White gold: Here's why lithium has emerged as priority metal for India

On February 10, 2023, when the Geological Survey of India announced the ‘discovery’ of lithium ore in Jammu & Kashmir, the whole country celebrated. After all, lithium is the fuel behind the fuel (batteries) of electric vehicles, smartphones and any other type of device that uses a rechargeable battery today. And India is importing most of its requirements from, guess who? China, of course. So, now, we have lithium in our own country! We can make our own batteries, save on our import bill, and do a lot of other things.

Well, don’t pop the champagne just yet. For one, the lithium found in J&K was actually first discovered in 1999. And even though it is used in industries like speciality chemicals, glass, etc., India has continued to import the soft metal because mining it domestically is very capital intensive and not entirely profitable. Well, those caveats still exist, even though the exponential rise in demand would surely soften them. But the bigger challenge now is that of time and money—time that would be needed to first understand how much of the reserves can be commercially mined, and then the time it’ll take to get to the mining stage; and the bagfuls of money that would need to be pumped in to build a completely new ecosystem of industries to leverage the metal.

Often called ‘white gold’, lithium has emerged as a priority metal for India given its ambitious target of achieving 30 per cent sales of EVs, along with increasing non-fossil fuel energy capacity to 500 gigawatt by 2030. “India’s annual lithium-ion battery market is expected to grow to 116 GWh (gigawatt hour) by FY30, from 2.6 GWh in FY21, with EVs accounting for 90 per cent of the market—according to a report by JMK Research & Analytics and Institute for Energy Economics and Financial Analysis,” says Prahalathan Iyer, Chief General Manager for Research & Analysis at India Exim Bank.

“The discovery of lithium (inferred) reserves in J&K, is strategically important as it improves India’s energy security by securing the critical mineral’s supplies and also builds self-sufficiency,” explains Anish Mandal, Partner at Deloitte India, adding that apart from reducing India’s import bill and trade deficit, the reserves could also help the country achieve its net-zero target by accelerating green transportation and green energy adoption. For context, around one tonne of lithium can be used to produce batteries for around 90-120 4-wheeler EVs.

They key operative word here, therefore, is ‘inferred’—the discovery is under the ‘inferred category’ signifying low confidence in the reserves and requiring more detailed studies. So, no, we can’t use the J&K lithium just yet.

Jumping the Gun

If the reserves turn out to be as massive as claimed, India may find itself joining a list of select nations that have large lithium reserves (see Global Reserves). But the road to getting this domestic treasure into the country’s burgeoning EV and green energy spaces will be a long and bumpy one. India will have to drive itself on bigger wheels (build the ecosystem), fix the bad tyre alignment (change policy) and even install new suspensions (provide incentives) to get the ball rolling. Incidentally, the government had already announced a production-linked incentive (PLI) scheme in 2021 to support production of advanced chemistry cell (ACC) energy storage tech in the country. With a financial outlay of Rs 18,100 crore for seven years, the scheme aims to establish a globally competitive ACC-battery manufacturing ecosystem with a capacity of up to 50 GWh.

“This [discovery] can be game-changing depending on how much eventually turns out to be proven and extractable from the ore discovered. The declared discovery of 5.9 million tonnes is very large otherwise and can ensure that domestic needs are addressed,” says Anish De, Global Head of Energy and Natural Resources at KPMG. Emphasising the word ‘extractable’ used by De, industry experts say there are chances of the quantum of reserves falling by a third when mined. The rationale behind this conservative outlook is simple. The discovery of the reserves in India—that has excited everyone—is in the G3 stage, where the volume, grade and mineral content of the reserves is only estimated. This will be followed by the G2 (general exploration) and G1 (detailed exploration) stages, during which the reserves’ actual properties will be confirmed and only after that can commercial mining begin.

Popularly found in different forms of deposits—brine and ore—the extraction of lithium is also different. For the reserves found in the brine reservoirs of South America, salt-rich water is pumped to the surface and into a series of evaporation ponds. As the water evaporates, a slurry of hydrated lime is added to the brine to precipitate the unwanted elements, leaving a brine with an ever-increasing concentration of lithium. Later, this brine is pumped into a recovery facility, where the brine is further purified to remove contaminants and other unwanted elements, followed by chemical treatment, filtration and then treatment with soda ash to collect lithium carbonate precipitate. Finally, this precipitate is washed and dried into the final product. But the lithium discovered in India is ore-based, which has a long and tedious mining process.

After the size, location and quality of the deposits are assessed, firms with experience in mining lithium will be pressed into service to develop the site, which may involve building access roads, constructing buildings and other infrastructure. Setting all this up can take a year or more. Once the basic infra is in place, heavy machinery is deployed to extract the ore, which can be found mixed with sand, stone or other metals.

