Episode 225: The Missing Midstream

Hi, it's Joe Lowry. Welcome to another episode of the Global Lithium Podcast. Today is episode 225 and it is a panel discussion from the Arkansas Lithium Innovation Summit. The participants were David Park, the CEO of Standard Lithium, Dan Blondall, the CEO of Nano1, Hugh McDonald, the Secretary of Commerce for the State of Arkansas, and Bogrith Vody from the Ford Motor Company. The Arkansas Lithium Innovation Summit was the final week of October. I have already released the episode with Governor Sanders and several others. By now, most people are aware that Arkansas and some of the border states are trying to develop what has been recognized as a significant Lithium resource in the smackover. But in addition to that, Arkansas has broader ambitions and that would be to go downstream from Lithium production into what's referred to as the midstream, what you are about to hear about, and more specifically, cathode is really the focus. And when we talk about cathode, the way the world is going with the booming best market and a transition of EV batteries to using more LFP, if North America is to have a robust Lithium ion battery supply chain, we have to participate in cathode in the midstream, and you're about to hear the panel discuss the topic. Welcome back to the 2025 Arkansas Lithium Innovation Summit. Up next on our stage is a panel discussion on the missing midstream, featuring our panelists. Begirif Voddy, Battery Raw Minerals Engineer and Geologist for Ford Motor Company, David Park, CEO of Standard Lithium, Dan Blondell, CEO of Nano1, Hugh McDonald, the Arkansas Secretary of Commerce, and your moderator, Joe Lowry, founder and president of Global Lithium. Ladies and gentlemen, your panel. People are right. These lights are bright, and you can't see anything. But we will move forward. Simon Moore stole my thunder a little earlier today. I was going to call Jesse up here, but I don't want him to have to come up here twice. But Jesse's done a yeoman-like job getting this event organized, and you can clap for him. So wherever you are, Mr. Edmondson, thank you, and thank you for giving me the podcast equipment at the 11th hour for the podcast I did a few minutes ago. And now to the issue at hand, the missing midstream. Everybody hears a lot about all the investment that the United States is going to do in batteries. And we're all here because of the lithium and the smackover, but you can't just take the smackover lithium chemicals and stuff them in a battery. They have to be converted into other materials, and that's the missing midstream. So, Dan, as the panelist most impacted by the fact that the midstream is missing, define midstream. The midstream obviously starts from the time you extract the raw materials from the ground all the way through until you stuff them the combined materials into the into the battery. And that includes refining, that includes purification, that includes the precursors, the cathode materials, all of that ends up eventually into a powder that gets layered into a battery. But I kind of wanted to find out, I thought about it, I knew I was going to get this question, but I wanted to kind of think about it really in strategic terms. And I think it's really important to understand this. We bind materials wherever there are, and we're blessed here in Arkansas with an incredible lithium asset in the smackover. And nickel and cobalt and iron and phosphorus and all the other materials that go into batteries are mined wherever they're mined around the world. And often they're refined or at least brought up to a first saleable material close by to that mine. And then those materials will get shipped a large percentage but not all of them will get shipped to China for further refining. And ultimately, all of it funnels through the cathode materials. And that is where the bottleneck is. And I wanted to find that kind of the midstream as the bottleneck. And that's because we look at cathode materials and precursor materials that go into batteries anywhere between 90 to 98% of those, those chemicals are finalized in China today. So wherever they're mined or wherever they're refined, they end up being funneled through the Chinese precursor and cathode processing materials. And that is the missing midstream. It's missing not in China, but it's missing here in North America and the rest of the world. And that's really key. I'm being able to bring that back into North America. It doesn't mean we don't know how to make it. We don't want to do it. It's about building that whole supply chain and the ecosystem that will actually then enable it to thrive. So hopefully that's a reasonable understanding of it. Once you made the cathode materials, of course, they go into cells and actually the large propensity of battery cells are made in China. And then those cells start to distribute around the world and they're made into battery packs for obviously electric vehicles and for also for the energy storage, you know, AI data centers and all the other applications. But you can imagine you've got the mining on one end, get the funnel in China, and then eventually it ends up back in cells and battery packs elsewhere in the world. And that's really that. That's the bottleneck. That is the that is the midstream that we have to solve. Well, I don't want to under sell the the Japanese and the Koreans both know how to do this, too. It's just that they've also allowed China to dominate. But nano one, your company has been out there for now more than a decade on this journey to try to establish production in North America. What's a nice Canadian boy like you doing in Arkansas now? Well, I mean, I definitely enjoy dinner at rights. That's for sure. So can't complain about that. The hospitality is great. But look, I think I think Arkansas of all the jurisdictions in the US has a possibility to build an ecosystem here that can thrive. And it starts obviously with lithium, but it's an ecosystem that needs to be developed. The industrial challenges here, the chemical engineering is here obviously as was spoken in the panel before. And also Senator