Critical Metals: The case for carbon mineralization

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.

Paul Needham: So I think the mining industry has a unique opportunity now to reconsider its mining by-products not as waste, but as a resource. I don’t know, Tom. Maybe mines of the future will be mining the ground for critical metals and minerals that we need for the energy transition, and mining the air for carbon dioxide.

Tom Heintzman: We’ve been exploring various aspects of carbon over a number of episodes. Now, today I’d like to explore a different type of removal carbon mineralization. We’ll explore the technologies transforming CO2 from the air into solid carbonate minerals, the potential marketplace benefits for mining companies producing carbon negative minerals, and the importance of long term off takes to scale the market for carbon removals. I’m super excited to welcome my guest, Paul Needham, Chief Executive Officer at Arca. Paul has over 20 years of experience as a senior advisor, board member, technology CEO and serial entrepreneur. Prior to joining Arca in 2022, Paul co-founded and led Asia’s largest rural rooftop solar leasing company called Simpa Networks. He also co-chairs the D-Wrek Initiative, a non-profit, multi-stakeholder, industry led initiative focused on creating a global market for distributed renewable energy. And I’ve had the privilege of working with Paul predominantly on renewable energy for several decades now. Good afternoon, Paul, and welcome to the show.

Paul Needham: Well, good afternoon, Tom. Thank you very much for having me here today.

Tom Heintzman: Paul, can you start by providing some context on what carbon mineralization is and how it will help accelerate Gigatonne scale carbon removal?

Paul Needham: Yes, absolutely. Geologists will happily tell you that 99% of all the carbon on Earth is actually contained underground, primarily in rocks and sediments. So the Earth naturally geologically stores about 1.9 billion tons of carbon. So less than 1% of the planet’s carbon is above the ground in our oceans and our atmosphere or biosphere. And there’s also this natural flux that happens at two directional movement of carbon from the geological system to the biological system, from that long term system to the short term system. So volcanoes, of course, release vast quantities of stored geologic carbon up into the atmosphere. There’s also certain kinds of rocks that naturally capture carbon dioxide through a process called carbon mineralisation, which is the natural geochemical process by which carbon dioxide from the air chemically reacts with certain minerals at the Earth’s surface to form new carbonate minerals. So these geochemical reactions are natural, but they’re very, very slow, so they occur over millions of years. Carbon mineralisation has actually been drawing down CO2 from the atmosphere and helping to cool the planet. I’m holding in my hand here a very special rock. This is serpentinite. It’s about a kilogram of serpentinite. This is an ultramafic rock, and that just means that it’s rich in magnesium. But under the right conditions, the magnesium ions on the surface of a rock like this will bind with carbon dioxide molecules from the air to form new solid magnesium carbonate minerals. So this rock builds more rock very, very slowly, naturally. And at Arca we work with rocks like this. Give them some superpowers so they can capture and store carbon dioxide millions of times faster than they would have naturally.

Tom Heintzman: So, Paul, I’ve had the privilege of having an inside view of your workshop, your laboratory. I’m not sure exactly what you call it. Yeah. So I’ve been able to see how you assist operators and mining developers in permanently storing CO2 in mine tailings. But can you describe for our audience how it works and what technology you use and what you’re learning from the deployment of that technology with your mining partners?

