EV mineral companies get tail wind from Biden administration

Editor's note: This story has been corrected to reflect that Standard Lithium will produce 20,900 tons of lithium carbonate annually. It previously said 20,000 tons of lithium carbonate and did not provide a production time frame. 

The transition from gasoline to electric vehicles mainly depends on the supply chain for batteries and their materials.

Domestic shortages of lithium and other critical minerals have plagued U.S. auto manufacturers trying to keep up with EV demand, which is growing at a steep 30 percent annually, according to EVAdoption.com.

The largest shortfall is domestic lithium production. Australia accounts for half of the 100,000 tons of lithium produced globally, according to the World Economic Forum. Chile and China are next. The U.S. lags far behind, producing fewer than 1,000 tons of lithium annually.

The same is true for other critical minerals used in batteries. The U.S. has relied on countries like Russia and the Democratic Republic of Congo, while U.S. mining has stagnated.

As the U.S. EV market expands, the federal government and industry players are looking to build out a domestic mineral supply chain.

The feds have accelerated production plans with generous incentives. The 2021 Infrastructure Law earmarked more than $7 billion to strengthen the U.S. battery supply chain, including $400 million for grants to develop domestic critical mineral supplies.

The 2022 Inflation Reduction Act followed up with tax credits of up to $7,500 for an EV purchase, as long as a hefty share of the battery minerals comes from North America or from U.S. free-trade partners.

Before 2024, 40 percent of critical minerals must be extracted or processed in the U.S., in a nation where the U.S. has a free-trade agreement in effect, or from materials recycled in North America. That jumps to 80 percent by 2027.

Aspiring domestic lithium producers said the legislation is a concrete step toward President Joe Biden's goal of EVs accounting for half of new-vehicle sales by 2030.

"The Inflation Reduction Act underscored Biden's agenda," said Jonathan Evans, CEO of Lithium Americas, of Vancouver, British Columbia. "Its passage has already unified players across the automotive industry and the battery supply chain behind it."

Others are less confident that the Biden administration's EV industrial policy will solidify the U.S. position in the industry, citing the massive size and complexity of the supply chain.

"Taking the power battery industry alone as an example; it covers positive and negative electrode materials, separators, electrolytes, and more. It is not possible for the United States to establish a huge industrial supply chain by itself within a short space of time, or even in association with countries with free trade agreements with the United States," Maya Xiao, an analyst at the Interact Analysis research firm, wrote in a recent report.

Yet it's still early days as the companies wait to see how the proposed funding will pan out. Lithium Americas, for example, is pursuing a Department of Energy loan that would be essential to the company's ability to finance its Thacker Pass project in Nevada's Humboldt County.

Meanwhile, Piedmont Lithium's lithium processing plant in Etowah, Tenn., became one of the first to get funding from the Infrastructure Law, receiving a $141.7 million grant in October.

"This funding should help further project development plans, including detailed engineering and orders for long-lead items," said Piedmont Lithium CEO Keith Phillips.

This makes it possible for the company to simultaneously develop its Tin-Spodumene Belt project in Gaston County in North Carolina along with the Tennessee project. The two facilities will produce 60,000 tons of lithium hydroxide per year when fully operational in 2026.

As companies compete for a share of government funds, they benefit from a focus on the industry that gives banks and investors confidence in the sector.

"The government is creating paths by which money can flow into this industry," said Emily Hersh, CEO of Vancouver's Luna Lithium, which is developing its Pilot Peak brine exploration project in Nevada's Columbus Basin. "My company and the purpose of my company is now a mainstream dinner conversation."

The Inflation Reduction Act is pushing auto companies to secure domestic supplies of critical minerals to ensure their products qualify for the tax credit. Piedmont Lithium, for example, recently expanded its production deal with Tesla, even though its U.S. sites have yet to begin construction. Ioneer already has an agreement with Toyota, and said others are coming calling.

And the push is essential for these lithium companies.

Lithium Americas, for example, said it is negotiating a partnership with a significant EV company in exchange for construction financing.

And while companies are negotiating funding, they face significant permitting hurdles.

Ioneer, for example, believes its planned Rhyolite Ridge operations in Esmeralda County in Nevada will produce 20,000 tons a year of lithium carbonate and lithium hydroxide — enough for 400,000 EV batteries a year. The company has spent more than $100 million on the site since 2017.

Despite its upfront investment and the site's potential, getting the necessary permits was initially slow for Ioneer, an experience shared by many lithium production companies.

The Biden administration has toggled between ensuring solid environmental protections are in place while still encouraging new mines.

Ioneer has met multiple times with the Fish and Wildlife Service, the Bureau of Land Management and other agencies to discuss environmental protections, said the company's Executive Chairman James Calaway.

"In this last year, they started acting on those discussions and helping to work through the details," he said. "In the next year or two, you are going to see the fruits of that."

Plans for Standard Lithium's Smackover project in El Dorado, Ark., lay out how it is leveraging a brownfield site using existing operations and infrastructure. In doing so, Standard Lithium is reducing its environmental footprint, said Robert Mintak, CEO of the Vancouver company, in an email. The project removes the need to build a new mine and all the supporting roads and pipelines. The plant will produce 20,900 tons of lithium carbonate annually when operational.

The biggest challenge EVs now face really revolves around manufacturers coming up with enough of the raw materials — especially lithium — for their batteries to meet the expected sharp growth in demand.

"I believe the biggest challenge and risk to the industry is time," Piedmont Lithium's Phillips said. "The timeline for developing lithium resources is not short. It generally takes five, 10 and even 20 years from first discovery — just as it does with most commodities."