GMS: Trent Mell on the green energy revolution and the problem with supply chains

The continuing interest in the battery sector was the focus of an in-depth discussion on the second day of The Northern Miner’s Q4 Global Mining Symposium, as the executive editor of MINING.com, Frik Els, spoke with Electra Battery Materials’ president and CEO Trent Mell.

This was Mell’s first chance to talk about some of the issues he sees facing mining’s green energy players since the company he founded as First Cobalt (TSXV: FCC; US-OTC: FTSSF) underwent a rebranding to Electra Battery Materials, and he did not hold back in speaking to the symposium audience about what he called the ride cobalt’s been on in recent years.

“[When] I started the company four and a half years ago, you know, in 2017, cobalt was the best performing commodity and we set about on a journey to find cobalt for the North American electric vehicle market,” Mell said.

That journey has led to the company acquiring assets in Canada and the United States, including a hydrometallurgical refinery in northern Ontario with a series of exploration properties nearby, as well its Iron Creek project in Idaho. Now, Mell said the company wants to capitalize on both its North American assets and the demand for battery materials from downstream consumers.

“I think in our discussions now with the downstream, we’re twelve months away from first production with the cobalt plant, but the automotive companies need more,” he said, adding that there’s a gaping hole in the supply chain, not just with the demand for production of new battery materials, but also with an increased focus on the process of recycling batteries in the electric vehicle (EV) sector.

“It’s a huge priority for the EVs. The auto manufacturers [have] got teams of people trying to figure out what do you do with end of life batteries. And so that’s the market where everybody is focused. So, the opportunity in the future is going to be fairly large.”

But Mell says a big challenge with EV battery recycling is the capital involved in building a facility capable of doing the work, something he pegged would cost in the region of US$300-350 million to build in the U.S.

However, he told the audience that his company plans to expand its existing cobalt refinery in Ontario to the tune of $200 million and have it up and running by next year, initially as a demonstration plant. He also said that Electra plans to increase the plant’s capacity from 5,000 tonnes of cobalt annually to 6,500 tonnes, pending permit amendment.

In looking at the broader geopolitical questions affecting the green sector, such as the reliance on overseas producers in places like China or the Democratic Republic of Congo (DRC), Mell said the issue of feedstock for cobalt is “trickier”, but that his company has contracts in place with three of the four biggest cobalt operations in the world, including with Glencore (LSE: GLEN).

Nevertheless, Mell believes it’s necessary to find more domestic sources in both Canada and the U.S., and pointed to the Canadian government’s $2 billion Strategic Innovation Fund as a sign that supply chain issues are being recognized as vital to western economies. He also recounted a recent visit to the White House in Washington in which he witnessed increased attention in the importance of supply chains.

“Our supply chains are too big. We’re circumnavigating the world, sometimes twice over, to get out battery parts. And there’s a real focus on getting that domesticated. And now you’ve got the ESG (environmental, social and corporate governance) rationale to do it as well. That’s an important attribute that consumers are looking at.”

Mell said that ESG pressures have pushed the cobalt sector to “clean up its act” when it comes to issues like child labour or corruption in the DRC. But the demand for green energy materials is so intense that there will always be some players willing to look the other way as long as they can find resources.

“Anybody who studies the demand projection knows that the raw material supply is going to become an issue,” he told the audience. “I mean, two years ago, everybody was chasing their tails over cobalt. Now it’s nickel. We’re running to Indonesia looking for nickel deposits in a state that’s going to have a terrible carbon footprint. But it’s going to be the answer to our demand needs. So we’ve got a lot of conflicting issues.”

While he thinks there are opportunities to develop assets in more transparent jurisdictions, Mell worries that Western nations are taking too long to permit them, leading to another gap in the supply chain.

In terms of the Buy America policy and its potential impact on Canadian miners, Mell downplayed the effects this could have.

“If you look under, for instance, the Defense Procurement Act, Canada is treated no different than any other of the U.S. states. And it’s the only country in the world that gets that kind of special treatment,” he said. “So, I think there’s a view that Canada can and must play an important role, particularly because mine development is easier in this country, and the resource side is a piece they see us really playing a role in.”

Mell also highlighted the radically expanding global EV market, which is only beginning to hit its stride in North America, and which will be the driving source of green energy materials.

“In the U.S., it’s [EV sales] going to go up by 60% next year. So we in Canada are going to be the beneficiaries of greater availability. It’s coming. Last year, during Covid, [conventional vehicle] sales in Europe were down 26%. EV sales were up, I think threefold, roughly, if my math is right. Year to date, North America, I think we’re up 140%. The investment announcement — the full velocity of investments, the amount of dollars that are being thrown in the infrastructure in North America — suggests to me that the EV adoption rate in North America is a lot [bigger] than people think. And I think in two years from now, it’ll be a very different landscape.”

Watch the full interview here: