Lithium and Graphite
Investment in Ontario soars as market dynamics create lucrative opportunities
Lithium
Due to its lightweight properties, lithium plays a crucial role in electric vehicle batteries. As the adoption of electric vehicles continues to gain momentum in the next decade, demand for lithium is expected to significantly escalate. In order to satisfy the decarbonization and electric vehicle goals of national governments, an additional 60 lithium mines will be required by 2030, according to IEA figures. Nevertheless, financing a lithium mine can be considered a heavy lift. There are currently zero producing lithium mines in Ontario, and many investors bear scars from the bankruptcy of Nemaska Lithium in Québec in late 2019, which came after spending C$411.4 million on the C$1.27 billion Whabouchi lithium project. Subsequently, there has been a marked appreciation in lithium prices, with a roughly 1,000% increase observed. Simultaneously, the federal and provincial governments have expressed a heightened willingness to invest in remote infrastructure and promote the establishment of mid-stream processing in Ontario.
As Frontier Lithium president and CEO Trevor Walker put it: “The urgency of climate change, transition to low GHG sources of energy production and storage, advancement of technology to allow for electrification of transportation, and geo-political conflict highlighting East Asian dominance in supply chains are all accelerating changes here at home.”
Consequently, the province has recognized Frontier Lithium as a leader in this space due to the significance of its PAK lithium project, which an updated resource estimate revealed to have about 42 million t measured, indicated, and inferred with a grade of just over 1.5% lithium oxide. That represents the highest-grade resource for lithium in North America. “When fully in production the lithium chemicals supplied by Frontier Lithium for EV battery use will help displace approximately 500,000 internal combustion vehicles,” Walker affirmed.
“We expect that the shortages on the conversion facilities, such as lithium converters and refineries for other metals are likely to stay in place.”
Dirk Harbecke, CEO, Rock Tech Lithium
Partnerships Pave the Way
Another lithium explorer gaining momentum in Ontario is Green Technology Metals (GT1). The company made its IPO on the ASX in 2021, and is now moving to build a vertically integrated lithium business in Ontario with the help of Lithium Americas Corp who came on as a strategic investor in 2022, in an effort to add portfolio exposure to hard rock spodumene in Canada. “They chose to partner with us because we have a very strong board of directors and strong backing from companies like Primero, one of the most advanced businesses in the world spearheading innovation technology and building lithium processing plants, and AMCI, a strategic partner to assist with financial backing to make sure we get into production,” said GT1 CEO Luke Cox.
Cox elaborated that the ultimate vision is a costly but worthy one, the plan being to create a concentrate around 2025. GT1 will look to take the concentrate offsite and convert it into lithium hydroxide. “To create lithium hydroxide would complete the lithium supply chain from mine to electric vehicle and it will all be made in Ontario,” he added.
Even more than financing a mine, the construction of a lithium hydroxide facility is a costly endeavor, with estimates ranging from half a billion to three-quarters of a billion US dollars. Such a significant financial undertaking presents a formidable challenge for both junior and major mining companies, rendering it imperative that they form strategic partnerships in order to bring projects to fruition. For this reason, Avalon Advanced Materials has chosen to pursue the development of a mid-stream battery material processing facility in Thunder Bay. “We now have LGES as an interested party to commit to the offtake and potentially partner with us. That is what we need to be able to access the capital because it is by far the most expensive part of the lithium battery materials supply chain,” said Don Bubar, president and CEO of Avalon Advanced Materials.
Bubar added that since conducting a PEA in 2016, he realized that to create a mid-stream processing capacity, it must be in a central location so that it is not just serving one mining operation. Rather, it should be able to serve the needs of other new lithium mineral producers in Northwest Ontario. This would be instrumental in lowering barriers to entry for smaller projects that are often overlooked. “If Avalon gets the processing capacity established, that should inspire more new producers of lithium concentrates. I am trying to encourage more First Nations to take advantage of this opportunity, because you do not have to try to scale production in the same way traditional mining does. There is not the same need to develop big and high-grade operations. You can develop a bunch of small quarries that do not create the same environmental impacts but can create a significant supply,” Bubar concluded.
Regional Supply Chains Lower Carbon Footprint
While much of the focus in North America today is about building up North American supply chains, it is important to note that beyond securing access to the mineral, it is essential to consider the distance the commodity must travel, and how that might impact its carbon footprint. Ion Energy is a Toronto-based lithium explorer whose 100%-owned flagship Baavhai Uul project represents the largest exploration license ever granted in Mongolia. The company has a distinct advantage given the mine's proximity to hungry EV markets in both China and Japan.
Ion CEO Ali Haji points out that, if you look at consumption today, China uses over 50% of mined lithium to produce batteries for the world. Most of this lithium is extracted in the lithium triangle in the Andes Mountains, alongside assets in Australia, but people are not accounting for the fact that producers are putting lithium on a ship that has to sail 15,000 nautical miles to China for refinement. “This process is extremely carbon intensive. ION’s location close to the Chinese border can significantly lower the carbon footprint of the battery manufacturing supply chain,” he said.
