WSJ : The Surprising New Source of Lithium for Batteries

The Surprising New Source of Lithium for Batteries
Rising demand for the EV battery metal fuels efforts to extract it in areas known for churning out oil and gas

Large troves of lithium will be needed to make the batteries for growing numbers of electric cars on the road. To find new supplies, companies and researchers are turning to an unexpected source: oil-and-gas reservoirs.

These oil-and-gas sites harbor not only hydrocarbons, but also brine that contains metals including sodium, calcium and some lithium. When drillers poke holes into oil-saturated formations, the brine flows back to the surface along with the molecules that end up as fuel, and companies have been prompt to discard the earthy marinade. But now that the EV battery material has become a prized commodity, lithium companies are developing technologies to remove it from this brine—and oil-and-gas companies are also taking a second look.

The process, known as direct lithium extraction, could mark a new era for the industry, researchers and analysts say.

Extraction can be labor-intensive and has yet to be commercialized at scale, but rising demand for lithium is increasing the focus on new methods. “We need to rethink and look at assets that will require modern processes to unlock,” says Robert Mintak, the chief executive of Vancouver-based Standard Lithium.

In Arkansas, now a minor producer of oil and gas, Standard Lithium is running a demonstration plant to extract lithium from oil-field brine. In Canada, the company E3 Lithium is working with an oil-and-gas company to produce the metal from a depleted oil-production field. And in the Permian basin of West Texas and New Mexico, driller Devon Energy is testing techniques with other companies to produce lithium from wastewater it pumps alongside oil and gas.

Demand for lithium batteries is projected to shoot up this decade, with U.S. demand expected to increase by nearly six times by 2030 to reach $52 billion, according to a Boston Consulting Group analysis. Billions of dollars in government subsidies are also bolstering companies’ bets on finding new ways to extract the metal.

Now, most of the world’s lithium supply comes from Australia, Chile and China. They provided about 92% of the 130,000 metric tons of lithium extracted globally last year, according to investment bank Raymond James. Producers crush rocks to extract lithium, or collect it by pumping shallow subterranean brines—which offer much higher concentrations of lithium than oil-field brines—and pouring it into gigantic evaporation ponds. This involves using large amounts of water, and environmental groups say the ponds can contaminate the air and soil.

Tapping the brine in North America’s oil fields with direct lithium extraction is less damaging, companies and researchers say. Because energy companies have drilled millions of oil-and-gas wells and collected subsurface data in the process, lithium prospectors know where to look.

Direct extraction could also speed up lithium production. Concentrating lithium in brine ponds can take up to 18 months and recovers about 50% of the lithium, according to an April report by Goldman Sachs. In direct extraction, brine is sent to a processing unit, where chemicals, a resin or a membrane, among other technologies, are used to capture the lithium ions. The water is then reinjected into the aquifer where it originated. The process takes at most a few days, and recoveries are up to 90%. Analysts say direct-extraction technologies could be applied to lithium-rich shallow brines as well.

The technology presents some challenges. Because each brine is a unique broth of chemicals, collecting lithium through direct extraction will require tailored approaches for each project, says Kevin Murphy, director of metals and mining research at S&P Global Commodity Insights. The lower the concentration of lithium in the brine, the higher the operating costs, as producers need to process more water. The presence of other elements can also interfere with the extraction process, Murphy says.

In Canada’s Alberta province, E3 Lithium aims to coax the metal from the Bashaw district in the depleted Leduc oil field, an area that it estimates contains about 16 million metric tons of lithium—about five times the estimated lithium in Canada’s rock deposits. The company has received Canadian federal grants totaling more than 30 million Canadian dollars (about $22 million). Imperial Oil, an oil producer majority-owned by Exxon Mobil that discovered oil at Leduc, has invested C$6.4 million in E3 Lithium, according to the companies. The partnership grants E3 Lithium access to Imperial Oil’s freehold lands and to its water and reservoir-management savvy.

“We operate like conventional oil,” says E3 Lithium Chief Executive Chris Doornbos.

E3 Lithium, which plans to begin operations at an extraction pilot plant in the third quarter of 2023, hopes to initially produce 20,000 metric tons of lithium hydroxide per year. It aims to pump brine from a depth of 1.5 miles, potentially using existing wells as well as new ones. The liquid will then likely be sent through pipelines to a facility where a sorbent material will capture the lithium and reject impurities to create a concentrated liquid, which then will be further refined into battery-grade material.

