Justin Young: Hello, everybody. I’m Justin Young. I’m a partner in Osler’s Emerging and High Growth Companies Group based here in Vancouver. And I’m really pleased today to be here speaking with our client, Saad Dara, the CEO of Mangrove Lithium. I’ll start with a brief intro of Saad and then get into a few questions. As mentioned, Saad co-founded and now runs Mangrove Lithium, a company commercializing electrochemical lithium refining technology to power the energy transition. Under Saad’s leadership, Mangrove has developed breakthrough electrochemical technology that enables more efficient, flexible and sustainable lithium production. Saad holds a BSc, an MASc, and a PhD in chemical and biological engineering from the University of British Columbia, where his research laid the foundation for Mangrove’s technology. Recognized for many honours, Saad has successfully taken deep tech innovation from lab to commercial scale, and he’s backed by investors like Breakthrough Energy Ventures, BMW iVentures, and the Canada Growth Fund. So welcome, Saad, and to start, I’m hoping you can please provide us with a short overview of what Mangrove Lithium does and give us a little bit more background on the company’s history, your progress to date and the future.
Saad Dara: Thanks, Justin. Thank you for having me, it’s a pleasure. So, as you correctly pointed out, we’re focused on lithium processing and refining. We do that using an electrochemical process — and what does that mean? It means that we use electricity to do the same things that chemicals would do. So, if you don’t know anything about the lithium market and where lithium comes from, I’ll add two little anecdotes. The first is that about 75% of the world’s lithium is produced in South America and Australia, but about 80% of that lithium is actually refined and processed in China. When you consider what happens with that lithium, all of that lithium can’t just end up in a battery, so processing and refining is quite critical. And within the Chinese ecosystem, the processes that they operate allow the Chinese to have quite a strong position in terms of dominating that supply chain. Those processes rely heavily on chemicals. They produce a lot of waste that contributes to emissions as well. And what Mangrove does is we use an electrochemical process that allows us to eliminate those chemicals, it allows us to reduce the OpEx about 40% and allows us to have an overall greener product. Ultimately, what this means is that our technology allows us to be able to have a process outside of China that can compete on cost and OpEx with the Chinese processes without having a lot of the wastes that are generated that prevent those processes from being deployed elsewhere. And so Mangrove as a company has been commercializing this technology for the last five or six years, especially focused around the lithium market. To date, we have now built and are commissioning, and it will be in production, a first-of-a-kind plant that’s operating in Delta, about 15 kilometers from here. And recently we announced the financing from Canada Growth Fund, which is to really take us to a final investment decision on a full-scale plant. So our Delta plant today accounts for about 7% of North American refining capacity. Within the greater lithium market, that’s actually a very small plant, but it points to the challenge within the lithium market. And so the next plant that we’re building, which is intended to be a 20x larger facility, that would be about 50% of North American capacity but would play a critical role in developing a non-China supply chain for lithium chemicals.
Justin Young: Yeah, super. Yeah, thanks. It’s an amazing story, and we’ve known each other for quite some time, and it’s great to see the success you guys have had recently. You mentioned that you closed on the US $85 million financing in January, led by Canada Growth Fund, as you said, and you had participation from existing investors, Breakthrough Energy Ventures, BMW iVentures. National Bank was also part of this, underwriting a first-of-its-kind $9 million clean technology manufacturing investment tax credit-backed loan. And really the money was used, as you said, to fast-track plans to commercialize your technology. That’s a large group of investors, obviously with different interests and mandates and drivers, and across different geographies. So when you look at your capital-raising history, what’s been involved in bringing those investors together? Can you speak to a little bit your strategy and your success in bringing together a great group of funders?
Saad Dara: So, the different funders have different requirements. So we’ve taken a strategy of having a wide mix of investors. So we’ve had financial investors like Breakthrough Energy Ventures, BMW iVentures. We’ve also had strategic investors come in that have importance for the technology. Those include Mitsubishi Corporation, Asahi Kasei, and then we’ve had government funds that have a different mandate but are also driven by a similar purpose. So Canada Growth Fund, BDC, EDC, are some of those funds.
In terms of our strategy, what’s important to different investors is different. So for the financial investors, showing the large potential of the market, the breakthroughs of the technology enables, the trajectory that the company is in and where the market and lithium supply is heading was quite critical. With respect to some of the strategic investors that we brought in, technology commercialization, especially in this sector, it can be quite capital-intensive, but it also requires quite important skill sets with respect to operations. So when we looked at our group of investors, we were quite motivated by folks like Asahi Kasei that have been operating electrochemical plants for 100 years. We wanted to have them at the table because as we’re building our first of a kind plant, that kind of history and operations was quite critical to our learnings. Mitsubishi Corporation, we worked with their mining and minerals unit. They have assets that they own in North America, or not own, but are investors in North America. They have a need for new technologies that can enable lower cost production, that can enable better production for those assets. They also have a lithium trading group. They have a trading group that trades lithium, among other commodities. So that was a natural fit for them as well. And then, Canada Growth Fund was really driven by the story around Mangrove. All of the Canadian hard rock material, there’s only one mine in North America that’s producing, and that’s Allegra. All of the Brazilian material, it all gets shipped to China for processing. And so, their mandate in terms of developing critical mineral supply chain, capturing more of the value of our resources was quite important. Within Canada, the Canadian oil and gas sector sends a lot of our crude down to the United States, where it gets processed and comes back as value-added product. And we think that there’s an opportunity here that we don’t lose this value the same way that the oil and gas sector does.
