Bottled Lightning

by Seth Fletcher

  Earlier that year, Tahil had published another paper. That one was called “Ground Zero: The Nuclear Demolition of the World Trade Centre.” He argued that two “clandestine” nuclear reactors, buried some 250 feet below the World Trade Center, were deliberately melted down, Chernobyl-style, at the same moment the hijacked airliners hit the Twin Towers on September 11, 2001. No “let it happen on purpose” for Tahil. Not even the kind of controlled implosion that commercial firms use to take down buildings could explain to Tahil the events of that day. Instead: “The evidence is overwhelming and incontrovertible that the Twin Towers were subjected to far more than just a conventional Controlled Demolition. They were each pulverized to dust by a Nuclear Explosion.” Who buried these secret nuclear reactors beneath the World Trade Center? Who sabotaged them that morning? Tahil did not claim to know. But, as he pointed out, the first atomic bomb test was called Operation Trinity, and “It is interesting to note that the church at the WTC was called Trinity Church.”

  This didn’t damage Tahil’s credibility. At least not right away. Numerous media outlets seized on Tahil’s warning about “peak lithium,” and soon the public was being bombarded with the notion that because of a critical resource shortage, the electric-car revival was doomed before it even began. Tahil was quoted in mainstream publications like Forbes and industry magazines like Chemical Week. Every newspaper or magazine story on the lithium-based electric-car revival suddenly seemed to contain a boilerplate warning from Tahil on the consequences of dependence on lithium-ion batteries.

  Each of those stories also tended to contain a rebuttal from the geologist R. Keith Evans. “It was total bullshit,” Evans told me. We were walking down a hallway at Caesars Palace in Las Vegas, where I had intercepted him as he headed to the casino for a cigarette. I had come to the second annual Lithium Supply and Markets conference looking for the truth behind the lithium-supply debate, because even though Tahil had turned out to be a little unhinged, that didn’t necessarily mean his math was wrong. Plenty of credible people had also been expressing unease about the reliability of world lithium supplies. Donald Sadoway, for example, a proud ambassador for electrochemistry, had soured on lithium because of such concerns. “I started asking, how much lithium is there on the planet that’s readily available?” he said. “Where are the decent lithium resources? They’re in surface brines on the border between Bolivia and Chile and in China. It’s not the Middle East, but it’s not Utah. So I started thinking—are we going to trade in importation of petroleum for importation of lithium? And what’s to stop the people that have lithium from arbitrarily raising its price, so we go from OPEC to LiPEC? Or the Organization of Lithium Exporting Countries—OLEC?”

  There, on the long escalator down to the casino, Evans explained how he became involved in the peak lithium debate. I hadn’t asked how the feud started. I had actually asked him why Toyota, a rich source of anti-lithium-ion talking points in the months after the Chevy Volt unveiling, had recently taken an ownership stake in a minor lithium producer called Orocobre. But for Evans, the story began with Tahil. Once Tahil’s paper grabbed the public consciousness, Evans suggested, every major business contemplating a future involving large-scale purchases of lithium probably told their procurement offices and analysts to look into the situation and, if necessary, to guarantee a supply.

  It all happened quickly. Two years after the Volt’s debut, the London-based trade magazine Industrial Minerals convened the first Lithium Supply and Markets conference in the lithium capital of the world, Chile. A year later, by the second meeting, Toyota had come around so strongly that they were now part owners in a company whose mine wasn’t even operating yet, whose only selling point was a claim to a promising salt flat in the far north of Argentina.

  The doomsaying about lithium supplies continued, despite Evans’s best efforts. When Tahil published “The Trouble with Lithium,” Evans, who had spent nearly forty years studying lithium supplies—first, in the early 1970s in Zimbabwe, and then during the false start of the late 1970s in the Salar de Atacama, the world’s largest and purest active source of the mineral—was apoplectic. “And so I decided that I had to come out of retirement.”