The Smackover formation of southern Arkansas is seen as one of the most promising regions in North America to test and deploy the technology. Exxon this year purchased drilling rights to a significant lithium prospect in the region, which it intends to develop, according to people familiar with the matter. The metal’s concentration there can be over 500 milligrams per liter, by some estimates, compared with around 75 milligrams per liter in the Leduc field.

Exxon declined to comment.

Chemical companies in the region have long produced brine from depleted oil fields to collect bromine, another valuable chemical in the saltwater. Now, lithium companies want to get a piece of the action.

Standard Lithium has been operating an industrial-scale plant in the Smackover area since 2020 with German chemical maker Lanxess. Brine, which Lanxess processes to produce bromine, flows into the facility at the rate of about 3,000 gallons a minute. Using the same brine, Standard Lithium expects to produce just under 6,000 metric tons of lithium annually from this plant and targets a production of 50,000 metric tons across the company’s projects in Arkansas, chief executive Mintak says.

Some companies hope the direct-extraction technology will also open the door to producing lithium in the Permian basin of New Mexico and West Texas, the most active oil field in the U.S. Drillers there inject millions of gallons of water down wells to frack shale rock. As this wastewater flows back up along with brine, producers have to dispose of it. The Permian basin produced around 18 million barrels of water a day in 2021, according to investment bank Goldman Sachs. Monetizing the lithium in the saltwater could allow the drillers to offset the cost of having to handle it, executives and analysts say.

Permian producer Devon Energy has invested millions of dollars through venture-capital firms into companies working on alternative energy projects and technologies, including direct lithium extraction, says Trey Lowe, the company’s chief technology officer. Because lithium is so diluted in Permian water, Devon is working with specialized companies to test techniques that concentrate the metal further, and is looking at ways to extract other valuable chemical elements, such as iodine.

Others are more skeptical. Amanda Brock, the chief executive of Aris Water Solutions, a water-management company in the Permian, says that it has looked into producing lithium from wastewater, but that it doesn’t see near-term potential given lithium prices and production costs.

“We would love to find a way to cost-effectively extract the lithium,” she says.

FT : Can Franklin buy its way to survival in the asset management thunderdome?

Can Franklin buy its way to survival in the asset management thunderdome?
We’re going to find out!

Asset management is a funny business. By funny, we mean an unending, bloody, Mad Max-style battle to avoid death irrelevance in an industry where even $1tn of assets is not what it once was (BTW; RIP Tina Turner)

The prevailing view is that to thrive, you either need massive, vast, humongous scale, or a commanding position in a hot niche (above all in private capital). Ideally you want both. Which is why there’s been a spasm of consolidation among asset managers in recent years, and asset management companies snapping up smaller boutique players in areas like private debt or ESG.

But no one has been more aggressive about expanding through serial acquisitions than Franklin Resources, the family-run investment company that not so long ago looked doomed to a lucrative but steady slide into irrelevance: too big to be acquired, too profitable to die, but too feeble to actually bother the industry big beasts.

It’s fair to say Franklin is rolling the dice to avoid that fate. Here’s the latest gambit of Jenny Johnson, the fourth Johnson to run a firm named as a homage to Benjamin Franklin:

Franklin Templeton has agreed to buy rival Putnam Investments for more than $1bn as the California-based asset manager continues its expansion into alternative products and retirement plans.

Franklin will pay Putnam’s owner, Great-West Lifeco, $925mn in cash and shares up front and up to $375mn more over the next seven years if revenue targets are reached. The deal gives the Canadian insurer a 6.2 per cent stake in Franklin.

The Putnam purchase is just the latest in a massive buying spree by Franklin which has boosted its overall assets under management from $717bn five years ago to almost $1.6tn once the most recent deal closes. The deals include:

  • Putnam Investments. 2023. Cost: $925mn. AUM acquired: $136bn.

  • Alcentra. 2022. Cost: $350mn. AUM acquired: $38bn.

  • Lexington Partners. 2021 Cost: $1.75bn. AUM acquired: $34bn.

  • O’Shaughnessy Asset Management. 2021. Terms not disclosed. AUM acquired: $6.4b.

