LG Energy Solutions’ investment in Green Technology Metals shows Canada’s status as an FTA-approved country seems to justify earlier stage investment in mining projects. 

LG Energy Solutions (LGES) have announced an investment of AU$20.0M (US$13.3M) in Canada-based lithium project developer Green Technology Metals. The deal also entitles the South-Korean batteries giant to 25% of spodumene concentrate produced from the Ontario-based project when it comes online.

Green Technology Metals are currently developing the spodumene resource, with an aim to be fully integrated to lithium hydroxide production as the project develops. The industry has seen other examples of lithium miners signing offtake agreements with downstream customers in a move to generate cash flow and develop downstream conversion facilities of their own, which would appear to be the case with this latest news.

Green Technology Metals’ project is at an early stage in its development, currently working towards a preliminary economic assessment (PEA). Investment and offtake agreements are not typically agreed prior to the disclosure of a feasibility study. However, this early-stage investment may be the result of LGES’ desire to secure long-term battery material supplies as concerns over supply volumes continue to trouble battery and electric vehicle (EV) manufacturers. LGES has a number of battery manufacturing facilities in the United States, such as its Michigan-based hybrid EV plant, joint EV facilities with General Motors (GM) and Stellantis, and several others. The company has committed significant investment to further expanding its battery manufacturing facilities in North America, including a US$5.5Bn investment to develop an Arizona-based battery facility. To feed this demand, the company will need to source significant volumes of lithium chemicals. In addition to this, incentives for EV sales have been rolled out under the recently released Inflation Reduction Act (IRA). This legislation allows EV manufacturers in the US which source 40% of battery value from domestic sources, or sources from countries with which the US has a free trade agreement (FTA) in place, to offer subsidies on electric vehicles sold in the US.  

The move to source material from Canada, a nearby jurisdiction with an FTA in place with the US, shows a growing trend among battery and EV manufacturers when it comes to sourcing materials. Namely, a greater appetite for investment risk to ensure supply volumes for their aggressive battery manufacturing targets. Canada, with its FTA status, reputation as a favourable mining jurisdiction, and proximity to LGES’ battery manufacturing facility, justifies an earlier-than-typical investment strategy in a lithium mining project, in this case, Green Technology Metals.