Listen: Catching up with Innovators throughout the battery materials supply chain

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Dan:

Hello and welcome to Energy Evolution, the S&P Global Commodity Insights podcast where we bring you insights and analysis on the energy transition. My co-host, Taylor Kuykendall, has been in the field reporting from CERAWeek in Houston during the week-long energy conference. For those that don't know, it's one of the biggest events in the industry, often referred to as the Super Bowl of energy. So if you're a regular subscriber, I hope you've enjoyed the episodes we've delivered to you so far from CERAWeek, but we're not done yet. Isn't that right, Taylor?

Taylor Kuykendall:

Hey, that's right, Dan. But this is our final CERAWeek episode. The episode's a bit different, however. We're going to be featuring a lot of different voices involved with making batteries and finding the materials needed to build them. So instead of our full interviews, we're going to share some of our favorite insights from guests at Locus Mining Solutions, Momentum Technologies, Li-Metal and Xerion Advanced Battery Corp. Let's start the conversation with Gabi Knesel, a senior Vice President at Locus Fermentation Solutions. We met to discuss Locus Mining Solutions, a company that is working to extract high mineral yields from lower quality ores. That means more valuable material from feedstocks that might otherwise be treated as waste. Now, Gabi said her company makes two promises, an increase in metals recovery and an ESG benefit because now you can produce more valuable metals and minerals with less mining activity. Now they're looking into energy transition metals, but so far their target's been more profitable, materials like gold and they're doing it with biodegradable chemicals and the magic of fermentation. Now, if you think wine and beer, when you hear fermentation listeners, you are not alone.

Gabi Knesel:

Fermentation is something brand new that we are bringing to the mining industry. We are the first company globally that is producing these chemicals via fermentation. And you're right, the idea is more or less the way it works is like a mini brewery, but what we are bringing to the industry is natural chemical reagents that don't have anything live in it. So we add the natural feedstocks, the ingredients into these fermenters. So very simple sugars, oils, yeast, and then we filter, we clean the product coming out of the fermenter, and what we sell to miners are really just a standard liquid that one would not even notice the difference. They would not know that it would come from fermentation. Just as an example, if we go to a gold producer, right, and we added our natural chemicals into their process and we are able, let's say to increase two, 3% of gold recovery, for some customers, that means $25 million a year.

So that's why I always tell the community as well, or not communities, but actually more the investors of our company and some of the companies that we are trying to get our technology to, the global players. Locus is an unknown biotech company at the moment. Okay. So not many people in our community, unless you are in the technical team at a company that we are speaking to, then they know who we are. But if you go around and ask, oh, who Locus is, people don't know because we are new. But the interesting thing is that the global players are giving us a chance to test our technology because of the benefits that we can bring to them.

Taylor Kuykendall:

And it's a pretty flexible technology too.

Gabi Knesel:

We are working with very large companies. We are a small team and we have actually a lot of projects and companies that we would like to give more attention, even in small producers. But we would like to first scale up, right, the mining production or the production for mining customers. So we are with a selection of large miners because we believe that if we have a successful case within a global company, we can replicate that quickly. But your question in terms of what metals we are working on, we are targeting the energy transition metals, but also gold and iron ore, and there are reasons for that. In terms of geography, we are an American biotech company and our plants are located in the US. So for us, from a supply chain perspective, it's easier to transport these natural chemicals into the, let's say North American market.

And also I mentioned to you gold and iron ore. These are the top three metals in the US in terms of production is gold, copper, and then iron ore in third in Minnesota and the Canada region. So for those reasons, we are targeting transition metals and then gold and iron ore. In terms of customers and companies that we are working with, we have Valley, we have Glencore. So big names out there. Yes, very big names and there are others, also big names that we are working on.

But at the moment, we are prioritizing some of our customer just because a mature startup. That's the way that I describe it to the mining community when I'm talking with people. The reason why I say mature startup is our company was founded nine years ago, but the mining division is brand new. So we are about a year and a half. We open our Hhdrometallurgical lab here in the Houston area, actually this year that we open officially the lab. And this lab is where we have the complete set of equipment to receive ore from customers, process it, test it with our products, and then later go to the customer site to test.

Taylor Kuykendall:

All right, I'm glad I was able to catch up with Gabi at the show and appreciate her taking some time to share insights with you listeners. But now let's turn to another company that's looking to new ways to extract metals that'll be critical to the energy transition. Momentum Technologies is a company aiming to satisfy the growing need to deal with waste and reuse. See, they hope to support a future circular economy by recycling devices and batteries at the end of their lives. During CERAWeek in Houston, I sat down with Momentum Technology, CEO, Mahesh Konduru.

