EQUITY RESEARCH | April 27, 2023 | 9:31PM AEST

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Hugo Nicolaci
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Goldman Sachs Australia Pty Ltd

Paul Young
+61(2)9321-8302

Global Metals & Mining

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Goldman Sachs Australia Pty Ltd

Direct Lithium Extraction: A potential game changing technology

The implementation of Direct Lithium Extraction (DLE) technologies has the potential to
Nicholas Snowdon
+44(20)7774-5436
[email protected]
Goldman Sachs International
significantly increase the supply of lithium from brine projects (much like shale did for oil), Aditi Rai
For the exclusive use of [email protected]

nearly doubling lithium production on higher recoveries and improving project returns, though +44(20)7774-5179
with the added bonus of offering ESG/sustainability benefits, while also widening rather than [email protected]
steepening the lithium cost curve. We explore the progress, economics, and implications of DLE Goldman Sachs International
being implemented at scale, with increasing relevance in the context of Chile’s recent National
Lithium Policy. Trina Chen
+852-2978-2678
[email protected]
• Potential game changing technology: A number of proven DLE technologies are emerging and Goldman Sachs (Asia) L.L.C.
being tested at scale, with a handful of projects already in commercial construction. While there
Joy Zhang
may still be challenges around scalability and water consumption/ brine reinjection, with the
+852-2978-6545
ongoing efforts, DLE could be implemented between 2025-2030 in both Chile and Argentina, in [email protected]
our view (compared with market skepticism on development by 2030). We estimate on Goldman Sachs (Asia) L.L.C.
scenarios/benchmarking the capital intensity range of DLE is comparable with a traditional pond
project, where risk of a higher upfront capital intensity is potentially offset by lower unit costs. Yan Lin
We see NPV breakeven for a DLE project (80%+ recovery) vs. a traditional pond (~50%) at opex of +852-2978-7020
[email protected]
<US$5,700/t (on GSe lithium prices), and look to our upcoming trip to Argentina to affirm our

80043743200000000000000000000000
Goldman Sachs (Asia) L.L.C.
analysis.
• Cost curve & supply/demand impacts: Our analysis suggests that DLE will widen, rather than Elise Bailey
+61(3)9679-1344
steepen, the lithium brine cost curve with an average project likely sitting in the second or third
[email protected]
cost quartile. With resulting additional lithium supply we also see risk that DLE implementation Goldman Sachs Australia Pty Ltd
could extend the size and duration of lithium market surpluses/reduce deficits vs. our base
case SD balance (without a pull forward of demand with new supply), where ~20-40% of LatAm Roy Shi
brine projects implementing DLE (recovery from ~50% to ~80%) could add ~70-140ktpa LCE +852-2978-0110
from 2028+, increasing GSe global raw supply by c.8%. [email protected]
Goldman Sachs (Asia) L.L.C
• Best placed to benefit: We prefer briners over miners in the lithium sector over the medium
term, with DLE offering significant potential to increase lithium output on improved recoveries Nick Zheng, CFA
and lift project economics. We reiterate our Buy ratings on Allkem/RIO (on CL)/Qinghai and +852-2978-1405
highlight 27 global lithium projects using/implementing DLE and nine advancing third-party [email protected]
Goldman Sachs (Asia) L.L.C
technology developers.

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For
Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as
research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc.
 Goldman Sachs Global Metals & Mining

Table of Contents
The Benefits & Economics: How DLE compares to traditional brine ponds 3

The Supply/Demand Implications: New DLE supply from 2025+ 10

The Well Positioned: Projects/stocks that could benefit from DLE 15

LatAm lithium resources 19

The Technology: DLE vs. traditional brine evaporation 21

Commodity and FX forecasts 29

Valuation methodology & Investment risks 30

Disclosure Appendix 31
For the exclusive use of [email protected]

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27 April 2023 2
 Goldman Sachs Global Metals & Mining

The Benefits & Economics: How DLE compares to traditional brine ponds

Direct Lithium Extraction (DLE) has the potential to significantly impact the lithium
industry, with implementation on the extraction of lithium brines potentially
revolutionary to production/capacity, timing, and environmental impacts/permitting.

Much like shale did for oil, DLE has the potential to significantly increase the supply of
lithium from brine projects, nearly doubling lithium production/yield (taking recoveries
from 40-60% to 70-90%+) and improving project returns, though with the added bonus
of offering sustainability benefits and ESG credentials for its implementors (land usage
from lack of ponds declines >20x, water usage and metrics improve on potential brine
reinjection), while also widening (rather than steepening) the lithium cost curve.

A number of proven DLE technologies are emerging and being tested at scale, with a
handful of projects already in commercial scale construction (some China projects in
production). Though the application of technologies used in DLE processes may be fairly
new to the lithium industry, many are already utilised across other commodities.
For the exclusive use of [email protected]

While there may still be key challenges around scalability, water consumption, and brine
reinjection, with the ongoing efforts, DLE could be implemented between 2025-2030 in
both Chile and Argentina, in our view, both as greenfield projects and brownfield
expansions, or to enhance recoveries of existing pond operations. Chile’s recent
National Lithium Policy (NLP) also pushes for new lithium projects to implement DLE for
water/environmental concerns, further supporting an accelerating implementation of
DLE technologies. This compares with market skepticism around commercial
development of DLE by the end of the decade (from discussions with investors).

We set out a summary of the processes for traditional brine ponds and key DLE
technologies below, with a more detailed comparison of the variations in a later section.

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Exhibit 1: Comparison of lithium extraction methods

Lithium extraction methods Hard Rock Brine

Mining Evaporation DLE

Production times (extraction to production) Weeks to months Months to years Hours to days
Lithium recovery rates ~60-80% (processing) ~40-60% ~70-90%+
Costs Medium-High Low Low-Medium
Capex Varied on grade/ ~US$23-34,000/tpa LCE ~US$26-34,000/tpa LCE
Opex chemical conversion ~US$3,300-4,900/t LCE ~US$2,800-3,600/t LCE
Spodumene Lithium Carbonate (Li2CO3) / Lithium Carbonate (Li2CO3) /
Lithium product
(~5-6% Li2O) Lithium Chloride (LiCl) Lithium Chloride (LiCl)
Heating, cooling, crushing, and Staged atmospheric evaporation, Adsorption (Ad), Ion Exchange (IX),
Process
roasting plant processing Solvent Extraction (SX), Membrane
Further processing requirements Yes No (subject to end use) No (subject to end use)
Land area requirement High High Low
Weather dependance Yes Yes No
Low-Medium
Water consumption High Medium-High
(subject to reinjection availability)
Energy Consumption High Low (free solar evaporation) Medium
Emissions High Low Low

Generalised; IX often already utilised in sorption and pond proceses for impurity removal; Brine capital intensity and opex based on GSe modeled scenarios outlined below.

Source: Company data, Data compiled by Goldman Sachs Global Investment Research

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 Goldman Sachs Global Metals & Mining

Exhibit 2: Traditional process of Brine Extraction vs. DLE, and timing of each stage
For the exclusive use of [email protected]

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Indicative timings; pond based on Olaroz flowsheet

Source: Company data, Goldman Sachs Global Investment Research

27 April 2023 4
 Goldman Sachs Global Metals & Mining

DLE implementors and technology developers

Several lithium projects are utilising or in the process of selecting technologies for DLE implementation, while a number of
large global OEMs and miners (who may also be interested in by product application for extraction of other elements, such
as potassium) have backed or have stakes in some technology developers. We outline in the table below 27 global lithium
projects that are using or plan to implement DLE, along with a further nine advancing third-party technology developers.

