Minmetals Securities: it is estimated that the total production capacity of lithium extraction from salt lakes in China will increase to 220000 tons from 2020 to 2025.

Main points of the report

Salt Lake accounts for nearly 60% of the world's proven lithium resources, and it is the cornerstone of the future power and energy storage TWh era. Salt lakes are mostly formed in closed basins with high altitude, arid or semi-arid climate and lacustrine sedimentations. the four major metallogenic areas in the world include the Andes of South America, the western United States, the Dead Sea in West Asia and the Qinghai-Tibet Plateau of China, some of which are dry salt lakes. Lithium resources in salt lakes are mainly contained in intercrystalline brine and surface brine, derived from ancient marine deposits, long-term confluence of rivers or underground hot springs, and are often associated with sodium, boron, potassium and magnesium, but not all salt lakes contain lithium. We believe that in view of the fact that salt lake type lithium resources account for 58% of the world's proven lithium resources, the total amount of salt lake type lithium resources is large and the identification rate is still low, the reserve scale of individual projects is usually considerable, and the production cost is low, so it is suitable to be used as the cornerstone of global lithium resource supply in the TWh era, but unlike static hard rock lithium deposits, salt lake brine has a certain degree of dynamic mobility, so sustainable bittern extraction requires a detailed hydrological model.

Technological progress will increase the supply proportion of lithium extraction from salt lake, and it is suggested to adopt it step by step in accordance with local conditions. We believe that:

(1) both hard rock lithium ore and salt lake brine lithium belong to low-grade minerals, so they are not simply equated with the "grade is king" of iron ore. The recoverability and extraction process will also determine the production cost to a large extent; (2) Lithium is still a young industry. It can be seen from the mineral processing yield of 50% of the lithium ore in Western Australia and the overall primary yield of about 40% of the global salt lakes that there is a broad space for the improvement of lithium extraction technology. (3) at present, the classical route of extracting lithium from salt lake is to use salt field system to separate sodium, potassium and then extract lithium from old brine, while the technology of separation and concentration of magnesium and lithium varies from lake to lake. the advantage of extracting lithium from old brine is that it can make full use of the rich solar and wind energy in the mining area in the process of lithium enrichment and partial impurity removal, so as to realize the low cost of relatively hard rock lithium ore. However, the key constraint lies in the need to build a large area of salt fields, low primary yield, especially the brine drying period as long as 12-24 months, which makes it difficult to keep up with the outbreak of demand. (4) looking forward, with the maturity of all kinds of adsorption, membrane separation, concentration and extraction technologies, lithium extraction from salt lakes will be gradually promoted to "continuous industrial production", and salt lake projects with lithium as the main products will also become more common; in the future, the maturity and commercialization of a new generation of technologies such as "extraction of lithium from raw halogen" will significantly improve the production efficiency and production share of global salt lakes and bring about a revolution in the supply of lithium resources.

The maturity of Qinghai Salt Lake and the benchmarking of Tibet Salt Lake shoulder the important task of ensuring the security of China's lithium resources supply.

Lithium brine accounts for 79% of China's local lithium resource potential. Salt lakes are mainly distributed in Qinghai and Tibet, while Dazhou in Sichuan and Qianjiang in Hubei have deep brine in gas fields. After nearly 20 years of technical iteration, process running-in and continuous investment, all the main salt lakes in Qinghai have broken through the extraction of lithium from brine with high mg-Li ratio. The process routes of Chaerhan (adsorption + membrane), Dongtai (electrodialysis), Xitai (calcined steering membrane method) and Yili Ping (membrane gradient coupling method) have been basically finalized and continuously optimized. We believe that thanks to the complete guarantee of infrastructure such as electricity, fresh water, natural gas and roads, and the mature completion of the salt field system, lithium extraction from Qinghai Salt Lake will not only usher in the harvest of long-term hard work. it will also speed up the construction of a world-class salt lake industrial base and embrace greater development opportunities, of which Chaerhan and Xitai are expected to become the main body of increment. At the same time, as a virgin land, the lithium concentration of the salt lake in Tibet is generally higher and the development potential is great. Despite the high altitude, difficult conditions, and the constraints of electric power and ecological environmental protection, it is still early for comprehensive development. However, we are optimistic that Zabuye will make positive progress as a benchmarking project, and the technology and experience based on Qinghai are also overflowing, helping to open the treasure basin of the salt lake in Tibet. Overall, we expect that the total production capacity of lithium extraction from salt lakes in China is expected to increase from 100000 tons to 220,000 tons from 2020 to 2025.

Invest in "hard resources". The lithium industry is in the super demand cycle brought about by the global energy revolution, and we continue to be optimistic about the overall investment opportunities in the lithium sector. We suggest to pay attention to the producers with "hard resources". The criteria are: first-line resources on hand, online production capacity-can enjoy immediate price and volume dividends, with considerable potential for capacity expansion.

Risk tips: 1, if the release of global lithium mine supply exceeds expectations and the promotion of new energy vehicles is low, it will lead to a decline in the price center of lithium products; 2, the shortage of automotive chips and economic fundamental risks are a drag on global sales of new energy vehicles.