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Large-scale deposits require 15-20 years to develop

Battery metals is a thinly traded market

As the demand for batteries increases with electric vehicle sales on the rise, so does the demand for transparency within the battery supply chain, while the industry also deals with permitting uncertainty, energy experts said March 7.

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Consumers are demanding that the supply chain is responsibly sourcing materials, the experts said during a panel at the CERAWeek by S&P Global energy conference in Houston.

"When you start to include the real value of risk in the value chain, it becomes not just the bottom line but also the top line," said Christopher Skeete, Quebec's minister for the economy.

One example is the coffee industry. If a company doesn't source fair-trade coffee, it can't compete because consumers push pressure on the industry to not harm local communities where materials are sourced.

"That's kind of the goal we need to have," Skeete said. "We need to make sure we don't repeat the mistakes of the past."

Through the Inflation Reduction Act, the US government is attempting to promote reliable and responsible battery material supply chains that emphasize procurement from domestic sources or trade-friendly countries.

The IRA provides tax credit incentives to both EV producers and consumers in the US based on the sourcing of materials and components in the vehicle's battery. A tax credit for an EV can be claimed if the car's battery is made with raw materials and components that are sourced within the US or from one of the country's free trade partners.

Supply chains for battery metals such as copper, lithium and nickel could more readily adapt to the IRA benefits as they can be sourced from free-trade partners such as Canada, Australia and Chile. However, cobalt may prove more challenging as the majority of its production is concentrated in the Democratic Republic of the Congo.

There has been an increasing degree of flexibility and innovation over the last year with automakers, said Frank Fannon, managing director with Fannon Global Advisors. The industry has to be sure it is driven not just to get the cheapest "because cheapest is not always the best."

"The automakers are coming up the learning curve quickly," Fannon said. "Everything is very different from what they're accustomed to which is why you're seeing a change."

To align with IRA requirements, automakers and battery producers with US operations have increasingly moved to invest in domestic lithium projects that will support their growing battery production footprint. In January, General Motors announced the largest such deal to date in the US when it said it would invest $650 million in Lithium Americas, granting the automaker exclusive access to the first phase of lithium carbonate output at the Thacker Pass project in Nevada.

"No matter what we do, whether it's the [Inflation Reduction Act] or something else, if we don't fix permitting and litigation in the US, it won't work," said Andrea Vaccari, head of responsible production and sustainability with Freeport McMoRan.

It currently takes 15 years to 20 years from start to finish to develop large-scale deposits, Vaccari said, adding that the timing needs to be shortened.

"We shouldn't wait for the permit process to have conversations with involved participants," she said.

Republican legislators have repeatedly called on the US government to reform the country's mine permitting laws to allow projects to reach production more quickly, citing the need to ramp up the domestic capacity of critical materials that are necessary for energy transition initiatives.

In February testimony before the US House of Representatives Committee on Natural Resources, National Mining Association CEO Rich Nolan said the current lengthy permitting process puts the US "at a competitive disadvantage in attracting investment for mineral development."

Governments need to do better creating a predictive environment for timing, Skeet said about permitting.

When Quebec built a wind farm, it brought the city where it is located in as a part owner, which made the city want to see the project happen and therefor make permitting happen quickly, Skeete said.

Early agreements with interested parties mean it's more likely to have an agreement at the end, Vaccari said.

It is critical the IRA has integrity, Fannon said. Otherwise, he said he is fearful it will fail.

"There's very little transparency," Fannon said about battery metals. The market is thinly traded.

Just like greenhouse gas policies can track emissions, there should be a way to track the battery metals supply chain to ensure it is not tainted by forced labor or slavery, he said.

"If we can track the release of the visible emissions, we should be able to trace the workers," Fannon said.

EV consumers are demanding the industry ensure battery metals do not harm local communities where they are mined.

"When you're looking to develop a mine, you have to look at all aspects of the mine," Skeete said about the supply chain transparency. Otherwise, a company could get left out of a bid.

To get buy in from the local community, Quebec's two mines provide partial ownership with the community, he said. One mine has 50% ownership from the community, while the other has 40% ownership. The two mines should be operation by 2027.

By being transparent with the community from the beginning, it cuts down on potential uprising.

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