The extracted ore is far from pure and the impurities are removed using physical or chemical methods, such as crushing, grinding, froth flotation or dense media separation. This is followed by a series of chemical reactions to convert the concentrated lithium into the more usable lithium carbonate or hydroxide—a white, powdery substance. Lithium in its purest form, is highly volatile as it ignites on contact with water. It has to be mixed with other metals before it can be used to make products like cathode-active materials that are further used in making lithium-ion batteries. After one more purification step, it is shipped to be used in batteries, ceramics, glass and other products. Based on the experience from global mining projects, De of KPMG reckons it can take up to seven to eight years to bring a mine to full commercial production.

Today, the world’s lithium mines are spread across Argentina, Bolivia, Australia and a few other regions in South America. “But the output of those mines is taken to China for final refining. Even though China’s lithium reserves are limited, it has managed to dominate the lithium value chain. And 90 per cent of battery-grade lithium carbonate or hydroxide is produced in China,” explains Nitin Gupta, CEO & Co-founder of Attero Recycling.

But China’s advantage is not a recent phenomenon. “China was the first mover. And now, it has huge processing plants to convert lithium into lithium carbonate and then into cathode activity material. That’s where China’s strengths lie,” says Akshay Singhal, Founder & CEO of nanotech start-up Log9 Materials. He further adds that China has provided various financial incentives to countries rich in lithium resources to corner a major chunk of the global supply lines.

Environmental Stake

Ensuring stable supply lines of the elusive mineral is just one part of the challenge, as mining and refining lithium can also be environmentally damaging. “The mining process can have negative environmental impacts similar to that of other metal mines—such as degradation [of soil], water scarcity, creation of tailing dams and water-flow disruptions—unless companies act responsibility,” says Sambitosh Mohapatra, Partner and ESG Leader at PwC India.

Unless sustainable mining practices are followed, lithium extraction would unavoidably lead to increased emissions and also cause soil and water contamination. As per the International Energy Agency’s (IEA) estimates, production of a tonne of lithium carbon equivalent (LCE) emits 2.8-9.6 tonnes of CO2. Moreover, production of one tonne of lithium could require approximately 500,000 gallons of water.

In that backdrop and given India’s aim to achieve net-zero emissions by 2070, experts that BT spoke to expressed hope that the government will conduct the mining in a sustainable manner.

Who’ll Mine, Where?

The government now plans to invite bids for the auction of this discovery in the June 2023 quarter and intends to mandate the reserves to be refined domestically only. This could be a stumbling block given that India does not have the expertise or even a lithium mining company. “Lithium mining is very different compared to iron or copper mining, and mining firms in India don’t have any experience in that. So, either a company will have to work with some international company that is already in the business, go into a JV, or get into those kinds of structures, to mine and process it,” explains Singhal.

Another question that remains to be answered is regarding who will finally bid and mine the reserves. The reason: lithium and seven other metals, including beryllium and zirconium, fall under the restricted list of the Department of Atomic Energy that forbids private players from mining or producing them. Not only that, the average total cash cost of operating 11 hard-rock lithium producers was pegged at $2,540 per tonne of LCE in 2019, by S&P Global. Some experts estimate this cost to be upwards of $2,500-3,000 these days, excluding capital investments.

And as India bets big on the recent discovery, there is yet another opportunity it can leverage, which is recycling end-of-life lithium batteries. Industry experts believe that in the next two years, 90 per cent of the lithium mined today will end up in the lithium-ion batteries used in EVs. This is where home-grown recycling companies like Attero Recycling, Gravita India and Metastable Materials come in.

Catching up

The uptake in sales of EVs and green energy-storage solutions has pushed the demand for lithium to astronomical heights. And as China controls 90 per cent of this market, there is sustained geopolitical push from countries like the US, the EU and even India to break China’s stronghold. “The US has come up with a new law called the Inflation Reduction Act, and it’s a $500-billion subsidy. This states that EV subsidies will be given to those automobile OEMs who can prove that the batteries or the EV is not coming from China. It’s either domestic or coming from friendly countries,” says Gupta.

And as lithium emerges as a key element for the future, India isn’t settling down with the J&K reserves. For instance, the GSI has carried out 14 exploration projects for lithium and associated elements across states between 2016-17 and 2020-21, and another five such projects in 2021-22. Moreover, the Atomic Minerals Directorate (AMD) has been tasked to carry out exploration projects for lithium in parts of Karnataka and preliminary surveys have indicated the presence of lithium resources of 1,600 tonnes (inferred) in Mandya, Karnataka. And as India lacked the two primary raw materials—lithium and cobalt—a joint venture between National Aluminium Company Ltd, Hindustan Copper Ltd and Mineral Exploration Corporation Ltd named Khanij Bidesh India Ltd (Kabil) was formed in 2019 to supply strategic minerals from overseas locations to industries in India. Hopefully, India will discover more lithium reserves, while speeding up the process of mining the reserves already discovered. This will not only secure lithium supplies for the domestic market, but also help in building international bridges through exports.

 

@nidhisingal