In mid-December, the U.S Department of Energy announced a conditional loan of US$755 million to battery materials and technology company Novonix to build a plant in Tennessee for manufacturing synthetic graphite, a key component in batteries for electric vehicles.
The funding aims to produce 31,500 tonnes of synthetic graphite a year, enough for 325,000 EVs annually. It’s part of the department’s US$77.2 billion in loans under the Biden administration to meet clean energy goals and reduce reliance on China.
Developing a domestic supply chain for critical minerals has become a national security concern, according to CEOs in the mining industry.
“They are completely panicked about how dependent the U.S. economy is on a bunch of supply coming from China,” Mark Selby, CEO of Canada Nickel (TSXV: CNC; US-OTC: CNIKF), said during a January presentation on nickel to an investor group in Toronto.
“They know the big threat, security wise, for the next 20 years is China and so they are going to spend and throw money and do whatever it takes to basically start to see those supply chains get built. They’re frustrated they haven’t seen more of it already.”
Diverse sectors
As of Jan. 10, the loan office approvals under the Biden administration include US$43.4 billion for 20 conditional commitments across diverse sectors including battery production, the critical minerals supply chain, sustainable aviation fuels and virtual power plants. The remaining US$33.9 billion included 19 closed loans and loan guarantees for nuclear, hydrogen, critical minerals, virtual power plants and advanced vehicle components, the office confirmed in an emailed response to questions.
Virtual power plants include rooftop solar, EVs and a variety of chargers and flexible electrical loads that can balance supply and demand like a traditional power plant, the DoE said.
While the energy department’s recent funding hasn’t included projects in Canada, similar efforts at the Pentagon have helped finance efforts north of the border. These include US$15.8 million for Fireweed Metals‘ (TSXV: FWZ; US-OTC: FWEDF) tungsten project in December and US$6.3 million for Fortune Minerals‘ (TSX: FT; US-OTC: FTMDF) NICO project in May.
The Department of Energy’s Loans Program Office was created in 2005 to finance clean energy projects that commercial banks were reluctant to back. In its early days the office gave loans to wind and solar farm projects and to Elon Musk’s Tesla. It issued a US$465-million loan to the EV maker in January 2010 to produce all-electric plug-in cars and develop its manufacturing facility in Fremont, California. The loan was fully repaid in May 2013.
Expanding graphite output
Its conditional loan to Novonix in the graphite space follows a US$102-million loan in July 2022 to Syrah Technologies to expand its Vidalia facility. It’s a processing plant in Louisiana that produces graphite-based active anode material (AAM) used in lithium-ion batteries and other clean energy technologies. The DoE estimated that Syrah’s expanded production capacity would support enough EVs to save 52 million gallons (about 200 million litres) of gasoline each year.
Some of the projects the loan office selects from a wide pool of applicants are to contribute to the “circular economy” through recycling critical minerals. In November, the office closed a US$475-million loan to Li-Cycle U.S. to help finance construction of what it describes as “the first-of its kind lithium-ion battery resource recovery facility in North America”. The loan will help Li-Cycle, a pure-play lithium-ion battery recycler, expand its operations in a suburb of Rochester, New York.
Materials will be aggregated and processed into “black mass” — recycled lithium-ion battery feedstock — at three operating sites in New York, Arizona and Alabama and then shipped to the Rochester hub facility for additional processing.
EVs supported by the facility’s output, the DoE said in a release, would reduce gasoline use by up to 71 million gallons per year, or the equivalent of more than 633,000 tonnes of CO2 emissions a year.
Recycling batteries
Another recycling project received a conditional commitment for a loan of up to US$2 billion in February 2023. If the loan is approved, Redwood Materials will use the funds to build a battery components recycling and production facility in McCarran, Nevada, just east of Reno.
The Redwood plant would recycle end-of-life batteries from consumer electronics like cell phones, laptop computers and power tools. According to the DofE, Redwood would recover more than 95% of their critical battery elements including lithium, nickel, cobalt, manganese and copper.
It can then use both new and recycled feedstock to make about 36,000 tonnes per year of battery-grade copper foil and about 100,000 tonnes a year of cathode active materials. Full production would amount to more than 1 million EVs a year, cutting annual gasoline consumption by more than 395 million gallons and avoiding more than 3.5 million tons of CO2 emissions annually.
“To date, nearly all anode and cathode production supporting U.S. battery cell manufacturers occurs in Asia,” the DoE stated in a release. “With this conditional commitment, Redwood Materials will lead one of the first domestic projects that produces cathode materials at scale for battery cell manufacturing.”
Lithium build-out
The loan office also has been active in the lithium mining space. In March last year, it offered a conditional commitment to Lithium Americas (TSX: LAC; NYSE: LAC) for a US$2.3 billion-loan to help finance the construction of a lithium carbonate processing plant at Thacker Pass project in Nevada. The loan was finalized in October and the proposed processing plant is to produce about 40,000 tonnes of lithium carbonate annually for use in EV lithium-ion batteries. The project is next to a project that contains the largest proven lithium reserves in North America.
The site, which is partly supported by an equity investment in Lithium Americas from General Motors, is to produce enough lithium carbonate to support the production of batteries for up to 800,000 EVs a year, the DoE said. That would cut the consumption of 317 million gallons of gasoline a year.
“The project’s output will qualify for the Inflation Reduction Act’s Made in America benefits and sourcing requirements, making it an attractive source of lithium carbonate for domestic automakers,” the DoE said.
Rhyolite Ridge
One of the DOE’s earliest conditional loan offers in the lithium sector was to Ioneer’s (NASDAQ: IONR; ASX: INR) Rhyolite Ridge lithium project in Nevada’s Esmeralda County, about 300 km northwest of Las Vegas. The federal office offered to lend up to US$700 million to finance the processing of lithium carbonate at the project site in January 2023.
According to the DoE, the plant could potentially support production of lithium for about 370,000 EVs a year and cut annual gasoline consumption by nearly 145 million gallons and the release of 1.3 million tons of CO2 each year.
“While Asia currently dominates the lithium carbonate refining process, the Rhyolite Ridge deposit is one of two known sizable lithium-boron deposits in the world and is expected to be the second lithium mine in the U.S.,” the department stated.
The only producing lithium mine in the country is Albemarle’s (NYSE: ALB) small-scale Silver Peak brine operation in Nevada.
Another conditional loan in the lithium space went to Ultium Cells LLC. The US$2.5-billion loan closed in December 2022 and was issued to help Ultium finance the construction of new lithium-ion battery cell manufacturing facilities in Ohio, Tennessee and Michigan.
Ultium is a joint venture between General Motors and South Korea’s LG Energy Solution.
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