Australia Markets closed

Albemarle freezes Chile expansion plans in wake of lithium tech scrutiny

(Adds details from earnings call, updates stock)

By Ernest Scheyder

Nov 8 (Reuters) - Albemarle Corp on Thursday defended a previously announced process it has said could boost lithium production in Chile but at the same time postponed two expansion projects in the country that would have needed the new technology to be successful.

The move raises further questions about just what Albemarle, the world's largest lithium producer, has developed and how it could work. If the process proves less than advertised, the company risks not being able to meet an expected surge in demand for lithium in coming years to make Tesla and other electric cars.

Albemarle said last year it had developed a process that would more than triple its lithium output in Chile without using more water, in what would be a tantalizing development for the arid region where the white metal is produced.

"If successful, and we have seen no doubt to indicate that it won't be, the project would allow us to produce more lithium from the same amount of brine that we pump a day," Chief Executive Luke Kissam said on a Thursday conference call after the company released its third-quarter results.

Reuters reported earlier this week that the claim was drawing increased scrutiny from regulators and investors pushing for more details.

On the same call, Kissam said Albemarle will stop engineering work on its planned La Negra V and VI expansion projects because it believes battery producers will want more lithium hydroxide, a type of the metal commonly found in Australia but not Chile.

Albemarle has authorization from Chilean officials to produce the equivalent of up to 80,000 tonnes annually of lithium through 2043. The La Negra V and VI projects would have taken the production above that mark, requiring regulatory approval. But when Albemarle asked for permission, regulators began delving into just how the new process works, ultimately rejecting the application for lack of details. Albemarle has said it will re-apply.

"All (Chilean regulators) want to see is some proof that it's going to work before they give (approval to produce more lithium) to us. That's it. It is not a big deal, OK? It's not a big deal. And we only need it if we build" La Negra V and VI, Kissam told analysts.

Despite canceling parts of the La Negra expansion, Albemarle said it will continue to spend money to research and engineer the new technology, though it gave few details on the amount or timing. In 2017, Albemarle said that the new technology had already been developed.

"In our spending, our capital spending guidance, we are spending for that technology. That continues onwards," Eric Norris, head of Albemarle's lithium division, said on the call.

Charlotte, North Carolina-based Albemarle on Wednesday posted a better-than-expected forecast helped in part by price hikes, though Hurricane Florence closed processing facilities in North Carolina for a week, denting volumes.

Shares fell 2.2 percent to $105.55 in Thursday afternoon trading. (Reporting by Ernest Scheyder in Houston; Editing by Bernard Orr and Cynthia Osterman)

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