Change to federal tax credit a big boost to Alberta lithium extraction

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A small adjustment within the federal authorities’s flow-through shares and demanding mineral exploration tax credit score may yield large returns for native firms pioneering the extraction of lithium from brine.

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The change was a part of the federal price range offered on March 28 and expands on an already current tax credit score. If accepted, the tax credit score – presently focused at conventional onerous rock mining as undertaken in jap Canada – would come with firms attempting to extract lithium from different sources reminiscent of oil area brine.

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“That is going to have a big effect on the out there capital that’s going to come back into this business right here in Western Canada,” says Chris Doornbos, founding father of E3 Lithium. “If capital is on the market, the business is more likely to develop and change into a actuality.”

The flow-through funding permits firms to provide their shareholders a future tax credit score, which was elevated to 30 p.c final yr. E3 Lithium is definitely previous the stage the place this flow-through tax credit score will have an effect on the agency individually, as it’s focused for exploration.

With its Clearwater venture, utilizing the Leduc aquifer, the agency drilled its take a look at wells close to Olds final summer time and continues on the trail to manufacturing, which incorporates conducting a pilot and pre-feasibility research this yr. It will result in making lithium hydroxide – the product wanted for batteries – in industrial gear they intend to construct in Alberta. If all goes nicely, E3 will probably be within the strategy of design and development in 2024 with a focused opening in 2026.

Tax credit score is predicted to assist different firms

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For Doornbos it’s a case of a excessive tide that lifts all boats.

There are solely a choose few firms in Alberta engaged on lithium extraction from brine and a big pent-up demand for the product.

Grounded Lithium, headquartered in Calgary, has secured land in southwestern Saskatchewan and close to Drumheller. Its operations differ from these of E3 as the corporate doesn’t function from the aquifer of earlier oil and gasoline fields. As an alternative, it targets lithium-rich brines in non-oil areas, so it does not must separate oil throughout processing. Nonetheless, this implies there may be extra exploration work for the corporate.

Grounded Lithium drilled its first take a look at nicely final summer time at a price of $1.5 million, however as a result of it occurred earlier than the change, it is not going to be lined underneath the flow-through tax credit score. Nonetheless, future exams will probably be.

It is about lowering the danger for firms to satisfy huge demand in Canada and world wide.

“There may be actually quite a lot of momentum behind the vitality transition. We see plenty of challenges in all of this to get there, together with your complete provide chain,” stated Gregg Smith, president and CEO of Grounded Lithium. “The chain when it comes to manufacturing the anodes to cathodes, the batteries and EVs are nicely in place. Who they forgot to speak to is the mining business.”

Demand for lithium is predicted to develop

In accordance with the Lithium Trade Affiliation, the demand for lithium will develop from 292 thousand metric tons in 2020 to 2.5 million metric tons by 2030, largely because of the elevated use of lithium-based batteries in electronics and automobiles.

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The federal authorities has laws phasing out conventional combustion engines in new automobiles by 2030 in an effort to get to web zero. To satisfy this demand, officers have prioritized the acquisition and extraction of essential minerals domestically, in addition to the event of producing vegetation in Canada for batteries and automobiles.

Whereas all types of lithium mining will probably be wanted in Canada as an answer to this, brine mining has some benefits over the standard onerous rock mines in Ontario and Quebec that fell underneath the primary iteration of the tax credit score. The tactic utilized by E3 Lithium and Grounded Lithium has extra price predictability and takes a couple of third of the vitality to supply, along with having no open pits that scar the land.

“I am not attempting to detract from mining — we see it as a essential part to the entire battery vitality transition,” Smith stated. “Nevertheless it’s simpler for us to have a smaller footprint.”

‘It is as large as oil is for Alberta’

Doornbos additionally pointed to the financial impression as a complete for lithium mining. Specifically, there’s a direct transition for oilfield employees to come back from a rig or a pipeline crew, because the infrastructure and the gear are very related.

“The abilities are one hundred pc transferable,” Doornbos stated.

He stated Alberta has the lithium reserves to be one of many greatest gamers on the planet and as a rustic to change into a serious drive on the world stage, not simply in uncooked supplies, however as a producer.

“We may very well be 10 p.c of the world’s lithium manufacturing from Alberta (by 2040),” he stated. “We’re it from a relative scale, it is as large as oil is to Alberta, globally. We will probably be one of many high lithium reserves on the planet.”

jaldrich@postmedia.com

Twitter: @JoshAldrich03