Mahesh Konduru:

So Momentum Technologies is a technology platform. Our goal is to recover valuable materials from waste. The first market we're targeting for waste is the battery waste from lithium batteries and that battery waste could come from production scrap that Gigafactories produce or end-of-use waste that electric vehicles produce. So that's the first target market and we aim to be the best-in-class technology that offers a few things. It's a mouthful, so I'll say it slowly. What we're offering that has advantage, we have flexibility, the type of chemistries we can handle. We are modular in that we can co-locate next to you. We are environmentally friendly. We use less harmful chemicals, we have lower footprint and all of this translates to high ROI, which I know you said acronyms are not good, but it's a return on investment on small-scale projects, which is quite a unique and we believe nobody in the industry offers that.

What we are offering essentially is that we co-locate our facility next to you and the business model question that you asked, we are flexible. So we think in the beginning, typically the way it works in financing projects that have a technology of a first of a kind is that people tend to view it as quite risky. So you only tend to get certain [inaudible 00:07:58] capital for it, certain type of capital for it. In this case, we believe it needs to be equity finance for the first project. So we have fortunately some great anchor investors and some partners that we believe are going to help us finance the first project. So because of that, the business model is we will finance it, we will build it, we will deliver the product to you. We have a supply agreement with party that's going to give us the raw material and we have an off-day agreement with the party that's going to sell the product.

So we're kind of all-inclusive, all-sufficient for the first project, but beyond that, we are going to be flexible. We could license it as needed. We could also offer a process package to you and we can help you maintain and run it if you want. So there's a model in the industry. People call the DBOOM model, another acronym, design, build, own, operate, and maintain. We could pick any one of those boxes and we can help you do that.

So for us it's about giving a client the independence, the flexibility, the luxury of picking a model that benefits you and keeping the critical minerals within your communities. The problem with what you said earlier was people are building these big hubs where they collect all the waste and then put it in and then process it. That means you have to transport all these materials which are hazardous and valuable at the same time across state-country boundaries that are not easy to do. And also some communities do not want to send these valuable materials across borders. They want to keep it to themselves. So we give you the luxury of keeping it to yourselves by building these small modular plants.

Taylor Kuykendall:

Now the rise of electric vehicles, battery storage and really a really long list of other technologies increasingly need more mined materials. While electric vehicle markets slowed in recent months, many expect that's just going to be a blip in overall trends.

Mahesh Konduru:

I'm very comfortable in stating that we need to build these supply chains and value chains to cater to that demand. It's coming. It may be smaller than people expected, but it's still going to be huge and I think so what we are hoping to do is contribute to that supply side by actually being very smart and prudent about how we reuse materials instead of throwing them away. So I think our vision is that in a certain period of time, every device that you handle, whether it's transportation or mobility, there's certain component that comes from recycling and we want to be a certain part of that. We want to be the low-cost source of this material. That's our goal and I think we have a strong case to make that we will be there.

You mentioned mining. Unfortunately mining is facing its own challenges from what I hear. Taking a mine from concept to production depending on the part of the world could be 10 to 16 years. Right. So imagine if you have to catch up to capacity to five years from now, we should have started 10 years ago. If you start today, it'll take time. Right. So I'm not saying it's good or bad, but that's a reality. However, I think a lot of the supply would come from some of these traditional sources. We want to be a portion of that. And if you look at what people are putting out from a forecast perspective, they're saying that recycling may be up to 15% of supply in the next 10 years, which is still quite substantial and we hope to be a part of that.

Taylor Kuykendall:

Next we're going to talk about a company that hopes to revolutionize the battery industry with technologies that will enable the production of lithium anodes and lithium metal required for the next generation of batteries. I caught up with Srini Godavarthy CEO of Li-Metal during CERAWeek about what his company is doing in the battery space. Now, at the time of our conversation, he said they were in talks with about 27 different customers including large OEMs and next-generation battery players who were sampling their lithium metal product.

Srini Godavarthy:

Today the technology uses lithium chloride as a feedstock that has to be made on purpose, but most of that gets made in China. So the metal mostly gets produced in China. What we have done is we have, that lithium chloride gets produced from lithium carbonate. So what we said was, hey, can we directly use lithium carbonate as a source and not produce lithium chloride? Because carbonate to chloride conversion takes about $200 million in CapEx, and then you have chloride evolution when you convert that lithium chloride into metal. So our process leverages lithium carbonate directly and converts it into lithium metal. The lithium carbonate for us can come from two sources. Either we can get fresh lithium carbonate from any of the miners. Quite a few are developing mines in North America, US, and Canada, but Chile is also IRI compliant. So you have Albemarle and SQM who have lithium carbonate in South America, so you could use any of that lithium carbonate.