  In response to Tahil, Evans wrote his own estimate of the world’s lithium supply, a white paper called “An Abundance of Lithium.” In it, he told of an urgent conference that the U.S. Geological Survey held in 1975 to warn of an impending shortage of lithium from the year 2000 on—for use in nuclear fusion reactors. That scare generated the first serious estimate of global lithium supply. In the years after the 1975 conference, data on lithium abundance multiplied, and when Evans wrote his reply to Tahil, he explained that the current global lithium deposits amounted to some 28.4 million tons of lithium (or 150 million metric tons of lithium carbonate, the most common form in which lithium is produced and sold). The annual demand for lithium was 16,000 metric tons. Particularly after taking into account the rush of exploration and research that was accompanying this burgeoning lithium boom, there seemed to be little to worry about.

  The fencing continued. Tahil hit back with “The Trouble with Lithium 2: Under the Microscope,” this time addressing Evans by name and accusing him of confusing the abundant theoretical supply of lithium contained in Earth’s crust with lithium that was economically extractable.

  Evans lost his patience. He posted a response paper online that was part lithium-reserve update—estimating upward based on new exploration and information—and part direct attack on Tahil.

  Estimated global lithium reserves and resources are increased slightly from the earlier figure to 29.9 million tonnes Li.

  This revision is written in response to a recent report which is alarmist in its gross underestimate of resources and, in several respects, ludicrous.

  That was the entire abstract.

  Nonetheless, governments, brokerage houses, automakers, and electronics manufacturers were all in Vegas that week, all of them eager to understand the supply of the mineral that suddenly appeared as if it would be essential for energy storage for decades.

  At the cocktail reception the night before the conference began, five showgirls in full peacock-feather undress danced to “Viva Las Vegas” before a Tesla Roadster, two electric motorcycles, and a DeLorean that had been converted into an electric car. The crowd was young, predominantly male, and had come prospecting from Japan, South Korea, France, Germany, Switzerland, Italy, Chile, Bolivia, Peru, Argentina, Brazil, Mexico, Canada, Australia, Norway, Serbia, the United Kingdom, and various American states.

  Around a standing table in the middle of the convention center meeting room, I talked to two employees of the U.S. Defense National Stockpile Center, one of them a thirtyish guy who confessed to being gleefully ignorant about the lithium markets and lithium-ion batteries in general. He had no idea that the lithium-ion batteries that would soon go into electric cars were made of a different combination of elements from the batteries in his cell phone. I asked whether he would be attending the “field trip” at the end of the week, a charter flight to northern Nevada to visit the site of what could soon be the only large-scale lithium mine in the United States—a source of lithium in the lower forty-eight large enough that, according to the company developing the property, it could theoretically supply the entire world. He was not. “Are you kidding? The government is paying for this.” (The field trip cost $1,350.)

  The next morning I ran into Defense National Stockpile in the maroon-carpeted hall just as the opening presentation was beginning. He looked rough. Vegas. “I was out laaate,” he told me conspiratorially. “That’s why I’ve got the coffee and the Gatorade.”

  “The biggest weakness we have in our system is policy makers’ ignorance,” said the opening speaker, Gal Luft of the Institute for the Analysis of Global Security. “Go to the records: When was the last time the word ‘lithium’ was mentioned in Congress? Never. Government officials know absolutely nothing about this. They know about as much as we know about the ing
redients in our food. They don’t know and they don’t care.”

  Luft was not arguing that a lithium shortage was likely. He was actually arguing that a shortage of everything else that goes into an electric car—particularly rare-earth metals, which are essential for building the permanent magnets that drive electric motors but which are mined almost exclusively in China—was more likely. Lithium was the good news. Still, lithium is, as he put it, “the yeast in the dough.” If we’re going to put one million electric cars on the road by 2015, we need to make sure we have the raw materials to do so, and so far we haven’t done that, he argued. As he put it to me later, the United States is like “a bakery that doesn’t take inventory.”

