract, must come from the US, something
Canada is not happy about.
540% increase in EVs
Right now, Tesla is the leading EV seller in the US; the California-based
firm partners with Panasonic, a Japanese company, to produce lithium-ion EV
batteries at its Gigafactory in Nevada. It's building another factory in
China.
But if current growth rates continue, Tesla may soon to be hit with an
onslaught of competitively priced models that will challenge its number one
market position.
Reporting on predictions for the US EV market, research firm IHS
Markit said 43 companies are expected to be offering EVs in the US
in seven years, compared to just 14 last year – accounting for 7.6% of new
vehicle sales versus just 1.1% in 2018. SUVs are expected to be a core target
market, reaching nearly 60% of total American EV sales by 2026, according to
IHS Markit.
The London-based firm notes that global EV sales surpassed 1 million units
in 2017 for the first time, and last year doubled to 2.1 million units sold.
US EV sales grew 79% last year, with the majority of the growth, 138,000
of 158,000 EV sales, coming from the Tesla 3 according
to EV-Volumes.
The inflection point in the United States is expected to come in 2026,
when the cost of electric vehicles will reach parity with gas or
diesel-powered cars, states a Deloitte
report on the battery-electric vehicle industry.
That year IHT Markit thinks electric vehicle sales in the US
will smash 1.28 million units, a whopping 540% increase from the 200,000 sold
in 2017, or a CAGR of 30.4%.
US mine to EV supply chain
The big question is, where are all the North American auto plants, once
they get re-tooled for EVs, going to get their batteries from?
We know from an announcement early this year, that Korean company SK
Innovation is planning on building a large battery plant in the United
States. In May ground was broken on the $1.67 billion facility, located in
Georgia. Lithium-ion batteries produced at the factory for electric and
hybrid vehicles will be shipped to Volkswagen’s electric vehicle assembly
plant in Chattanooga, Tennessee, which is under construction and expected to
open in 2022.
At full capacity the SK Battery America plant would produce enough
batteries to power 250,000 EVs per year. The company is also reportedly
mulling an expansion of the Georgia plant to as much as 50 GWh, from
the initial 20 GWh, by investing $5 billion.
Volkswagen
and Ford just announced they are teaming up to develop self-driving
and electric vehicles, by using Argo AI, an autonomous vehicle platform
company valued at $7 billion. Ford plans to use VW’s electric-vehicle
architecture to build EVs for sale in Europe starting in 2023.
In April the Ford Motor Company said it will make a $500 million
investment in Rivian, an EV start-up, to produce an electric vehicle.
The new model adds to an electric F-150 pickup truck and a Mustang-inspired
cross-over that are under development by the iconic auto-maker, The
Verge reported.
While most new battery cell manufacturing capacity is headed to Europe and
Asia, where automakers are more aggressively targeting EVs, two of SK
Innovation's customers - Mercedez-Benz and Hyundai-Kia Motors - will
need battery cells in the US.
Locating the EV battery plant in Georgia is strategic because Hyundai,
Mercedes and Honda operate assembly plants in nearby Alabama, while Mazda and
Toyota have broken ground on a factory in Alabama. Volkswagen already has an
assembly plant in Chattanooga, Tennessee.
“This is where the demand is concentrated,” said Jun Kim, the president
and CEO of SK Innovation, quoted
in a recent transportation publication’s post.
Automakers throughout the world are reportedly planning
to spend at least $300 billion on EVs within the
next five to 10 years - with $135 billion directed to China,
currently the largest EV market - but also the United States.
Major investments in the hundreds of millions and billions by some of the
world’s largest EV automakers and battery-cos give us a good look at what
could be a future electric vehicle ecosystem, where batteries are made in the
United States possibly even from metals mined in America -
like lithium, nickel, cobalt and graphite - then sold to EV makers in the US
- likely the southeastern US anchored by SK Innovation’s huge battery plant
in Georgia.
The announcement a few weeks ago by Schlumberger, the world’s largest
oilfield services firm, that the USD$50.5-billion market cap company has
invested $2 million for Pure Energy’s (C:PE) lithium brine project in the
Clayton Valley, appears to support this thesis.
Oilfield services does not seem to be paying off quite so handsomely as in
the past. If Schlumberger is intent on getting into the US lithium business I
very much doubt that the story stops with Pure Energy. Time, as always, will
tell.
Tesla
has a secret lab trying to build its own battery cells to reduce dependence
on Panasonic
Meanwhile Tesla’s massive lithium battery plant, Gigafactory 1, in
Sparks Nevada, was built to supply Model 3 electric motors and battery packs
along with Tesla’s energy storage products. Panasonic makes Tesla’s EV batteries;
the individual cells are assembled into battery packs for the cars at the
Sparks plant.
Elon Musk, Tesla’s CEO, recently talked about plans to ramp up car
production and to start mass-producing electric pick-ups and electric Class 8
semi trucks by the end of 2020. Musk added these plans are dependent on Tesla
being able to manufacture a lot more lithium-ion battery cells.
Once Tesla increases production to a “very high level it will look
further down the supply chain and get into the mining business” said
Musk.
Reuters
reported Tesla’s head of minerals procurement said that the company
expects global shortages of lithium, copper and nickel in the near future.