But our process was built to also use lithium carbonate that will get produced from recycling of first generation batteries so that we can have a more sustainable value chain. So as in somebody will take all those spend batteries, recycle them, they generate the lithium carbonate, we will put them into the next generation of batteries. So nothing is going to waste. Right. So we basically close the loop and build a circularity. Eventually we don't see ourselves building all this capacity out on our own. We will need a partner.

So we are looking at both the carbonate suppliers as a partner or our end users as a partner, JV partner to come in and work with us because this is going to be a lot of capital. And we are a technology company that wants to scale, but realistically that's hundreds of millions of dollars and we will need somebody with a strong balance sheet to help us navigate this. And look, our expertise is engineering, right? Not operations yet. Right. We will get there, but having a good partner who has operational experience here come be our partner is definitely going to be helpful for us.

Taylor Kuykendall:

Now we talk about the Inflation Reduction Act and other legislation that's been drafted to help aid the energy transition on this show a lot. Of course that's mostly targeted to companies that sell you a final product, think EVs or wind turbines or solar panel. There's been little in the way of incentivizing raw material production as Srini mentioned in our conversation.

Srini Godavarthy:

What I've been telling people is whether it's DOE, that Inflation Reduction Act, there is a challenge with it. Right. What they're incentivizing is more the cell and battery manufacturing and to a little extent the critical materials, but what they're incentivizing is current generation of battery technology. What I've been trying to educate people is if you want to win this race, it is not going to be on the current generation of battery technology. Right. That China's way ahead and we're trying to catch up. If you want to leapfrog, it has to be on the next generation of battery technology. And that has not, people, our senators, our congressmen, they have not yet woken up to that. It is important to prioritize that next generation. There's a gap. Right.

You have venture capitals who will provide you 10, $20 million of funding. Then you have DOE and others who through their loan programs will provide you 50 plus million dollars of funding. But there is always a point for everyone where you're in the 20 to 50 where you are not at a pilot scale, but not at a complete commercial scale. We are trying to de-risk the commercial, and that's the gap. Right. That's where we are stuck. Honestly, we are in that gap as well as a lot of other companies in that space. And if IRA or all these really incentivize this technology development, I think it's going to really help because VCs don't come in, the strategics don't want to take that technology. There is still some risk because you're not proven commercially. So there is somebody. The government needs to step in, I think.

If you look at the in general battery industry, the know-how resides with a very small group of people and I think, look, it's no fault to the Senate. They're doing everything, the congressmen and senators are doing everything they can, but they still need to be educated. Right. All the things that they're trying to do, it's difficult for them to understand every aspect of this. The challenge is also kind of some of the projects that we are deploying the funds for. Right. You saw Clay Project gets several billion in funding this week or last week, right? Clay is one of the most expensive resources out there, and if you're deploying that, how successful will it be? Is it the right leverage or the right use? So those kind of know-how resides with a very small subset of people. And I think the US government needs to really seek those people out and absorb that knowledge so that they are making the right decisions. They're trying their best, but unfortunately you've got to understand the technology otherwise we won't win.

Taylor Kuykendall:

Now if you've been keeping up with your Energy Evolution episodes, we also spoke with Chevron recently about the oil and gas industry's interest in lithium production. I asked Srini if he worries about the oil and gas industry moving into the lithium space, whether that's going to be because of a fear of competition with their big balance sheets or having to navigate a reputation as one of the largest sources of greenhouse gas emissions.

Srini Godavarthy:

To me, I really welcome the oil industry coming in. Why? One, it greens them, right? They are making an effort and if they see value in lithium, it's great, right? The Exxons, the Totals, if they come in and really utilize produced water from their wells, perfect, right? I mean it is great. The advantage that they bring and the challenge that the industry has always had is execution. If you see a lot of these projects delayed, a lot of the capital overruns, you are bringing in experienced operators who always focus on cost and project delivery.

And so that could help really drive the cost down in the industry and help adoption rate. Plus as they learn, and if they see this is profitable, maybe they give up on oil and maybe they really help decarbonize faster. Right. Look, in the end, what do they care? They care about money that they generate. And if this is a profitable way to replace carbon fuels, why not? Right. It incentivizes. I think they should come in. They should get the feet into the water and they should see. They should catch the green bug, right? Good for the entire industry. And in the end, look, I'm a strong proponent of economics. In the end, companies will do what is good for the bottom line and what better way than come in and dip their feet and see how much money they can make in this industry and really drive this.

Taylor Kuykendall:

Okay. Last but not least, I talked to John Busbee, the CEO and co-founder of Xerion Advanced Battery Corp. Wondering what Xerion is? Well, I'm just going to let John answer that.