Exhibit 3: DLE has a growing number of developers and future implementors

DLE implementors & technology developers
Company Project Country DLE Project stage DLE technology provider Lithium extraction technology Tech Origin Geothermal Resource (Mt LCE) Start date Capacity (ktpa LCE)

Lithium project developers/operators

Eramet/Tsingshan Centenario-Ratones Argentina Construction Proprietary Sorption - - 10 2024 ~24+50 (P1+P2)
Livent Fenix (Hombre Muerto) Argentina Production Proprietary Sorption USA - 12 1998 ~80 (3 expansions)
For the exclusive use of [email protected]

RIO Rincon Argentina Pilot Proprietary Sorption - - 12 2024 30

Lake Resources Kachi Project Argentina Pilot Lilac Solutions IX USA - 4 2024 25
Allkem Olaroz enhanced recoveries Argentina Study TBD (in testing phase) TBD TBD - - - -
Tibet Summit Resources Angeles Argentina Construction SunResin Sorption China - 2 2024 25 (P1)
Eon Minerals Amanecer Argentina Pilot Proprietary Sorption Argentina - - - -
Albemarle Atacama Chile Pilot Proprietary LiET / Third party testing TBD TBD - 11 2023 -
SQM Atacama Chile Pilot Proprietary / Third party testing TBD TBD - 68 2024 220-250
CleanTech Lithium Laguna Verde Chile Pilot SunResin Sorption China - 2 2026 20
CleanTech Lithium Fransisco Basin Chile Pilot TBD (in testing phase) TBD TBD - 1 - -
Lanke Lithium Yiliping Lake China Production SunResin Sorption China - - 2017 20
Zangge lithium Chalkhan Lake China Production SunResin Sorption China - - 2018 20
Jintai Lithium Mahai Lake China Production SunResin Sorption China - - 2019 7
Tibet National Qinghai China Commissioning SunResin Sorption China - - - -
Yiwei Lithium Qinghai Salt Lake China Construction SunResin Sorption China - - - -
Anson Resources Paradox Lithium USA Pilot/DFS SunResin Sorption China - - - -
Compass Minerals Great Salt Lake USA Pilot Energy Source Minerals (ILiAD) Sorption USA - 2 2025 35
Berkshire Hathaway Salton Sea USA Pilot Proprietary Sorption USA Yes - - 90
Energy Source Minerals Salton Sea (Project ATLIS) USA Pilot Proprietary (ILiAD) Sorption USA Yes - 2024 20
Controlled Thermal Resources Salton Sea USA Pilot Lilac Solutions IX USA Yes - - 25
Controlled Thermal Resources +HOO¶V.LWFKHQ USA Offsite Pilot Lilac Solutions IX USA Yes 3 2024 25
Standard Lithium Smackover (Lanxess Project) USA Demonstration Proprietary (LiSTR) IX USA - 3 - 22
American Battery Materials Lisbon Lithium Project USA Pilot TBD (in testing phase) TBD USA - - - -

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E3 Metals Corp Clearwater Canada Pilot Proprietary IX Canada - 7 2025 20
LithiumBank Boardwalk Canada Pre-PEA Conductive Energy IX Canada - 6 - -
Vulcan Energy Upper Rhine Valley Germany Pilot Proprietary (VULSORB) Sorption Germany Yes 16 2024 48
Technology developers
Summit Nanotech - - Pilot/Demo Proprietary (denaLi) Sorption Canada - - - -
SunResin - - Commercial (growing scale) Proprietary Sorption China - - - -
International Battery Metals (IBAT) - - Demo/Commercial Proprietary Sorption USA - - - -
Koch Technology Solutions - - Lab/Pilot Proprietary (Li-Pro) Sorption USA - - - -
Lilac Solutions - - Demo/Commercial Proprietary IX USA - - - -
Conductive Energy - - Pilot/Demo Proprietary IX Canada - - - -
EnergyX - - - Proprietary (LiTAS) Membrane USA - - - -
Geo40 - - Lab Proprietary (GeoSieve) Membrane NZ Yes - - -
Solvay - - Pilot Proprietary (CYANEX 936P) SX Belgium - - - -

List not exhaustive; Technology developers listed separately where not developing own resource; Geothermal category for project/tech that is specifically geothermal - technologies may be applicable across resource types; Quoted resource/start date may apply to whole
project rather than planned expansion.

Source: Company data, Data compiled by Goldman Sachs Global Investment Research

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 Goldman Sachs Global Metals & Mining

Scenario economics and real world asset benchmarking

While we believe there is increasing awareness of the technological implications of DLE
around increased recoveries/production and accelerated ramp-up of projects, the
economics of its implementation, along with the implementation of the various
technologies in other mineral commodity extraction, remain underappreciated, in our
view.

In this context, we provide a desktop indicative analysis of the possible economics of a

DLE project vs. a traditional brine pond under a range of scenarios, informed by existing
projects and our sense checks with industry participants, along with a comparison to
announced projects.

These scenarios assume a hypothetical brine resource is extracted at the same grade
and volume at ~25ktpa contained LCE over a 20-yr production life to produce and sell
the same quality of lithium carbonate product, both as a DLE (which ramps up 18mths
faster vs. traditional ponds though with higher nominal capex/opex) and a traditional
evaporation pond project.
For the exclusive use of [email protected]

We expect a DLE project achieves recoveries of ~70-90% producing ~18-23ktpa LCE

(though model a wider 50-100% range covering up and downside risk), while a
traditional brine pond achieves recoveries of ~40-60% producing ~10-15ktpa LCE (again
modeling a wider 30-80% range to capture upside risk of improving recoveries of newer
pond projects). We expect plant and processing infrastructure drive a higher upfront
capex for a DLE project, which more than offsets the lack of traditional pond
infrastructure.

Exhibit 4: DLE can increase lithium recoveries to 70-90%, from Exhibit 5: Plant and processing infrastructure are likely the bulk of
40-60% for traditional ponds higher DLE capex
Annual lithium carbonate production (ktpa LCE) on modeled scenario Pond vs. DLE project indicative capex split for mid-point of scenario
lithium recoveries modeling (US$mn)

30 800

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ktpa LCE US$mn
700
25 600
90%+ recovery
600
20 500
70-90% recovery
60-80% recovery
400 350
15
50-60% recovery
40-60% recovery 300
10
30-40% recovery 200

5 100

0
0 Pond DLE
Pond DLE
Wellfields & Brine Distribution Evaporation Ponds Plant & Reagents
Utilities Infrastructure Indirect Costs
Estimate range Possible Contained in extracted brine
Total other costs

Source: Company data, Goldman Sachs Global Investment Research SdV Stage 1 & 2 technical study (2022) split for pond capex, apportioned to mid-point of capex
scenario estimates; DLE plant capex taken as balancing item of capital items (as no pond capex)
for illustrative purposes.

Source: Company data, Goldman Sachs Global Investment Research

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 Goldman Sachs Global Metals & Mining

Though there remains a range of outcomes subject to capital and opex requirements of
a DLE project, ultimately the improvement in the achieved lithium recovery and resulting
increase in annual production is the key driver of economic outcomes, in our view,
supporting the implementation of DLE over traditional brine ponds. Therefore our
scenarios predominantly test input assumptions (capex/opex/price etc) against achieved
recovery.

The charts below outline the required lithium price of a mid-range DLE project (80%
recovery/~20ktpa LCE) vs. pond the recovery range (40-60%/~10-15ktpa LCE). We see
NPV breakeven for a DLE project with a mid-point 80% recovery vs. a traditional
pond with a bottom end 40% recovery on our mid case capex estimates (capital
intensity ~US$30,000/tpa LCE), and GSe lithium pricing, requiring an opex unit
cost of <US$7,500/t. When compared with a pond at the top end of the recovery
range at 60%, this opex unit cost requirement for break even would fall to
<US$4,000/t (though we expect most pond-only projects are unlikely to consistently
achieve overall lithium recoveries as high as 60%). Compared to a mid-point 50%
recovery pond, the breakeven opex unit cost would be <US$5,700/t.
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We note these economic outcomes only reflect the 18 month faster production ramp
up, and don’t consider any possible benefits from product grade variation, or lower land
usage and water loss that may accelerate environmental permitting and hence the
project timeline of new projects (also benefiting NPV). The application of the technology
for selective removal of by-products (such as potassium) into their own saleable
products may also improve the economics of DLE projects.

Exhibit 6: DLE project (80% recovery) NPV breakeven vs. pond Exhibit 7: DLE project (80% recovery) NPV breakeven vs. pond
project (40% recovery) at varying lithium prices project (60% recovery) at varying lithium prices
Opex unit cost (US$/t LCE; FOB, pre-royalty) vs. capital intensity (US$/tpa Opex unit cost (US$/t LCE; FOB, pre-royalty) vs. capital intensity (US$/tpa
LCE) LCE)

25,000 14,000
Opex Opex
US$/t LCE US$/t LCE

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12,000
20,000
10,000

15,000
8,000

6,000
10,000

4,000
5,000
2,000
Capital intensity Capital intensity
US$/tpa LCE US$/tpa LCE
0 0
980 1,307 1,634 1,961 2,288 2,614 2,941 980 1,307 1,634 1,961 2,288 2,614 2,941
10,000 GSe 20,000 30,000 40,000 10,000 GSe 20,000 30,000 40,000

DLE capex range US$300-900mn in US$100mn increments for resulting capital intensity on an DLE capex range US$300-900mn in US$100mn increments for resulting capital intensity on an
80% recovery DLE project (~20ktpa LCE) vs. a pond project at 40% recovery (~10ktpa LCE). 80% recovery DLE project (~20ktpa LCE) vs. a pond project at 60% recovery (~15ktpa LCE).

