[in-depth report] technological progress in lithium extraction from Salt Lake plays the main theme of industrial innovation.

Abstract

Salt lake lithium resource reserves are large, but the degree of development is low, and the resource endowment is uneven. Technological progress is the core driving force of salt lake lithium extraction industry innovation. The technology of extracting lithium from Qinghai salt lake has basically reached the leading level in China and even in the world, and is promoting the development of Qinghai salt lake industry in the direction of larger scale, better quality and higher efficiency, and is expected to spill over to Tibet and overseas. it brings an opportunity for the efficient development of local high-quality salt lake resources.

To meet the increasing demand for millions of tons of lithium, it will be a general trend to increase the development of salt lake resources. Under the trend of global automobile electrification, we expect the global lithium demand to increase from 430000 tons in 2021 to 1.54 million tons in 2025. LCE,CAGR is 38% LCE,CAGR 2021-2025 lithium supply and demand is expected to gradually become tight. Salt lake resources have the advantages of large reserves and low cost of lithium extraction, which is of great significance to ensure the global supply of lithium resources. For China, the degree of external dependence on domestic lithium resources reached 74% in 2020, while salt lake lithium reserves accounted for 79% of domestic lithium resources. Under the background of countries around the world building a closed loop of lithium power industry, the development of salt lakes is of high strategic significance to ensure the safety of domestic lithium resources supply.

The lithium extraction technology of Qinghai Salt Lake has basically reached the leading level in China and even in the world, and technological progress will still be the core driving force for the development of Qinghai Salt Lake in the future. The reserves of lithium resources in Qinghai Salt Lake are the leading in China, but the resource endowment is not dominant. After long-term development practice, the lithium extraction process of the main salt lakes in Qinghai has been basically stable, and there is room to continue to expand production capacity. We believe that the future technological progress will still be the core driving force for the development of Qinghai Salt Lake. With the advance of technologies such as lithium extraction from raw brine and one-step preparation of lithium hydroxide, Qinghai Salt Lake is expected to further upgrade from front-end lithium extraction to back-end products.

With the spillover of lithium extraction technology in Qinghai, the salt lake in Tibet is expected to usher in an inflection point for accelerated development. The natural endowment of Tibet's salt lake is unique, but it is restricted by the natural environment and infrastructure conditions, so the development of Tibet's salt lake lags behind in the early stage. It is worth mentioning that at present, the strategic significance of the development of salt lake resources in Tibet is improving, and transportation, power, and other infrastructure facilities are gradually being improved. we believe that the superior lithium extraction technology cultivated by Qinghai's inferior resources is also expected to lift the shackles of the traditional process of salt lake development in Tibet and activate its broad potential for resource development.

Chinese enterprises "go out" with technology and are endowed with high-quality overseas resources. The "lithium triangle" salt lake in South America is rich in resources and excellent in endowment, but not all salt lakes are suitable for traditional precipitation method, and there are still a large number of potential salt lake resources that have not been fully exploited. Over the years, Chinese enterprises have iterated over the development of low-endowed salt lake resources with advanced lithium extraction technology and rich project experience in line with local conditions. we believe that lithium companies such as Ganfeng lithium industry, Mount Qomolangma in Tibet, lithium extraction technology providers, and even mining leaders in traditional fields are expected to carry lithium technology "out", further extend the resource map to overseas salt lakes and open up a broader space for development.

Risk

1) the progress and technological progress of the salt lake lithium extraction project are lower than expected; 2) the production and sales of new energy vehicles are lower than expected.

Text

1. To meet the increasing demand for millions of tons of lithium, it will be a general trend to strengthen the development of salt lake resources.

1.1 Lithium demand will meet the million-ton increment, and there is a bright future for lithium extraction from salt lakes.

With the general trend of global energy transformation, the demand for lithium will meet the increase of one million tons. In the context of carbon neutralization, lithium as a key material in the battery field, we believe that the demand for lithium in the field of power and energy storage is expected to continue to benefit from the transformation of clean energy. Among them, the power sector is the main growth point of lithium demand. We expect global sales of new energy vehicles to grow from 5.24 million in 2021 to 21.46 million in 2025, 42% of CAGR in 2021-2025, and lithium demand in the corresponding power sector will grow from 180000 tons of LCE in 2021 to 1.17 million tons of LCE,2021 in 2025. CAGR in 2025 is as high as 59%. According to our estimates, the demand of the lithium industry will grow from 430000 tons of LCE in 2021 to 1.54 million tons of LCE, in 2025 and 38 per cent of CAGR in 2021-2025.

Figure 1 CAGR for lithium demand in various areas 2021-2025

Source: Marklines, China International Capital Corporation Research Department

Chart 2Ru 2021-2025 Global Lithium demand

Source: Marklines, China International Capital Corporation Research Department

Figure 3: global sales and Forecast of New Energy passenger cars (EV+PHEV)

Source: Marklines, China International Capital Corporation Research Department

Figure 4: power battery demand is driven by three waves of global growth

Source: Marklines, China International Capital Corporation Research Department

From 2021 to 2025, the supply and demand of the lithium industry is expected to gradually become tight. According to our review of the world's major lithium resource projects, the supply of the lithium industry will grow from 480000 tons of LCE in 2021 to 1.48 million tons of LCE,2021 in 2025-32% of CAGR in 2025, lagging behind 38% of CAGR, on the lithium demand side. Considering the complexity of resource project development, the actual development schedule is relatively uncertain. According to our estimates, the balance of global lithium supply and demand from 2021 to 2025 is + 3.49,4.27,2.07,3.98 and-80300 tons respectively. Demand-driven supply and demand in the lithium industry is expected to gradually become tight.

Chart 5: supply and demand of lithium industry is becoming more and more tight in 2021-2025.

Source: Marklines, China Automobile Association, Company announcement, China International Capital Corporation Research Department

The total amount of global lithium resources is not scarce, but the distribution is uneven, and the projects that are economical and easy to exploit are relatively limited. According to USGS, the total amount of lithium resources in the world is 86 million metal tons (about 458 million tons of LCE), and with the deepening of exploration in the future, lithium reserves are expected to continue to increase. However, the distribution of global lithium resources is uneven and highly concentrated. The "Lithium Triangle" of South American salt lakes and Australian lithium mines together account for 65% of the global lithium reserves. Considering the resource endowment and infrastructure construction of specific lithium resource projects, the economically exploitable high-quality lithium resource projects are more limited.

Figure 6: the main type of proven lithium resources in the world is salt lake brine.

Source:: USGS (2017), China International Capital Corporation Research Department

Figure 7: global lithium resources are not evenly distributed

Source:: USGS (2020), China International Capital Corporation Research Department

Chart 8: forecast of global lithium supply structure in 2021

Source: company announcement, China International Capital Corporation Research Department

Chart 9: forecast of global lithium supply structure in 2025

Source: company announcement, China International Capital Corporation Research Department

We believe that the demand of the lithium industry is expected to meet the million-ton increment in the future, and lithium resources such as hard rock lithium ore, salt lake and clay should complement each other and focus on each other. Among them, salt lake resources have the advantages of reserve scale and cost, so it is necessary to strengthen the development of salt lake lithium resources.

