Lithium stock investing series: How is lithium mined?

This lithium mining stock investing series kicks off with coverage of the types of lithium mining operations.

A miner in a hardhat makes a sale on his tablet in the field.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on All figures quoted in US dollars unless otherwise stated.

Lithium mining stocks have been having a great year. Shares of the three largest lithium producers listed on a major U.S. stock exchange -- Albemarle (NYSE: ALB), Sociedad Química y Minera de Chile (NYSE: SQM), or SQM, and Livent (NYSE: LTHM) -- returned 57%, 155%, and 63%, respectively, over the one-year period through May 31. The S&P 500 index returned negative 0.3% over this period.

The rising demand for lithium is primarily being driven by growing consumer adoption of electric vehicles (EVs). The silvery-white metal is used to make the lithium-ion batteries that power EVs.

This article covers the two current types of lithium mining operations and briefly mentions several other types that are being explored. It's intended to lay the groundwork for a series, whose goal is to help investors make smarter investment decisions in this complex and rapidly growing industry.

While the "who" and "where" of lithium mining aren't the core focuses of this article, it will touch briefly upon some of the main companies and geographies that fall into each section. These topics will be covered in more depth in future articles.

Brine mining  

In the most common method of lithium brine mining, brine (salty water) that contains lithium chloride and other salts is pumped from reservoirs that lie beneath dried lake beds into above-ground evaporation ponds. Arid weather conditions and high elevations help the water in these ponds evaporate faster than it would in other climates and geographies. 

The lithium chloride that is left is then processed into lithium carbonate, which is then sometimes further processed into lithium hydroxide, as well as other premium lithium products. Both lithium carbonate and lithium hydroxide can be used to produce lithium-ion batteries, but lithium hydroxide has emerged as the preferred compound for making EV batteries.

Livent, based in the United States, has a proprietary brine extraction technique, which differs somewhat from the process just described. 

The major players in extracting lithium from brine include U.S.-based Albemarle, Chile's SQM, and Livent. Albemarle and SQM both have operations at Salar de Atacama in Chile. (Salar is the Spanish word for salt flat.) They pay royalties to the Chilean government, which owns this resource. It's Albemarle's primary brine operation and SQM's sole source of lithium. Livent's sole source of lithium is the Salar del Hombre Muerto in Argentina, which it owns.

China's Ganfeng Lithium is on track to join the significant players in mining lithium from brine. It is part owner of two brine resources in Argentina, with one project nearing the commercial stage.

Extracting lithium from underground brine has historically been a more cost-effective method than mining it from hard rock. 

Hard-rock mining

Hard-rock mining is the other way lithium is now currently obtained for commercial use. This type of mining is what most folks probably think of when they hear the term "mining." It involves open-pit mining of ore containing the lithium-bearing mineral spodumene.

The spodumene is processed into a concentrate and then further processed into premium lithium products, notably lithium hydroxide. Unlike the lithium chloride that's obtained from brine mining, spodumene concentrate can be directly processed into lithium hydroxide. 

Most hard-rock lithium mining is in Australia and China. China's Tianqi Lithium, Albemarle and Ganfeng are the major players in this sphere. Together with Albemarle, SQM, and Livent, China's duo of Ganfeng and Tianqi make up the top five lithium producers. (Tianqi owns a 24% stake in SQM, so it's indirectly a notable player in mining lithium from brine.) 

Other types of mining operations are being explored and developed  

Soaring lithium prices have been leading many companies to explore other potential sources of lithium and methods of mining that might now be feasible economically, as well as technically.

Numerous companies are in the exploration and development stages of obtaining lithium from clay, geothermal brine (a byproduct of geothermal energy production), and oil field brine. 

This article was originally published on All figures quoted in US dollars unless otherwise stated.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Red arrow going down, symbolising a falling share price.
International Stock News

Why Amazon shares fell 12% in June

The online retailer and cloud computing expert largely rode the broader market's waves last month. The loudly touted stock split…

Read more »

A male executive worker wearing glasses and a blue collared shirt looks at his laptop screen with a concerned look on his face and his hand to his forehead as he watches the Bank of Queensland share price fall
International Stock News

Why Alphabet stock crashed 25% in the first half of 2022

Even mighty tech titans were doled out their fair share of market punishment.

Read more »

Woman on her laptop thinking to herself.
International Stock News

How far could the stock market fall? 2 indicators may hold the answer

These indicators suggest we're quite a ways from reaching a bottom.

Read more »

Red arrow going down and symbolising a falling share price.
International Stock News

Why shares in Berkshire Hathaway fell in June

The month marked a reversal of fortune for Warren Buffett's investment company.

Read more »

a man sits with his head in his hand, looking quite dejected, as he holds a rubber tipped pen on the screen of a computer showing a graph trending downwards.
International Stock News

Is it safer to pull your money out of the stock market or keep investing for now?

Most investors should avoid selling in a bear market.

Read more »

A Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share prices
International Stock News

Headwinds will slow growth for Meta; Should investors sell now?

This former trillion-dollar company's value has been slashed by more than half.

Read more »

Red arrow crashing in the ground with a Bitcoin token next to it.
International Stock News

Why Bitcoin stocks crashed (again) last month

The original cryptocurrency is still suffering under economic pressure, dragging several crypto-oriented stocks along with it.

Read more »

two colleagues high five each other as they sit side by side at a long desk in front of their laptop computers in an office environment.
International Stock News

5 surefire investments you’ll thank yourself for later

Investing in skills, knowledge, and relationships is just as important as the investments you make in your portfolio.

Read more »