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Breaking through the battery bottleneck

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Between the COP26 conference in Glasgow, President Biden's infrastructure bill and ongoing calls for more EVs, Jon Evans, Lithium Americas CEO and President, explains how mining lithium more locally can help ease EV bottlenecks and increase production.

Video Transcript

- We've got about 45 minutes to go until the closing bell. You're still looking at gains across the board. Another record-setting day on Wall Street. Dow, S&P, and NASDAQ all moving to the upside. You can see the Dow up just around 100 points, S&P up just around a tenth of a percent, the NASDAQ up about a quarter of a percent. In terms of the leadership that we're seeing within the Dow today, Caterpillar, UnitedHealth, Visa, Intel, and Merck are the top five performers.

Another group of stocks getting a boost today are the EV stocks. Now this move to the upside is coming on some of the excitement after Congress passed a trillion dollar infrastructure package late Friday night. And now we know that this infrastructure package includes billions of dollars of spending for the EV industry. So let's talk about a key component of EV adoption and that is lithium. It's necessary for the use of EV, or it's necessary for the production, I should say, of EV batteries.

So let's talk about how to boost production of this, the importance of it. And for that, we want to bring in Jon Evans. He's Lithium America's CEO and President. And Jon, it's good to see you again. We know that this is a very aggressive EV uptake that the Biden administration has laid out. We've heard it from a number of, not only here in the US, but a number of countries around the world. Just give us a sense of what the supply and demand picture looks like for lithium right now.

JON EVANS: Things are really short in the industry, overall. You can see that with stock pricing which has come up and actually now contract pricing has come up behind it. Over the last year, pricing has gone from around $8,000 a ton to today it sits well over $20,000 a ton. And the market's really tight. And that's been followed on by all these announcements by OEMs to build battery capacity in the US and Europe and other places. So the industry is really setting itself up for structural shortness over the next couple of years.

- Jon, your shares are up pretty strong today, up over 8%. Help us understand where we are in the production of lithium. The majority of this is coming out of South America, but there are efforts-- I mean, how many mines are now up and running in the United States? At one point, I guess it was just one mine out of Nevada. But is that increasing?

JON EVANS: There's only one right now, and that mine's been in operation since the early 60s. So there's a couple of projects, ours being the most advanced and biggest. But there is a few others as well, they're all going to be needed. As our country really goes from today to 2030, it's going to be a 10x increase in the amount of lithium that's needed just to support the transportation industry. So it's a critical link in the supply chain and certainly in the US. It's one that we need to react on and ensure that we have the ingredients here to participate in the market.

- Jon, give us a sense just of the infrastructure bill that was passed. Billions of dollars of that has been allocated or will be allocated to the EV industry. From someone that's within the industry, obviously playing a very important part in the adoption of EVs going forward, is this enough funding in your view?

JON EVANS: I think it's great, I really applaud the administration and both parties for supporting this. There's a lot of key elements in it that support not only processing and manufacturing but also charging stations. Of course, there's tax benefits for purchasing electric vehicles that sort of hits the entire waterfront. There's a lot of excitement around it.

Is it enough? Probably not. But I think what it does do is it helps bring private capital off the sidelines and that there's a real commitment now by our government behind this. We're committed to it, and with that, I think some investors won't be so spooked. And really, what you need is private capital to come in and finish the equation, which I think that's going to happen now. I think you're starting to see that with retail and institutional shareholders buying into companies like our own and others' in the supply chain and I think you'll see that closely followed by hard investments in some of these segments of the supply chain by private capital.

- Can you share with us the estimates, if they exist, for the amount of lithium that remains untapped. And is there a peak lithium the way we talk about peak oil that can be easily extracted going forward as demand is just going to keep increasing.

JON EVANS: Well, lithium is not rare. So there's quite a bit in the US and Canada and that's been untapped obviously with only one mine that's operating. We're not going to run out of lithium. I don't think we're at peak lithium at all, I think it's going to be hard when to call that, but it's certainly going to be the decade or next 20 years we'll be lithium. I think the interesting thing with lithium though, is that you can start to close the supply chain, unlike oil and gas, which aren't recyclable.

There's companies like Redwood and others that are putting recycling. And now, the batteries, once we have enough batteries, which over the next 10 years will start building them out and they start coming due to be recycled, you can close the loop and actually a portion of the lithium demand and they'll continue to grow over the years can be satisfied with recycling. So I think that's often lost in discussions, that we're going to keep digging or building mines and building processing facilities. I think that will treble 20 years from now as recycling becomes more meaningful. 15% maybe 20% of the lithium demand can be satisfied with recycling.

- Jon, we've seen a number of the large automakers place an emphasis on this in real focus on this. But what are you targeting? What is Lithium America targeting just in terms of production capacity? And how quickly do you think or are you expecting to be able to scale that production?

JON EVANS: Well, in South America, we have an asset coming online next year and the capacity of that's about 40,000 tons, which sounds like a lot on an annualized basis, but it's less than 10% of the annual demand as we sit today. And by 2025, it's even less than that, it'll be about 4%. In the US, the project at Thacker Pass, the initial capacity is going to be about 40,000 tons for the US market with the ability to raise up to 80,000 tons.

Again, sounds like big numbers, but the US by 2030 will be consuming over 350,000 tons of lithium, just in our own domestic market. So there's going to be more projects that are needed and they'll be different technologies for different resources. But it's certainly something that the industry needs to respond now because it takes a long time to put these in the service. It can take decades.