First, salt lake resources have the advantage of overall reserve scale, and the scale of single resources is usually larger than that of hard rock lithium deposits. Global lithium resources mainly occur in salt lake brine, hard rock lithium ore and lithium clay, of which salt lake brine type lithium resources account for about 58% of the total, hard rock lithium ore and clay type lithium resources account for 26% and 7% of the total, respectively. The single resource scale of salt lake projects is generally larger than that of hard rock lithium mines. Relatively speaking, the development process of global salt lake lithium resources lags behind relatively. According to our estimation, the global salt lake lithium resources supply only accounts for 43% of the global lithium supply in 2020.

Figure 10: progress in the development of major salt lake lithium resources projects in the world

Source: company announcement, China International Capital Corporation Research Department

Figure 11: the single resource scale of salt lake resources project is generally larger than that of hard rock lithium ore.

Source: company announcement, company website, China International Capital Corporation Research Department

Second, the cost of extracting lithium from salt lake resources is low, and the development of salt lake resources is conducive to ensuring the supply of basic lithium salts such as lithium carbonate. At present, the lithium salts needed for power batteries are mainly lithium carbonate and lithium hydroxide. Salt lakes give full play to the advantages of comprehensive utilization of solar energy and resources in the process of lithium extraction, and the production cost is low, but because of the complex content of impurities, it is more difficult to produce high-quality battery-grade lithium hydroxide, so we think that in the future we will focus more on ensuring the supply of basic lithium salts such as lithium carbonate. Relatively speaking, the ore resources are more in line with the high consistency requirements of battery-grade lithium hydroxide, and the increase in the supply of lithium extracted from salt lakes will also release part of the ore production capacity, and ore resources are expected to focus more on the production of high-quality battery-grade lithium hydroxide. It is worth noting that we believe that lithium extraction from salt lakes in the future is also expected to achieve one-step preparation of lithium hydroxide and increase the supply share in the field of lithium hydroxide.

Figure 12: salt lake lithium resources will focus more on the production of basic lithium salt products.

Source: ALB announcement, China International Capital Corporation Research Department

1.2 the degree of external dependence of domestic lithium resources is high, and the strategic significance of domestic salt lake resources development is prominent.

The supply of lithium resources in China is highly dependent on the outside world, so attention should be paid to the resource value with controllable supply risk. The supply risk of lithium resources is rooted in the uneven distribution of global resources. According to USGS, China's lithium reserves account for only 7% of the world's lithium resources, but China is also the world's largest consumer market for lithium salt raw materials. According to our estimates, China's lithium salt supply accounted for about 75% of the world's lithium salt supply in 2020, but about 74% of China's lithium salt processing raw materials are supplied by Australian mines, and lithium salt raw materials are highly dependent on imports and highly concentrated. Under the trend that Australian lithium mines begin to layout downstream lithium salt production capacity and the regionalization of the global lithium industry, more attention should be paid to the value of lithium resources with controllable supply risk.

Chart 13: China's lithium supply accounts for about 75% of the world's lithium supply in 2020.

Source: according to the company announcement, China International Capital Corporation Research Department

Chart 14: the raw materials of China's lithium salt plants mainly rely on imported Australian ores.

Source: according to the company announcement, China International Capital Corporation Research Department

As the largest type of lithium resources in China, salt lake resources are of high strategic significance to ensure the supply security of domestic lithium resources. According to the 2019 China Mineral Resources report, China's total lithium resources is about 102 million tons of LCE, ranking sixth in the world. Structurally, China's resources are mainly salt lake brine type, mainly distributed in Qinghai and Tibet, accounting for about 79% of the total lithium resources in China. However, compared with the major overseas salt lakes, the overall resource endowment of domestic salt lakes is slightly inferior, especially the lithium concentration of Qinghai salt lakes is low and mg-Li is relatively high. Generally speaking, although the domestic salt lake resources are not superior in endowment, they have a certain total advantage, which is of strategic significance to ensure the security of domestic lithium resources supply.

Chart 15: salt lake brine is the main lithium resource in China.

Source: 2019 China Mineral Resources report, China International Capital Corporation Research Department

Figure 16: China's salt lake resources are mainly distributed in Qinghai and Tibet.

Source: China Mineral Resources reserves Bulletin in 2016, China International Capital Corporation Research Department

Figure 17: comparison of lithium concentration between Chinese and overseas salt lakes

Source: company announcement, company website, China International Capital Corporation Research Department

Chart 18: comparison of magnesium-lithium ratio between Chinese and overseas salt lakes

Source: company announcement, company website, China International Capital Corporation Research Department

two。 Technological progress will be the core driving force for the innovation of lithium extraction industry in Qinghai Salt Lake.

2.1 after long-term exploration, the technical route of lithium extraction from Qinghai Salt Lake is gradually stable.

From quantitative change to qualitative change, the disadvantage of resources reverse drives the technology of extracting lithium from Qinghai Salt Lake to the leading level in the world. The total amount of lithium resources in Qinghai Salt Lake is the leading in China, but the overall lithium concentration is low and high magnesium lithium is relatively high, so it is difficult to use the traditional precipitation method to extract lithium like overseas high grade salt lakes. How to extract lithium with high efficiency in salt lakes with low lithium concentration and high mg / Li ratio has always been the core pain point of the industry. As far as the technological path of extracting lithium from salt lake is concerned, the main link is nothing more than "enrichment, impurity removal and lithium deposition". After decades of exploration and improvement in the development practice of low-grade salt lake, the technology of extracting lithium from Qinghai salt lake has leaped from quantitative change to qualitative change, and has reached the leading level in the world. Various salt lakes gradually find lithium extraction processes suitable for their resource endowments, and gradually realize large-scale production by adsorption, membrane, extraction, calcination and other processes.

Figure 19: distribution and development of major salt lakes in Qinghai

Source: according to the company announcement, China International Capital Corporation Research Department

From the front-end raw brine treatment link, Qinghai Salt Lake mainly "first extract potassium, then lithium", through the comprehensive utilization of resources to achieve cost reduction. At present, the major salt lakes in the world basically extract lithium resources from the old brine after potassium extraction, giving full play to the advantages of solar energy and the comprehensive utilization of salt lake mineral resources, taking into account the differences in resource endowments and technological paths, according to the announcements of major salt lake enterprises, after depreciation, the production cost of lithium carbonate in Qinghai Salt Lake can reach 23,000-40,000 yuan / ton, and the cost advantage is significant.

