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Canadian miners eye more lithium deals after LG Energy signs three deals in 24 hours

EV Batteries at InterBattery 2021 as Global Sales Surge
EV Batteries at InterBattery 2021 as Global Sales Surge

South Korean battery maker LG Energy Solution Ltd. announced three agreements in a span of 24 hours with Canadian miners to source materials required to make batteries for electric vehicles (EVs) as it looks to boost its focus on North America.

After announcing its three-year cobalt deal with Toronto-based Electra Battery Materials Corp. on Thursday morning, the Tesla Inc. supplier announced agreements to source lithium from Toronto-based miner Avalon Advanced Materials Inc. and Winnipeg-based Snow Lake Resources Avalon Advanced Materials Ltd., which is developing a lithium project in Manitoba.

The miners, whose share prices rose immediately after the announcements, expect more global battery makers to ink deals with Canadian companies due to the Inflation Reduction Act that United States President Joe Biden signed last month.

The act states that EVs containing batteries assembled in North America and made up of critical minerals sourced from the region could receive US$7,000′ worth of tax credits, which could offset some of China’s advantages in the field.

“Basically, the door is now open for us to start working with some of the EV manufacturers that want to be able to get sure access to the battery material products,” said Avalon’s chief executive, Donald Bubar, adding that the deal with LG Energy was a “very significant” first step towards finalizing a sales agreement with a “major processor.”

Snow Lake chief executive Philip Gross echoed a similar sentiment and said that although a domestic supply chain doesn’t yet “exist,” the law will pressure companies to make changes.

“We are seeing announcements every day with foreign manufacturers on shoring their production in order to comply and benefit from the act,” he said.

The deals paint a hopeful picture at a time when the demand for EVs has increased and the world looks to shift away from coal, but Canada still lacks a steady mine that produces lithium, a key component of the batteries used in EVs.

In a bid to encourage the industry to invest more in critical minerals such as lithium, Canada allocated a record $3.8 billion to the sector in its 2022 federal budget.

The federal government is also trying to accelerate its goal of creating an EV battery ecosystem on home soil. Last month, it signed agreements with automakers Volkswagen AG and Mercedes-Benz AG to promote EVs and earlier this year, it inked deals with Umicore SA, Stellantis NV and LG Energy to build cathode and battery factories.

According to the agreement with Avalon, the company will supply LG Energy for five years with half of its initial battery-grade lithium hydroxide from the processing facility it aims to build in Thunder Bay, Ont., by 2025.

The company initially plans to feed the facility with concentrate produced from its Separation Rapids Lithium project in Kenora, Ont., which Bubar said will start producing within the next two years, before looking to buy lithium concentrate from other projects.

In a similar deal with Snow Lake, LG will source lithium from the company’s planned lithium-hydroxide plant in Manitoba for 10 years and collaborate with the company to create the plant.

Snow Lake owns an early-stage lithium project in Manitoba that covers about 55,000 acres and is expected to annually produce about 160,000 tonnes of lithium spodumene from 2025, a deadline that Gross admits is ambitious.

“We recognize that it’s ambitious, but at the same time necessary if North America is going to avoid an existential threat to our automobile industry,” he said.

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