Westerman and and the governor everyone kind of brought it up as well. You've got the you've got the regulatory framework that the training the skills training is super important. And then I think the political will is here and that is something that's really unique. The political will not just to extract the minerals, but to create to create that kind of larger ecosystem that will let it thrive. So that's why we're here. You know, we as a Canadian company, you know, we see these kinds of things in pockets around the world, but there aren't many. We have it in Quebec where there's actually a pretty deep ecosystem that's been investing in batteries and battery materials for a while and we see that possibility very much here in Arkansas. So that's a bit of a long answer, but hopefully that that address we always have time for you, Dan. David, as a lithium, the CEO of a lithium production company. Does it matter to you if there's a midstream in the United States? Yes, Joe, it does. And why is that, David? You kind of have to draw him out. Joe, I think the last panel highlighted some of this developing these projects and surviving in this ecosystem and being a player in the domestic battery value chain or supply chain. Is very excited to exciting to a number of people because there's opportunities to invest billions of dollars in industries that are growing. However, the profit pool is not incredibly large in that. It is a thin, tough, margin business almost every stage of that value chain. It just makes no economic sense for us to be paying incremental shipping, warehousing, transport costs to move product to Asia to be processed then to come back into this and then ship it back here for then batteries to be made here in this country. So from a producer perspective and from the economics of the supply chain, there's just there's waste in the system that we could eliminate. In addition, from a state perspective, it's a lost opportunity. Many hundreds of millions of dollars or billions of dollars can be invested. Jobs can be created right here in Arkansas and in the US developing a CAM and midstream ecosystem. So not having it is a missed opportunity for the state and the people in the state. And then finally, from a national security perspective, it doesn't make sense for us to be investing many billions of dollars to produce the lithium here and then investing billions of dollars to develop a downstream business. But then allow the product or have the product have to go overseas to be processed before coming back. It just it puts too much power in the hands of other regions of the world. You have your hands full right now going into lithium production. That's obviously your number one focus. But can you see a day where you help the gentleman to your right out? Can you see an extension of what you want to do is moving downstream? Does that make sense to you? I can see the day and the day might even look like yesterday. We are spending time with Nano. We have produced lithium carbonate and we are now have sent samples to Nano for them to process so that lithium from Arkansas can be converted into CAM. So we're at early stages of seeing what's possible. Okay. I'm going to move down to Buggerit and get the Ford, the OEM, the EV makers perspective. How significant is a localized midstream to you? Yeah. So basically for the OEMs having a domestic supply is is not just a corporate comfort. What basically happens is when we are talking about the raw materials or for that matter pre cathode materials or the precursor materials they all come from China. And if at all, if your fundamentals are like if you don't have the basic understandings of how these things are there, even in the first place, then things get really bad in a sense that the battery industry especially for the manufacturing car manufacturing and pharmaceutical companies are the only industries where you have stringent specifications. So your quality time, everything has to be counter reacted within the same time frame and like if things are not progressing well in that phase, it gets very difficult for the OEMs to like even get a better understanding of what's happening with the battery minerals especially. Also, not just on the cost or the quality aspects, even on the technological aspects, what generally happens is if we're told you do you do not know the know how of how these things are done, then there is a lot of complications when you're actually making a battery. And unlike the IC vehicles, what happens with the EV cars is like even if you want to change few things, your cost gets like it just gets expanded to an extent and things get really bad. And that's one of the important things why we would want to have a domestic supply and that that gives a good understanding of how what kind of material goes. Even it also enables you to co-develop the battery precursor materials within the domestic supply and that reduces the volume of impurities that might come when you're actually getting the material out somewhere out of the North America. Looking ahead from a little different lens, would you view having the domestic supply more a security of supply perspective or trying to lower your cost? The security that also gives you a good, it's both actually like you're actually securing and also this and the amount of vehicles that you produce, the kind of scale that you're actually producing can like the pricing can come down if at all you have this domestic supply of the battery minerals especially. It's not just lithium but like that could be for any of the minerals that goes into this EV batteries. You, I enjoyed your talk this morning but I'd like to get some additional perspective here I guess. Both you and Governor Sanders talked about going further down the supply chain. How do you do that? What concrete steps would you be putting in place to try to let's get the lithium from the smack over and let's build the ecosystem here? Well it's a good question Joe and you know I three years ago the state really wasn't focusing on the opportunity and it took me a while frankly to it's a very complicated supply chain all you guys