However, the lithium extraction process using old brine as raw material after potassium extraction has some problems, such as lithium loss caused by salt field leakage, need of large-scale land, long construction period, large capital expenditure, weather-sensitive production and so on. And the scale of lithium extraction capacity is limited by the supply of old brine. We believe that in the future, the maturity of the original halogen lithium extraction process is expected to advance the lithium extraction process and save the front-end brine drying link.

Chart 20: comparison of main processes for extracting lithium from salt lake

Source: according to the company announcement, China International Capital Corporation Research Department

The resource endowment determines the lithium extraction process, and the enrichment and impurity removal links show the characteristics of "one lake, one strategy". At present, Qinghai Salt Lake has formed four mainstream technical routes: adsorption, membrane separation, extraction and calcination, but the specific process selection and combination need to be judged comprehensively according to the project environment, salt lake resource endowment and other factors. According to the resource characteristics of low lithium concentration and high mg / Li ratio in Qinghai, adsorption + membrane method has become the mainstream route of extracting lithium from Qinghai salt lake. In addition, although the process framework of each lithium extraction technology route is generally similar, according to the different brine parameters, small-scale and pilot-scale tests are needed before industrialization, and a customized process package is designed to solve the problem of industrialization.

2.1.1 adsorption method

The adsorption method has high selectivity for lithium ion and has obvious advantages in low-grade salt lakes. The basic principle of the adsorption method is to use the adsorbent to selectively adsorb specific components in the liquid, while letting go of the rest of the components. The adsorption effect can be achieved through the design of the pore structure of the adsorbent, or functional groups can be added to the adsorbent. The target components can be grabbed by functional groups. Therefore, the core advantage of adsorption lies in the high selectivity of lithium ion, which can achieve a good effect of lithium extraction in low-grade salt lakes, and can even be used in seawater to extract lithium, and the overall lithium extraction process is also relatively green. It is worth mentioning that because a large amount of fresh water is consumed in the elution process of adsorption, the fresh water supply around the project may restrict the production capacity to a certain extent.

Figure 21: salt Lake and Zanggeti Lithium area are located on both sides of Chaerhan Salt Lake

Source: Wang Di, Potash Sedimentary characteristics and Palaeowater temperature of Bayle Beach, Chaerhan Salt Lake, Qinghai Province (2020), China International Capital Corporation Research Department

Figure 22: simulation of continuous adsorption + membrane process in Tibetan lithium industry

Source: Zangge Holdings, Koda Manufacturing Company announcement, China International Capital Corporation Research Department

Lanke lithium industry and Tibetan lithium industry both use adsorption membrane method to extract lithium, and Zangge has some innovation in adsorption process. The concentration of lithium in Chaerhan Salt Lake is low and mg-Li is relatively high, so it is difficult to directly use other methods to extract lithium from its old brine, so it is necessary to introduce adsorption pre-treatment. The lithium extraction regions of Lanke lithium industry and Tibetan lithium industry are distributed on the east and west sides of Chaerhan Salt Lake, and their resource endowments are similar, so they both use adsorption + membrane method to extract lithium, which can be summarized as the technological process of "old brine extraction-adsorption concentration-nanofiltration membrane magnesium removal-reverse osmosis membrane concentration-MVR concentration-back-end lithium deposition".

The core difference between the two processes lies in the application of adsorption equipment. Lanke lithium industry adopts single-tower adsorption method, and the yield of adsorption section is about 60%. Tibetan lithium industry innovatively adopts simulated continuous adsorption process in the adsorption process, different media are controlled into different containers through valve array, and the yield of adsorption section is about 80%. From the point of view of cost, according to the company announcement, the complete cost of single ton lithium carbonate in Tibetan lithium industry is about 30,000 yuan / ton. It is slightly lower than the 34000 yuan / ton of Lanke lithium industry.

Figure 23: principles, advantages and disadvantages of three adsorbents

Source: Yin Tao Gang's "Research Progress of Lithium extraction by adsorbents" (2010), China International Capital Corporation Research Department

More efficient adsorbents and adsorption processes will be the main research and development direction of adsorption. The core of the adsorption method is to select the adsorbent which has good selective adsorption to lithium ion and can eliminate other metal ion impurities. At present, there are mainly three kinds of adsorbents: aluminum series, manganese series and titanium series, among which only aluminum series adsorbents have realized industrial production. Overseas FMC has been used for more than 20 years. Aluminum series adsorbents have the advantages of good selectivity and many cycles, but the adsorption capacity is relatively small, so it is necessary to build large-scale adsorption towers. The adsorption capacity of manganese-based adsorbents and titanium-based adsorbents is relatively larger, but manganese-based adsorbents have serious solution loss and titanium-based adsorbents have large granulation problems, which are still being developed and improved. We believe that the development direction of adsorption in the future is to find more efficient adsorbents and adsorption processes. Due to the designability of adsorbents, there is still potential to improve product quality and reduce production costs in the future.

2.1.2 membrane method

At present, the relatively mature methods of membrane separation at the front end mainly include nanofiltration membrane method and electrodialysis method. On the whole, the basic principle of the membrane separation process is to make lithium, sodium and other monovalent ions pass through the membrane, while impurities such as magnesium and calcium are intercepted by the membrane, so as to achieve the effect of impurity removal. At present, the relatively mature membrane separation methods mainly include nanofiltration membrane method and electrodialysis method.

Before the application of nanofiltration membrane (Nanofiltration): in the field of lithium extraction from salt lake, nanofiltration membrane technology has been widely used in wastewater treatment and other fields. The nanofiltration membrane process mainly makes some solvents pass through the membrane driven by the pressure difference, and the interception effect of the molecular weight and pore size of the nanofiltration membrane is specific to the univalent inorganic salt, so as to realize the separation of magnesium and lithium in the salt lake. It is worth mentioning that because the nanofiltration membrane process has high requirements for the total salinity of brine, it is not possible to extract lithium independently at present, which generally needs to be used in conjunction with adsorption, electrodialysis, reverse osmosis membrane and other technologies.

Electrodialysis membrane method (Electrodialysis,ED): cations in brine migrate by electric field force, in which univalent cations such as lithium migrate to the concentration chamber through selective ion exchange membrane, while bivalent cations such as magnesium and calcium are blocked by the membrane and remain in the desalting chamber.

Figure 24: main principles of nanofiltration membrane method

Source: Principles of nanofiltration membrane processes, China International Capital Corporation Research Department

Figure 25: main principles of electrodialysis membrane method

Source: pan Hailu, "Research Progress of Electrodialysis Technology in the treatment of High salinity Wastewater" (2021), China International Capital Corporation Research Department

The lithium-rich brine after pre-treatment can be further purified by reverse osmosis membrane. The principle of reverse osmosis membrane (Reverse Osmosis) is to apply pressure to the brine on one side of the membrane to make the water molecules pass through the membrane against the direction of natural osmosis, and to retain the solute particles to a large extent, so as to concentrate the brine and form a lithium-rich solution for subsequent lithium deposition. For low concentration brine, after pre-treatment, if the lithium chloride content in the brine is still less than 4-5%, the reverse osmosis membrane process can be introduced for further purification, and for high concentration brine it can be omitted.