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

27 April 2023 7
 Goldman Sachs Global Metals & Mining

At our mid-case scenarios outlined above, and on GSe lithium prices, we model a NPV
range for a DLE project of ~US$0.6-1.1bn on a 70-90% recovery range for an IRR of
c. 20-30%, while a traditional brine pond has a NPV of US$0.3-0.7bn on a 40-60%
recovery range for an IRR of c. 20-25%. Put another way, a DLE project with bottom
end recovery (70%) achieves a higher NPV than a mid-upper end recovery (50-60%)
pond project.

Exhibit 8: Pond vs. DLE project NPV on production recovery at price Exhibit 9: Pond vs. DLE project IRR on production recovery at price
scenarios scenarios
NPV (US$mn) vs. production recovery (%) IRR (%) vs. production recovery (%)

5,000 100%
US$mn IRR
90%
4,000 80%
70%
3,000 60%
50%
2,000 40%
30%
1,000 20%
10%
For the exclusive use of [email protected]

0
Lithium recovery 0%
Lithium recovery
30% 40% 50% 60% 70% 80% 90% 100% 30% 40% 50% 60% 70% 80% 90% 100%

Pond DLE Pond (GSe pricing) DLE (GSe pricing) Pond DLE Pond (GSe pricing) DLE (GSe pricing)

Pricing scenarios US$10,000-40,000/t carbonate, with GSe pricing scenario shown as line. Pricing scenarios US$10,000-40,000/t carbonate, with GSe pricing scenario shown as line.
Dotted lines equate base DLE recovery range at 70-90% to pond scenarios. Dotted lines equate base DLE recovery range at 70-90% to pond scenarios.

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

As outlined in the charts below, we estimate the capital intensity range of DLE is
comparable with a traditional pond project after adjusting for higher recoveries,
with a capital intensity range of DLE at ~US$26-34,000/tpa LCE at a 70-90%
recovery rate on upfront capex of US$600mn (mid-point of US$300-900mn estimate
range), and a traditional pond range of ~US$23-34,000/tpa LCE at a lower 40-60%
recovery range on upfront capex of US$350mn (US$200-500mn estimated range). DLE
at commercial production levels may also be more incrementally/rapidly scalable without

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the need for new brine ponds.

However, we expect the risk of a higher upfront capital intensity of DLE vs.
evaporation ponds is offset by lower unit costs resulting from higher production
on improved lithium recovery. We estimate an opex unit cost (FOB, pre-royalty)
range of DLE at ~US$2,800-3,600/t LCE at an 70-90% recovery rate on annual opex
of US$65mn (mid-point of US$35-95mn estimate range), compared with a traditional
pond range of ~US$3,300-4,900/t at a lower 40-60% recovery range on opex of
US$50mn (US$20-80mn estimated range for ponds at this scale). These ranges will
likely be subject to the grade of the resource and the availability & cost of reagents,
though we note the possibility of more unique regagents/eluents being used in DLE
may also reduce opex variability (less used by other markets/accessibility to site of acids
vs. soda ash), while we note traditional pond unit costs may reduce more at scale
(though with increased permitting challenges for the ponds/land required). We further
highlight that, like with most new technologies, the capex and opex intensity may
improve as DLE technology and implementation advances beyond the first wave of
implementation.

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 Goldman Sachs Global Metals & Mining

As a sense check of our hypothetical resource modeling, in the range charts below we
also benchmark a selection of existing real world green and brownfield lithium brine
projects on both capital & opex intensity. In this context we highlight that Eramet’s
Centenario-Ratones project is a commercial scale DLE (sorbent) project with Phase 1
already in construction (~24ktpa LCE commissioning targeted 1Q24 and full ramp up
mid-2025) following on site pilot testing since 2019, with FID on a Phase 2 targeted by
year-end 2023 (additional ~50ktpa LCE). Livent’s Fenix Expansions 1 & 2 are both
utilising their DLE technology, while Expansion 3 uses convential brine ponds to utilise
the already existing pond infrastructure from earlier stages to achieve a lower capital
intensity on spent capital (rather than implying their DLE technology has been less
effective than planned).

Exhibit 10: Pond vs. DLE project capital intensity vs. production Exhibit 11: Pond vs. DLE project unit cost vs. production recovery at
recovery at varied capex scenarios varied opex scenarios
Capital intensity (US$/tpa LCE capacity; FOB, pre-royalty) vs. production Opex unit cost (US$/t LCE; FOB, pre-royalty) vs. production recovery (%)
recovery (%)

70,000 9,000
US$/tpa LCE DLE US$/t LCE DLE
Pond 8,000 Pond
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60,000
7,000
50,000
6,000
40,000 5,000

30,000 4,000
3,000
20,000
2,000
10,000
1,000
Lithium recovery Lithium recovery
0 0
30% 40% 50% 60% 70% 80% 90% 100% 30% 40% 50% 60% 70% 80% 90% 100%
Pond DLE Olaroz S1 Fenix Pond DLE Olaroz S1 Fenix
Olaroz S2 Cauchari S1 Sal de Vida S1 Sal de Vida S2 Olaroz S2 Cauchari S1 Sal de Vida S1 Sal de Vida S2
Atacama SQM ex Fenix Exp. 1 Fenix Exp. 2 Fenix Exp. 3 Atacama (SQM) Fenix Exp. 1 Fenix Exp. 2 Fenix Exp. 3
Centenario P1 Centenario P2 Angeles Phase 1 Kachi Centenario P1 Centenario P2 Angeles Phase 1 Kachi

Capex/opex ranges on GSe modeled outcomes as described above (with shorter DLE build Production/recovery numbers as per previous Exhibit notes unless noted; SQM shown on 2022
time/ramp up), and assumes an Argentinian fiscal regime on a constant FX rate; Capex excludes costs and estimated recovery; Angeles quoted costs from partner may not be like for like;
VAT as may be partially reimbursed, consistent with company estimates; Recoveries rounded to Centenario Phase 2 unit costs esimtated on assumption ~40% Phase 1 costs are fixed, which
nearest 10% and are resource recovery (project technical studies may quote plant recovery); increase 1.5x on Phase 2, while variable costs increase proportionally to volume; Growth projects
Centenario Phase 1 (~24ktpa) based on Eramet Mar-23 release and includes supporting are life of mine (LOM) real unit costs, while operating assets are 2022 reported unit costs; Fenix
infrastructure not replicated in Phase 2 (~50ktpa) or other included comparable brownfield taken at Woodmac unit cost estimate for 2022, and first year of full production for expansions;
projects, Phase 2 GSe on recent industry inflation; Fenix expansions (1: 20ktpa; 2: 30ktpa; 3: up to Cauchari-Olaroz operating costs on Oct-20 DFS. Dotted lines equate base DLE recovery range at
30ktpa) based on Livent Feb-23 presentation (mid-point where ranges given), with Exp. 3 70-90% to pond scenarios.

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capex/recovery a GSe on repurposed pond infrastructure; Angeles (SunResin tech) estimated on
PLASA parent co, Tibet Summit’s funding partner, Honbridge Holdings’ reported (Apr-23) capex of
~US$700mn combined with ~US$100mn spend on Phase 1 (~25ktpa) DLE equipment from Source: Company data, Goldman Sachs Global Investment Research
SunResin, with recovery taken at mid-range of our DLE estimates of 80% (though early work has
been reported at >90%); Olaroz S1 (17.5ktpa) reported 2014 completion capex (intensity of
~US$13,000/tpa) inflated to comparable real $; Fenix initial project recovery/capex estimated and
inflated to comparable real $; Cauchari-Olaroz capital intensity Stage 1 (~40ktpa) as of Mar-23,
with planning for Stage 2 expansion (at least 20ktpa) continuing to progress to align with
completion of Stage 1; Atacama (SQM) feeding Antofagasta Carmen 2024 plant capacity
extension on Mar-23 capex (30ktpa); SQM/ALB DLE projects not shown pending cost updates;
Olaroz Stage 2 (25ktpa) and Sal de Vida Stage 1 & 2 (15ktpa & 30ktpa) costs based on Allkem
2022 technical reports; Kachi (Lilac tech) estimates based on Lake’s 2021 FS at (25ktpa), though
updated DFS due mid-2023 (~50ktpa) following pilot/demo completion. Dotted lines equate base
DLE recovery range at 70-90% to pond scenarios.

