Critical Metals: Enabling a secure and sustainable battery supply chain

Tom Heintzman: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape. I’m your host, Tom Heintzman. Please join me as we explore today’s most pressing issues with special guests that will give you some new perspectives and help you make sense of what really matters.

Dominique Barker: We need more electric vehicles because gasoline goes into the auto market. So we need more EVs and therefore we need more batteries and therefore we need more copper, nickel and of course lithium. And in order to power that, we’ll need that electricity from nuclear.

Tom Heintzman: In two recent episodes, we discussed two examples of how mining can play a role in the transition to a low carbon economy. In those cases, by acting as a carbon sink. On today’s episode, we explore a different side of mining, exploring the importance of critical minerals and metals in the transition to a low carbon economy. In particular, we’ll examine the latest developments in the market demand for electric vehicles and how this is impacting lithium’s growth projections and where Canada’s ambitions stand in building a secure and sustainable lithium supply chain. We have a very special guest joining us today that I know will delight our longtime listeners. I’d like to welcome Dominique Barker, Chief Financial Officer and Head of Sustainability at Lithium Royalty Corp. Prior to joining LRC, Dominique was the Head of Sustainability Advisory at CIBC Capital Markets and was the original host for this podcast series, The Sustainability Agenda. We miss your voice and your presence on the show. Prior to this role, Dominique spent 10 years as a portfolio manager at CIBC Asset Management. Dominique, it’s a great pleasure to welcome you back to the show.

Dominique Barker: Tom, thank you so much and thank you to my friends at CIBC for inviting me back to this podcast as a guest. I’m really excited.

Tom Heintzman: Great, well let’s dive right into it. It’s been about a year since you joined Lithium Royalty Corp. What new opportunities have been keeping you busy? What have you been focused on?

Dominique Barker: Well, yeah, I’ve had a major shift in career. So as CFO of a newly public company, so we went public in March of 2023 with an IPO of 150 million. And as part of that, really what’s been keeping me busy is implementing and I’ll call it hardening of all the required infrastructure that’s required for a public company. So that’s been really new for me and really exciting. We’ve been putting in place robust practices. We have big ambitions for growth. And so setting up all that infrastructure is really important for that growth. And I’d say also education. We actually in end of February,we helped the TMX put together a lithium day. And so education is a really big part of what I’m trying to do going forward. And so I’m really delighted to be on today’s podcast.

Tom Heintzman: Great, well on the topic of education, how about you educate us? There’s a narrative out there that EV demand growth is slowing down. And I’m curious whether that’s actually the case and how does that affect lithium demand?

Dominique Barker: What’s interesting because demand growth is no longer accelerating, but it’s still growing. So I think, there’s a difference in the vocabulary, because EV demand, yeah, it’s slowed down, but that’s a normal occurrence for any disruptive technology. Even iPhones when they came out, that growth wasn’t in a straight line. Global passenger EV sales should still see growth over 22% in 2024. And that brings it to 16.7 million units. And established automakers like Ford, GM, they’ve really struggled with model launchesand demand due to limited range and quality concerns. But the difference is that the pure play EV manufacturers, they’ve continued to expand. And I think that’s the disconnect. So folks like, well, obviously Tesla, but Kia, Hyundai, BMW, BYD, they’ve all had a huge roster of new models at really attractive price points, and I’d also keep an eye out for the world’s biggest OEM Toyota. They announced a couple of months ago that they’ll be spending fourteen billion dollars in North Carolina and they’re finally committing to electrification in a big way. So that’s a big marker for us. That’s the largest investment they’ve ever made outside of Japan. And even battery electric trucks, that’s been a small portion of the fleet currently, but that’s set to change. We also saw an announcement from the biggest truck manufacturers, Cummins and Paccar. They’ve set to spend two billion dollars to build the nation’s largest plant dedicated to batteries for commercial vehicles. And that’s a bet that demand will grow as regulations drive reduction in emissions. So we’ve seen spot lithium prices come down. And it has been a rough go. And as we speak, we are seeing a revival in pricing. So we’ll see by the time this is published. But there’s no question that demand is continuing to grow and investments continue to be made. The bottom line, we think we’re going to see three times more lithium by 2030 than is produced today. And we are at the center of it.

Tom Heintzman: Okay, well that’s inspiring that growth and the projection of three times lithium demand. So maybe we can turn to the supply side for lithium and perhaps you could touch on the Canadian momentum or lack of in the space. How is Canada doing in the race to provide the world with the lithium it needs for this energy transition?

Dominique Barker: Let me just start globally on the supply side. I think one of the things that happened in 2023 is that supply was higher than expected. And that’s because supply came from places like Zimbabwe and also something called domestic lepidolite in China. And lepidolite is ultra low concentration. And so it creates a lot of waste. So that was higher than expected in 2023. But like we’ve seen in many other battery materials like nickel, there is an incentive price required to bring on new capacity or it just won’t get built. So with demand still robust, as I touched on, we are certain that prices are going to need to rise to build the supply that we need. And so when we think about Canada, I mean, one thing that we’ve dubbed here at Lithium Royalty Corp is something called the ABCs of hard rock. We’re really interested in Australia, Brazil and Canada. And so Hard Rock, the other word for that would be called spodumene. And so we’re really interested in those spodumene assets in those countries. And in Canada in particular, we have 17 of our 34 royalties in Canada. And 10 of those are based in Quebec, where we’re incredibly optimistic long-term. We’ve seen a lot of developments in the province of Quebec, sponsored by the provincial government, but also the federal government, and also industry. So given today’s prices, the economics have been challenging as we speak, but we use a long-term price and that long-term price averages about 1400 dollars per ton of spodumene. And we think that the high cost tons will leave the market and eventually we’re going to see a robust domestic supply chain that will get built in Ontario and Quebec and that will spur development in mines.

