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The traditional supply chains for lithium hydroxide could be defeating the very purpose of global decarbonisation and instead taking a high environmental toll.

The whole purpose of electrifying vehicles has been to ‘reduce’ CO2 emissions for the sustainability of the world.

But if miners were to continue producing and refining lithium through traditional means — and 60 per cent of supply is now from hard-rock mining, with most carbon-intensive processing in China — the emissions produced to electrify all passenger vehicles would equate to over a billion tonnes, which is equivalent to the total annual emissions produced across the UK, France and Italy combined.

Back in 2020, Volkswagen was emitting about 2.5 times more CO2 to manufacture an EV compared to manufacturing an internal combustion engine (ICE) vehicle, because of the CO2 intensity of manufacturing lithium-ion batteries and the raw battery materials required.

Because of this, VW amongst others has since committed to reducing the CO2 intensity of its EVs to net zero, through sourcing raw materials with low or zero carbon footprint.

There are various ways that lithium can be produced, but the environmental impacts vary significantly:

  • Mining a tonne of lithium hydroxide from a hard rock source, with processing in China, requires 15 tonnes of CO2, costs more than $7500 and is water- and land-intensive
  • Extracting and processing the same amount of lithium hydroxide from brines in the Atacama Desert of South America (the second driest place on earth) emits five tonnes of CO2, takes large quantities of water and costs nearly $6500
  • However, using renewable energy to extract and process lithium hydroxide from sub-surface geothermal brines in Germany could require no fossil fuels, require far less water than the previous two methods and cost just over $4500

The latter method is the formula Vulcan Energy Resources (VUL) is planning to use for its Zero Carbon Lithium project, which is in the Upper Rhine Valley region of Germany. It will require only a very small land footprint to produce lithium hydroxide, as a co-product from its renewable energy plants — the first of which is already in operation.

MD and CEO Dr Francis Wedin said the company was developing the first and only net-zero carbon, zero fossil fuels lithium project in the world.

“We aim to be the world’s first integrated lithium chemicals and renewable energy producer with zero greenhouse gas emissions,” Dr Wedin said.

“Europe has zero local supply of the lithium hydroxide it needs for battery production. Forecasts from the EU are that Europe will see a 57-fold increase in lithium demand in coming years, but nearly 80 per cent of lithium hydroxide currently comes from China.

“Lithium is the lifeblood of the European auto industry’s present and future. As one of the largest industries in Europe, the situation is critical. The need and opportunity are now.”

The European Union has this month acknowledged the urgency to shore up reliable domestic supplies of materials including lithium by releasing its Critical Raw Materials Act, which should help fast-track projects like Vulcan’s through permitting and grants.

Canaccord Senior Mining Analyst Tim Hoff said the Critical Raw Material Act proposed to establish strategic projects and “Vulcan’s project would clearly meet the requirements”.

“Vulcan could meet up to 6.7 per cent of the EU’s lithium requirements at the full project scale,” he said.

“The EU is targeting 10 per cent of raw materials and we think there is potentially an excellent return for the EU to assist Vulcan in achieving its ambitions.”

Mr Hoff said a similar act in the US, the Inflation Reduction Act (IRA), was aimed at stimulating its battery supply chain with subsidies provided under conditions for complying developments.

“We’d like to see the EU putting money where its mouth is and commit to serious funding for up and downstream development of the battery supply chain,” Mr Hoff said.

Proven pilot and offtake agreements secured

Vulcan is unique in that it has secured five key offtake agreements with the West’s leading auto and battery manufacturers, including Volkswagen and Stellantis, which equate to its lithium being ‘sold out’ for the first five years of production.

This year it plans to start producing lithium through a commercial demonstration plant as it works towards its target of the start of commercial production by the end of 2025.

Dr Wedin said that following two years of successful pilot plant operation at the company’s commercial geothermal energy plant and having completed its DFS, Vulcan was now moving into the execution phase of its first commercial development.

“We are moving into the execution phase, leveraging our existing cash position to move the project forward quickly and keep to our timelines, whilst financing discussions with banks and strategic investors continues,” he said.

“We will be ordering long lead items for our commercial plant starting in Q2 this year and will start drilling our production wells to increase our current lithium brine production.

“We are working to make this carbon neutral, integrated renewable energy and lithium project a reality, which together with the regulatory tailwinds from the EU, make this an exciting year ahead for Vulcan.”

The pressure is on in Europe, with the Green Deal signed by 27 EU member states in 2019 committing to becoming the first climate-neutral continent by 2050, and the law passed to sell only electric cars by 2035. The clock is ticking.

VUL by the numbers
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