supply chain

When it comes to the metals and minerals underpinning the green energy transition, and specifically the EV battery revolution, much of the spotlight has fallen on lithium — and for good reason, as we will discuss in a forthcoming post.  However, as ARPN’s latest review of the “battery criticals” against the backdrop of the just-released latest iteration of the USGS Mineral Commodity Summaries (see our posts on graphite, manganese and cobalt) shows, they are equally “critical” in their own ways. The same holds true for the next battery critical in our lineup – Nickel.

While Nickel’s biggest traditional application is in alloying, particularly in the production of stainless and heat-resisting steels, it is its ability to achieve good storage capacity and higher energy density in batteries at an affordable cost that has sent the material’s star soaring in recent years.  It has also sent demand projections soaring, as nickel’s role in the EV revolution takes center stage.

At the end of 2021, nickel was only one of two new metals (the bulk of the expansion of the list from 35 to 50 minerals and metals was owed to the fact that the Rare Earths and Platinum Group Metals were now listed individually) to be added to the revised U.S. Government List of Critical Minerals. As Reuters’s Andy Home wrote at the time, while a “relatively benign supply profile kept nickel off” in the past, there are two reasons for including it on the updated list:

Pointing to the only domestic operating nickel mine in the U.S. and a single producer of nickel sulphate (which only produces Nickel as a co-product), Home said “the USGS has expanded its criticality criteria to look beyond trade dependency to domestic supply, particularly what it calls ‘single points of failure.’”

The second reason, according to Home, was “nickel’s changing usage profile from alloy in stainless steel production to chemical component in electric vehicle batteries.”  The rapid uptake of EVs as a key to the net-zero carbon transition has propelled nickel onto the critical minerals list, and has sent carmakers like Tesla and others to embark on missions to secure their own supply chains.

This push gained new urgency with Indonesia’s investment minister hinting at the possibility of Jakarta pursuing the creation of an OPEC-like cartel for nickel (and other key battery materials) last fall.  What is resource nationalism to some is supply risk to others, and that’s clearly part of the narrative around nickel.

The looming specter of battery material cartelization – first introduced earlier this year by South American Lithium producers — along with soaring demand scenarios provided fresh impetus for U.S. stakeholders to kick the buildout of domestic battery supply chains into high gear wherever possible, and efforts to this effect are currently underway.

According to USGS, in 2022, the underground Eagle Mine in Michigan – currently the only U.S. primary nickel mine in operation – “produced approximately 18,000 tons of nickel in concentrate, which was exported to smelters in Canada and overseas. Nickel in crystalline sulfate was produced as a byproduct of smelting and refining platinum-group-metal ores mined in Montana. In Missouri, a company produced nickel-copper-cobalt concentrate from historic mine tailings and was building a hydrometallurgical processing plant near the mine site.”

But with the Eagle project entering its final years, Michigan’s near-neighbor Minnesota holds promise for strengthening the U.S. domestic nickel supply chain.

The first recipients of federal funding disbursed under the 2021 infrastructure law to “supercharge” U.S. manufacturing of batteries for electric vehicles and the electric grid included the Tamarack Nickel Project in central Minnesota.  Talon Metals’ subsidiary Talon Nickel was one of 20 processing and manufacturing companies in 12 states chosen for a combined $2.8 billion award to “expand domestic manufacturing of batteries for electric vehicles and the electric grid.” 

Talon, which had previously signed a six-year agreement with Elon Musk’s Tesla under which Tesla would buy 75,000 metric tons of nickel concentrate, is looking to use part of the government grant to further its plans to construct an ore-processing facility in Mercer County, situated in the east-central region of North Dakota.

As ARPN has noted, the Tamarack project had previously been awarded  $2.2 million to fund an effort to achieve carbon capture by a process that mineralizes the carbon in rock – a process far more stable than methods that inject carbon, where it remains vulnerable to seepage and fracturing due to earthquakes. Bringing the supply chain home could not only inoculate the U.S. from trade issues on the critical minerals front but could also help reduce the industry’s — arguably large — carbon footprint.

The project is expected to start the environmental review process this year, a process that will be closely watched in particular in light of the Biden Administration’s recent decision to withdraw northeastern Minnesota’s Boundary Waters Canoe Area Wilderness from future mining – a move that could effectively kill another nickel and copper project, the proposed Twin Metals Minnesota underground mine, which has seen an ongoing legal and regulatory battle over the years.

A third proposed copper-nickel project in northeastern Minnesota — the PolyMet mine near Babbitt and Hoyt Lakes, just saw PolyMet Mining and Teck Resources finalizing a joint venture earlier this month to develop PolyMet’s copper-nickel deposit along with another larger ore body controlled by Teck. The project – a 50-50 venture, will be called NewRange Copper Nickel.

With the Tamarack and NewRange Copper Nickel projects situated in different watersheds, they are not affected by the Biden Administration’s Boundary Waters decision; however, as followers of ARPN well know, the not-in-my-backyard sentiment is a firm staple in the discourse over bolstering domestic supply chains, and brings us back to the “inherent irony” or “paradox of the green revolution” Reuters columnist Andy Home has invoked in several instances when covering critical mineral resource supply chains for the very materials underpinning the green energy transition — the paradox that “public opinion is firmly in favour of decarbonisation but not the mines and smelters needed to get there.”