More good news for Cypress and other lithium juniors exploring in the
US.
Finally, Albemarle, the world’s largest lithium producer, is developing
a battery research center near its headquarters in North Carolina,
as a way to distance itself from its nearest competitors, Chile’s SQM
and Tianqi Lithium, from China. Albemarle wouldn’t be wasting money
on battery R&D if it didn’t think there is an even larger market for
its lithium products, including the States.
How
lithium-rich Chile botched a plan to attract battery makers
Cypress Development Corp
Cypress Development Corp (TSX.V:CYP) has an elephant of a lithium resource
in Nevada’s Clayton Valley next to Albemarle’s Silver Peak lithium mine, the
only current US producer. Nevada for those who don’t know is the most
mining-friendly state in the US. There are no issues expected with permitting,
no tariffs to worry about, and infrastructure and labor are close by.
Cypress’ Clayton Valley Lithium Project hosts an Indicated
Resource of 3.835 million tonnes LCE and an Inferred Resource of 5.126
million tonnes LCE. This ranks the project among the largest in the world.
A
preliminary economic assessment (PEA) published last October showed
an outstanding net present value of $1.45 billion at an 8% discount rate,
yielding an internal rate of return (after tax) of 32.7%. Payback is just
under three years.
Metallurgy
The size of a lithium deposit is of limited value if the metallurgy
doesn’t work. Importantly CYP’s deposit contains non-hectorite clay, meaning
the process to separate the lithium from the clay is simpler and less costly
than clay containing hectorite.
The completion
of the PFS first phase confirmed that lithium can be acid-leached to between
75% and 83% extraction with sulfuric acid consumption of between 85
and 132 kilograms per tonne – in line with the 125 kg/t estimated in the PEA.
The tests also showed impurities such as magnesium - which can significantly
increase the complexity and costs of processing lithium, are controlled
through conventional processing.
The next stage of the prefeas is to produce lithium carbonate or
lithium hydroxide that can be marketed to end users.
Getting there will be a lot easier thanks to the collaboration between
Cypress and Lilac Solutions. The PFS incorporates Lilac’s patented ion
exchange process.
Cypress’ technology reduces the sulfuric acid needed to leach the lithium
from the clay, which saves production costs. After the lithium gets leached
into a solution, it is fed into conventional process equipment to produce a
high-purity lithium carbonate or lithium hydroxide product.
According to Cypress’ news release, during testing, Lilac was able to
recover 83% of lithium from the leachate while simultaneously rejecting more
than 99% of sodium, potassium, and magnesium impurities. The remaining
lithium in the leachate would be recycled back to the leaching stage for
recovery.
Lilac’s founder and CEO, David Snydacker, said the company is pleased
to work with Cypress, which he noted has one of the largest lithium resources
in the United States, to take the project to commercial production. He
added:
“The United States is home to a variety of important players in the
electric vehicle sector and is an epicenter for innovation. This Nevada
project has the potential to deliver the critical raw material needed by
every North American automaker to compete over the next decade.”
Next steps
The next steps for Cypress/ Lilac include more testing to demonstrate that
lithium products can be reliably, and commercially produced. This will entail
further bench-scale testing, followed by a larger bulk test using a pilot
plant which CEO Bill Willoughby says they are planning.
In an earlier interview Dr. Willoughby told AOTH the plant would likely
cost $2-3 million, processing a bulk sample of between 100 and 1,000 tonnes
of material. A relatively small pilot plant could be set up a long distance
away, whereas something larger would have to be built within close
proximity to the project. The CEO said they’ve already identified a
couple of locations that have power, a water supply and tailings disposal.
Conclusion
I’m satisfied that Cypress is moving this project forward. In fact, it’s
more than that. If they can successfully up-scale the lithium extraction
process to a pilot plant, and reliably produce lithium carbonate and
hydroxide, Cypress/ Lilac will be pioneers in commercializing a lithium
claystone deposit.
Also of interest is the market that appears to be developing around
vehicle electrification - now would be the perfect time to score an offtake
agreement with Cypress.
I’ll be watching for more announcements from CYP regarding the second
stage of the prefeas, plans for a pilot plant a pilot plant and an
agreement with a major player in the lithium/battery/EV sector as the summer
rolls on.
Cypress Development Corp
TSX-V:CYP, OTCQB:CYDVF
Cdn$0.205 July 17th
Shares Outstanding 74.6m
Market cap Cdn$15.2m
Cypress website
*****
subscribe
to my free newsletter
Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or
the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources he
believes to be reliable but which has not been independently
verified. Richard Mills makes no guarantee, representation or warranty and
accepts no responsibility or liability as
to its accuracy or completeness. Expressions of opinion are those of
Richard Mills only and are subject to change without notice. Richard Mills
assumes no warranty, liability or guarantee for the current relevance,
correctness or completeness of any information provided within this Report
and will not be held liable for the consequence of reliance upon any opinion
or statement contained herein or any omission. Furthermore, I, Richard Mills,
assume no liability for any direct or indirect loss or damage or, in
particular, for lost profit, which you may incur as a result of the use
and existence of the information provided within this Report.
Richard owns shares of Cypress Development
Corp (TSX.V:CYP).
|
