The future of lithium

Tecpetrol steps up its bet on lithium for the energy transition

With demand surging for electric cars, more lithium will be needed for batteries. This is encouraging more companies to acquire acreage, including Tecpetrol. Exploration must be widened to boost production.

#9-December 2023

There has been a rise in the acquisition of lithium assets in the high altitudes of northwestern Argentina as more companies bet on the growth potential for the metal. This is not surprising. Lithium is a key material for the energy transition to net-zero carbon dioxide emissions, and developers are seeking to ramp up production to meet an expected surge in demand for its use in batteries, especially for electric cars.

More people are buying electric cars. Makers of electric vehicles are expected to ship 15.4 million units globally this year, including battery electric and plug-in hybrid models, up 34% from 11.5 million in 2022, according to the latest forecast by Gartner, a research and consulting firm. The shipments are estimated to increase 20% in 2024 to 18.5 million units.

“We expect electric car sales to continue growing,” says Federico Sulprizio, Tecpetrol’s Senior Manager of Energy Transition Planning.

Electric vehicle sales, including cars, buses, heavy trucks and vans, likely will increase 2.5-times to 40 million units in 2030, up from 15 million in 2022, he says.

This bodes well for lithium, the material of choice for car batteries. Lithium-ion batteries are favored by carmakers for their high power-to-weight ratio and energy efficiency, as well as their solid high-temperature performance, long life, and low self-discharge.

The rising demand for electric cars should sustain the price of lithium, which after surging to $80,000 per metric ton last year from a steady $10,000-$15,000 over the previous few years, is expected to average between $23,000 and $35,000 in the medium term and $20,000 in the longer term, Sulprizio says.

Keeping up with demand

The biggest sources of production are Australia, Argentina, Chile and China, which together with other suppliers are expected to produce 1 million tons this year, up from 700,000 in 2022. "That’s still shy of the 2.5 million tons needed to meet demand for use in car batteries in 2030, meaning that production must grow fast," Federico says.

Argentina is expected to produce 40,000 tons this year, with three projects in production in the northwestern provinces of Catamarca and Jujuy. With the expansion of existing projects and the entry of a new one, production is expected to reach 100,000 tons in 2024 and 250,000 tons in 2025, according to Sulprizio.

Tecpetrol recently picked up more lithium assets in Argentina through the acquisition of a controlling stake in Canada-based Alpha Lithium, with some 30 employees. Alpha has acreage in the Salar de Tolillar and Salar del Hombre Muerto salt flats. Both are located in the Argentine Puna, a high-altitude region that forms part of the so-called lithium triangle shared by Argentina, Bolivia, and Chile.

At Tolillar, Tecpetrol gained 2.5 million tons of lithium carbonate equivalent in place. A total of 27 wells have been drilled there, including brine, industrial water, piezometers and diamond.

"Tolillar is a clastic salt flat that is geologically very heterogeneous and has a high structural complexity, which means that studies are lacking to fully understand what pore volume the salt flat has and how it is distributed," says Josefina d'Hiriart, Reservoir Geologist Expert.

In Salar del Hombre Muerto, it is estimated that there are more or less 1.7 million tons of lithium carbonate equivalent in place. “Although only two brine wells were drilled in Alpha's properties in Salar del Hombre Muerto, there is more knowledge. This is due to the exploratory activity carried out by companies with properties adjacent to Alpha's, where the resource and productivity have already been proven," d'Hiriart says.

Alpha’s project with the most potential is Tolillar in Salta.

Francisco Grosse, Business Development Senior Manager at Tecpetrol, describes this asset: “With 27,500 hectares and 3,650 meters above sea level, Tolillar has potential to produce 50,000 metric tons of lithium carbonate equivalent per year. Alpha owns 100% of the salt flat, meaning that there are no competitors for the resource and water supplies. A total of 29 wells have already been drilled, with only 32% of the concession explored. There are ample fresh water supplies available.

“This made Alpha attractive for acquiring at a time when more companies were buying assets in Argentina, led by Chinese companies paying above-market prices. Indeed, Alpha sought to sell the asset to a Russian company, but the deal fell through after the start of the Ukraine war. A law in Canada – the Investment Canada Act – subsequently shut out buyers from China and Russia from acquiring critical mineral assets in that country, leaving players in the West with the chance to bid for Alpha. Tecpetrol had a unique competitive advantage over most other potential bidders. We know how to operate in Argentina, a market of excessive economic and political volatility.” explains Francisco Grosse.

With 27,500 hectares and 3,650 meters above sea level, Tolillar has potential to produce 50,000 metric tons of lithium carbonate equivalent per year.

Lithium from low-quality brine

Alpha is part of Tecpetrol’s larger push into lithium. A first project was to build a lithium pilot plant in the high altitudes of Olacapato, Salta, the first of its kind in Latin America. The quick-to-build and low-cost plant processes 1,000 liters of brine per hour to test all types of brine using an innovative technology for direct extraction. The plant has recovered good amounts of lithium even if fed with very poor-quality brine, boosting the potential of developing salt flats that may have been overlooked for the low levels of lithium and doing this sustainably, such as by returning the brines to their sources of origin.

This will help Tecpetrol widen its own exploration, including in a lower-elevation salt flat in Jujuy. This salt flat, called Guayatayoc, has several advantages over others in Argentina. The first is that it can be reached by a paved road in 2.5 hours from the province’s capital, San Salvador de Jujuy. The second is that at 1,400 meters above sea level, altitude is not a problem compared with other projects at 4,000 meters or higher. Guayatayoc is also supplied with electricity and natural gas.

“You don’t get all this in other projects in Argentina,” says Ticiana Caruso, Tecpetrol’s Business Development Manager who is leading the project.

There are challenges, of course. The first is that Guayatayoc is largely unexplored, meaning that lithium may not be found in a large enough concentration or volume for the project to be economically viable. The second is that to even start the project the company must get the approval of the local indigenous communities.

The risks led Tecpetrol to structure its exploration investment under a three-year contract with the option to buy, a process that will allow it to de-risk the project without major upfront spending and the opportunity to exit.

“This is an opportunity to enter the world of lithium with a low initial exposure,” Caruso says.

Seeking a social license

To develop Guayatayoc, the biggest challenge will be to convince the local communities. Tecpetrol plans to do this with the other companies with acreage in the area, including the local oil producers Pan American Energy and Pluspetrol and the Australia-based lithium producer Vulcan Energy Resources. This will involve a communications campaign in 2024 to demystify the supposed risks of the lithium business, in particular for access to land and water, much like what was done to gain widespread approval for developing the Vaca Muerta shale play in Patagonia, now the largest source of oil and gas in Argentina.

If all goes well, exploration will start in 2025, including with the drilling of six wells to appraise the potential. Earlier seismic data for oil suggests that the basin could stretch down for 3,500 meters to 5,000 meters, which is not common in the salt flats of Argentina. Tecpetrol plans to drill to a depth of up to 2,000 meters to test the potential, which will require an investment in technology given that lithium drilling equipment isn’t designed to go deeper than 800 meters.

Following the appraisal period, Tecpetrol will seek further environmental and social licenses, allowing it to advance to the production stage, which calls for drilling 16 wells in 2027 and building a plant with 20,000 meters of capacity to go into operation in 2029.

This will complement the larger investment in Tolillar, where the company is seeking to reach 20,000 tons per year in production by 2028 and 30,000 by 2029.

With all the production potential in these assets, Tecpetrol is doing its part to meet rising demand for lithium in the transition to a cleaner and greener future.