Samsung SDI stake in Canada Nickel highlights EV materials focus

South Korean battery maker Samsung SDI’s recent investment in Canada Nickel, despite falling nickel prices, is the latest example of companies forming long-term partnerships to secure electric vehicle supply chain production that qualifies for tax credits under the US Inflation Reduction Act (IRA)

Earlier this month, Samsung SDI agreed to pay $18.5 million for 15.6 million shares of Canada Nickel, becoming an 8.7% shareholder.

The battery maker also received the right to purchase a 10% equity interest in the Crawford nickelcobalt project in Ontario for $100.5 million, dependent upon a final construction decision. Samsung SDI would also then have the right to 10% of the production from the Crawford project over the life of the mine, and the right to an additional 20% of the production for 15 years, extendable by mutual agreement.

Canada Nickel’s proposal for the Crawford open-pit nickel-cobalt mine, announced on January 12, states that it would have a mine ore capacity of 275,000 tonnes per day and a mill ore input capacity of 120,000 tpd, operating for about 43 years, according to the company’s website. The project has 3.79 million tonnes of proven and probable nickel reserves, and 215,000 tonnes of cobalt, a 2023 feasibility study showed.

Nickel-cobalt-aluminium (NCA) and nickel-manganese-cobalt (NMC) batteries rely on nickel because it offers greater energy density and storage at a lower cost, delivering a longer range for vehicles, according to the Nickel Institute. However, a significant portion of nickel mining and refinement is concentrated within what the US deems Foreign Entities of Concern (FEOCs) – such as Chinese investments in countries like Indonesia – and therefore are not eligible for IRA tax credits. Government officials from Indonesia, the world’s largest producer of nickel, were reportedly in talks with the US government last year to explore a free trade agreement that would enable the US to import more Indonesian nickel for electric vehicle (EV) batteries.

“Developing assets that are IRA-compliant is attractive,” Olivier Masson, principal analyst of battery raw materials at Fastmarkets, said. “For nickel, however, the US does not have many ore bodies, so the investment needs to go into other countries.”

The IRA’s sourcing requirements have been beneficial to American companies like Talon Metals, a Minnesota-based company focused on finding more high-grade nickel sulfide deposits in the US via a joint venture with Rio Tinto.

Todd Malan, chief external affairs officer and head of climate strategy at Talon Metals, told Fastmarkets that Talon has been selected for two direct grants from the US government:

  • $114 million for a battery minerals processing facility to be built in North Dakota, via the Department of Energy from the Bipartisan Infrastructure Law, and
  • $20 million from the Department of Defense to double the company’s exploration budget for high-grade nickel deposits in Minnesota or Michigan.

“The ‘Foreign Entity of Concern’ provision in the IRA ensures that nickel or cobalt produced at low standards in third countries by Chinese companies cannot benefit from the taxpayer-funded incentives in the IRA,” Malan said. “Domestic nickel sourced from Minnesota or Michigan, where Talon is exploring and developing its first mine, will unquestionably be favored in US policy that aims to strengthen security of supply. This is a bipartisan priority in Congress, so markets should not expect it to diminish or loosen in the future.”

“Oversupply by China or Chinese companies operating from countries that don’t have high standards for environmental protection, labor rights, human rights, participation of indigenous people and a high embedded [carbon dioxide] cost is a strategic challenge to US policy and priorities,” he added.

Nickel prices logged the biggest losses within the base metals complex on the London Metal Exchange (LME) in 2023, and continued edging lower in the beginning of 2024. Three-month futures contracts were nearing $16,000 per tonne on Monday January 22, hitting $16,007 per tonne at the LME 5pm close, down by 3.59% from $16,603 per tonne on December 29, and 43.06% lower than $28,110 per tonne a year before.

Lower nickel prices have led some companies, such as Australian miner Wyloo Metals, to idle nickel operations.

Despite the price slump, Malan still expects more offtake partnerships and more direct investments like Samsung SDI’s in Canada Nickel.

“Savy automakers and battery manufacturers are working to line up [and] secure supply from countries that meet the IRA requirements and meet their own [environmental, social and corporate governance] values,” he said. “There are a number of nickel mining projects going through permitting processes within the current IRA-compliant countries.”

“Also, there is potential for mine expansion in the US, Canada and Australia; new refining capability; and significant resources going into battery recycling in the US,” Malan said. “Samsung, Tesla and BHP are all great examples of how the private sector is stepping up, rather than defaulting to the lowest common denominator.”

In 2022, BHP signed a memorandum of understanding for nickel supply with Ford Motor Company, and also announced plans to explore options to supply Ford with nickel from its low-carbon Nickel West asset in Western Australia.

BHP also has supply and collaboration agreements with EV maker Tesla, as well as a battery making joint venture between Toyota Motor Corp and Panasonic Corp.

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