John Busbee:

Xerion is a cell manufacturing company. We have two core technologies. One, it's an anti-structured metallic foam that we make. It's a basis for an electrode architecture for lithium ion batteries and new generations as well. And the other one is something we've trademarked as direct play, which is the ability to use molten salt electroplating to directly make and coat cathode materials in a single step.

Taylor Kuykendall:

Okay. Well let's actually break that down just a little bit further.

John Busbee:

In general, batteries or all the materials are made. People don't know that all these, whether it's a cobalt material or a nickel or manganese or whatever, all these battery materials, they're all made of ceramics. And so you can think of it almost like making pottery. They take all these materials which have to be absolutely pure because if you take a vase and you make a vase and there's a chunk of dirt in it, well you get to charge more for it because it's artistic. But a chunk of dirt in your battery ruins the battery. So everything has to be absolutely pure. So they mix it all up and then they fire it to make the ceramics and then they crush that into a powder and they stick some polymer binder in there that's very similar to paint, which is not conductive. So then they also add carbon powder into it to make it conductive.

They spread that out on a foil, they dry it at high temperatures and then they crush it to make sure that it's really dense and firmly adhered. And we're replacing all of that with a single step. So we take the aluminum foil that is the current collector, and we run that through a molten salt bath and run some electricity across it. And we actually directly make, so we're actually refining, synthesizing, and depositing all in one step, the final battery material. So it goes in as bare foil, it comes out as a finished battery electrode in one step.

Taylor Kuykendall:

So John told me he was in the Air Force, and that makes him particularly sensitive to ensuring the US has domestic supplies, the materials and technologies society needs to function as it is. See, that's been a driving motivator as the company looks to make first production of its battery cells by 2026 in Ohio. And to open a second plant in Florida by mid 2028.

John Busbee:

We were always looking at strategic metals, strategic minerals, and could it be made domestically? And were we putting components from someone who might later become an adversary in our product and really giving ourselves a severe disadvantage. So all the way upfront, I was really concerned about that and I really just initially just wanted to bring manufacturing back. But as we started to do this, we were really just trying by using the molten salts, it's the fluid that would dissolve the cobalt and lithium salts in. We were just trying to get away from water. That was really the thought was let's use this as a fluid instead of water. And it wasn't until later that we started realizing that not only could we make better batteries, but we could also make a lot of the precursor materials using the same process. So we can actually refine nickel, we can refine cobalt, we can use our electrodes as the basis for direct lithium extraction out of different brine sources.

And we can directly use the hard rock, lithium, the stuff that they have in Quebec, North Carolina and all of it in Western Australia. So we had all these sources we could put in our baths and use to make our own batteries. But you can't build a domestic industry without it being holistic. It has to be systemic. And so a battery company that doesn't have access to raw materials can't succeed. A raw material company with nobody to sell to without having to absorb the shipping costs and stuff can't succeed. And unfortunately, we in the United States, we're kind of late to wake up to that.

So we're playing catch up. And so as we were looking at it over the last several years, we realized that not only could we make a better battery to help support the space, we could supply some of those materials from domestic mines. Never send it to China. Like for cobalt, China has I think 70% of the world's refining capacity and people send it from all over the world there and there is no source. They have to use it from that for all practical purposes. And so the fact that we could take the material from the mine, put it in our baths, make our own battery with us and China, but then also we could stop at the cobalt precursor or the lithium precursor material. So then we said, well, let's supply those materials as well. Let's go upstream and see if we can actually build some plants to actually supply the others in the United States to give us that differentiated capacity, which will allow us to compete globally.

Taylor Kuykendall:

All right, listeners, thank you so much for joining us as we share some of the great interviews I was lucky enough to grab during CERAWeek in Houston. It really is an incredible event with lots of influential folks in the energy space. Certainly fill a whole lot of your time talking to. However, my notebook or rather my recorder is now empty and we'll be returning to our usual schedule of publishing each Friday morning.

Dan:

All right, that's going to do it for this episode. Now, before we sign off, I want to just give a shout-out to our other podcast team members that includes my stalwart co-host, Taylor Kuykendall, Camilla Naschert, Camellia Moors, Christopher Coats, and Karen Willenbrecht, as well as our agency partner, the 199. Now to stay up to date with upcoming episodes, be sure to subscribe to Energy Evolution on your favorite platform. And if you've got any ideas for future themes or guests, we'd love to hear from you. Please shoot us an email at energyevolution@spglobal.com. If you like what you heard today, consider sharing our podcast with others or leaving a review on your preferred platform. We look forward to bringing you more deep discussions in the future. Take care and we'll catch you next time on Energy Evolution.