© Reuters. FILE PHOTO: An employee works on the battery manufacturer Octillion's production line for electric vehicles (EV) in Hefei, Anhui Province, China, March 30, 2021. REUTERS / Aly Song / File Photo
By Clara Denina and Zandi Shabalala
LONDON (Reuters) – Growing demand for electric vehicles has spurred small lithium, cobalt and rare earth mining companies on which automakers rely to develop mines and build refining capacity in Europe to reduce their reliance on China.
Efforts by the United States and Europe to build a safe and independent supply chain for the key minerals used in electric vehicles (EVs), wind turbines and aircraft engines have accelerated as the pandemic resulted in shutdowns and bottlenecks.
With companies under pressure to reduce their carbon footprint, processing metals into goods that circulate within the continent and don't have to travel far is an environmental goal.
At least four smaller companies are building plants for processing ore in Europe's special economic zones over the next five years, while others are planning to build mines on the continent and process materials on site, company representatives said.
Mkango Resources, a rare earth developer with projects in Malawi, is working with chemical company Grupa Azoty Pulawy to build a separation facility in Poland's Special Economic Zone that will benefit from tax exemptions and state aid.
"The location … aligns with European initiatives to create more robust, diversified supply chains," said William Dawes, CEO of Mkango Resources.
Rare earths like neodymium, praseodymium, terbium, and dysprosium are used to make magnets to fire EV motors and power windows, offshore wind turbines, and other high-tech devices. China currently provides 98% of the world's supply.
Europe is home to automakers like Volkswagen (DE :), BMW Group, Stellantis Renault (PA 🙂 as well as automotive component suppliers who are being pressured by regulators to source materials in the region.
The EU rules of origin, which determine where goods are manufactured or produced, stipulate that from 2027 65% of a product's value must be sourced locally in order to qualify for duty-free movement of goods within the bloc.
Moving out of cheap countries like Asia carries risks, said Craig Scherba, president of graphite developer NextSource Materials, who has a project in Madagascar planning a battery anode facility, with Europe being one of the possible locations.
"Those who can maintain low costs will survive," he said.
Elsewhere, rare earth developer Pensana Plc, which owns assets in Angola, is building a metal cleaning facility in the UK using the UK government's Automotive Transformation Fund, which provides grants to help transition to a net-zero Accelerate vehicle supply chain.
"There are a number of incentives that have been put in place," said Pensana Chairman Paul Atherley.
The Saltend plant has lower investment and operating costs than comparable locations in Europe, he said.
Saltend is located in the Humber port region, which has free port status, which means that incoming goods are exempt from customs duties.
Pensana has so far raised £ 15 million ($ 20.96 million) through an equity raise for the $ 125 million plant, which will create approximately 100 jobs.
New jobs are welcome for the local community, but union officials say UK industry also needs to invest in training workers.
The Australian company Infinity Lithium is aiming to develop the San Jose Industrial Lithium Project in Spain, an open pit mine that also aims to treat and refine on site.
NeoMetals, another Australian company, is planning a lithium recycling plant in Germany.
For large miners dealing with much larger tonnages, it is generally uneconomical to build plants in Europe, but some are relocating.
Glencore (OTC 🙂 is reviewing European processing facilities, including in the UK, for their recycling operations, while Rio Tinto (NYSE 🙂 plans to have an on-site processing facility at its Serbian Jadar lithium mine, which is expected to have a feasibility study in late 2021.
Part of the role of so-called junior miners in the industry is downsizing projects and doing the early development work, which in some cases leads to takeover by larger miners, said Caspar Rawles of Benchmark Mineral Intelligence (BMI).
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