Source: Company data, Goldman Sachs Global Investment Research

27 April 2023 9
 Goldman Sachs Global Metals & Mining

The Supply/Demand Implications: New DLE supply from 2025+

Much like shale did for oil, Direct Lithium Extraction (DLE) has the potential to
significantly increase the supply of lithium from brine projects - although unlike shale,
which typically sits toward the top of the oil cost curve, the cost analysis set out above
suggests that DLE will widen, rather than steepen, the lithium brine cost curve
with an average project likely sitting in the second or third cost quartile.

DLE in contrast to shale also offers lower perceived environmental risk and significant
environmental benefits vs. traditional brine ponds, nearly doubling lithium
production/yield (taking recoveries from 40-60% to 70-90%+) and improving project
returns, offering sustainability benefits and ESG credentials for its implementors (land
usage from lack of ponds declines >20x, water usage and metrics improve on potential
brine reinjection), while also widening (rather than steepening) the lithium cost curve.
These benefits may also support improved timelines for community and permitting
approval, while enhanced production on higher recoveries could also improve/bring
For the exclusive use of [email protected]

forward government take from projects.

While the impact of DLE on market dynamics will be linked to the pace and scale at
which it is adopted, as we highlight (Exhibit 3), there are a significant number of
resources business and technology providers that have been incentivised to find
technological improvements to lithium resource extraction as a result of record lithium
prices that are well above the marginal cost of existing and proposed lithium supply (and
thus more than offset the upfront R&D costs). Policy changes, such as Chile’s recent
NLP, may further support an accelerating implementation of DLE technologies.

DLE offers a potential game changing technology for lithium supply, and while there may
still be key challenges around scalability and water consumption, with the ongoing
efforts, DLE could be implemented between 2025-2030 in both Chile and Argentina, in

80043743200000000000000000000000
our view. This compares with market skepticism (based on discussions with investors)
around commercial development of DLE technology by the end of the decade.

Following on from the project economic analysis above, we set out below an
indicative impact to both the LatAm lithium brine cost curve vs. industry
estimates, and lithium market supply/demand dynamics vs. the GSe base case.
While implementation at this scale may be unlikely on a five-year view, and is not
included in our supply/demand base case, the analysis gives an indicative guide as to
the potential cost curve and supply/demand impacts of the implementation of DLE.

Cost curve
Our cost analysis above suggests that DLE will widen, rather than steepen, the LatAm
lithium brine cost curve with an average project likely sitting in the second/third cost
quartile, with an estimated opex range of US$2,800-3,600/t. The chart below sets out
the potential DLE impact to a five-year forward (2028) LatAm lithium brine industry cost
curve (Woodmac), under an indicative only scenario if ~30% of LatAm lithium brine
projects (GSe) implemented DLE in some form and took average extracted brine lithium
recoveries from ~50% to 80% (mid-point DLE scenario recovery range), with an ~18

27 April 2023 10
 Goldman Sachs Global Metals & Mining

month timing benefit on faster ramp up than traditional ponds. We highlight this level of
accelerated ramp up of DLE-linked projects in five years is unlikely, in our view, with the
curve only illustrating the potential cost curve impact from DLE implementation.

Exhibit 12: We estimate that DLE implementation will widen, rather than steepen, the lithium brine cost curve
2028 LatAm lithium brine cost curve with impact of DLE additions (US$/t LCE FOB; pre-royalty)

5,000
US$/t LCE
4,500

4,000
DLE additons to ~30%
of GSe add ~110kt
3,500
DLE estimated opex range
~US$2,800-3,600/t
3,000

2,500

2,000

1,500
For the exclusive use of [email protected]

1,000

500

0
0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900
Atacama-SQM Rincon-RIO Tres Quebradas-Zijin Mining Group kt LCE
Centenario-Ratones-Eramet Olaroz-AKE DLE addition (30%)
Atacama-ALB Cauchari Olaroz-Minera Exar Sal de Vida-AKE
Hombre Muerto-Livent Hombre Muerto North-POSCO Cauchari-AKE (acq. Advantage Lithium)
Maricunga-Minera Salar Blanco Pastos Grandes-LAC Kachi-Lake Resources

All volume and costs estimates are Woodmac (may differ vs. GSe supply forecasts) and don’t include small scale projects proposed or already in production, Centenario Phase 2 added at WM Phase 1
costs; DLE indicative ranges on GSe. Indicative scenario if 30% of LatAm projects (GSe) implemented DLE in some form and took recoveries from an average 50% extracted brine lithium recovery to
80% recovery (mid-point DLE scenario recovery range), with an ~18 month timing benefit on faster ramp up than traditional ponds.

Source: Woodmac, Goldman Sachs Global Investment Research

The charts beneath show the 2022 and industry 2028 cost curves.

Exhibit 13: While only a handful of projects produced in 2022... Exhibit 14: ...several projects of scale will be in production by 2028

80043743200000000000000000000000
2022 LatAm lithium brine cost curve (US$/t LCE FOB; pre-royalty) 2028 LatAm lithium brine cost curve (US$/t LCE FOB; pre-royalty)
5,000 5,000
US$/t LCE US$/t LCE GSe base case
4,500
4,000
LatAm 2028 LCE
4,000 supply ~540kt
3,500 3,000
3,000
2,000
2,500
2,000 1,000
1,500
1,000 0
0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800
500 Atacama-SQM Rincon-RIO kt LCE
Tres Quebradas-Zijin Mining Group Centenario-Ratones-Eramet
0 Olaroz-AKE Atacama-ALB
0 20 40 60 80 100 120 140 160 180 200 220 240 260 Cauchari Olaroz-Minera Exar Sal de Vida-AKE
kt LCE Hombre Muerto-Livent Hombre Muerto North-POSCO
Cauchari-AKE (acq. Advantage Lithium) Maricunga-Minera Salar Blanco
Atacama-SQM Atacama-ALB Olaroz-AKE Hombre Muerto-Livent Pastos Grandes-LAC Kachi-Lake Resources

Indicative; Combination of reported 2022 volumes and costs (approximated from accounts where All volume and costs estimates are Woodmac (may differ vs. GSe supply forecasts) and don’t
not specified) include small scale projects proposed or already in production, Centenario Phase 2 added at WM
Phase 1 costs
Source: Company data, Goldman Sachs Global Investment Research
Source: Woodmac, Data compiled by Goldman Sachs Global Investment Research

27 April 2023 11
 Goldman Sachs Global Metals & Mining

Supply/demand
Globally brine makes up nearly two thirds of lithium resources, though only c.40% of
production (2022), where production from the Lithium Triangle (Bolivia, Chile, Argentina)
has lagged that from spodumene sources like Australia. While our base case lithium
supply forecast has this share of production continuing to decline, the implementation
of DLE may increase brine’s share of output, where new brine projects or those with
expansions planned are likely able to implement components of DLE technology, which
could also bring project ramp ups forward ~18 months. Policy changes, such as Chile’s
recent National Lithium Policy (NLP), may further support an accelerating
implementation of DLE technologies.

The DLE impact to supply/demand, simplistically, if ~20-40% of our base case LatAm
brine projects implemented DLE in some form, increasing their recoveries from ~50%
to ~80% (mid-points of above project economic analysis) and accelerating supply by
~18 months, this could add ~70-140ktpa of LCE from 2028+ (GSe LatAm brine supply
~540kt; Woodmac ~800kt), which on GSe supply numbers would increase LatAm brine
supply c.35% (average 2026-2030E) and our global raw supply by c.8%.
For the exclusive use of [email protected]

These impacts are in addition to Eramet’s Centenario Phase 1 (ramped up by 2025), and
Livent’s proposed expansions at Fenix, where we note this excludes the impact of
newly economic projects that work with DLE, any DLE supply linked to brine projects in
China, or DLE implementation on European/North American geothermal brines, where
all may increase the lithium supply impact of DLE.

Put another way, DLE implementation could extend the size and duration of lithium
market surpluses/reduce deficits vs. our base case (without a pull forward of demand
with new supply).

