US approves lithium project in bid to break China's hold on EV minerals

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The United States has approved the construction of a massive new lithium mine in Nevada and provided tax breaks to some miners as part of its strategy to break Chinese dominance over critical mineral supply chains.

Australian producer Ioneer announced Thursday that it had received a federal permit for its Rhyolite Ridge lithium-boron mine, a project that could produce enough lithium to power around 370,000 electric vehicles per year. The silver-white metal is an essential ingredient in the production of rechargeable batteries and essential for the future of the electric vehicle industry.

Rhyolite Ridge is the first approval of a lithium mine by the Joe Biden administration, which offered Ioneer a $700 million loan to help it build a project that would quadruple U.S. lithium production when completed in 2028. Since 2002, only three American mines have been commissioned. for critical minerals, none of which are located on public lands.

Ioneer shares jumped 15 percent in New York after the approval closed at $7.92.

Western producers have struggled to compete with Chinese rivals in the production and refining of key minerals due to higher costs, stricter regulatory standards and delays caused by legal challenges. Lithium mining and processing has a significant environmental impact because it uses large amounts of water and energy, as well as toxic chemicals such as sulfuric acid.

The Ioneers project has faced opposition from conservation groups, who have warned it could lead to the extinction of an endangered flower species. U.S. regulators said they worked with the company to amend its project and develop a plan to protect the Tiehms buckwheat flower, allowing approval of the mine to continue after a six-year review.

Bernard Rowe, chief executive of Ioneers, said its Nevada mine would help break U.S. customers' reliance on Chinese companies, which account for more than two-thirds of global lithium refining capacity.

We have one of the largest deposits of lithium and boron in the world… It's almost ready to be built, he said.

Ioneer estimates its Nevada project will cost more than $1.2 billion to complete Robyn Beck/AFP via Getty Images

In an effort to jumpstart mining and processing construction, Washington on Thursday issued new guidance allowing producers to claim tax credits on the costs of mining and extracting critical minerals, provided they process some of the materials.

There is no shortage of lithium in the United States. This week, the U.S. Geological Survey said it had discovered between 5 million and 19 million tons of lithium reserves beneath southwest Arkansas, potentially enough to meet nine times the projected 2030 global demand for car batteries.

Yet most of the world's lithium is mined in Australia or taken from large saltwater lakes in South America and then processed in China.

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Analysts said the mine approval and tax breaks were important steps in Washington's efforts to encourage the creation of a domestic lithium mining and refining industry to supply the electric vehicle sector.

James West, an analyst at Evercore ISI, an investment bank, said: “Extracting lithium from US-based mines or salt-rich brines is important for strengthening supply chain security. American and ensure that a domestic electric vehicle industry is not dependent on China.

A piece of searlesite, a rock containing lithium and boron, at the Rhyolite Ridge site in Rhyolite Ridge, Nevada Robyn Beck/AFP via Getty Images

Only one lithium mine is operating in the United States, the Albemarles Silver Peak mine in Nevada, which produces approximately 5,000 tons of lithium per year. Site preparation is underway for another mine and processing plant, Nevadas Thacker Pass, led by Vancouver, Canada-based Lithium Americas and backed by General Motors. It was approved by the Donald Trump administration in January 2021, and the Biden administration announced a $2.3 billion federal loan to help develop the mine.

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But Ioneer will face competition from several lithium producers, which have announced plans to open new mines and processing plants in the United States in an effort to take advantage of Inflation Reduction Act incentives . Oil producers ExxonMobil and Occidental are among several companies running lithium pilot projects in Arkansas and California, respectively.

Ioneer estimates its Nevada project will cost more than $1.2 billion. In 2021, it signed a financing agreement with South Africa's Sibanye-Stillwater to sell it half of the Nevada project for $490 million, subject to approval. It also has contracts to supply lithium to automaker Ford and a joint venture between Toyota and Panasonic.

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