Potential Berkshire U.S. lithium project faces uphill road

By Ernest Scheyder

Jan 22 () - A reported Berkshire Hathaway Inc project to produce lithium from California geothermal wells has raised questions about what technological process the venture could use and whether it would be successful.

The Financial Times, citing people familiar with the matter and a fundraising document, said Berkshire's BHE Renewables subsidiary had signed an agreement to allow extraction of lithium from its California geothermal wells and was in talks to supply the white metal to Tesla Inc.

The company is "evaluating the mineral extraction opportunity in the Imperial Valley" in southern California, BHE Renewables spokeswoman Jessi Strawn said in an emailed statement on Tuesday. She declined to comment further.

Potential interest from Berkshire, controlled by billionaire investor Warren Buffett, in lithium has thrown fresh spotlight on the metal, a key ingredient used to make electric car batteries and one underpinning the global push to transition away from fossil fuels.

The FT report said the venture could produce 90,000 tonnes of lithium per year, which would surpass annual output from top global producers Albemarle Corp and SQM.

A project of such magnitude could change the paradigm for an industry that has been struggling in recent years to boost output. Industry observers said they are eager to see details of any project should it be started.

Berkshire's geothermal business operates in California'sSalton Sea, which is part of the Imperial Valley, using lithium-rich brine.

It was not immediately clear whether any Berkshire lithium venture would produce the metal using evaporation ponds, the industry's standard technology, or nascent industry processes, some of which are largely unproven. Nearly all lithium extraction methods are costly and require large amounts of electricity.

Industry analysts and investors expressed skepticism that any Berkshire lithium project in the region could succeed where others have failed. Simbol Materials tried to develop a Salton Sea lithium project earlier this decade before its cash reserves dwindled.

"It's only slightly better than to say you'll get lithium out of the ocean," said James Calaway, chairman of Nevada lithium startup ioneer Ltd and the former chairman of Argentina lithium producer Orocobre.

Wall Street so far does not seem impressed. Shares of existing lithium producers have moved little on Australia, Canada and United States exchanges since the FT report. Shares of companies in industries where Buffett has invested in the past have typically moved sharply after an investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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