Exhibit 15: GSe base case Global raw lithium supply with the Exhibit 16: Global lithium balance under DLE scenarios
addition of 30% of LatAm brine projects adopting DLE Global lithium supply surplus/(deficit) (kt LCE)
Global lithium raw supply (kt LCE)

80043743200000000000000000000000
3,000 500
kt LCE kt LCE
400
2,500
300
200
2,000
100
1,500 0
(100)
1,000
(200)
(300)
500
(400)
0 (500)
2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

Base case Global raw supply DLE increase GSe Global Balance +10% of brine projects using DLE +30% +50%

Source: Goldman Sachs Global Investment Research SD balance reflects recently updated demand estimates

Source: Goldman Sachs Global Investment Research

27 April 2023 12
 Goldman Sachs Global Metals & Mining

Exhibit 17: Brine makes up only c.40% of global lithium supply Exhibit 18: ...where implementation of DLE may increase brine’s
(2022) though nearly two thirds of global lithium resources... share of output
Global lithium supply composition (kt LCE) Global lithium supply composition (%)

3,000 100%
kt LCE
90%
2,500
80%
70%
2,000
60%
1,500 50%
40%
1,000
30%
20%
500
10%
0 0%
2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

Brine Spodumene Other Brine Spodumene Other

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

Exhibit 19: With brine a significant portion of China supply... Exhibit 20: ...supprting development/implementation of SunResin
China lithium supply composition (kt LCE) and other DLE technologies
For the exclusive use of [email protected]

China lithium supply composition (%)

800 100%
kt LCE
700 90%
80%
600
70%
500 60%
400 50%

300 40%
30%
200
20%
100 10%
0 0%
2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

Brine Spodumene Other Brine Spodumene Other

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

80043743200000000000000000000000

27 April 2023 13
 Goldman Sachs Global Metals & Mining

Chile’s National Lithium Policy

Chile’s recently announced National Lithium Policy (NLP) outlines the plans for the future
implementation of lithium exploration and exploitation policies that are intended to bring
Chile back to the forefront of global lithium production, with the new policy being the
result of a consultation process with a wide variety of stakeholders nationally and
internationally (including project operators/developers). It has also taken into
consideration the objectives of the Chilean State, including its role to participate in the
efficient and rapid development of the lithium industry, where the government has
outlined Codelco as the vehicle for project partnerships.

As recently commented by Lithium Power International (LPI.AX; Not Covered), in their

view the new policy does not constitute a nationalisation of the lithium industry in Chile,
rather its objective, as clarified by the Mining Minister, is to set the conditions and
parameters for the country to have a more active involvement and higher financial
returns in a strategic industry, particularly where those lithium resources are located on
concessions already owned by the Chilean State on the Atacama Salar (Chilean output is
currently restricted to SQM and Albemarle from Atacama, with their contracts expiring
For the exclusive use of [email protected]

in 2030 and 2043 respectively). Essentially the policy sets to move toward a more
public-private model, with the government expecting to start conversations with
operators this half and hosting talks with local and Indigenous communities in the
Atacama salt flat early on in the process.

The NLP also seeks to accelerate the development of new projects in the country, with
a push for new projects to implement DLE for water/environmental concerns (SQM has
already committed to cutting its brine extraction in half over the course of a decade via
its DLE implementation and expansions), further supporting an accelerating
implementation of DLE technologies.

80043743200000000000000000000000

27 April 2023 14
 Goldman Sachs Global Metals & Mining

The Well Positioned: Projects/stocks that could benefit from DLE

In the context of DLE, we highlight potential winners below. We prefer briners over
miners in the lithium sector over the medium term, with DLE offering significant
potential to increase lithium output on improved recoveries and lift project
economics.

n Covered companies: Within our covered lithium companies, we highlight the

following opportunities, and reiterate our Buy ratings on Allkem, RIO (on CL), and
Qinghai.
o Allkem (Buy): With a number of growth projects that could utilise DLE (not in
GSe), Allkem has strong growth optionality, with possible projects including:
§ Enhanced brine recovery: Technologies are being reviewed that may
see an increase in plant recovery from ~75% to ~95% at both Olaroz
Stages 1 and 2 (total recovery ~60% including ponds), without the
need for additional ponds or pumping of more brine. Pilot tests are
For the exclusive use of [email protected]

underway and a Feasibility Study is targeted for 1H CY23, with 3 DLE

technologies under final consideration by AKE. While we don’t include
the enhanced brine recovery in our base case (pending results of
testing), our analysis suggests that increasing recoveries from 75% to
95% from FY26E at Olaroz would drive a >US$500mn increase in our
Olaroz NAV or ~A$1.20/sh (on our long run pricing). Possible future
expansions at Sal de Vida may also benefit from DLE technologies.
§ Olaroz Stage 3: Options are being considered by AKE for a material
increase in production capacity and studies are underway into
conventional and alternate processing technologies. AKE is currently
assessing the potentially substantial increase of production capacity for
Stage 3 above the previous studies, with pre-feasibility due in 1H CY23.

80043743200000000000000000000000
§ A dedicated purification facility is being considered for construction
near Jujuy, Argentina. This would allow Olaroz Stage 1 to be a dedicated
technical grade facility with a commensurate 30-40% increase in
production, and the purification process would benefit from lower costs
and better sustainability performance, with current purification facilities
at Olaroz a potential bottleneck per AKE.
o Rio (Buy, on CL): A pilot plant is currently operating at the Rincon site and
further work will focus on continuing to optimise their proprietary DLE
process and recoveries (though we note RIO’s cost estimate and schedule at
Rincon are under review on inflation/cost escalation).
o SunResin (Neutral): SunResin is increasingly a supplier of choice for lithium
resource owners in China, with its DLE technology being implemented across
Qinghai and Tibet projects. SunResin notes that its DLE technology has high
recoveries with low costs and expedited processing times, and does not use
any solvent and is more eco-friendly for sustainable development, and has
executed nine commercial DLE contracts representing a total capacity of

27 April 2023 15
 Goldman Sachs Global Metals & Mining

~73ktpa lithium (including delivery of equipment for Angeles Phase 1).

SunResin also has MoUs with Anson Resources (Paradox lithium project in
Utah, 91.5% recovery in test work, moving to full scale commercial plant),
CleanTech Lithium (Laguna Verde in Chile, looking to build on site pilot plant in
2023), and Power Minerals (was PepinNini Minerals, Salta project in
Argentina).
o Qinghai Salt Lake Industry (Buy): QHL is the largest potash producer and
leading integrated brine-to-lithium carbonate operator in China. The company
has exclusive mining rights for the Qarhan salar, with 6.6Mt of lithium
reserves as of 2021. Despite QHL’s large reserve in the Qarhan salar, the brine
is of lower grade versus global peers, yet the company is able to deliver
lithium carbonate production at the low end of the global integrated lithium
cost curve. Much of this is attributed to their membrane-adsorption
technology in lithium extraction, and melting technology on low grade
potassium deposits, and through ongoing efforts in process optimization and
innovation. We see room for continued improvement, through advanced
For the exclusive use of [email protected]

technologies such as direct lithium extraction (DLE) and solvent extraction,

leading to a potentially higher yield and recovery rate in the process. QHL’s
lithium carbonate production cost now averages ~US$4,500/t (~Rmb30,500/t)
in 2022A, and we see room for a 7% further improvement in the long term,
assuming 30% higher yield in the process, and a 20% higher recovery rate.
n Projects: At a project level, we highlight a select number of projects (Exhibit 3) that
are either increasingly well advanced in the DLE space or have outlined
implementation targets:
o Centenario-Ratones (Eramet): Eramet’s Centenario-Ratones project is the
first greenfield, commercial scale DLE (sorbent) project, with Phase 1 already
in construction since 1H22 (~24ktpa LCE commissioning targeted 1Q24 and
full ramp up mid-2025) following on site pilot testing since 2019, with FID on a