Haji has been conducting technical site visits to Mongolia this year, and has added Dr. Mark King to his team. He is well known for writing the first 43-101 for lithium brine, specifically for the Canadian market, and is helping the company to kick off the next phase of its fully-funded exploration programs, which includes over 100 line km of TEM surveys at Ugrakh Naran. Haji outlined: “Our exploration program continues to progress rapidly, and we are now drilling diamond holes. This work will enable us to come to an average grade across the entire brine body. Multiply that by the volume that we have calculated and that will take us closer to our inferred resource calculation”.
OEMs with Equity Exposure
All of this progress that Ontario-based companies are making is grabbing the attention of many OEMs that are in desperate need to secure the raw materials required to feed massively increased lithium ion battery manufacturing capacity. In prior years, few would have imagined OEMs taking equity risk in mining companies. However, in an effort to secure preferential access to product at market prices this has become common. General Motors announced that it will invest up to US$69 million and take an equity stake in Queensland Pacific Metals to secure a new source of nickel and cobalt for battery cells for use in the US automaker's vehicles. Denis Frawley, a partner at Ormston List Frawley LLP, observed these dynamics through his work with critical mineral clients in Ontario. "The pipeline of projects to support that transition is being built, and the revitalization of a “cold war” like geopolitical order is forcing manufacturing companies to look at alternative pathways to secure future supplies. Consequently, manufacturers are now having direct discussions with exploration companies and not necessarily relying on mining companies to be their intermediaries to supplies,” he said.
Case in point, in 2022, Rock Tech Lithium announced a partnership with Mercedes Benz who will be its offtake partner for 40% of its lithium hydroxide production from 2026 onward. According to Rock Tech’s CEO Dirk Harbecke, the company will take material out of the ground, and concentrate it into a 6% lithium concentrate in Canada at its Georgia Lake mining site near Thunder Bay. Rock Tech will then produce the material in Europe with its lithium hydroxide converter. This is the first of its kind on the European continent that will produce a lithium hydroxide product out of spodumene concentrate. “The car makers and power utilities are the strongest financially, and in terms of brand name and reputation, they are the strongest partners in the supply chain. They also need the products, so they are supporting us in lobbying on the political side to help politicians understand how challenging it is to create a completely new supply chain. The politicians are telling them that they also must invest directly, so all parties can get things done together. This is already happening, but we see much more of this coming,” Harbecke affirmed.
J.C. St-Amour, president of Imagine Lithium, whose Jackpot lithium project neighbors the Georgia Lake project and whose pegmatites were most likely created by the same event, shares a similar view to Harbecke, noting that favorable supply-demand dynamics are driving opportunities to finance lithium exploration. “In general, market conditions are tough for exploration companies. For lithium, I think it is much easier.”
He also points out that Ontario’s flow-through regime is influencing capital flows for critical mineral exploration in the province. “For lithium in particular, the tax incentive is greater than it is for other types of projects. This generally means that more funds are available for lithium projects and allows companies to raise funds at a greater premium in the market.”
Graphite
When a battery is charged, lithium ions flow from the cathode to the anode through an electrolyte buffer separating the two electrodes. This process is then reversed as the battery discharges energy. While various materials can be used for the cathode, graphite is the go-to material for most anodes, thanks to its abundance, low cost, and long cycle life.
China plays a significant role in the production of a battery's anode, and according to the International Energy Agency, China is responsible for mining 65% of the world's graphite, processing 85% of it, and is home to the six largest producers of anode materials. The only graphite producer in North America is Northern Graphite, whose sole asset in the past was its Bisset Creek project in Ontario. In the past year, however, the company purchased two Imerys assets: Lac des Iles in Québec and the Okoruso/Okanjande mines located in Namibia, which they anticipate to be back in operation next year. Through these acquisitions, Northern Graphite will become the third largest producer of graphite outside of China, with the intention to develop capacity from 50,000 t/y of production to 300,000 t/y.
In examining why Northern Graphite’s Lac des Iles mine is the only producing graphite mine in North America today, Northern Graphite Corp. CEO, Hugues Jacquemin, indicated that the scarcity of mines has little to do with a scarcity of deposits in North America. “Canada is actually very rich in graphite. The issue is that, until now, the volume of demand for graphite in its traditional industrial markets was relatively small,” he said.
Because China had most of the production, whenever they had a surplus of graphite capacity, they would sell that capacity into North America and into Europe at very low prices, which created a vicious cycle, where people trying to develop capital intensive graphite mines could never raise enough money to do it. Whenever the cycle was at the top, China would dump graphite onto the market, and suddenly prices would crash and North American business models would no longer make sense.
Jacquemin posits that this time is different thanks to skyrocketing demand for lithium-ion batteries. “These batteries did not exist in cars until 2010, but once electric vehicles started to be manufactured, the amount of graphite required by the market started to grow exponentially. What we see now is that, as these batteries grow, you need between 800 to 1,200 t of graphite per gigawatt hour of battery capacity,” he added.
Article header image courtesy of Green Technology Metals