Thursday, December 01, 2022

As for the battery: VW wants to invest in Canadian mines

Status: 08/23/2022 2:09 PM

Volkswagen wants to invest in mines in Canada. In this way, the group secures access to critical raw materials for battery production. According to VW, the country has practically all the raw materials needed for this.

The high demand for electromobility is also increasing the need for raw materials required for battery production. Volkswagen, the largest German automotive conglomerate, is now looking to invest in mines in Canada to secure access to critical raw materials. “We don’t open our own mines, but we want to invest in Canadian mines and mine operators,” said Thomas Schmall, a board member of the group responsible for technology and batteries.

The main focus is on strategically important long-term supply agreements with which the carmaker seeks to secure volume and prices – for example as part of a joint venture with Volkswagen battery subsidiary Powerco. A letter of intent has to be signed with the Government of Canada for this purpose.

Nickel, Copper and Cobalt in Canada

“Canada has practically all the raw materials we need for battery production,” Schmall said. “The highest grade nickel, as well as copper, contain large amounts of cobalt. And there’s a lot of mining activity.” 20 to 30 percent of a mine’s annual output could then be bought by Powerco at a fixed price, and the mine operator could sell the rest to the world market.

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Chancellor Olaf Scholz (SPD) had already met with Prime Minister Justin Trudeau and agreed on closer cooperation in the energy sector. According to VW, Scholz is also part of the delegation CEO Herbert Diess. According to its own statements, the carmaker is currently working on reliable and sustainable supply chains as part of expanding its own battery business. This also applies to the promising North American market.

Raw Material Cost Driver for Battery Cells

Schmall said that 80 percent of the cost of battery cells is the cost of raw materials. “The big carmakers used to think that this sale was enough to buy factories. Today we know we have to go much deeper down the value chain.” As with mine operators, VW is looking to work with a maximum handful of interface partners. The Fraunhofer Institute for Systems and Innovation Research (ISI) wrote in a study that due to an increasing proportion of material costs in battery cells, access to raw materials and components will represent a major competitive component in the future.

Overall, Volkswagen battery subsidiary Powerco, along with partners, intends to invest double-digit billion in the development of the global battery value chain. In Canada it could be a single digit billion amount, it said. Accordingly, Volkswagen will be the first Western automotive group to take a direct stake in large-scale mine operators.

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Other Corporation Secure Access

According to Company Circles, Volkswagen’s rival Mercedes-Benz is also looking to sign a Declaration of Intent on the raw materials during Scholz’s visit to Canada.

Other carmakers reserve access to critical raw materials through contracts. Last year, for example, US electric car maker Tesla signed a four-year contract with Australian company Syrah Resources, which operates a graphite mine in Mozambique. In late July, American automotive conglomerate Ford announced that it had signed letters of intent with several mining companies for the raw materials nickel and lithium. These include Australian mining giant BHP.

Most of the raw material needed for battery production is still mined overseas. Most of the world’s cobalt reserves are in the Democratic Republic of the Congo; Australia and Indonesia are behind. Lithium mining is concentrated in countries such as Australia, Chile, Argentina and China. When it comes to graphite, China plays an important role. Indonesia, the Philippines and Russia were among the most important countries for nickel mine production last year.

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