80043743200000000000000000000000
Phase 2 targeted by year-end 2023 (additional ~50ktpa LCE), which on the
same timeline would then be in production in 2027. Potentially being among
the first of successful commercial scale DLE implementation may also allow
for future technology licensing revenue streams.
o Fenix (Livent): Livent’s Fenix Expansions 1 & 2 are both utilising their DLE
technology, while Expansion 3 uses conventional brine ponds to utilise the
already existing pond infrastructure from earlier stages to achieve a lower
capital intensity on spent capital (rather than implying their DLE technology
has been less effective than planned). Expansion 1 at 20ktpa will happen over
two phases in 2023 & 2024 for ~US$450mn, and expansion 2 at 30ktpa is
targeted in 2026 for US$500-700mn; expansion 3 of up to 30ktpa is targeted
for in 2029/30 with lower capital intensity on existing infrastructure.
o Angeles (PLASA / Tibet Summit Resources): The Angeles project operated
by Potasio y Litio de Argentina (PLASA; parent company Tibet Summit
Resources with recent funding partner Honbridge Holdings) will target a
Phase 1 production of ~25ktpa LCE, with future expansion to ~50ktpa, with

27 April 2023 16
 Goldman Sachs Global Metals & Mining

first production previously targeted for 2023 (prior to contractor changes and
new funding partner arrangements in Apr-23). Capex has been quoted as
~US$700mn combined with ~US$100mn spend on DLE equipment.
SunResin is the DLE provider, with equipment shipped to Argentina in 2022,
where recoveries in early work had been reported at >90%. Opex of
~US$5,000/t is not specified as FOB/pre-royalty, and the company noted it
can only be estimated more accurately depending on the process route and
related costs.
o Kachi (Lake Resources): The Kachi project has completed pilot/demo phases
and is looking to release an updated DFS mid-2023 for a ~50ktpa project
(Lake’s 2021 FS at 25ktpa for US$544mn). The pilot/demo produced 2.5kt LCE
with 80% lithium recovery, 90% plant uptime, 1,000x less land compared
with evaporation ponds, and 10x less water compared with conventional
aluminum-based absorbents. Rejection of boron, a troublesome impurity for
brine projects, is greater than 99.9%.
o Atacama (ALB/SQM): As highlighted by our Chile trip feedback, the brine
For the exclusive use of [email protected]

conversion technology is proven and both ALB & SQM well advanced on
studies on various Direct Lithium Extraction (DLE) technologies including
internal and external flow sheets and have completed pilot plant test work,
and permitting for desalinated water and brine re-injection, though may need
to overcome a number of technological and regulatory hurdles.
§ ALB is currently constructing a yield improvement plant (Salar
improvement project #1; to be completed by mid 2023) at the Salar to
wash lithium from the magnesium (Mg) and potassium (K) salt products
to improve lithium recovery from ~50% to 65%, and is studying a Salar
improvement project #2 to lift recoveries further. In a step toward
implementing DLE, Albemarle has agreed to buy freshwater for the
Salar de Atacama from a desalination plant near Antofagasta, Chile,

80043743200000000000000000000000
with a pipeline being built near Atacama. ALB hasn’t disclosed which
technology it plans to use but says it is considering both internally and
externally developed processes, having piloted one DLE technology in
Chile in 2018 and expects to pilot several others in 2023. Albemarle has
asked regulators to approve a pilot project starting in early 2023 that
will study the best way to reinject brine into the ground (leveraging their
experience in reinjecting brines at their bromine project in Arkansas,
though with clearly different hydrogeology).
§ In 2020, SQM committed to cutting its brine extraction in half over the
course of a decade. SQM announced in Sep-22 that it plans to spend
~US$1.5bn on desalinated seawater, DLE, and other technologies to
reduce water usage and improve lithium production in Chile. SQM is
still evaluating DLE technologies (having already piloted four
approaches), and is pursuing the multistep route rather than a straight
DLE process in part because it wants to produce potassium chemicals,
with the current proposed implementation first pumping brine into
evaporation ponds and precipitating sodium chloride. Then a mechanical

27 April 2023 17
 Goldman Sachs Global Metals & Mining

evaporator would remove water and the fertilizer potassium chloride,

yielding a concentrated lithium brine. The DLE plant would use water
from the mechanical evaporator to strip lithium from the concentrated
brine, and the spent brine would be reinjected. SQM doesn’t expect to
submit an environmental assessment of its project to Chilean
regulators until the second half of 2024.
o Other early stage LatAm brine projects that are either in ramp up or with
growing resources bases (i.e. Salar de Rincon (Argosy), Hombre Muerto West
(Galan), etc) may also stand to benefit from the possible implementation of a
successful technology, with enough third party providers emerging to avoid
the need for lengthy development processes with quicker implementation.
o DLE projects in China: A number of China projects already utilise DLE in
some form (where SunResin technology is being implemented across Qinghai
and Tibet projects).
o Geothermal projects in Europe and North America are also looking to
implement DLE (Upper Rhine Valley (Vulcan Energy), Clearwater (E3 Metals),
For the exclusive use of [email protected]

Salton Sea (various), amongst others), though with generally lower lithium
concentrations and the possibility of geothermal power offering different
project economics to those described above.

n Technology developers: Third party technology providers that are increasingly

advanced and moving to demo and potentially commercial scale projects over the
coming years (particularly those that have successfully tested multiple brine
sources) will likely also be well positioned (including Summit Nanotech, Lilac, IBAT,
SunResin, and others (Exhibit 3)) potentially unlocking future technology licensing
revenue streams, or the ability to acquire and develop their own resource. The
environmental push to reinject brine and use DLE may also create a push for more
advanced geophysical models, which could also support the work pipeline of

80043743200000000000000000000000
services companies.

27 April 2023 18
 Goldman Sachs Global Metals & Mining

LatAm lithium resources

Exhibit 21: LatAm lithium projects
For the exclusive use of [email protected]

80043743200000000000000000000000
Source: Company data, Goldman Sachs Global Investment Research

27 April 2023 <9

 Goldman Sachs Global Metals & Mining

Exhibit 22: LatAm lithium brine resources

Lithium concentration (mg/L) vs. contained LCE (kt); bubble size of contained lithium resource

1,750 mg/L
Salar de Atacama
(SQM)
1,500
Salar de Atacama
(ALB)
1,250
Hombre Muerto Norte

1,000 Maricunga
Hombre Muerto Oeste
Uyuni
Sal de Oro (HM North)
Sal de Vida
750 Cauchari-Olaroz
Candelas Tres Quebradas Fenix
Olaroz (Allkem)
Maria Victoria Olaroz (SdJ)
500 Sal de la Puna Cauchari PPG
Sal de… Salar de Rincon

Rio Grande Pastos Grande

250 Rincon Mariana Centenario-Ratones
Kachi
Tolillar
kt LCE
0
For the exclusive use of [email protected]

- 5,000 10,000 15,000 20,000 25,000

Source: Company data, Data compiled by Goldman Sachs Global Investment Research

As impurity ratios will impact the ultimate recovery of projects, including in DLE
implementation, we outline the impurity ratios of key projects vs. lithium concentration
and resource size in the chart below, where typically in a traditional brine pond high
impurities are more expensive to process.

Exhibit 23: LatAm lithium brine impurity ratios

Magnesium ratio (Mg/Li) vs. SO4 ratio (SO4/Li); bubble size of contained lithium resource

20 Mg/Li ratio
Uyuni
18

80043743200000000000000000000000
16

14

12 Salar de Atacama (SQM)

10 Salar de Atacama (ALB)

Salar de Rincon
8 PPG
Maricunga
6
Olaroz (Allkem)
Pastos Grande Cauchari
4
Sal de Vida Fenix Olaroz (SdJ)
2 Hombre Muerto Oeste Cauchari-Olaroz
Tres Quebradas
Hombre Muerto Norte
SO4/Li ratio
0
- 5 10 15 20 25 30 35 40 45

Missing pieces of impurity data have been approximated where possible on neighbouring projects sharing a salar

Source: Company data, Data compiled by Goldman Sachs Global Investment Research

27 April 2023 20
 Goldman Sachs Global Metals & Mining

The Technology: DLE vs. traditional brine evaporation

Traditional brine pond lithium extraction

With the lithium brine pumped to surface, it is distributed to evaporation ponds where
the brine remains for 9 to 12-18 months (depending on the project/weather conditions)
until most of the liquid water content has been removed through solar evaporation. Salar
brines are very concentrated and contain a range of other salts. Facilities usually operate
several large evaporation ponds of various ages and may extract other metals (e.g.
potassium) from younger ponds while waiting for the lithium content to reach a
concentration optimal for further processing. In some cases, reverse osmosis is used to
concentrate the lithium brine to speed up the evaporation process. Once the brine in an
evaporation pond has reached an ideal lithium concentration, the brine is pumped to a
lithium recovery facility for extraction using a series of treatments and processing.