Figure 26: reverse osmosis membrane process principle

Source: Albemarle "Process for recovering lithium" (2019), China International Capital Corporation Research Department

Figure 27: technological process of lithium extraction by constant signal fusion nanofiltration membrane + reverse osmosis membrane

Source: Hengxinrong, Qinghai, method of extracting Lithium from Salt Lake Brine (2015), China International Capital Corporation Research Department

On the whole, the membrane process has the characteristics of green environmental protection and excellent separation effect, but the cost of membrane use and maintenance is relatively high. Compared with the traditional process of removing impurities with chemicals, the separation effect of membrane method is excellent, and its application can significantly improve the quality of the final product, and the production process does not use strong acids and bases, and is relatively friendly to the environment. It can be applied to areas where the ecological environment is relatively fragile. At present, the technologies of nanofiltration membrane and reverse osmosis membrane in China are relatively mature, but some high-performance membranes still rely on imports for a long time, which limits the application space of membrane method to a certain extent. If used in brine with high concentration and high salinity, the membrane is more likely to cause fouling and damage, and the cost of maintenance and repair is relatively high.

Membrane method is widely used in Qinghai salt lake, and the specific process depends on the endowment of the salt lake. The mg / Li ratio of Qinghai salt lake is significantly higher than that of overseas, which puts forward higher requirements for impurity removal process. under such resource endowment, membrane process has been relatively widely used in Qinghai, but the process path is different according to the specific salt lake endowment. Chaerhan Salt Lake has the characteristics of low lithium concentration and high mg / Li ratio, so membrane adsorption is needed to improve the influent quality. Dongtai, Xitai and Yiliping Salt Lake all use membrane combination to extract lithium, Dongtai and Yiliping Salt Lake use electrodialysis + nanofiltration membrane, while Hengxin Lithium melting Industry in Xitai Jinaer Salt Lake adopts nanofiltration membrane + reverse osmosis membrane. CITIC Guoan, which originally adopted the calcination method, is also promoting the transformation to the membrane process.

2.1.3 extraction method

The separation effect of magnesium and lithium by extraction method is good and the cost is low. The main obstacle of industrial application is the challenge of extractant to equipment and environment. In the extraction method, the old brine is acidified first, and then tributyl phosphate and other organic solvents are added to form the extraction complex, and hydrochloric acid is used for reverse extraction after pickling to increase the concentration of lithium in the solution. The extraction method is suitable for various types of salt lake brine with high mg-Li ratio, and it is a relatively wide range of methods for extracting lithium from brine. At present, the industrial application cases of extraction method are relatively limited, the main problem is that high acid substances and organic solvents are easy to corrode the equipment and affect the continuity of production, in addition, the extractant has great pollution to the environment. Phosphorus in the extractant will also cause eutrophication of salt lakes.

Figure 28: technological process for the production of Li2CO3 by extraction

Source: Li Zengrong's Overview of Lithium Resources and Lithium extraction Technology in Qinghai Salt Lake (2017), China International Capital Corporation Research Department

The enterprises applying extraction method in Qinghai are mainly Dahua Chemical Industry, which may be extended in the direction of mother liquor extraction in the future. The main enterprises that use the extraction method to produce are Dahua Chemical Industry and Jintai Lithium Industry. The main difference in the process path lies in the extraction equipment, Dahua Chemical uses box-type cascade extraction tank, while Jintai Lithium Industry uses centrifugal extraction equipment in the first phase of production capacity. In addition, due to the high concentration of lithium in the lithium-forming mother liquor, the need for extractant and the consumption of brine are also greatly reduced. At present, Zangge is studying the extraction method for the recovery of tail liquid in order to improve the overall yield of lithium carbonate. we think that the extraction method may further extend its application in the direction of mother liquor extraction in the future.

Figure 29: process of extracting lithium from alkaline brine containing lithium based on centrifugal extractor

Source: Qinghai Salt Lake Research Institute "Technology of extracting Lithium from Lithium-containing Alkaline Brine based on centrifugal Extractor" (2017), China International Capital Corporation Research Department

In view of the limitations of the current extraction methods, the focus of the current research and development is to find more environmentally friendly and more stable extractants. At present, the extraction method is restricted by some problems, such as low stability, corrosion equipment, high pressure of environmental protection and so on, and the application space of industrialization is relatively limited. In the future, more environmentally friendly and stable extractants will be the main direction of research and development, and the extraction efficiency and production time are expected to be further improved, and the technical problems of lithium mother liquor extraction are also expected to break through step by step.

2.1.4 calcination method

The calcination method uses the insolubility of magnesium oxide to separate lithium and magnesium, so it is easy to make high-quality lithium salt products. In the calcination method, the brine is acidified and boron removed, and then the acidified brine is instantly dried at high temperature by spray to obtain magnesium chloride containing lithium. Magnesium chloride containing lithium is obtained by calcination at high temperature, and the insolubility of magnesium oxide and lithium carbonate is used to leach the calcined products to get lithium-containing solution, and finally add soda ash to precipitate to get lithium carbonate.

Figure 30: calcination process

Source: space Power Research Institute, China International Capital Corporation Research Department

The calcination method is only used in CITIC Guoan, and its limitation lies in high energy consumption and pollution. The application experience of calcination method in Qinghai salt lake is mainly CITIC Guoan. The application of calcination method can realize the comprehensive recovery of lithium, magnesium, boron and hydrochloric acid, and the final product quality is high, which can achieve battery-grade lithium carbonate. However, the limitation of the application of the calcination method lies in the high energy consumption and the serious corrosion of the hydrogen chloride gas produced in the production process to the equipment, resulting in high production cost and low continuity. The application of calcination method restricts the actual production capacity of CITIC Guoan. At present, the company is carrying out the transformation of lithium extraction technology and studying the application of membrane process in Xitaijinel Salt Lake.

2.2 Lithium extraction from Qinghai Salt Lake is evolving towards larger scale, better quality and higher efficiency, and process progress will be the core driving force.

The lithium extraction process from the main salt lakes in Qinghai is gradually stable and has the basis for large-scale production capacity expansion. After long-term exploration, the lithium extraction process of the main salt lakes in Qinghai has gradually stabilized, and the local infrastructure is also relatively mature, which has the basis for large-scale expansion, and the progress of lithium extraction technology is also expected to activate some salt lake resources. further expand the supply camp of Qinghai Salt Lake. We estimate that the lithium salt production capacity of Qinghai Salt Lake is expected to increase from 100000 tons in 2021 to 20-250000 tons of LCE, in 2025. The corresponding supply capacity of Qinghai Salt Lake will increase from 70, 000 tons of LCE in 2021 to 12-150000 tons of LCE in 2025.

