Deal focus: Excavating the lithosphere

The great irony of the electric vehicle (EV) revolution is that the herculean industrial effort required to make emissions-free cars requires significant emissions production.

As EV momentum builds, investors are creeping down the supply chain, with noteworthy forays into the battery and recharging infrastructure segments, among others. Now there is increasing recognition that this rabbit hole inevitably leads to mining and raw materials handling.

“Can other people please do this work? That would be great. We’re begging you. We don’t want to do it. Can someone please? Instead of making a picture-sharing app, try lithium mining and refining, heavy industry, come on,” Tesla CEO Elon Musk said in the company’s latest earnings call.

The world didn’t need that much lithium before. The metal was mostly used in ceramics, glass, and conventional household batteries. By 2026, EV batteries will represent 90% of the market, according to Benchmark Mineral Intelligence, with demand continuing to outstrip supply.

In 2023 alone, lithium demand is set to jump 27% year-on-year to 900,000 tonnes globally. And that tonnage figure is expected to grow 2.5x by the end of the decade. This is the dirty underbelly of EV and most of it is happening in Asia; Australia is the largest producer of raw lithium and China is the largest processor.

Herein lies much of the rationale for a AUD 23m (USD 15.5m) Series A round raised by Australia-based Novalith Technologies. The deal brought together US-based climate specialist Lowercarbon Capital, Grantham Environmental Trust, and TDK Ventures, along with local investors Clean Energy Finance Corporation and Investible.

“Our comfort comes from being aware that there’s unprecedented lithium demand, so there’s got to be movement in production to increase capacity. And critical mineral security is becoming a key focus in Australia, so there’s demand for domestic processing,” said Ben Lindsay (pictured), an investment manager at Investible.

“On top of that, there’s the idea that production and processing of spodumene [a lithium-bearing ore] is such a heavy emitter with incumbent technology. Then we see a company like Novalith saying they’re going to address the critical mineral requirements in Australia and do it with significantly lower CO2 production with a very strong, well-connected team.”

Investible is investing via its Climate Tech Fund, which launched in 2021 with a target of AUD 100m and remains in the market with AUD 33m collected to date. The fund has backed 13 early-stage companies so far, including Novalith, with a global albeit mostly Australian remit. Its portfolio support programme, Greenhouse, networks corporates, academics, and government agencies among others.

Novalith is years away from commercialisation and profit – the Series A will be used to build a pilot plant over the next three years – but its initial promises are intriguing. The company claims it can produce 99.8% pure lithium from spodumene using 90% less water than convention methods, reducing carbon emissions by 54% and operating costs by up to 40%.

Part of the lithium thesis is in the unsustainability of the status quo. Current extraction techniques produce 20 tonnes of CO2 for every tonne of lithium carbonate, including scope-3 emissions. Yet this process only recovers only 50% to 70% of the metal from the spodumene.

“We step in when the science is de-risked and we’re looking ahead at engineering risk associated with scaling, but we’re not just talking about Novalith scaling up to produce more lithium more efficiently,” Lindsay added. “We’re also looking at them scaling up while hitting those low emissions rates they’re after.”

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• Topics
• Australasia
• Early-stage
• Industrials
• Australia
• Commodities
• Lowercarbon Capital
• Investible
• Clean Energy Finance Corporation
• TDK Ventures