Pros: (i) Conventional/established technology potentially offers lower risk deployment, (ii)
Lower energy consumption (free solar evaporation can raise lithium concentration in
For the exclusive use of [email protected]

brine from ~0.2% to ~6%), (iii) smaller variety of chemicals used in reagents.

Cons: (i) Environmental concerns (diversion of sometimes limited water can impact on
the surrounding area and communities, waste build up from impurities at each pond/
plant stage can’t be reinjected), (ii) Slow time to market (likely longer build time and
lengthy evaporation process), (iii) Only relevant in certain regions of the world, where
deposits and right weather conditions exist, (iv) As lithium has a very low concentration
in brine, a larger volume is often required to achieve high production values.

Exhibit 24: Traditional brine pond flowsheet

80043743200000000000000000000000

Indicative pond process flowsheet based on Sal de Vida flowsheet

Source: Company data, Goldman Sachs Global Investment Research

27 April 2023 21
 Goldman Sachs Global Metals & Mining

Exhibit 25: Traditional process of Brine Extraction vs. DLE, and timing of each stage
For the exclusive use of [email protected]

80043743200000000000000000000000

Indicative timings; pond based on Olaroz flowsheet

Source: Company data, Goldman Sachs Global Investment Research

27 April 2023 22
 Goldman Sachs Global Metals & Mining

Direct Lithium Extraction (DLE) technologies

DLE technologies precipitate lithium out of brine using filters, membranes, ceramic
beads, or other equipment, which is often housed in a small warehouse, significantly
shrinking the environmental footprint of evaporation ponds used to produce commercial
quantities of lithium traditionally. In a DLE operation, brine is pumped to a processing
unit where an adsorption, resin or membrane material is used to extract only the lithium
from the brine, while spent brine can be reinjected into the basin aquifers. The more
rapid production time frame and possible brine reinjection into the aquifer is a key
environmental differentiator between the DLE process and traditional lithium process
that uses evaporation ponds.

Though the application of technologies used in emerging DLE processes may be fairly
new to the lithium industry, adsorption (AD), ion exchange (IX), and solvent extraction
(SX) technologies are already utilised across other commodities at commercial scale
(and we note IX is already utilised in some conventional lithium brine processing to
manage impurities). Other DLE technologies in early stage development, including
membranes and precipitants, may also offer potential DLE solutions.
For the exclusive use of [email protected]

While the impact of DLE on market dynamics will be linked to the pace and scale at
which it is adopted, as we highlight (Exhibit 3), there are a significant number of
resources business and technology providers that have been incentivised to find
technological improvements to lithium resource extraction as a result of record lithium
prices that are well above the marginal cost of existing and proposed lithium supply (and
thus more than offset the upfront R&D costs). Policy changes, such as Chile’s recent
NLP, may further support an accelerating implementation of DLE technologies.

While each salar/brine resource is different (varying concentrations of lithium and other
elements/impurity ratios), and variations between salars mean there is unlikely a one
size fits all solution, we would expect a degree of transferability of successful DLE
technologies between resources (though likely requiring optimisation/subject to impurity

80043743200000000000000000000000
ratios), with differing applications and end products (lithium carbonate or chloride)
depending on the project/available finishing capacity/end market optimisation.

DLE offers a potential game changing technology for lithium supply, and while there may
still be key challenges around scalability and water consumption (though modular
designs and water recycling may assist with these issues, though could require energy
intensive mechanical evaporation), and brine reinjection may be slightly dilutive to the
resource (though proponents don’t expect material impacts over proposed project lives),
with the ongoing efforts, DLE could be implemented between 2025-2030 in both Chile
and Argentina, in our view. DLE projects could also be implemented both as greenfield
projects and brownfield expansions, or to enhance recoveries of existing pond
operations. This compares with market skepticism around commercial development of
DLE technology by the end of the decade.

27 April 2023 23
 Goldman Sachs Global Metals & Mining

Exhibit 26: Technical details of the 3 different types of DLE processes

Source: Data compiled by Goldman Sachs Global Investment Research

For the exclusive use of [email protected]

Exhibit 27: Example of DLE flow sheet

80043743200000000000000000000000
Process shown for sorption

Source: Compiled by Goldman Sachs Global Investment Research

27 April 2023 24
 Goldman Sachs Global Metals & Mining

Adsorption
Adsorption is increasingly the most developed DLE technology globally, with the
majority of DLE projects utilising it to some degree (Exhibit 3).

Adsorption-separation resins are typically synthetic round-shaped beads with designed

physical characteristics (i.e. pore size/structure, surface area, porosity) and chemical
structure (e.g. functional groups) to capture desired / remove undesired molecules in
aqueous solutions to enable purification, extraction, separation, concentration and
decolorization. The material is already experiencing widespread adoption across a
broad range of industries, including water management, pharmaceuticals, food
processing and hydrometallugry.

In adsorption’s use in DLE, lithium chloride (LiCl) molecules from the brine infiltrate
within the atomic layers of an adsorbent. Once LiCl fills the interstitial layers of the
adsorbent, it is removed with a strip solution, typically warm-hot water. After the
sorbent is loaded with the LiCl, it’s washed with a diluted lithium chloride stream to
remove unwanted ions, and then washed a second time to unload the lithium chloride.
For the exclusive use of [email protected]

Some sorbents developed can recover >90% of the lithium present, with this method
not requiring an acid wash or other chemicals, adding to its environmental credentials.

Other variations may include a recently tested lithium aluminum layered double
hydroxide chloride sorbent (LDH), which is still being tested (though researchers
consider them promising).

Pros: (i) Does not require reagents like ion exchange or solvent extraction, instead water
is used to recover the lithium chloride, with soda ash to convert to carbonate (which is
more readily available and easier to get to site vs. some acids for IX), (ii) Less impacted
by brine composition, or by weather conditions, with lower waste generation, (iii)
potentially >90% lithium extraction efficiency, (iv) Typically produces high quality lithium
chloride/carbonate, and can be suitable for low lithium concentration brines.

80043743200000000000000000000000
Cons: (i) Usually requires temperatures >40 C, (ii) Lower eluate LiCl concentration than
IX, and may require further steps to purify product and recycle water, (iii) Some
implementation may find it difficult to prevent contamination with the brine,
compromised by lower lithium uptake and carry-over of more impurities into the
product, (iv) The adsorption equipment can be expensive (potentially high upfront costs)
and complicated, with the cost of the adsorbent potentially higher if increasingly
tailored.

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 Goldman Sachs Global Metals & Mining

Exhibit 28: Livent’s DLE implementation at Fenix supports both enhanced recoveries of ponds and DLE-based expansions
Project Fenix facility first expansion process flow diagram
For the exclusive use of [email protected]

Expansion 1 of 3 shown

Source: Company reports

Ion Exchange (IX)

Ion exchange systems separate ionic contaminants from solution through a physico
chemical process where undesirable ions are replaced by other ions of the same
electrical charge. Essentially, the ion-exchange material acts as a sieve with an adjusted

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porosity that only allows lithium (and hydrogen) ions to pass through, where the
ion-sieve can then be washed with an acidic solution promoting the replacement of
lithium ions with hydrogen ions. Lithium recovery by ion exchange can change with a
simple adjustment in pH, temperature, or stream composition (though the same goes
for other lithium extraction methods), but researchers also believe this method can
recover ~90% of the lithium present.

Pros: (i) Simple process, (ii) High selectivity for lithium and reduced risk of impurity
contamination in the product stream, (iii) High capacity and therefore high concentration
of Li in the strip solution, and can be suitable for low lithium concentration brines, (iv)
Low energy/water consumption and unaffected by weather conditions, (v) continuous
operation potential.

Cons: (i) Potentially high upfront costs, and may require further steps to purify product,
(ii) High opex resulting from large amounts of base and acid inputs, and risk around acid
supply to site, (iii) Some IX material have the potential to degrade in acidic conditions.

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 Goldman Sachs Global Metals & Mining

Solvent Extraction (SX)

Solvent-extraction uses an organic solution (containing solvent and extractant) to extract
lithium from brines either chemically or physically and transforming it into LiCl (or ions).
The organic solution typically comprises of kerosene (or similar material) and an
extractant, which show very high selectivity toward lithium over sodium and magnesium
ions under optimized conditions. Solvent extraction can theoretically achieve any
concentration factor up to the saturation limit, where there is also the potential to use
solvent extraction as a post-DLE step to polish the product stream and produce
concentrated lithium solutions with high battery-quality purity. The process is also
versatile and can potentially be adapted to produce high-purity lithium hydroxide, rather
than lithium carbonate through precipitation with soda ash, with the technological
process also being explored in battery recycling.