Chaerhan Salt Lake: there are mainly two enterprises that carry out lithium extraction production in Chaerhan Salt Lake. One is that the Tibetan lithium industry has a quasi-battery lithium carbonate production capacity of 10,000 tons per year, and it will add 20,000 tons of lithium carbonate production capacity after brine farming. Second, Salt Lake has the potential to reach 100000 tons / year lithium salt production capacity. Lanke Lithium, a subsidiary of Koda Manufacturing Joint Venture, currently has an industrial grade lithium carbonate production capacity of 10, 000 tons per year. Lanke II's battery-grade lithium carbonate production capacity has been commissioned in April 2021, and the company is expected to reach the production standard in 2022. In addition, Salt Lake BYD, a joint venture subsidiary of Salt Lake and BYD, plans battery-grade lithium carbonate production capacity of 30,000 tons per year, which is currently in the pilot stage; follow-up Salt Lake shares is still expected to carry out further planning for the next 40,000 tons of lithium salt production capacity.

Wuxi Taijinel Salt Lake: Citic Guoan has the mining right of Xitaijinel Salt Lake, with an annual production capacity of 10,000 tons, the company is carrying out research and development of membrane lithium extraction technology, and plans to build a new lithium carbonate production capacity of 20,000 tons per year. Qinghai Hengxin Lithium melting Lithium Industry's brine resources mainly come from CITIC Guoan, which currently has a lithium carbonate production capacity of 20,000 tons per year.

Dongtai Jinel Salt Lake: Dongtai Lithium Resources has the right to exploit Dongtai Jinel Salt Lake and currently has a battery-grade lithium carbonate production capacity of 20,000 tons per year. Dongtai Lithium Resources is the controlling shareholder of Qinghai lithium industry, providing salt lake brine to Qinghai lithium industry production. Qinghai lithium industry currently has an annual production capacity of 10,000 tons of lithium carbonate.

Yiyiping Salt Lake: Minmetals Salt Lake Company is the main development enterprise of Yiliping Salt Lake. Minmetals Salt Lake Company currently has a production capacity of 10,000 tons of lithium carbonate per year, and plans to increase the production capacity of lithium carbonate by 20,000 tons per year in the future. It is worth mentioning that Minmetals Salt Lake Company is conducting a pilot test of extracting lithium from raw brine in Yili Ping Salt Lake. at present, the operation effect of the pilot test is good, and the application of new technology is expected to improve the landing speed of Minmetals Salt Lake production expansion planning.

Da Chaidan Salt Lake: the main development enterprise of Da Chaidan Salt Lake is Dahua Chemical Co., Ltd. Its holding subsidiary Xinghua Lithium Industry currently has a production capacity of 3000 tons of lithium carbonate and 7000 tons of lithium chloride. Lithium chloride provides raw materials for Jinkunlun Lithium Industry, a subsidiary of Dahua Chemical Co., for the preparation of lithium metal. In 2021, Yiwei Lithium Neng acquired a 34% stake in Dahua Chemical Industry, and in the future, it plans to set up a joint venture with Jin Kunlun Lithium Industry to build a project with an annual capacity of 30,000 tons of lithium carbonate and lithium hydroxide.

Ballon Mahai Lake: Jintai Potash, the controlling shareholder of Jintai Lithium Industry, has the right to exploit Barun Mahai Lake. Jintai Lithium Industry currently has a lithium carbonate production capacity of 7000 tons / year, and the overall lithium carbonate production capacity of Jintai project is planned to reach 10, 000 tons / year.

Chart 31: sorting out the production capacity of the main salt lakes in Qinghai

Source: company announcement, China International Capital Corporation Research Department

Chart 32: production capacity Forecast of Qinghai Salt Lake from 2021 to 2025

Source: company announcement, China International Capital Corporation Research Department

Chart 33: output Forecast of Qinghai Salt Lake from 2021 to 2025

Source: company announcement, China International Capital Corporation Research Department

We believe that the core driving factor for the efficient utilization of lithium resources in Qinghai Salt Lake in the future lies in the progress of technology. With the advance of technologies such as (DLE) extraction from raw brine and one-step preparation of lithium hydroxide, lithium extraction from salt lake is expected to get rid of the limitation of old brine production, and the back-end products are not limited to industrial and quasi-battery-grade lithium carbonate, which is expected to further upgrade the lithium extraction industry in Qinghai Salt Lake.

First of all, the extraction of lithium from original halide is expected to improve the efficiency of lithium extraction and activate some potential resources, but the economic factors should be considered in practical application. The original halogen lithium extraction method puts the lithium extraction step in front, uses a new lithium adsorption resin through continuous off-line equipment, and separates sodium, potassium, magnesium, boron and lithium at the same time. This method gets rid of the limitation of drying brine in traditional salt field, shortens the production cycle from 2 years to 20 days, and reduces the loss of lithium resources in the process of drying brine. We think that it is expected to improve the production efficiency of extracting lithium from salt lake. and activate some salt lake resources which are difficult to apply traditional methods.

However, considering the economic factors, not all salt lakes are suitable for extracting lithium from original brine, and its investment efficiency is affected by the concentration of lithium in brine. When the concentration of lithium is too low, it is necessary to expand the scale of adsorption equipment or increase pre-steps such as concentration, which will significantly increase the production cost.

Second, bipolar membrane electrodialysis will extend the product system of Qinghai Salt Lake, from one-step production of lithium carbonate to lithium hydroxide. Bipolar membrane method is an electrochemical separation process driven by DC electric field. By using the selective permeability of anion and cation exchange membranes to specific ions, lithium sulfate commonly found in sulfuric acid salt lake brine can be quickly converted into sulfuric acid and hydroxide LI solution. The main method of producing lithium hydroxide from salt lake resources is to causticize lithium carbonate products, which requires more complex processes and greater follow-up investment, so the products of salt lake resources are mainly lithium carbonate. The one-step lithium hydroxide process is expected to reduce the cost and improve the quality of lithium hydroxide products, open up the possibility of large-scale production of lithium hydroxide, and further extend the product system of Qinghai Salt Lake.

Figure 34: raw brine adsorption process

Source: announcement of Mount Qomolangma in Tibet, China International Capital Corporation Research Department

Figure 35: one-step process for preparation of lithium hydroxide

Source: Lanran Environmental Technology Co., Ltd. "Bipolar membrane process for recovery of Lithium hydroxide from solution" (2017), China International Capital Corporation Research Department

3. The technology of extracting lithium from Qinghai salt lake is expected to spill over to Tibet and overseas, bringing an opportunity for the efficient development of local high-quality salt lake resources.

3.1 Tibet Salt Lake has excellent endowment and is expected to usher in the inflection point of accelerating development.

