➤ Low lithium prices make some hesitant to invest in the industry, but prices are likely to rebound, creating an advantage for low-cost direct lithium extraction.

➤ Slower-than-forecast increases in lithium demand could offer the industry the necessary lead time to build supply.

➤ Lilac Solutions is searching for partners and investors for its commercial projects.

Raef Sully, CEO of Lilac Solutions. Source: Lilac Solutions Inc.

As pressure grows for direct lithium extraction (DLE) technology adoption among lithium brine producers to cut water consumption, the industry is also contending with low lithium prices that are forcing project rollbacks and cuts.

S&P Global Commodity Insights spoke with Raef Sully, CEO of DLE technology company Lilac Solutions Inc., at the SAFE Summit conference in Washington, DC. Sully discussed Lilac Solutions' future, the direction of the DLE industry, and the impact of low prices on technology adoption. The following conversation has been edited for clarity and length.

S&P Global Commodity Insights: You became Lilac Solutions' CEO on Feb. 26. What is your vision for the company?

Raef Sully: Lilac has a unique technology in the DLE space. It's ion exchange. It's different from aluminum absorption technology, which is, I think, 90% of the offering out there in the market. We think it's differentiated in a number of ways. It uses less energy. It uses much less water. It operates and works effectively, we think economically, at very low concentrations of lithium. So we think there's a very large market that will benefit from using our technology.

The next step for us is commercial. Right now, the focus of the company is to find the right partner or partners to build a small commercial facility, something in the range of 3,000 to 5,000 metric tons of production.

We've got some projects that we've been involved in in Latin America. One of those is the Kachi project that Lake Resources NL owns, and we are the technology provider. We'd love to see that project develop. We think it's a great project. Here in North America and Europe, we're helping to develop three or four projects. And for each of those, we will be the technology provider. And we're just in the process of finding the right partner to invest with us to build a small commercial facility.

Lilac Solutions recently raised $145 million in series C capital and has talked about one of the biggest areas it plans to focus on next: lithium extraction from the Great Salt Lake. Are there any updates on that plan?

Salt Lake is a very sensitive project from an environmental perspective. The government has made moves in the last couple of years to really restrict any further evaporation in the ponds there. So our technology is perfectly suited to develop lithium without evaporating any more water. The legislation that the state government has put through in the last couple of years favors us.

After our pilot is completed successfully in the summer, we think there's probably a two-year period of construction with our partner, and then we can produce lithium on the Great Salt Lake.

Are current low lithium prices acting as a headwind to wider adoption of DLE technology?

It's making people hesitant about investing in the industry. I think we've demonstrably hit the bottom, and I think it will come back up. I think it has to, for economic reasons.

From an economic perspective, I don't think you'll see prices below $20,000 per metric ton often. Obviously, there's going to be some volatility. But if you look at where all the long-term forecasts are in the high 20s to low 30s, that probably makes sense to me. But even at these prices, we believe that our technology can still be viable.

We think our cost of production at scale would be much less than the best spodumene deposits and slightly more than evaporative ponds. So think about $5,000–$7,000, or $5,000–$6,000 per metric ton.

At scale, our technology allows a producer or developer to be able to produce lithium well below hard rock mining costs, which gives us an advantage. And at the bottom, you've got the very important production from hard rock with lepidolite and spodumene deposits, which is putting a floor under prices, and we operate below that floor.

How have low lithium prices affected Lilac Solutions?

Regardless of where the prices have gone, our technology has continued to improve. So, in the last 12 to 24 months, we've gone from laboratory testing through to a field demonstration plant. So, our path is continuing to develop.

This is an interesting time to be in. I think, in some ways, it might actually help us. And I say that because we just closed series C, so we're capitalized. And I think other competitors who are perhaps less substantive technology offerings may find the current environment hard to continue in. So I'm actually hoping it burns off some of our competition.

Do you have any concerns about the stability of lithium demand in the long term?

I think the overall demand picture is right. I think what they got wrong was how quickly it would ramp up.

I actually think a slower ramp-up is beneficial for the whole industry. It means it's easier to find investment, to build the supply required, and probably leads to less volatile markets, which again reinforces the ability to invest. I'm actually very bullish on the size of the demand.