Pros: (i) High concentration of lithium can be produced from the brine with a high
recovery rate, and is also unaffected by weather conditions, (ii) Low opex costs, (iii)
Lithium solvent extraction is essentially a stand-alone process, whereas the other two
DLE processes typically require an additional concentration step, either through smaller
For the exclusive use of [email protected]

solar evaporation ponds, forced (artificial) evaporation, before the purified solution can
be converted to the final product.

Cons: (i) Potentially less applicable with higher impurity ratios (lower concentrations of
Ca and Mg usually required which may require pre-treatment of brine), (ii) Organic
solvents are environmentally challenging, and are potentially more difficult to get to site,
(iii) Fire risk with high temperature brines, (iv) Expensive relative to other technologies,
potentially larger capex for the first fill and can cause costly equipment corrosion, (v) The
residual brine that remains after lithium extraction may require post-treatment to remove
the leached solvent before it can safely be sent for disposal.

80043743200000000000000000000000

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 Goldman Sachs Global Metals & Mining

Exhibit 29: Variations between salars mean there is unlikely a one size fits all solution (though solutions may still offer some transferability)
Comparison of different lithium brine extraction methods

Method Precipitation/Evaporation Solvent extraction Adsorption Ion-exchange Membrane separation

The salt-rich water from the underground

brine deposit is pumped to the surface and Use lithium-selective membrane to
direct into evaporation ponds. The The lithium is selectively extracted from The lithium ion in brine water is selectively separate Li/Mg ions, induced by external
The lithium chloride in brine is selectively
How does it work precipitation process takes months/years brine into the organic phase of the solvent captured by ion-exchange sorbents and driving forces such as pressure
captured by sorbent
to remove the water content through during the extraction process replace with like-charged ions (nanofiltration), electric field (selective
evaporation, yielding a high lithium electrodialysis) or thermal gradient
concentration
For the exclusive use of [email protected]

Pumping brine into Brine

Brine Sorbent
evaporation pond Sorbent K Cl
K Mg
Cl Mg Cl
Cl
Cl
Schematic illustration V V Cl
VV VV V
Mg Mg
Cl Li Cl Cl
Cl Cl
Na Cl H+
Cl Na Li+
Cl

Simple process Simple process

Efficient
Efficient Efficient
Simple process Low operating cost Efficient
Advantages Unaffected by weather conditions Unaffected by weather conditions
Low operating cost Non-weather dependent Environmental friendly
Suitable for low lithium concentration Suitable for low lithium concentration
High recovery rate
High recovery rate High recovery rate

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Time consuming
Limit to brine with low Na/K content
Weather-dependent Corrosion to equipment High upfront cost High upfront cost
Disadvantages Water-intensive process
Requires additional processing steps Environmental impact Requires additional processing steps Requires additional processing steps
High upfront and operating cost
Environmental impact

Source: Company data, Goldman Sachs Global Investment Research

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 Goldman Sachs Global Metals & Mining

Commodity and FX forecasts

We factor in the GS commodity team’s lithium prices, reflecting weak 2023 pricing driven mostly by ongoing supply chain
destocking, and further downside in spot prices with flattened yet no correction on downstream inventories. Our 2024/25
price forecasts reflect our view our growing supply supporting the lithium market moving into surplus.

Exhibit 30: GS Metals and Mining commodity and FX forecasts

Calendar year Unit Spot 2021 Q1'22 Q2'22 Q3'22 Q4'22 2022 Q1'23 Q2'23 Q3'23 Q4'23 2023 2024 2025 2026 LT (real) LT (nom)
Battery Materials
Lithium carbonate US$/t 55,750 14,303 49,640 55,500 65,040 69,290 59,868 62,710 22,124 24,727 20,822 32,596 11,000 11,000 16,883 15,000 17,389
Lithium hydroxide US$/t 62,250 16,823 51,950 68,200 71,940 78,180 67,568 72,010 26,679 27,330 22,775 37,199 12,500 12,500 18,571 16,500 19,128
Spodumene 6% US$/t 4,190 967 2,716 3,877 4,885 5,994 4,368 5,600 3,250 2,750 2,000 3,400 800 800 1,126 1,000 1,159
Currencies
For the exclusive use of [email protected]

AUD:USD 0.67 0.75 0.72 0.71 0.68 0.66 0.69 0.68 0.67 0.67 0.68 0.68 0.69 0.70 0.70 0.70 0.70
CAD:USD 0.74 0.80 0.79 0.78 0.77 0.74 0.77 0.74 0.74 0.74 0.74 0.74 0.74 0.74 0.74 0.74 0.74
USD:ARS 219 95 107 118 136 163 131 192 263 335 419 302 481 400 300 300 300
Forecast lithium prices for China. Prices above are captured in covered company models and may not reflect latest commodity team updates.

Source: Platts, Bloomberg, Goldman Sachs Global Investment Research

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 Goldman Sachs Global Metals & Mining

Valuation methodology & Investment risks

Exhibit 31: Valuation methodology and investment risks
Rating Valuation Methodology Upside and Downside Investment Risks
Component and % Weighting
AKE Buy 50% 9x EV multiple on NTM EBITDA Ļ Lower lithium prices, raw material supply constraints
50% NPV with WACC of 10.2% Ļ Stronger FX (ARS, AUD, CAD), higher operating costs/capex, Argentinian inflation, production output issues
RIO Buy* 50% 5.5x EV multiple on NTM EBITDA Ļ Stronger AUD, iron ore price weakness, WA Heritage Act revision and possible impact to Pilbara operations
50% NPV with WACC of 9.2% Ļ Further delays to growth (Oyu Tolgoi, Jadar, Pilbara), higher capex and opex due to industry cost inflation.
SunResin Neutral 100% 24x EV multiple on 2025E EBITDA, - Slower/faster than expected capacity expansion, Evolvement of new technologies for lithium brine extraction
discount to 2023E @ 9.3% WACC - Delay or cancellation of lithium brine extraction orders, plant/process safety
For the exclusive use of [email protected]

QHL Buy 100% SOTP multiple on potash/lithium, Ļ Lithium prices and S/D, execution risk on its lithium expansion
LCE reserves at LT pricing Ļ Potash prices and S/D, opex/capex
Note: *on the ANZ Conviction List; AKE.AX covered by Hugo Nicolaci; RIO.AX covered by Paul Young; SunResin covered by Yan Lin; Qinghai Salt Lake Industry covered by Trina Chen

Source: Goldman Sachs Global Investment Research

The authors would like to thank Nizar Mesani for his contribution to this report.

The research views in this report are those of the analyst who covers the relevant area:

n Equity research views are expressed by Hugo Nicolaci, Paul Young and Elise Bailey, Equity Research Analysts covering
Australia Resources; Trina Chen, Joy Zhang and Roy Shi, Equity Research Analysts covering China Commodities & Steel;
Yan Lin and Nick Zheng, Equity Research Analysts covering China Machinery.
n Commodities research views are expressed by Nicholas Snowdon and Aditi Rai, Commodities Research Analysts.

80043743200000000000000000000000
27 April 2023 <0
 Goldman Sachs Global Metals & Mining

Disclosure Appendix
Reg AC
We, Hugo Nicolaci, Paul Young, Trina Chen, Joy Zhang, Yan Lin, Elise Bailey, Roy Shi and Nick Zheng, CFA, hereby certify that all of the views expressed
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Disclosures
Rating and pricing information
Allkem Ltd. (Buy, A$11.33), Rio Tinto Ltd. (Buy, A$111.94), SunResin (Neutral, RMB89.00), and Qinghai Salt Lake Industry (Buy, RMB20.67).

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27 April 2023 31
 Goldman Sachs Global Metals & Mining

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80043743200000000000000000000000
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27 April 2023 32
 Goldman Sachs Global Metals & Mining

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 Goldman Sachs Global Metals & Mining

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 MINDCRAFT: OUR THEMATIC DEEP DIVES
China Round-The- Global CHIPS Act Greater China Tech: The Ecosystem The Ecosystem of
Clock Renewables CHIPS Act Impact - US vs China Make in India Make in India of EV Batteries

Europe’s Energy The Circular

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What Matters Tracking the
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The Future
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