Tom Heintzman: Okay, that’s encouraging. Maybe let’s turn to Lithium Royalty Corp’s role in that expansion of the Canadian market. Can you tell us about the company itself and where you see its growth opportunities?

Dominique Barker: Sure. And it’s an impressive story. The business started in 2018. And at that time, not surprisingly, the view was that electrification was a once in a hundred year investment thesis. And so our founders, Blair Levinsky, Mark Wellings, and Ernie Ortiz, they raised 120 million dollars privately in a GPLP format with Waratah Capital as the GP.And along the way, Altius Minerals, which is publicly traded, and Riverstone Partners, which is a well-regarded PE firm in New York, they were the main sponsors who shared that vision that lithium was the irreplaceable element in the decarbonization of transportation. And so the criteria for investment is pretty simple. It’s a simple formula, hard rock or spodumene, like I said, high grade, low cost and a real desire for low technical complexity in safe jurisdictions. And so those main criteria have really driven the work we’ve done today. We’ve consciously avoided some of the higher risk geographies. And up until IPO, they had signed 29 royalties. And then we listed on the TSX in March of last year, 2023. The stock has struggled for sure. There’s no question about that, along with the rest of the sector. And that’s because of the weak chemical prices. But I will say we took advantage of that. We made a number of acquisitions in 2023. We deployed 50 million US of capital into six new royalties. And three of the acquisitions that were made in 2023, are going to see first production this year in 2024. Those include operators Atlas out of Brazil, Zee Chin out of China and Ganfeng also out of China. And those are all really well capitalized and we’re excited to see them come online in 2024. And my colleagues and I have such great conviction on this whole thesis. I think it’s notable to point out to you that insiders have purchased seven and a half million dollars worth of stock in the company itself since IPO.

Tom Heintzman: It’s great to see the company’s conviction in the long-term story and its willingness to double down in times of low market prices to make more investments and to bet on the long-term story and also the conviction shared by insiders. So that’s very inspiring. As we wrap up, I’m curious, you attended COP28 and I’m wondering whether there was any high-level comments you wanted to share from that perhaps anything dealing with lithium and the growth of that market.

Dominique Barker: Yeah, I’d love to share it. Our CEO Ernie Ortiz and myself were there. We were obviously focused on lithium. We presented a paper alongside one of our operators, Winsome Resources, and the Minister of Energy and the Economy in Quebec, Minister Pierre Fitzgibbon. And you can check out, we wrote a white paper leading into COP28. And for listeners, you can Google Quebec lithium or World Climate Foundation. Or you can also find it on our company website. But just a few takeaways. I mean, the whole of COP was really centered on reducing the use of fossil fuels. And so, Tom, you would have seen the UNFCCC, one of the conclusions that came out of COP28 was their press release called it, the beginning of the end of fossil fuels, but an observation I would make is a lot of the content at COP28 did not talk about what we would replace fossil fuels with. And of course, we need critical minerals. And Tom, you opened up by talking about, this is the lead into this conversation, is replacing fossil fuels with what? With critical minerals. Climate events really need to be less focused on the reduction of fossil fuels and more focused on what will replace it. And I know. One of the outcomes from COP that came out was a really good outcome for nuclear energy. They said that we need to triple our nuclear energy. And so that’s true. We need a heck of a lot more electricity in this energy transition. But that’s on the supply side. On the demand side, we need to replace gasoline. And for listeners, when you look at a barrel of oil, about 45% of a barrel of oil goes towards gasoline. And so we need to displace that gasoline. And in order to do that, we need more electric vehicles because gasoline goes into the auto market. So we need more EVs and therefore we need more batteries and therefore we need more copper, nickel and of course lithium. And in order to power that, we’ll need that electricity from nuclear.

Tom Heintzman: Well, it’s been great chatting, Dominique. Thanks for taking the time. One more question before you head out the door. Curious whether you own an EV yourself yet.

Dominique Barker: I’m proud to say that, yes, I recently did buy an EV. I bought a Tesla Model 3. And I will say, actually, several of our employees at our company at this stage own an EV, as you would expect. Range and access to charging infrastructure was certainly part of the decision making. And that’s partly why I picked the Tesla Model. And we’ve really enjoyed it so far. EV prices have come down considerably. And so affordability is really achievable, especially when you consider the cost to refill versus gasoline. And for listeners out there, since we bought our EV, which was in December 2023, there’s been a number of new models coming out. And I mean. There’s now 630 EV models out there in the market. That’s compared to in 2014, there was only 49 models available. So there’s lots of choices. If you’re looking for a seven seat SUV, and I know a lot of folks are out there in North America, I’m not advocating for it, but if you want to replace your SUV, I would look at the Kia E9 or Volvo EX90. Those are potential category killers, and you’re going to see a lot more noise on both of those models. Tom, curious, do you own one? 

Tom Heintzman: Well, you’ve got me. I am in the midst of finalizing plans to tear up my backyard in order to run electricity out to what is now a carport and will become a garage so that we can actually put in chargers. So don’t have one yet, but one is on the come. Well, thank you, Dominique, for your expertise and your insights. Thank you for sharing this platform for so many years, and thanks to our listeners for tuning in.

Dominique Barker: Thank you so much CIBC and Tom for hosting me here.

Tom Heintzman: Please join us next time as we tackle some of sustainability’s biggest questions, providing you different perspectives to help you move forward. I’m your host, Tom Heintzman, and this is The Sustainability Agenda.

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