Paul Needham: So our mission at Arca is to restore the atmosphere by capturing gigatons or billions of tons of excess carbon dioxide from the air, transforming it into rock where it’s safely stored forever. But to capture gigatons or billions of tons of carbon dioxide, we would need billions of tons of this ultramafic rock. And there’s very few industries in the world that move or process billions of tons of anything. But mining is one of those industries. So we partner with producers of critical metals like nickel to access the mine waste. And then we target specific minerals found in that mine waste, transform those minerals to make them very reactive to carbon dioxide. Nickel mining, for example, a good nickel mine these days might be 1% nickel. So if you think about that, 99% of what they mine and blast and crush and process is not nickel and all that extra material is the mine waste or the mine tailings that’s left over. These are the By-Products of mining. So our co-founder, Professor Greg Dippel, he’s a professor of geological sciences at the University of British Columbia. He discovered that this finely ground ultramafic mine waste is already accidentally capturing carbon dioxide from the air. And he developed new technologies, new ways of actually seeing that in real time. So one of the simplest things you can do to further accelerate that is just to churn up or manipulate the surface of these mine tailings, increasing the surface area. And that alone can increase the rate of CO2. Capture and mineralisation quite significantly, but you can get smarter than that. So we’ve developed this ability to actually see carbon dioxide moving from the air into the ground mine tailings in real time. So now we can optimise that process of churning. So we call it smart churning. And that depends on the real time monitoring. But also these autonomous amphibious rovers that I think you saw when you were here. These are large. They look like dune buggies with these wild wheels that make the vehicle amphibious, but also churn up the material as it moves across. And we’ve also developed some very novel technology that targets specific minerals found in the mine waste. We’re using high intensity bursts of microwave energy that breaks apart the minerals at the molecular level, disrupting the mineral lattice structure, liberating the magnesium. And that makes the material far more reactive to CO2. Capturing more, capturing it faster.

Tom Heintzman: Can you explain how you see the CO2 being absorbed? Because obviously it’s not transparent to the visible eye, right?

Paul Needham: Well, yeah, you’re right, it’s invisible and it’s 0.04% of the atmosphere. Of course, it used to be 0.028% of the atmosphere before the Industrial Revolution, but it’s still very small trace amounts and very difficult to detect. We use various instruments eddy covariance towers, dynamic closed chambers. I’ll give you an example, these dynamic closed chambers are instruments where you take samples, you define a sampling area. You set out the instrument over top of the mine tailings, and you create a pocket of air, a closed chamber of air, let’s say three litres of air over the mine tailings, and then you sample that air continuously over a period of, say, five minutes, and you measure the concentration of CO2 in that closed chamber of air. And in five minutes, we can get the CO2 level in that pocket of air from 420 parts per million back down to 280 parts per million just in five minutes. It’s really quite incredible how quickly the carbon dioxide is being captured and chemically reacting and mineralizing.

Tom Heintzman: That’s amazing. What’s the economic case for carbon negative metals? How do you see this helping metal manufacturers and how do you see it influencing carbon markets?

Paul Needham: Yes. Well, for mining companies that are producing the critical metals that we all need for the energy transition, there’s a pressure now to ramp up production while also decarbonising and reducing their overall emissions. So there’s a tension there. The International Energy Agency estimates that the annual production of lithium, for example, will need to increase 13 to 42 times by 2040. An annual nickel production needs to increase 6 to 19 times by 2040 over like a baseline of 2020. So that’s really the clean energy paradox. We need to increase production of these critical metals while also decarbonizing. But there’s also upside even in the near term manufacturers of electric vehicles and the EV batteries are actually signing long term supply agreements with nickel producers. So they’re going directly to the mining companies to sign these long term supply agreements. In some cases, these agreements come with requirements to reduce the carbon intensity of the production. These buyers are looking for low carbon or zero carbon nickel for their electric vehicles, which makes sense when you think about, you know, who’s buying the electric vehicles and the value proposition there. So we also hear from nickel producers that there’s an opportunity, perhaps to charge a premium for certified low carbon nickel. So we’re seeing some of our partners have the opportunity to produce carbon negative nickel in the not so distant future. Now they need to take other steps. They need to switch to renewable electricity at the mine site. BHP has just launched a very large solar energy plant right beside their mine site. They need to switch to electric haul fleets and electric equipment, so there’s other steps of decarbonization, but there’s an opportunity for these companies to de commoditize what has always been a commodity market, by selling a higher value, low carbon or even carbon negative nickel into the market.

