LG Energy Solution has secured 100% rights to battery-grade nickel and cobalt materials from Australian Mines Limited amid growing concerns about future supplies of raw materials.

LG Energy Solution has entered into a binding long-form offtake agreement with Australian Mines Ltd. for nickel and cobalt, which will be supplied in the form of mixed hydroxide precipitate (MPH) from the Sconi Project in North Queensland, currently under development. Valued at US$1.5 billion, the Sconi Project is a nickel and cobalt mine, capable of creating quality battery materials and boost battery supply chain.

Australian Mines aims to invest $1 billion to build a commercial battery metals production plant on the Sconi site. The proposed plant is expected to process 2 million tonnes of ore per year into battery-grade Cobalt Sulfate and Nickel Sulfate, with Scandium recovery and production of high purity Scandium Oxide.

The Mineral Resource Estimate and corresponding ore Reserve Estimate for Sconi indicates the proposed project has a lifespan in excess of 30 years. The plans for Sconi are to develop the site into a low-cost operation by mining and processing of ore into advanced battery precursor chemicals on one single site.

Over the life of the proposed Sconi Project it is expected to produce 1.4 million tonnes of Nickel Sulfate and 0.2 million tonnes of Cobalt Sulfate generating $13.3 billion in total revenue, $5.0 billion of free cash flow with a Net Present Value of $1.47 billion.

Under the binding long form offtake agreement between LG Energy Solution and Australian Mines Ltd, the battery manufacturer will have access to 71,000 tonnes of nickel and 7,000 tonnes of cobalt for 6 years starting from the end of 2024.

The six-year supply deal would translate to producing batteries that can power 1.3 million high-performance electric vehicles, with driving range surpassing 500 kilometers on a single charge.

Cooperation with Australian Mines Ltd. will also help LG Energy Solution gain an upper hand in securing stable supply of key ingredients for EV batteries, as a race to procure raw materials for EV batteries became fierce amid growing global demand of EVs.

LG Energy Solution also opts to raise its competitiveness in ESG management in the process of acquiring raw materials.

During the mining procedure, Australian Mines Ltd. will be using the dry stacking method—a sustainable method used to store filtered tailings. Although more costly compared to the conventional method due to construction and maintenance expenses, the dry stacking method is deemed an environmentally friendly way to extract raw materials.

The dry stacking method eliminates the use of storage ponds and dams associated with conventional tailings facilities. This method avoids the possibility of dam failure and long-term storage issues.

Conventionally, the handling of tailings includes dumping them directly into streams, rivers and lakes or using mining surfaces or underground quarries and pits for disposal, leading to potential leakage of toxic substances.

Australian Mines Ltd. became a member of the Initiative for Responsible Mining Assurance, the IRMA, in 2020 indicating that the mining firm supports and participates in a third-party verification and certification against a comprehensive best-practice standard that addresses environmental and social issues related to industrial-scale mines.

LG Energy Solution also has invested KRW 12 billion (US$10 million) in Queensland Pacific Metals (QPM) in June for 7,000 tonnes of nickel and 700 tonnes of cobalt per year for a decade starting late 2023.

Previously LGES has also announced its investment of KRW 57.5 billion (US$49.5 million) in the European subsidiary of Solus Advanced Materials in December for copper foil for 5 years from 2021.