  The lithium industry has historically been tiny and comprehensively ignored by mining companies, which are generally interested in more captivating resources like gold, silver, and uranium. But since the launch of the Volt in 2007, the number of companies and countries scratching their way into the lithium business has become overwhelming. “There are sixty-seven companies listed on the TSX [Toronto Stock Exchange] alone, and over one hundred companies globally looking for lithium,” the geologist and market analyst David L. Trueman said in a presentation the first day of the conference. In Canada, the exploration situation had gone “berserk,” Evans said in his presentation, beaming an illegibly dense list of Canadian exploration projects onto the presentation screen. Beyond that, a company called Nordic Mining in Finland was gearing up to extract lithium from a deposit of a rock called pegmatite. In Australia, the companies Galaxy Resources and Talison were preparing to do the same. A secretive start-up called Simbol, staffed by former Lawrence Livermore scientists, claimed to be able to meet some 20 percent of the world’s lithium demand by filtering the water that flows through four geothermal plants on California’s Salton Sea. Western Lithium was sitting atop an enormous deposit of lithium-rich clay in northern Nevada. The mining giant Rio Tinto was exploring a deposit of a lithium-bearing mineral called jadarite in Serbia. In addition to the recently announced Toyota-Orocobre deal, Toyota had just formed a joint venture with the South Korean steel company POSCO, and the Canadian auto-parts supplier Magna had also made investments in lithium exploration companies, according to an analyst with the London research firm Roskill.

  In Las Vegas, the Oligopoly, as I heard the three companies that supply the vast majority of the world’s lithium referred to more than once, had an important message for the prospectors: Our company is sitting on enough lithium to supply the world for hundreds of years to come. You junior mining companies and start-up dreamers in the audience, do not think that you can compete.

  The first to deliver this warning was Sociedad Química y Minera de Chile, or SQM. Patricio de Solminihac, the executive vice president and COO of SQM Chile, tried to discourage any potential wildcatters by explaining that its source of lithium, the Salar de Atacama, a 280,000-hectare salt-encrusted depression high in the Atacama desert, had insurmountable advantages: It contained forty million tons of lithium carbonate equivalent, the largest known commercially exploitable reserves in the world. Its brines contained a higher concentration of lithium than any other such deposit. That brine was low in the ancillary minerals that eat away at recoverable lithium content. The Salar de Atacama was close to the port city of Antofagasta, a Pacific coast mining hub. In 2009, SQM produced forty thousand tons of lithium carbonate. Count up the current expansion plans of the existing lithium market players and the world would be well supplied for the next fifteen years. If any new entrants got in the business, the market would be oversupplied for the next twenty years.

  Next, the German company Chemetall gave a similar presentation, ending with a coup de grâce that drew some mockery at the afternoon coffee break: a mention of its ability to reopen a dormant mine in Kings Mountain, North Carolina, which is full of the lithium-containing rock spodumene. “That’s like rolling out your ninety-five-year-old grandmother in her wheelchair for extra numbers,” I heard someone say.

  The third member of the oligarchy, FMC—a century-plus-old chemical company originally called Food Machinery Corporation, which in 1985 got into the lithium business by buying the Lithium Corporation of America—rounded out the discouragement by stressing its credentials not as a mere mining company but rather as a manufacturer of high-quality custom chemicals. “The automotive market has some of the toughest quality requirements in the world,” said Jon Evans, the manager of FMC’s lithium division, and FMC’s products—an array of processed lithium powders and ingots and solutions with names like LectroMax and LectroLyte—already met those specifications.

  During a panel that afternoon, an analyst offered a helpful tip for interpreting the day’s presentations. “We as listeners—we’re hearing competing agendas,” said Eric Zaunscherb, a mining analyst with the Vancouver-based finance firm Cannaccord Adams. “The big three, the Oligopoly, are sitting on one shoulder, and juniors are sitting on the other. We have competing agendas, and it’s important to remember that as we listen to people tell us how many tons of lithium are out there.”

