Besides wind and solar energy developers and electric vehicle manufacturers, winners from the just-signed Inflation Reduction Act could be companies that extract and process essential minerals to support battery production and other needs in the energy transition, say sector analysts.
The law, signed by President Joe Biden on Aug. 16, gives a needed investment signal to the underdeveloped supply chains for critical minerals in the U.S., including lithium, cobalt, nickel, manganese and graphite, say Reed Blakemore, acting director of the Atlantic Council Global Energy Center, a government consultant, and Paddy Ryan, its assistant director, in a web-posted analysis.
"Underdevelopment of battery metal supply chains remains a liability for EV deployment in the U.S." they say, pointing to the market dominance of China and Russia. "Critical minerals ... have value chains rife with underinvestment, political risk and poor governance."
While upstream mining required to meet supply chain requirements takes time to develop, inclusion of incentives for processing the materials “may alleviate” tough sourcing requirements between 2023 and 2027 because processing plants can be developed and built quicker than new mines, the analysis says. Those processing plants would ensure a strong demand signal for upstream extraction capacity, it adds.
The act requires that at least 40% of the value of critical minerals in an electric vehicle’s battery to be processed in the US or by a free trade partner beginning in 2024 and increases by 10% every year to reach 80% by 2028.
The act supports development of a more resilient domestic supply chain by offering a 10% advanced manufacturing tax credit for processing materials—including for building, retrofitting or expanding industrial plants to be used for processing or refining materials.
The same tax credit is offered for producing a single mineral in the long list of needed ones but requires it to be of a specific purity.
The law also eliminates the previously required end to the subsidy once a certain number of vehicles have been sold by a manufacturer.
That provision should indirectly benefit production and processing companies by increasing demand for domestically produced graphite and vanadium, says Terence Cryan, executive chairman of Westwater, an energy technology and battery-grade natural graphite development company.
The Centennial, Colo.-based firm has a graphite processing plant under construction in Alabama and a source of battery grade pure graphite in Coosa County.
Lithium Anericas Corp. is developing what it touts as the biggest lithium mine in the U.S. at Thacker Pass in Nevada. It is within the McDermitt Caldera, a 16 million-year-old supervolcano across the Oregon-Nevada border that has some of the country's highest concentrations of lithium.
Firm CEO Jonathan Evans said It may build a second mine before construction is completed because of the new law’s support for the mining sector, but Thacker Pass is mired in legal battles with ranchers, environmental opponents and Native tribes challenging federal approval last year of its construction permits.
Talon Metals on Aug. 10 entered an option agreement to obtain 80% ownership of the mineral rights of 400,000 acres in Michigan’s Upper Peninsula, known for high-grade nickel deposits. Firm CEO Henri van Rooyen said the acquisition directly responds to the government’s “urgent action” to establish a U.S. battery mineral supply chain.
“Talon will bring its proven approach to exploration and use cutting-edge technology to explore for new high-grade nickel, iron and copper deposits in the Upper Peninsula of Michigan, currently the only region in the United States that produces nickel,” van Rooyen said.
Meanwhile, the Biden administration may push to obtain those minerals from Canada, even providing mine development funding under the Defense Production Act, E and E News said on Aug. 23. Under an interpretation of Canadian-U.S. military pacts dating to the 1950s, miniing sites there could be deemed “domestic” U.S. sources that would be eligible for climate-change law funding.
Project Realities
But the Administration also has been less supportive of other minerals projects.
Mine developer Twin Metals Minnesota filed a federal suit on Aug. 22, alleging that the U.S. Interior Dept. illegally revoked critical mineral leases for its proposed $1.7-billion copper-nickel mine in a national forest and seeking reinstatement. The suit says the leases are necessary to proceed with environmental review and permitting, but the department previously noted concerns about acid mine drainage impact to the wilderness area that project opponents also raised.
The state halted its environmental review in February after the leases were cancelled.
The company claims an investment of more than $550 million in the project since 2010.
“We are standing up for our right to a fair and consistent environmental review of our proposed mining project,” said Dean DeBeltz, Twin Metals’ director of operations. “Our plan is backed by decades of exploration and analysis and is rooted in the most environmentally sophisticated design, which is tailored for our project location and mineral deposit. It deserves a fair evaluation by federal regulators based on its merits.”
Meanwhile, officials in Alaska also say that actions by Interior Secretary Deb Haaland are contradicting the administration’s effort to increase the domestic minerals supply, citing specifically the agency's withdrawal earlier this year of a final environmental impact statement for construction of a 211-mile industrial road, estimated to cost from $600 million to $1 billion, which is needed to develop the Ambler Mining District, considered one of the most prolific deposits of critical minerals.
Native groups and environmental advocates oppose the project, but proponents say it would create 3,900 jobs.
“The administration is inconsistent with what it wants,” says Kyle Parker, environmental partner at law firm Holland & Hart, which is attorney for the Alaska Industrial Development and Export Authority. The uncertainty created has made companies reluctant to invest in Ambler mining projects, he says.
