Jonathan Evans, head of Canada’s biggest lithium company, is hopeful that U.S. efforts to ignite domestic critical-minerals production will help fill the gap in private-sector lithium investment, as he searches for a partner to build a major new mine in Nevada.
U.S. President Joe Biden invoked the Defense Production Act this week, which opens up the spigot further on the already extensive U.S. government funding for critical-minerals industries, including lithium.
“It’s a pretty big statement,” said Mr. Evans, CEO of Lithium Americas Corp. LAC-T “And I’m not quite sure what more the government can do.”
Both the United States and Canada have been trying to wean themselves off Chinese supplies of critical minerals and boost their own fledgling industries. China is among the biggest miners of lithium, a key component in electric-vehicle batteries, and has a 60-per-cent share in refining. There are currently no lithium mines in Canada, and only one in the United States, the Silver Peak mine in Nevada, operated by Albemarle.
Originally conceived during the Cold War, the Defense Production Act will see the U.S. government potentially put money toward feasibility studies for early-stage projects, and possibly fund technological innovation to boost production and encourage better waste remedies at existing mines.
The act was last invoked at the start of the COVID-19 pandemic to encourage U.S. factories to boost production of PPE gear and respirators.
Even before Mr. Biden’s move, the U.S. government has been offering billions in incentives for the critical-minerals industry, including grants available through the Department of Energy, and extremely low-interest U.S treasury loans for mine construction.
With a market value of $6.4-billion, Vancouver-based Lithium Americas is by far Canada’s largest lithium player. It owns the Thacker Pass lithium project in Nevada, which is projected to be the biggest lithium mine in the United States once it comes into production, with projected output of 60,000 tonnes of lithium carbonate per annum, over a 46-year mine life.
Despite all of the government incentives on offer, investors have still been reluctant to fund the U.S. lithium industry, Mr. Evans said.
Extremely long timelines that can stretch a decade or more between making a minerals discovery and first production means investors have been skittish. The regulatory framework across North America has also becoming increasingly cumbersome, with huge scrutiny on the environmental impact of new mines, and lengthy consultations with stakeholders.
Court challenges on new mines have also become common place. Lithium Americas won a record of decision to proceed on construction of Thacker Pass last year, but it is still waiting for a ruling on an appeal of that decision.
An added hurdle for Lithium Americas in finding a partner at Thacker Pass is the technical nature of the deposit. The lithium is contained not in hard rock or brine, the industry standards, but in clay. There are currently no other major clay lithium mines in production, Mr. Evans said.
In addition, the list of potential global partners is limited because China, the biggest investor of all in the lithium space, is not an option. Mr. Evans says there is no way the United States would allow a Chinese company to own a lithium project on domestic soil.
Whether Lithium Americas eventually finds a partner, or goes it alone on Thacker Pass, it will be hoping not to emulate the experience of Canada’s Nemaska Lithium.
A few years ago, Quebec-based Nemaska promoted its novel technology for converting lithium as a game changer. After raising more than $1-billion from investors, the company embarked on its ambitious project only to see its capital costs skyrocket. Nemaska was eventually forced to seek creditor protection, wiping out its shareholders.
A newly capitalized iteration of Nemaska, owned by London-based private-equity firm Pallinghurst Group is currently attempting to revive the project, and hopes to have a new mine in production in a couple of years.
The industry will be hoping that Lithium America’s path to production will be a lot smoother than Nemaska’s.
“We can’t see how the U.S. achieves its EV goals without Thacker Pass,” said Puneet Singh, analyst with Industrial Alliance Securities Inc. in a recent note to clients.
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Niall McGee