The overall resource endowment of salt lake in Tibet is better than that in Qinghai, but the scale of individual resources is relatively small. From the perspective of regional distribution, the recharge of ice and snow meltwater in western Tibet has rarely become the main gathering area of salt lakes, but there are various types of salt lake resources in the region, including carbonate type, sulfate type and chloride type, among which carbonate salt lake is rare in the world. Zabuye Salt Lake, which is located in the central Xigaze region.

The Tibetan salt lake as a whole has the characteristics of high lithium concentration and low mg-Li ratio. Taking Zabuye Salt Lake as the center, the external lithium concentration gradually decreases and the mg-Li ratio increases gradually, but in terms of specific projects, the high lithium concentration and low mg-Li ratio of Zabuye and other salt lakes are rare in the world, but the single resource scale of Tibet salt lake is still relatively small compared with Qinghai and overseas large salt lakes.

Chart 36: distribution of lithium resources in salt lakes in Tibet

Source: Dong Tao's "Geochemical Distribution of Lithium in Salt Lakes in Tibet" (2015), China International Capital Corporation Research Department

Tibet has a large number of lithium-rich salt lakes and excellent resource endowments, and the progress of the benchmarking project is expected to promote the development of salt lake resources in Tibet as a whole. At present, the main benchmarking projects for the development of salt lakes in Tibet are Zabuye Salt Lake in Tibet Mining, Jieze Chaka Salt Lake and Longmucuo Salt Lake in Chengtou, Tibet, with excellent resource endowment and relatively leading development process of salt lake resources. However, in addition to several major benchmarking projects, there are still a number of well-endowed salt lake resources in Tibet that need to be developed. Although the overall large-scale release of salt lake resources in Tibet will take time, the progress of major benchmarking projects will have an exemplary effect. We will promote the development of more local high-quality salt lake resources and further tap the potential of Tibet's resources.

Chart 37: sorting out the resource endowments of major salt lakes in Tibet

Source: lithium Branch of China Nonferrous Metals Industry Association, China International Capital Corporation Research Department

The development of salt lakes in Tibet will face the challenges of natural environment and infrastructure. The resource endowment and development potential of salt lakes in Tibet take the lead in the country, but for many years, most of Tibet's high-quality resources have been developed at an extensive low level, and the biggest challenge behind this mainly comes from the extreme natural environment. Tibet is generally more than 4000 meters above sea level, the climate is cold and remote, which leads to the backwardness of local infrastructure, the serious shortage of power supply, the inconvenience of transportation, and the scarcity of labor force. it also brings higher difficulties for the construction and operation of resource projects. In addition, there is a lack of vegetation cover in Tibet, and the ecosystem is very fragile, so once destroyed, it is difficult to repair, so it is difficult for the salt lake project to build large-scale salt fields, there can not be a large number of pollutants discharged, and the requirements for the overall process plan are more stringent.

Improvement is expected in the future, and the spillover of lithium extraction technology in Qinghai will bring an opportunity for the efficient development of high-quality resources in Tibet. Domestically, Tibet's advantageous lithium, copper, chromium and other minerals are relatively scarce resources in other parts of the country, so the development of Tibetan resources is of strategic significance to ensure scarce resources and is expected to be strongly supported by policies. We believe that the salt lake in Tibet is expected to usher in an inflection point of accelerated development in the future. first, the transportation facilities in Tibet are gradually improving, and "photovoltaic + energy storage" is expected to become a feasible power solution. in the future, with the increase of policy support and the inflow of funds, the infrastructure problems in Tibet will continue to improve. Second, Qinghai Salt Lake has crossed the limitation of its resource endowment and realized large-scale lithium extraction under the resource conditions of low grade and high mg / Li ratio, and its lithium extraction technology has spilled over to Tibet, which will bring more possibilities for the development of local higher-grade salt lakes. Membrane, adsorption, original brine lithium extraction and other technologies may enable Tibet to break away from the restrictions of large-scale salt field construction and environmental protection, bringing more efficient and feasible lithium extraction solutions for Tibet salt lakes.

3.1.1 Tibet Mining Industry: Zabuye Salt Lake is endowed with unique endowment, and Baowu is in charge of invigorating Tibet's core resources.

Zabuye Salt Lake has excellent resource endowment and mainly adopts solar pool process at present. Zabuye Salt Lake is a rare carbonate salt lake, with lithium reserves of about 1.84 million tons of LCE, and ideal lithium extraction endowment of high lithium concentration (1200mg/L) and low magnesium-lithium ratio (0.005). The brine is close to the saturation point of lithium carbonate. Based on the brine characteristics of Zabuye Salt Lake and the natural environment of high evaporation and poor high temperature, the Tibet Mining Industry explored the solar pond precipitation method. The brine was first stored in winter, and 5% lithium mixed salt was obtained by freezing and sunning. Then the negative temperature effect of the greenhouse was used to make lithium carbonate crystallize at the bottom of the pool, and 65% lithium concentrate was obtained by "fresh water scrubbing-drying". Finally, silver is purified by causticizing-carbonization method to produce industrial grade lithium carbonate and lithium hydroxide. This method makes full use of the cold resources and solar energy resources of the salt lake, and avoids the pollution caused by chemicals, but it is affected by the weather and salt field leakage, so the production efficiency is relatively low.

Figure 38: flow chart of lithium extraction from Zabuye salt lake brine

Source: progress in the Development of Zabuye Salt Lake Resources, Chinese Academy of Geological Sciences (2018), China International Capital Corporation Research Department

Figure 39: processing flow chart of Zabuye (Baiyin) Lithium Plant

Source: progress in the Development of Zabuye Salt Lake Resources, Chinese Academy of Geological Sciences (2018), China International Capital Corporation Research Department

Baowu Group is in charge of Tibet's mining industry, and Zabuye Salt Lake welcomes the inflection point of accelerated development. Tibet Mining holds a 50.72% stake in Zabuye, Tibet, and has the exclusive right to exploit the Zabuye Salt Lake in Tibet. In January 2021, China Baowu Group and its concerted actor Xigaze City Investment acquired a total of 52% stake in the Mining Corporation, and Baowu Group became the actual controller of Tibet's mining industry. After taking office, Baowu Group plans to provide strong support to the development of Zabuye Salt Lake: first, to improve local infrastructure, and is coordinating with the national Electroweb to improve power supply in Zabuye; second, to send experts to support the research and development of lithium extraction process from Zabuye Salt Lake. In recent years, the progress of lithium extraction process in Qinghai Salt Lake also provides more abundant technological options. The change of governance structure and the innovation of lithium extraction technology are expected to become an inflection point for accelerating the development of Tibet's mining industry, and as a central holding enterprise dominated by mining development in Tibet, Tibet's mining industry also has the potential to continue to integrate local high-quality resources. to promote the development of salt lakes in Tibet as a whole.

Figure 40: ownership structure of Tibet Mining Industry (June 2020 to present)

Source: Tibet Mining Bulletin, China International Capital Corporation Research Department

3.1.2 Tibet City Investment: it has two high-quality salt lakes, Jieze Tea Card and Longmu Cuo, and pays attention to the improvement opportunity of lithium extraction process.