Tom Heintzman: Yeah, I love this story on so many dimensions, taking what we think of as fungible products and actually creating a higher value green product. I love taking one of the oldest industries known to mankind and the big technological spin on it, and I love the addressing of what perceives to be a fundamental tension between producing more minerals on one hand and decarbonizing on the other. It checks so many of these boxes. I understand you just signed a commercial collaboration agreement with a major Australian mining company. Can you tell us about the opportunity and why this is a significant milestone for Arca?

Paul Needham: Yes, that agreement was signed recently right at the end of November. This is a really exciting opportunity. BHP is one of the world’s largest producers of nickel, and under this agreement, we will be deploying our accelerated carbon mineralization technologies at their Mount Keith nickel mine, which is in Western Australia. This is the world’s first accelerated carbon mineralization project at an active nickel mine. We also received some financial and strategic support for this project from the BCCIC, which is the Centre for Innovation and Clean Energy. It’s a Vancouver based non-profit organization funded by the BC government and the Canadian federal government, so this funding has helped us build the capacity to move quickly and partner with one of the largest companies on the planet for this major project, this one mine, this Mount Keith nickel mine has the potential to capture and permanently store tens of millions of tonnes of carbon dioxide. They’ve been mining nickel there for 25 years, and there’s another 25 years ahead. It’s a very productive mine. And they’re producing nickel for the EV industry in particular. The mining industry has a unique opportunity now to reconsider its mining By-Products, not as waste, but as a resource. I don’t know, Tom. Maybe mine’s of the future will be mining the ground for critical metals and minerals that we need for the energy transition and mining the air for carbon dioxide. So in both respects, really helping to restore the atmosphere and repair.

Tom Heintzman: Fascinating. I’d like to now turn to the market mechanism that’s propelling carbon removal technologies. Advanced market commitments are when purchasers, large purchasers, make long firm commitments to generators of carbon removals. In order to provide them with the economic security, they need to invest in their projects. I understand that you have a partnership with Shopify and Frontier, and I’m wondering whether you can explain for our listeners what the nature of that partnership is and what your expectation is for long term offtakes and how they help scale the carbon removal market.

Paul Needham: Yes, you’re right, we have contracts in place already with Shopify and with frontier to remove hundreds of tons of CO2 from the atmosphere permanently. And we’re starting to see more and more companies around the world ready to take responsibility for their emissions. And I guess that’s how it should be. Of course, frontier is a collection of climate leaders companies such as Shopify, Stripe, Amazon, Meta, Alphabet, JPMorgan, McKinsey & Company, a number of others. In that consortium, they’ve committed to purchase $1 billion of carbon removal services from the market to kick start and stimulate the market with these long term offtake agreements. So they’re looking for high quality, durable carbon removal solutions. So we’re grateful for having had this opportunity to start the relationship with Frontier and Shopify. They’re paying companies like us to remove carbon dioxide from the air and store it away permanently, and they’re signing these long term offtake agreements. Early December, McKinsey released a report titled Carbon Removals How to Scale a New Gigaton Industry, and they concluded that the carbon removal industry could be an $80 billion industry by 2030 and $1.2 trillion industry by 2050. I think Microsoft is a really interesting case in point. It’s also a major player in this carbon removal space. They have a commitment to be carbon negative by 2030 and to remove from the atmosphere all of the carbon dioxide pollution that they’ve ever emitted, directly or indirectly, since the company was founded April 4th, 1975. So that really feels like leadership. But in some ways it also feels like common sense. Of course, you should take responsibility for any mess that you make. Why wouldn’t you?

