Opportunity knocks: lithium and graphite development in Canada

The International Energy Agency (the IEA) expects global electric vehicle use to rise from four million vehicles in 2018 to 120 million by 2030.^[1] However, if the international community adopts more ambitious environmental policies, the IEA suggests that up to 300 million electric vehicles (representing 18.5% of the global fleet) could be on the roads by 2030.^[2] Further, under the IEA’s proposed “Sustainable Development Scenario”, electric vehicles account for 40% of total passenger car sales in 2030 and make up 13% of the global car fleet. Under the IEA’s “Net Zero Emissions by 2050 Scenario,” more than 50% of passenger cars sold worldwide by 2030 are electric.^[3]

In Canada, 39,036 new motor vehicles registered in 2020 were battery electric vehicles, which represents 2.5% of Canada’s fleet.^[4] If hybrid electric vehicles and plug-in hybrid electric vehicles are included, this number jumps to 95,806 or 6.2% of Canada’s fleet.^[5]

In addition to this projected increase in the use of electric vehicles, there has been a rising demand for grid-scale and decentralized energy storage. This is due principally to the increased development of non-dispatchable or intermittent forms of electricity generation such as wind and solar, which can be generated only under requisite conditions – such as the sun shining or the wind blowing. This has led to greater discussion around policy solutions to energy storage across Canada.^[6]

As the demand for electric vehicles and energy storage has increased over the past decade, global demand for lithium and graphite has also increased significantly due to expanding production of rechargeable lithium-ion batteries for use in transportation and both grid-scale as well as decentralized renewable energy storage. With the global impetus on the clean energy transition, this trend is expected to continue into the foreseeable future. A recent publication by the World Bank emphasized that the current global demand for graphite and lithium is so high that production would need to increase by nearly 500% by 2050, simply to meet demand under the IEA’s “2-degree scenario”.^[7] However, it is worth noting that the World Bank also cautions that, because both lithium and graphite are used almost solely in relation to transportation and energy storage applications, there is greater uncertainty with respect to future demand as technological innovation and disruption could significantly impact the need for these minerals beyond 2030.^[8]

Under the IEA’s 2-degree scenario, the World Bank projects that approximately 4.5 million tons of graphite will need to be produced annually by 2050, for a cumulative total amount of 68 million tons.^[9] Further to this, while demand for lithium is only anticipated to rise to approximately 1.5 million tons annually by 2050, this represents a 488% increase in production over 2018 levels – a similar percentage increase to graphite.^[10]

Lithium and graphite development across Canada

Policy advancement

In an effort to meet such growing demand, we have seen governments around the world compete to position themselves as leading jurisdictions in critical minerals such as lithium and graphite through new targeted government policies. These policies are not solely aimed at spurring development of the resources, but also the creation of critical supply chains as policy makers come to understand the importance of these critical minerals to the clean energy transition.

In 2019, the Canadian federal government launched the Canadian Minerals and Metals Plan (the CMMP) which outlined the central goal of developing Canada as a leading mining nation.^[11] Thus far, under the CMMP, a preliminary Action Plan 2020 was published in March 2020^[12] (with a corresponding update in September 2020^[13]). Subsequent Action Plans are slated to be released in 2021, 2022 and every three years thereafter.^[14] The CMMP places emphasis on, among other things, developing pan-Canadian and international collaboration toward the development of critical minerals and improving supply-chain resiliency.^[15] While so-called “critical minerals” remains something of a nebulous concept, Natural Resources Canada includes both lithium and graphite under this umbrella.^[16]

Provincially, some governments are following suit. In 2020, Quebec released the Quebec Plan for the Development of Critical and Strategic Minerals 2020-2025.^[17] The plan focuses on developing “strategic minerals” including lithium and graphite through mapping and collection of data, creating a research and development network, financially supporting exploration, transformation, recycling, artificial intelligence and research and development projects, as well as promoting Quebec internationally as a responsible partner for the supply of strategic and critical minerals.

On September 23, 2020, Alberta announced its five-member Mineral Advisory Council, tasked with aiding the government in developing various minerals that are increasing in global demand, such as lithium, vanadium, uranium, and rare earth elements.^[18] Stakeholder engagement with the Council ended on February 3, 2021, and the Council is now reviewing results. The goals of the Council include developing a provincial Minerals Strategy and Action Plan, exploring regulatory options for Alberta’s metallic and industrial mineral sector, and reviewing and modernizing metallic and industrial mineral tenure arrangements.^[19]

Similarly, on March 10, 2021, Ontario released its Critical Minerals Framework Discussion Paper, which – like Alberta’s Mineral Advisory Council – aims to assist Ontario in developing critical minerals, including graphite and lithium.^[20] The Ontario discussion paper focuses on the development of what constitutes a “critical mineral”, enhancing investment in mineral exploration and development, regulatory reform, and focusing on Ontario-centered supply chain and manufacturing opportunities. Public consultation on the discussion paper, headed by the Ministry of Energy, closed on June 11, 2021.^[21]

In addition to these policy initiatives, provincial governments are also looking at developing and modernizing their regulatory frameworks to better regulate and support lithium development. While the development of a regulatory framework falls outside the scope of this post, please see this Osler publication discussing lithium development.

Development and technology

Notwithstanding the relatively early stages of policy development, a considerable amount of lithium and graphite development is underway across Canada.

Lithium is traditionally produced from brine solutions which are pumped from aquifers and left in purpose-built ponds where solar evaporation concentrates the brines prior to further processing. This method is used in the bulk of lithium production, which is currently globally concentrated in Chile, Argentina and China. Two functional challenges arise from this method: first, the concentration of lithium is low due to the presence of other ions, and second, the purification method is difficult due to strong interference from magnesium ions.^[22]

In Alberta, much of the proposed lithium development involves using existing oil and gas infrastructure with two main processes appearing to be at the forefront. First, some proponents are seeking to separate lithium from wastewater produced during conventional oil and gas production. The second method involves standalone extraction and production facilities for separating lithium from brines produced from depleted oil reservoirs, followed by re-injecting the lithium-free brine back into the subsurface reservoirs.^[23] There are currently four known lithium production projects in Alberta, three of which are proposed by E3 Metals Inc. and are anticipated to produce approximately seven million tonnes of lithium carbonate equivalent.^[24]

Saskatchewan, Manitoba and Ontario also have several early stage lithium production projects,^[25] and Quebec has a number of lithium and graphite projects, many of which are in more advanced stages. Several of these Quebec projects are open pit mines, which are in the process of undergoing environmental assessments by the Impact Assessment Agency, or have recently received approval. Of these, there are six lithium projects and 10 graphite projects.^[26]

Though graphite reserves are traditionally located in Ontario and Quebec, there is a producing graphite quarry and plant located in British Columbia, which has been in operation since 2001.^[27]

Conclusion

The clean energy transition has contributed to a dramatic increase in the demand for lithium and graphite, and demand is projected to keep growing for many years to come. To meet this surging demand, production capacity will need to grow far beyond the capacity of the traditional sources of supply. To their credit, policy makers across Canada at both the federal and provincial levels appear to have realized that this presents a real opportunity for our country, and are taking steps to develop policies and regulatory frameworks to support the development of the lithium and graphite industries. As Canada is home to large reserves of critical minerals, including approximately four percent of the world’s known lithium deposits,^[28] Canada is well-placed to be a meaningful supplier of these critical mineral resources.