Jieze Chaka Salt Lake and Longmu Co Salt Lake have the highest reserves in the world and have excellent resource endowments. The mining rights of the two major salt lakes Jie Chaka and Longmu Co belong to Guoneng Mining (41% owned by Tibet City Investment), both of which are located in Ritu County, Ali Prefecture, Tibet, with total lithium reserves of about 3.9 million tons LCE, ranking first in the world. Among them, Jiezecha is a carbonate salt lake with reserves of 2.01 million LCE, and lithium concentration as high as 1173mgUnix L, and Guoneng Mining owns its mining rights. Longmu Cuo is a chloride salt lake with lithium reserves of 1.89 million LCE, and lithium concentration of 794 mg / L, and the renewal of mining rights is under way.

Figure 41: the distance between Jieze Tea Card and Longmu Co Salt Lake is relatively close.

Source:: Google Map, China International Capital Corporation Research Department

Chart 42: Guoneng Mining has conducted a study on the bittern mixing process in two major salt lakes.

Source: Tibet Mining Bulletin, China International Capital Corporation Research Department

Jiezecha and Longmu Co Salt Lake have discussed the process of bittern, and a new process of extracting lithium is being studied at present. Because Jiezecha Salt Lake and Longmu Co Salt Lake are close to each other and belong to two major resource types, sulfate and carbonate, Guoneng Mining has studied the bittern mixing process of the two major salt lakes. At present, Guoneng Mining is promoting the pilot-scale test of lithium extraction from pre-concentrated brine in Jiezecha Salt Lake and Longmu Cuo aluminum adsorption process, and plans to further optimize the process route by cooperating to deepen the research on raw brine extraction and manganese adsorption process.

3.2 Chinese enterprises carry technology to "go out" and endow them with overseas high-quality resources.

The potential of lithium resources in South American salt lakes is broad, and some of the sub-optimal salt lakes have inherent requirements for advanced technology. In terms of total resources, South America's "lithium triangle" accounts for 53% of the global lithium resources, but at present, only a small number of salt lakes with outstanding resource endowments are being put into production, and there are still a large number of salt lake resources with development potential. According to the statistics of the US Geological Survey, more than 100 salt lakes have been bred in the lithium triangle region, but less than 10 salt lakes have been developed so far. In South American salt lakes, some of the salt lakes with sub-optimal resource endowments (relatively high magnesium and lithium, complex impurity content, etc.) do not have the conditions for the application of traditional precipitation method, so there is an inherent requirement for the introduction of advanced lithium extraction technology.

At present, the salt lakes that have been put into production overseas are mainly based on the traditional precipitation method, and the application of Livent lithium extraction technology is more advanced. Some overseas high-quality salt lakes can use a relatively simple precipitation process to extract lithium. At present, ALB, SQM and Orocobre all use precipitation to extract lithium, and lithium carbonate products can be obtained by evaporation concentration, impurity removal, lithium precipitation and other steps, but a large-scale evaporation tank needs to be built and experience a brine drying cycle of 12-18 months. Relatively speaking, Livent puts more emphasis on the application of advanced lithium extraction technology, using exclusive patent selective adsorption to produce lithium carbonate in Hombre Muerto, which has the advantage of less dependence on salt fields, the drying period can be shortened to 4-9 months, and the introduction of adsorption process also improves the impurity removal effect, making it easier to produce high-quality lithium salt products.

The precipitation method is mainly used in the chart 43:Alb, SQM and Orocobre.

Source: SQM announcement, China International Capital Corporation Research Department

Chart 44:Livent introduces selective adsorption technology

Source: Livent announcement, China International Capital Corporation Research Department

Under the pressure of environmental protection, overseas salt lake enterprises are promoting the upgrading of lithium extraction technology. The process of extracting lithium by precipitation used by overseas salt lake enterprises is relatively extensive, and the overall efficiency of extracting lithium is low (the yield is 15-40%). At present, overseas salt lake lithium extraction faucets have put forward sustainable development plans, and the core content of the plan is to reduce the extraction of raw brine, so overseas salt lake faucets are also promoting the upgrading of lithium extraction technology. gradually distribute the patents of adsorption, membrane and other related technologies and strengthen technical cooperation. It is worth mentioning that E3 Metal and other lithium extraction technology manufacturers are also carrying out research on emerging lithium extraction technologies such as DLE and one-step preparation of lithium hydroxide, and some of them have reached the pilot stage.

Chart 45: process path and development process of overseas lithium extraction technology manufacturers

Source: company announcement, China International Capital Corporation Research Department

It will be a general trend for Chinese enterprises to "go out" with technology and empower the development of overseas potential resources. Compared with overseas salt lake enterprises, adsorption and membrane processes in Qinghai have achieved large-scale and stable production and have more experience in industrialization. There is still a broad space for the development of overseas salt lake resources. under the background of the annual expansion of lithium demand in the future, we believe that it will be a general trend for China Lithium Industry Corporation and upstream lithium extraction technology manufacturers to "go out". It is expected to activate some resources with sub-optimal resource endowment, and extending the distribution of resources to overseas salt lakes is also expected to open up a broader space for development for domestic enterprises.

3.2.1 Ganfeng lithium industry: deep layout of overseas salt lakes, development of technical energy projects

The path of transformation from Ganfeng to low-cost brine resources is clear, and the Cauchari project has become the cornerstone resource in the salt lake field. The current capacity structure of Ganfeng is mainly to extract lithium from ores, and we believe that the starting point of the new production capacity in the future will gradually shift to low-cost salt lake resources. Ganfeng has the resource layout of two major salt lakes in Argentina, the Cauchari-Olaroz project and the Mariana project. Among them, Cauchari Salt Lake has become the cornerstone resource in the salt lake field because of its excellent resource endowment and leading project progress.

The cornerstone effect of the Cauchari project is mainly reflected in two aspects: first, the resource reserves are large, and the lithium reserves of Cauchari-Olaroz Salt Lake up to 24.58 million tons LCE, ranks first in the world, and its huge resource reserves will provide important support for the lithium extraction capacity of Ganfeng Salt Lake. Second, the project is progressing rapidly. The company expects Cauchari Salt Lake Phase I 40,000t Lithium Carbonate / year Project to be put into trial operation in the first half of 2022. At present, Ganfeng has sent a technical team to support the project construction work, and its commissioning will enrich Ganfeng's development experience in the salt lake field and form a demonstration effect on the follow-up overseas salt lake acquisition and development.