  • Legg Mason. 2020. Cost: $6.5bn, AUM acquired: $803bn.

  • AdvisorEngine. 2020. Terms not disclosed. Advisors with $600bn of assets use its platform.

  • Benefit Street Partners. 2018. Cost: $683mn. AUM acquired: $25bn.

Alphaville suspects Franklin is the fastest-growing asset manager on the planet, and it’s all driven by acquisitions – net investor flows have actually been severely negative for almost a decade.


The core business throws off plenty of cash, so as long as the Johnson family remains committed to running it it makes sense to plough it back into the business, in the form of new projects and acquisitions.

The overall balance of stuff they’re buying also looks decent, even if most of it is hardly prime (Alcentra had been shopped around for ages, and Putnam was originally bought by Great-West for $3.4bn back in 2007). Analysts seem . . . okay with the Putnam deal, which will give Franklin more scale in retirement and insurance. Here’s Jefferies’ Dan Fannon:

Acquisition of Putnam Investments - BEN announced the purchase of Putnam Investments from Great-West Lifeco (TSX: GWO), a subsidiary of Power Corporation Canada (TSX: POW), for $825M in stock at close and an additional $100M in cash to be paid 180 days after closing. The transaction is expected to close in 4Q23. BEN will issue 33.3M shares of stock to fund the deal (based upon 5/30 share price). There is an additional contingent payment of up to $375M payable in cash for years 3-7 following closing that will be tied to growth of the strategic partnership. The maximum consideration payable will be hit if partnership revenue grows +30% of Putnam current annual revenue of approx. $500M. Great-West will remain a long term shareholder with 26.2M shares (4.9% ownership) being subject to a 5-year lock up and another 7.1M shares (1.3% ownership) subject to 180 day lock up. With a modest assumption of deal-related D&A, we estimate the purchase price to be a mid-single-digits EBITDA multiple.

Financial Impact - The deal is expected to add total run-rate adj operating income of approx. $150M after the first year of closing, consistent with a ~30% operating margin and inclusive of approx. $150M of expected cost synergies (25% realized in the first year). The transaction will increase AUM by approx. +$136B as of 4/30 with an average fee rate of 36bps (vs BEN’s F2Q23 fee rate of 39bps) and current annual net fee revenue of ~$500M. There is expected to be $55-75M of non-recurring integration charges. The deal is anticipated to be modestly accretive to adjusted EPS by the end of the first year after closing, any incremental share repurchases beyond those to offset employee stock grants will accelerate this timeline. The transaction will also provide a cash tax benefit with an expected net present value in excess of $100M.

Strategic Partnership with Power and Great-West - Power holds a controlling interest in both Great-West and IGM Financial with a collective AUM/AUA of ~$2.1T. The partnership will have an initial $25B asset allocation from Great West that will be funded within 12 months of closing at a mid teens effective fee rate (2/3rds in core/core plus strategies) with the potential to meaningfully grow over time. The transaction materially increases BEN’s defined contribution AUM by +$90B as well as expands BEN’s insurance AUM to approx. $150B. Power’s asset management, wealth management and insurance channels all represent incremental growth opportunities for BEN’s suite of products and capabilities.

But digesting all this is going to massively tricky. Integrating just Legg Mason would be a herculean task for any investment company (some wags often observe that Franklin still seems to be integrating Templeton, the UK investment group it bought in 1992).

It boggles the mind to think of how they’re going to get a handle on all the businesses, get them growing and nurturing the core Franklin franchise back to health. Investors seem sceptical that this is going to work out well. Here’s $BEN’s share price over the past decade:

However, we’re gluttons for acquisition sprees like this: inevitably, they yield some tasty stories of glorious triumph or (more usually) abject failure. So go Franklin!