Tom Heintzman: Paul, one comment you made on one of my visits to your operations that stuck with me was the concept that perhaps as a replacement for all of the complicated carbon pricing and regulations and low carbon fuel standards, and it goes on and on that one day, maybe there’ll be a simple rule that if you emit a ton of carbon, you’ve got to remove a ton of carbon. And just the simplicity in that stuck with me. I would like to talk about policy. The Government of Canada announced in its 2023 fall economic statement that the Canada Growth Fund will allocate up to 7 billion of its current 15 billion in capital to issue all forms of contracts for differences and offtake agreements. The government policies and incentives go far enough to establish a robust carbon credit market in Canada, and also as a carbon removal technology company. What more would you like to see announced by policymakers to support your industry?

Paul Needham: Well, that’s a really exciting tool in the toolkit there, so I’m looking forward to seeing how that plays out and how that’s going to be implemented. Canada really has an opportunity to lead the world in this emerging carbon removal industry. Canada is very well endowed with the natural physical resources. We have the minerals, we have the forests, we have the soils, the oceans, clean electricity. We have opportunities to deploy more of that. We have a very enabling and supporting policy environment with incentives for R&D that are already in place, highly educated population, bringing in new immigrants as well, highly educated and of course our national commitments and climate goals. All of these are really the foundation for a successful player in this industry. But I think there are a few things Canada should keep in mind to better support developments and to accelerate the deployment of carbon dioxide removal solutions. So first, policies and funding programs need to be technology agnostic. So should focus on the outcomes, focus on what really matters. It’s got to be durable carbon removal. It’s got to be measurable. And you’ve got to think about safety and unintended consequences. So those are the factors that should really matter. But otherwise technology agnostic technology neutral. Secondly, governments are provincial. Territorial national governments should focus on stimulating market demand. So this could be done through carbon pricing that reflects true social cost of carbon dioxide pollution tax credits, offtake agreements, direct procurement or these contracts of differences that you mentioned. These are all great tools. And third, Canada should continue to incentivise R&D investment into CDR. This can be done with R&D grants, loan guarantees or investments into organizations like the BCCIC that I mentioned earlier. Again, Tom, I think Canada has a right to play and a right to win in this emerging trillion dollar carbon removal industry.

Tom Heintzman: Paul, it’s always great to talk to you. I learned something every time we chat. Thanks for taking time to join the show today, and thanks to our listeners for tuning in.

Paul Needham: Thank you, Tom, thanks very much.

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.

Disclaimer: The materials disclosed on this podcast are for informational purposes only and subject to our Code of Conduct as well as IIROC rules. The information and data contained herein has been obtained or derived from sources believed to be reliable, without independent verification by CIBC Capital Markets and, to the extent that such information and data is based on sources outside CIBC Capital Markets, we do not represent or warrant that any such information or data is accurate, adequate or complete. Notwithstanding anything to the contrary herein, CIBC World Markets Inc. (and/or any affiliate thereof) shall not assume any responsibility or liability of any nature in connection with any of the contents of this communication. This communication is tailored for a particular audience and accordingly, this message is intended for such specific audience only. Any dissemination, re-distribution or other use of this message or the market commentary contained herein by any recipient is unauthorized. This communication should not be construed as a research report. The services, securities and investments discussed in this report may not be available to, nor suitable for, all investors. Nothing in this communication constitutes a recommendation, offer or solicitation to buy or sell any specific investments discussed herein. Speakers on this podcast do not have any actual, implied or apparent authority to act on behalf of any issuer mentioned in this podcast. The commentary and opinions expressed herein are solely those of the individual speaker(s), except where the author expressly states them to be the opinions of CIBC World Markets Inc. The speaker(s) may provide short-term trading views or ideas on issuers, securities, commodities, currencies or other financial instruments but investors should not expect continuing analysis, views or discussion relating to those instruments discussed herein. Any information provided herein is not intended to represent an adequate basis for investors to make an informed investment decision and is subject to change without notice. CIBC Capital Markets is a trademark brand name under which Canadian Imperial Bank of Commerce (“CIBC”), its subsidiaries and affiliates provide products and services to our customers around the world. For more information about these legal entities, as well as the products and services offered by CIBC Capital Markets, please visit www.cibccm.com.