  Even so—even assuming that the three members of the Oligopoly were using their most wishful measurements and exaggerating the amount of lithium they had access to—the competitiveness of this market, the number of new projects, the amount of new exploration made concerns about an impending lithium shortage seem seriously unfounded. Particularly because lithium isn’t burned for fuel like oil is. It’s used to make a machine that stores energy, much like copper or iron or any other metal.

  Each member of the Oligopoly runs at least one major operation in the so-called Lithium Triangle, the corner of South America that is to this element what the Middle East is to oil. Ten thousand years ago, a series of saline lakes stood on the Andean plateau where the nations of Bolivia, Chile, and Argentina now intersect. When those lakes evaporated, they left behind enormous salares—deep, solid lakes of salt crystal sitting in basins surrounded by volcanoes. The volcanoes had long been factories for rocks high in light elements like magnesium, potassium, boron, and lithium. Over the millennia, as the snow capping those volcanic peaks melted each year, water glided downhill through that rock, leaching minerals free and dragging them down into the basin, where the resulting brine soaked into the salt. As a result, this remote region is today the world’s richest source of lithium.

  SQM extracts approximately 30 percent of the world’s lithium supply from a single salt flat in the Lithium Triangle, Chile’s Salar de Atacama. A Chemetall plant sits on that same salar. FMC drains most of its lithium from a similar salt flat across the border in Argentina, the gothically named Salar del Hombre Muerto.

  To the north of FMC’s source is the country that may be richest in lithium of them all: Bolivia. Its Salar de Uyuni is thought to contain the world’s single largest lithium resource, estimated at some 8.9 million tons. Because of poverty and political instability, that resource is untapped. But early in the electric-car revival, the Bolivian government committed to developing it, and by the time of the conference in Las Vegas, the Salar de Uyuni had gone from an obscure natural wonder to the investment opportunity of the century. Which suggests another way of interpreting the puffing and strutting from the existing three major producers: They aren’t fighting off competition only from the little guys. They’re fighting it off from the biggest resource in the world, located just across the border from their most fecund mines.

  The evening after the close of the conference, Western Lithium invited me to a “casual dinner” at Guy Savoy, the double-Michelin-starred American outpost of the Parisian chef’s empire. Vegas has gone upscale in recent years, but this restaurant still seemed entirely out of place in the smoky, tawdry halls of Caesars Palace, with soaring ceilings, argon-filled wine cabinets, and obsequious French waitstaff who seemed to magically appear when any glass approached empty.

  After two days in the bland, equalizing environment of a conference hall—everyone wearing the same plain business wear, everyone drink
ing the same squat half bottles of Diet Coke—walking into the predinner gathering around the bar at Guy Savoy felt like stumbling into a James Bond movie. Meet Yuhko Grossmann, an elegantly dressed woman of ambiguous nationality who was charming the group of six or seven strangers like an experienced, wealthy hostess. Upon meeting her husband, I realized that that is what she is. Meet Ed Flood. Ed Flood is a trim, handsome man in his early sixties with long, coiffed silver hair and a touch of a Reno drawl to his speech. His suit screamed money. His aura screamed money. I’ve been in elevators with guys like this; they usually own the company I work for.

  We were ushered into a private banquet room, and Flood took the head of the table. Grossmann sat in the center. The amuse-bouche arrived: two tiny fois gras and black truffle sandwiches on skewers.

  Ed Flood, who was not at the conference, and whose name I had heard for the first time the day before in a presentation by Western Lithium president Jay Chmelauskas, was our host. Flood is the chairman of Western Lithium, a position he took when Western Lithium was spun out of Western Uranium, where he was the founding president. Additionally, Flood is managing director of investment banking for Haywood Securities, a London-based arm of the Vancouver finance firm. But Flood made his real money at Ivanhoe Mines Ltd., the international mining firm where in 1994 he became founding president and where he still sits on the board of directors. Based in Vancouver and traded on the New York Stock Exchange, Ivanhoe is now best known for developing, in coordination with Rio Tinto, the Oyu Tolgoi project in southern Mongolia, one of the largest copper and gold mines on the planet.