>>> Europe : Brokers Upgrades & Downgrades - 2nd of June 2023 V2(+)

>>> Up
* Barrick Gold Raised to Buy at Veritas Investment Research Co
* GCP Infra Raised to Hold at Jefferies
* Macy's Raised to Buy at Gordon Haskett; PT $18
* Mitie Raised to Buy at Numis; PT 110 pence
* SoftBank ADRs Raised to Buy at Jefferies; PT $23.83

>>> Down
* Dollar General PT Cut to $166 from $214 at Truist Secs
* Dollar General Cut to Neutral at Piper Sandler; PT $178
* Honkarakenne Cut to Reduce at Inderes; PT 4 euros
* Majorel Cut to Hold at Berenberg; PT 30 euros
* Premier Miton Group PLC Cut to Add at Peel Hunt; PT 100 pence
* Reabold Cut to Hold at Panmure Gordon; PT 1 penny
* SentinelOne Cut to Neutral at DA Davidson; PT $13.50
* SentinelOne Cut to Hold at Canaccord; PT $14
* Victoria's Secret PT Cut to $21 from $35 at Barclays
* Warner Music Cut to Neutral at Atlantic Equities; PT $26 (+)
* Xcel Energy Cut to Peerperform at Wolfe

>>> Initiation
* ALDMS FP Rated New Buy at Euroland Corporate; PT 2 euros
* Atrato Onsite Energy Rated New Buy at Berenberg; PT 100 pence
* Linde Reinstated Buy at Equita; PT $425

>>> Call
* Citi Strategists Prefer Growth, Defensive Stocks Over Cyclicals (+)
* Danske Bank’s New Strategy Could Drive Re-Rating, Citi Says

>>> TradeGate Pre-Market Indications

DAX:
  • Adidas (ADS TH) +1.4%
    • Watch Adidas, Puma as Lululemon Rallies After Boosting Forecast
  • Zalando (ZAL TH) +1.2%
  • Fresenius SE (FRE TH) +0.9%
  • Porsche Automobil (PAH3 TH) +0.9%
  • Allianz (ALV TH) +0.9%
MDAX:
  • Puma (PUM TH) +2%
    • Watch Adidas, Puma as Lululemon Rallies After Boosting Forecast
  • Thyssenkrupp (TKA TH) +1.7%
  • ProSieben (PSM TH) +1.1%
  • Kion (KGX TH) +0.9%
  • Evonik (EVK TH) +0.9%
  • Aroundtown (AT1 TH) -0.6%
    • Azelis, SFS, NKT, New WH Smith, SSP to Join Stoxx 600
SDAX:
  • Ceconomy (CEC TH) +3.4%
    • Ceconomy Targets More Than €500m Adjusted Ebit by FY2025/26
  • MorphoSys (MOR TH) +1.7%
  • Varta (VAR1 TH) +1.6%
    • German Holdings Round-Up: Vitesco, Varta, TUI
  • DIC Asset (DIC TH) +1.5%
  • Deutsche PBB (PBB TH) +1.2%
  • DWS (DWS TH) +0.9%

>>> Stoxx 600 Pre-Market Indications

  • Puma (PUM TH) +1.6%
    • Watch Adidas, Puma as Lululemon Rallies After Boosting Forecast
  • Signify (G14 TH) +1.6%
  • Adidas (ADS TH) +1.3%
    • Watch Adidas, Puma as Lululemon Rallies After Boosting Forecast
  • Reckitt (3RB TH) +1.3%
  • BAT (BMT TH) +1.2%
  • Vodafone (VODI TH) +1.1%
  • Thyssenkrupp (TKA TH) +1.1%
  • Nibe (NJB TH) +1%
  • Evotec SE (EVT TH) +0.9%
    • EQS-News: Evotec receives grant from Open Philanthropy for discovery of RNA-targeting Henipavirus therapeutics
  • DNB Bank (D1NC TH) +0.9%
  • Aroundtown (AT1 TH) -0.5%
  • Fresenius Medical (FME TH) -0.6%

