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.
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.”
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.
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.
Listen to an Ahead of the Herd interview with Bill Willoughby, explaining what was achieved in the first stage of the PFS.
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.”
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.
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
Cdn$0.205 July 17th
Shares Outstanding 74.6m
Market cap Cdn$15.2m
Richard (Rick) Mills
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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
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Richard owns shares of Cypress Development Corp (TSX.V:CYP).