So having processing capability in Canada for material and hard rock material, which is what we’ve been focused on, to be processed locally, we thought was a really good story for Canada Growth Fund. One, given the stage we were at, but also where we’re heading, they’re quite motivated by being able to play on the project level as we go to the next scale. So what was important to each of the investors had to be communicated and the story had to be told really well, but you also had to communicate that with how as the company grows, where their other funds might be able to play. And so, we’ve been quite thoughtful about the investors we want to bring in. And of course, many of these investors that we did bring in, we had relationships that we’d built over years. And fundraising takes time. It’s not easy, especially in this sector.
Justin Young: Yeah, amazing. That’s quite a story. It’s not just about the money. It sounds like it’s operational expertise, vertical industry expertise, integration, supply chain and even domestic imperatives. So it’s amazing you were able to pull it all together. You did speak to this a little bit already, but when you think about, in plain terms, what do you guys do differently? I guess mostly vis-à-vis the traditional competition in China, but maybe even as compared to alternatives that you’re seeing in the market, that are looking to provide, whether it’s Canadian domestic or North American opportunities from a technology perspective.
Saad Dara: The traditional process, the way it works, especially for hard rock, is you get the material, you crush it, you leach from it, you add some chemicals to leach it, and then you add additional chemicals to convert the lithium into the appropriate form. Typically, that’s lithium hydroxide or lithium carbonate. The cost of the chemicals is a big driver in the operating cost. So they account for about 25% to 30% of the operating cost. After that, for every ton of lithium chemicals you make, you also make two tons of waste that’s generated because of the use of chemicals. And so that management of waste can add an additional 10% to 15% of the operating cost. And then lastly, the way the process works, when any sort of chemical process, you’re mixing things together, any sort of impurities that exist in those chemicals end up in your product. It makes it difficult to achieve battery-grade quality, which has a downstream impact on the quality of the batteries themselves, what their lifetimes may look like. And so that’s how a traditional process works.
What we do, largely the front end of the process remains the same, but the conversion step, we use electricity. So it’s an electrochemical cell. What the electrochemical cell does is it produces the chemicals in situ, and that allows us to eliminate the external use of chemicals. And so that automatically eliminates about a quarter of the OpEx. And then because we also don’t generate any of the waste, that also, overall, we have a 30% to 40% improvement on the OpEx. More than that, you also are not introducing any impurities, so being able to achieve high-quality products becomes a key competitive advantage for the company. Of course, we’re replacing that with an electrically driven process, so the cost of electricity is quite important. But in most geographies that OpEx reduction allows us to actually be able to compete with the traditional method or be better.
One of the challenges within the lithium market is obviously the cost of operations in China is a lot lower. The cost of labour is lower, the cost of capital is lower, the cost of chemicals is lower. And so, when you think about developing a non-China supply chain or developing a supply chain where people don’t have to pay more, you have to look at alternative operations and alternative options. And so, we believe the electrochemical process that we’ve developed is the best way to have a supply chain outside of China that people don’t have to pay more for. And that’s really been the core of our value proposition. Cost is important, purity is important, but being able to do that at a consistent scale and a large scale is now kind of where we’re heading. And so that’s what we’re working towards with the first-of-a-kind plant to demonstrate that unit economics at full scale and then scale that by repeating that module that we’re demonstrating into a full-scale plant.
Justin Young: Interesting. So let’s move a little bit away from the tech and the economics to the policy landscape. So there’s obviously references a little bit. There’s a global race to onshore critical mineral supply chains. How is that general push and the geopolitical climate shaping your commercial strategy, and what do you see as the biggest risk that you’re managing as you guys scale?
Saad Dara: One of the biggest challenges that we’re seeing in the market is how kind of bifurcated it is. So demand in China for batteries, demand in the Asian markets for some of those materials, is almost detached from what we’re seeing in North America. So demand for EVs here is a lot slower. Demand for EVs and other kind of the energy transition in Asia is a lot higher. What’s that meant is that we’re seeing the lithium market at least have a lot of focus within China has been like they’re going ahead. And so the challenge that we’re seeing is because of that demand, a lot of the chemical, a lot of the feedstock from the mines, is being taken up by Chinese companies in a very, very aggressive manner. So one of the things that we see as a potential challenge for this world as we look to onshore critical minerals is what’s happening with the mine development and whether Chinese companies are coming in and trying to secure that material at very aggressive pricing points, and then us losing that material for some time. This is actually not just kind of North America specific, but places like Zimbabwe have had this happen too, where Zimbabwe actually banned the export of the rock itself, even to China, and you have to do the processing in-house. So from a policy landscape, I think feedstock security and being able to secure that material and process that is going to be quite critical. Things like the investment tax credit on OpEx or CapEx, that can play an important role. But I think as we think about, recently we’ve announced that we’re going to have Chinese vehicles come to Canada. I think how much of the materials that end up in those cars should be Canadian materials. I think that’s something that we should be paying attention to. There’s no reason why the copper, the nickel, graphite, lithium that end up in an EV in those 49,000 vehicles couldn’t have a significant portion being Canadian material. For me, on a personal and a professional level, that would be something very satisfying to see.
Justin Young: Yeah, that’s great. And we are obviously — we have you here because you’re a Canadian company, and we’re talking about the impact that you can have in Canada but also on the global stage. Thanks so much for taking the time to talk to us today, Saad. At a time when energy security and clean energy transition are federal priorities here in Canada, your success certainly highlights how Canadian innovation can help strengthen our domestic critical mineral supply chains, reduce reliance on the geopolitically concentrated and sensitive sources, and I think more importantly, companies like Mangrove are positioning Canada as a key player in the global battery economy. So we’re really proud to have you here, and we’re really happy to be working with you and associated with you and your success. So thanks a lot, Saad.
Saad Dara: No, thank you for all the support that you guys have provided, and I think you played a really important role in getting the CGF deal closed.
Justin Young: Super. Thanks very much.
Saad Dara: Thank you.