Chart 46: global resource layout of Ganfeng lithium industry

Source: Ganfeng Lithium Industry Bulletin, China International Capital Corporation Research Department

Chart 47:Cauchari-Olaroz Salt Lake Project

Source:: Lithium Americas announcement, China International Capital Corporation Research Department

The distribution of overseas salt lake resources in Ganfeng continues to expand, which is expected to form a virtuous circle. In July 2021, Ganfeng Lithium Industry announced that it intends to acquire a 100% stake in Argentina's Pastos Grandes Salt Lake to further expand the distribution of overseas salt lake resources. The total lithium reserves of Pastos Grandes Salt Lake are 4.12 million tons LCE (measured + indicated). The first phase is planned to produce 24000 tons of lithium carbonate per year. Millennial expects to complete the construction and start commissioning in mid-2023. We believe that with the gradual production of existing resources, Ganfeng is expected to form a virtuous circle in the development of overseas salt lake resources. First, Ganfeng is expected to further accumulate Know-how; of lithium extraction process from salt lake through the development of existing resources. Second, although the total amount of salt lake resources in South America is rich, but the resources are complex, overseas mining companies will face the challenges of process selection and large-scale construction after completing the preliminary work, while Gan Feng will have more advantages in the follow-up technical and financial support.

3.2.2 Mount Qomolangma, Tibet: start the experiment of extracting lithium from raw brine to boost the salt lake resources in Argentina

The company has two major Argentine salt lakes and will officially carry out the pilot-scale process of extracting lithium from original halogen. In April 2018, NNEL, a shareholding subsidiary of Mount Qomolangma, acquired a 100% stake in LithiumX, Lthium X wholly owns the SDLA Salt Lake Project in Argentina (reserves of 1.6 million tons of LCE) and the Arizaro Salt Lake Project in the same region (under exploration), of which the expansion of the SDLA Salt Lake Project to 27500 tons of LCE has been started. According to the company announcement, the company cooperated with Jiuwu Hi-Tech to develop the technology of extracting lithium from original brine for Argentine salt lake, which includes adsorption, reverse osmosis concentration, high pressure nanofiltration, resin impurity removal and other processes. The company expects that the recovery rate from the adsorption section to the membrane section will reach 88%, which is much higher than the traditional lithium extraction process in South America. The application of the original halogen lithium extraction technology is expected to greatly shorten the project construction cycle and reduce the overall investment cost.

Chart 48:Lithium X's two major Argentine salt lakes

Source:: Lithium X announcement, China International Capital Corporation Research Department

Figure 49: technological process of extracting lithium from raw halide from Mount Qomolangma, Tibet

Source: announcement of Mount Qomolangma in Tibet, China International Capital Corporation Research Department

3.2.3 the traditional mining industry is expanding to the lithium industry, and the spillover of lithium extraction technology from salt lakes provides more possibilities.

Traditional mining leaders accelerate the process of expansion into the lithium industry. Under the background of the rapid development of the new energy industry, the traditional mining leader has gradually accelerated the process of expansion to the lithium industry. For example, Zijin Mining has launched a layout plan for lithium and other new energy mines, and the future business layout will be appropriately extended to new energy and new materials; the president of Luoyang Molybdenum Industry will visit the Argentine Ambassador to lay the foundation for the company's further development of mining investment in the field of energy metals, while overseas mining enterprises such as Rio Tinto are also promoting the development and planning of lithium resources.

It is necessary for traditional mining enterprises to expand to the lithium industry. At present, the lithium industry has a strong attraction in terms of current volume and future growth space, and the certainty of development has been continuously strengthened, which should not be underestimated by the traditional mining industry leader. Compared with the traditional mining industry, where the growth is gradually slowing down, entering the track with broader growth space in the future will help to provide the company with new business growth points and enjoy the dividends of the clean energy era; at the same time, the layout of metals in line with the trend of new energy transformation will help to improve the ESG level of mining enterprises. We believe that the development of a large amount of lithium resources in salt lakes is an ideal choice for traditional mining leaders to intervene in the lithium industry.

Figure 50: traditional colored faucets accelerate the process of expanding into the lithium industry

Source: company announcement, China International Capital Corporation Research Department

The core advantages of traditional mining leaders are expected to extend to the lithium industry, and the spillover of lithium extraction technology from salt lakes will provide more possibilities for them to catch up later. Traditional mining leaders have long focused on mining mergers and acquisitions and development, and the core advantages accumulated in the original field are expected to extend to the lithium industry.

First, the traditional mining leader has the advantages of governance mechanism, management experience and talent agglomeration tested by time and market, has rich experience in global mergers and acquisitions, development and operation, and has profound technology accumulation in mining, selection and metallurgy. It has formed the comprehensive influence of certain industries and countries where resources are located, and has a solid foundation for the development of lithium resources around the world.

Second, the traditional business provides rich cash flow and investment and financing means for lithium resources development. For example, the operating net cash flow of Zijin Mining and Luoyang Molybdenum is 14.3 billion yuan and 8.5 billion yuan respectively. As of the first quarter of 2021, the monetary funds of Zijin Mining and Luoyang Molybdenum are 12 billion yuan and 23.1 billion yuan respectively. At the same time, as a company listed in two places, it has a unique advantage in refinancing.

We believe that although the accumulation of Know-How in the field of lithium extraction from salt lake in the early stage of the traditional mining industry is relatively limited, compared with the leading enterprises immersed in the lithium industry for many years, the spillover of lithium extraction technology from salt lake will provide more possibilities for them to catch up later. We believe that the traditional mining leader can cooperate with enterprises with salt lake lithium extraction technology or absorb relevant talent teams, which is expected to achieve synergy in the development of salt lake resources and accelerate the process of expansion to the lithium industry.

4. Investment suggestion

We believe that global lithium supply and demand is expected to tighten and gradually tighten from 2021 to 2025, and lithium prices are expected to enter a "big bull market". At the same time, we suggest that attention should be paid to four structural "small logic":

First, resources are king, lithium mine prices are ushering in accelerated upward, high resource self-sufficiency rate or have the potential for resource mergers and acquisitions of enterprises will significantly benefit.

Second, the supply is controllable, taking into account the high degree of external dependence of China's lithium resources and the increased risk of overseas resource supply, enterprises that distribute domestic high-quality lithium resources and overseas lithium resources with controllable supply risk will usher in a strategic reassessment.

Third, demand premium. First of all, the rapid growth of demand for high-nickel ternary materials and the structural tightening of supply and demand of hard rock lithium ore will drive the upstream logic of lithium hydroxide more prominent in lithium products; second, with the further promotion of the application of lithium iron phosphate, the demand for battery-grade lithium carbonate is expected to be structurally accelerated and a certain demand premium is expected. Major suppliers of lithium varieties with demand premium and enterprises with production expansion expectations and capabilities are expected to achieve a simultaneous increase in volume and price.

The fourth is the spillover of lithium extraction technology from salt lake. The lithium extraction process of the main salt lakes in Qinghai has been basically stable, and has been iterated to a larger scale and better quality through technological progress, and its lithium extraction technology is expected to gradually spill over to Tibet and overseas, bringing opportunities for more efficient development of local high-quality salt lake resources.

Article source: China Gold Nonferrous Research