>>> What to look at today - 2nd of June 2023

Asian stocks advanced Friday, led by gains in Hong Kong-listed technology companies amid a buoyant tone in markets as traders look to the Federal Reserve to pause interest rate hikes in June. Shares also climbed in Japan, Australia and mainland China, while US futures ticked up following rallies for the S&P 500 and the Nasdaq 100 Thursday. A renewed surge in tech giants fueled the moves on Wall Street ahead of jobs data that’s projected to show a slowdown. News that Congress had passed legislation to avert a US default added to the buoyant mood. Hong Kong’s Hang Seng index rose more than 3%, pulling the benchmark back from the brink of a bear market following concerns about Chinese growth.
Despite stronger-than-expected manufacturing figures Thursday, and the gains in Hong Kong equities Friday, investors remain cautious on the outlook for China. South Korea’s Kospi index was headed for a bull market territory following a gain of around 20% from a recent low in September. India’s Sensex is  near an all-time-high and Philippines equities pulled back from the cusp of a 10% correction. The dollar declined, adding to the biggest drop in more than two months in the prior session. The won strengthened after South Korean economic growth numbers outpaced estimates slightly while inflation came in softer than expected. Traders are betting the monthly US jobs report later on Friday will bring enough moderation in the pace of hiring to allow the Fed to pause its tightening policy. US After Hours MDB +20.8%, LULU +13.3%, FIVE +4.8% higher on earnings; S -35.6%, PD -15.3%, ESTC -6.8%, GWRE -5.5%, AVGO -1.3% lower on earnings; SSYS +6% on competing bid.

Nikkei +1.11% Hang Seng +3.77% CSI +1.36% Shanghai +0.79% Shenzen +1.18%

Eur$ 1.0768 CNH 7.0900 CNY 7.0769 JPY 138.82 GBP 1.2536 CHF 0.9046 RUB 81 TRY 20.8822 WTI$ 70.50 +0.88% Gold 1,980 +0.14% BTC 27,027 +0.59% ETH 1,885 +0.82%

S&P +0.21% Nasdaq +0.26% EuroStoxx +0.52% FTSE +0.27% Dax +0.52% SMI +0.24%

Macro :
- Fed’s Higher-for-Longer Resolve Put to Test With Payrolls
- Azelis, SFS, NKT, New WH Smith, SSP to Join Stoxx 600
- Stoxx 600 :
--> In : Azelis Group, SFS Group, NKT, New WH Smith, SSP Group, Technoprobe, InPost and Santander Bank Polska
--> Out : United Internet, ALK-Abello, Future, Aroundtown, SBB, Sinch, Wallenstam and Hexatronic
- Peltz’s Son-in-Law, Trian Co-Founder Garden to Leave Firm
- AI Not Enough to Unhinge Stoxx 600 Sentiment From China Weakness

Keep an eye on :
- ADS GY : Lululemon Rallies After Boosting Forecast -->+ve ADS
- ADS GY : Niche Running Shoes Like Hoka, On Are Trouncing Industry Giants
- ADP FP : France Asks Airlines to Cut Third of Paris-Orly Flights Tuesday
- ALO FP : Alstom Signs Citadis Contract With SEPTA; Base Value €667m
- AZE BB :
- BOL FP : Bolloré: 99.1m Shares Tendered to Simplified Cash Tender Offer
- CPR IM : Lagfin Offers ~€535M Bonds Exchangeable for Campari Stock
- DPH LN : EQT Said to Near Deal for Vet Drugmaker Dechra Pharmaceuticals
- ALCRB FP : Carbios & Indorama Ventures Form JV to Construct Plant in France
- CNA LN : Centrica Holder Abrdn to Oppose CEO’s Pay Package: Sky
- DUFN SW : Dufry Says Threshold for Autogrill Delisting Crossed
- ENG SM : Enagas to Buy 10% Stake in Germany’s Hanseatic Energy Hub
- FCC SM : CPP Investments to Buy 24.99% of FCC Medio Ambiente for €965m
- MC FP : Arnault Loses $25 Billion in Wealth as Luxury Bull Case Doubted
- NKE US : Niche Running Shoes Like Hoka, On Are Trouncing Industry Giants
- NKE US : Nike’s Return to Wholesale May Signal Shift From DTC: Piper
- PSH NA : Pershing Square Holdings May Net Performance -1.8%
- SBBB SS : SBB’s CEO Heads to London in Need of Buyers to Save His Company
- S US : SentinelOne Plunges 36% After Disappointing Report
- STLA IM : Stellantis Says No Need for Italy Among Investors: Radiocor
- SSYS US : Stratasys: 3D Proposed Buyout for $7.50 in Cash, 1.2507 Shrs
- TKO FP : Tikehau Targets Real Estate Debt Squeeze With €1 Billion Fund
- UNI SM : Spanish Bank Unicaja’s CEO Menendez To Step Down (1)
- VOW GY : Videoconference in Your Audi: VW to Add Webex App to Some Models
- WHATS BB : What’s Cooking Won’t Proceed With Imperial/Stegeman Acquisition