As ARPN has previously pointed out – lofty goals of net carbon neutrality will not be achievable if we don’t embrace a push to secure critical mineral supply chains from “soup to nuts” to borrow a term used by Energy Secretary Jennifer Granholm.  That means “all of the above,” including domestic production and processing of metals and minerals like nickel.

After all, as we’ve noted often at ARPN, the first word in supply chain is… supply.

 In this post, we continue our review of the “battery criticals” (lithium, cobalt, graphite, nickel and manganese) against the backdrop of the just-released 2023 iteration of the USGS Mineral Commodity Summaries.  Next up:  cobalt.

With the material accounting for up to 20% of the weight of the cathode in a typical lithium-ion EV battery, cobalt was considered the highest material supply chain risk for electric vehicles by the U.S. Department of Energy in 2021.

While geopolitical challenges and rising demand in the context of the green energy transition are a factor for the supply scenario for all battery criticals, the cobalt conundrum differs in that more than 70% of the world’s material is supplied by the Democratic Republic of Congo, and labor practices in the country have long been scrutinized by the global community, including the United States.

In 2009, the Department of Labor first placed cobalt, specifically referred to as “cobalt ore” on its List of Goods Produced by Child Labor or Forced Labor, and a year later, Congress included language in the Dodd-Frank financial law targeting the sale of conflict minerals from the DRC to address profits from commodities mined in Congo, but stopped short of including cobalt, and only focused on gold, tin, tantalum and tungsten.

In 2016, Amnesty International released a report on child labor at the DRC’s so-called “artisanal” informal mine sites, increasing international scrutiny, but fast forward to 2022, and child labor persists in the DRC, prompting the U.S. Department of Labor to include lithium-ion batteries into its “List of Goods Produced by Child Labor or Forced Labor” – a list of 158 goods from 77 countries assumed to be produced in violation of internationals standards regarding child or forced labor.

The added scrutiny of labor practices for cobalt also increased urgency for U.S. policy and other stakeholders to build out a North American supply chain for “battery criticals” lithium, cobalt, graphite, nickel and manganese — which already has received fresh impetus with the passage of the sourcing requirements contained in the statutory language on EV credits in the recently-passed Inflation Reduction Act.

(ARPN has already outlined current U.S. efforts to this effect for graphite and manganese in our recent posts.)

After years of inaction on the domestic development front, U.S.-based cobalt projects have begun to move forward.

According to USGS, “in 2022, the nickel-copper Eagle Mine in Michigan produced cobalt-bearing nickel concentrate. In Missouri, a company produced nickel-copper-cobalt concentrate from historic mine tailings and was building a hydrometallurgical processing plant near the mine site. In October, commissioning began at a cobalt- copper-gold mine and mill in Idaho, where cobalt concentrate will be produced.”

While it “will be a while before we can actually say that this is going to be a growth industry,” as Brad Martin, director of the RAND National Security Supply Chain Institute says, the opening of the Idaho mine operated by Jervois Global is a “geopolitically significant” development for the United States and a small first step away from relying on materials sourced from a country using child labor practices.

However, as Gregory D. Wischer and Jack D. Little with Westwin Elements outlined in a recent op-ed for the Idaho State Journal, while Jervois’s mine will produce roughly 2,000 metric tons of cobalt, Idaho’s other untapped cobalt reserves “will sit uselessly dormant unless U.S. government policy changes — and, even if tapped, this cobalt ore will be shipped overseas for refining.”

They added, in a storyline familiar to followers of ARPN:

“U.S. government policy has long influenced America’s cobalt industry. For instance, during the Cold War in the 1950s, Calera Mining Co. expanded mining and refining in Idaho’s Blackbird district in exchange for U.S. government purchases of its refined cobalt. However, as U.S. government support dissipated, permitting timelines lengthened, and cobalt prices cascaded, U.S. cobalt mining evaporated. 

Consequently, China today controls approximately 35 percent of global cobalt mining production — given Chinese ownership of 50 percent of cobalt mining production in the Democratic Republic of the Congo — and more than 70 percent of global cobalt refining production.”

On the processing side, Canadian Electra Battery Materials is set to launch cobalt refining operations this year, but North American efforts — and in particular U.S. efforts — are still few and far in between because domestic cobalt mining and refining continue to face significant regulatory and financial hurdles, including lengthy permitting times that in the U.S. can range between seven and ten years.

Add Wischer and Little:

“Some people may argue that the United States can rely on mined and refined cobalt from ostensibly ‘friendly’ countries. Yet, as the COVID-19 pandemic displayed, even allies like Australia will protect their own supply chains and block critical exports to the United States during crises. Future events, such as wars, trade disputes and natural disasters, could similarly disrupt global cobalt supply chains. For instance, a possible U.S.-China conflict over Taiwan would likely delay U.S. cobalt imports, with consequences magnified by the defense industrial base’s increased cobalt demand for the war effort. In short, cobalt supply chains dependent on any foreign countries are insecure and risky.”

As such, cutting red tape for domestic cobalt projects like Jervois’s operations in Idaho, as well as supporting and incentivizing refining projects should range high on U.S. stakeholders’ priority list in the 2023 and beyond.

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