know this it's I came from electric utility background which is a pretty simple supply chain and and we we hired some experts to help us understand the supply chain better and you know make a long story short you know it it made logical sense for us to focus on number one where the resource is here that part of the supply chain and number two it's it's where the where the gap is you know in North America. And so that's where the legislature made moves to pass a sales tax exemption in that in that area of the in fact well it's actually broader than that the sales tax exemption goes from just from once you extracted all the way through battery making facilities and either even recycling. So so that's you know one step the royalty getting the royalty right was really really important a lot of attention was on that my good friend Shane Corey secretary Corey was heavily engaged in that the oil and gas commission ultimately got to the answer that is a royalty at two and a percent which is competitively supports commercialization so those were two big steps we've done a lot of work in workforce development we've started up a little accelerator process called Alta Arkansas lithium technology accelerator of 101 was a participant in in the first cohort to try to focus on those technologies in this midstream and continue to build build this ecosystem you know in in the state of Arkansas so you know we we also want to rely on the natural advantages that we have we've got obviously the the resource but we've got the oil and gas infrastructure natural gas and oil extraction infrastructure that's been there for a hundred years the the community support is is very much in support of this industry building out low cost energy low carbon energy you know let's not forget labor relations also we we don't have some of the challenges that some of our friends to the north and to the east and the west have on labor easy and the Yankees so you know we're just starting though we also recognize are just starting a long way to go but I think we're making progress but you made a point this morning in your remarks about 18 months ago it was promise and now you're you're further down that line so when you look out at the progress you've made in the last 18 months where do you think you are 18 months or 24 months from now in terms of actually getting capital in the ground beyond the lithium projects well you know it'd be great I think from a national security perspective and getting the federal government to say this is important this is a priority it's what China did 25 years ago we're going to we're going to create we're going to create this product and have this industry in this country and get behind it and you know that could come sooner rather than later that declaration but obviously that that will certainly help incentivize more financial capital flowing into the region but you know 18 months for now I I would hope that we've we're we're seeing concrete and steel putting the ground okay we will hold you to that with the most specialized team of lithium-brime professionals in the world so land is dedicated to providing exceptional customer service and support throughout every stage of lithium-brime field development and production from the Atacama to Ambrimuerto to the USA and Canada go to zalandas.com for more information that's zel_a_n_d_e_z.com all right Dan we're back to you Nano one owns the facility that actually made some of the best LFP in the world a decade ago you were hamstrung or the company that started that plan was hamstrung by the fact that the raw materials here and the process used while yielded a high quality material could not compete with China how have you changed the model you own that plan now you've got partnerships with a number of companies to try to move things forward so where do you feel you are in that process? yeah look it's maybe worth just giving a little bit of historical context LFP lithium iron phosphate which is where the bulk of our focus is right now at Nano one it was invented at university of texas by the late john dr. john good enough but it was first commercialized in Quebec by hydro Quebec university Montreal they figured out how to carbon coat the stuff and make it work commercially and a company back in 2002 called fostec lithium pulled the first license and made the first tons of product in 2005 so there's a rich North American history already in place that bridged all the way from texas all the way out to Quebec and very few people know that that company eventually built a plant that was operational in 2012 it operated for 10 years using a technology that made as you say a very good quality lithium iron phosphate but it was impaired with a lot of waste water and a lot of sulfate waste and that sulfate byproduct and that waste water are impediments to grow and continue to be impediments to grow anywhere in the west China has those very kind of same waste streams in different processes but they largely are able to either reindustrialize it, discharge it into waterways which we can't do in the west and by and large they discount it for the rest of the world you can't copy China's process and bring it here we learned that in Quebec many many years ago so nano one we came into existence in 2012 and we came really to the table with an innovative technology to combine both the precursors steps and the cathode making steps into one that cuts down the cost, the operating cost, the capital cost but enables us to actually eliminate all the waste water and all the sulfate so we saw an opportunity a couple of years ago to buy this plant in Quebec we bought it, we decommissioned all the waste water handling, all the sulfate handling and we've recommissioned it in the form of a very large demonstration facility the equipment in that plant is as big as it gets but it's still considered a very small plant but in that plant we can actually fully demonstrate, fully de-risk the technology and full scale equipment and demonstrate that cathode materials can be made without waste water and without sulfate waste and without relying on China's control over iron sulfate which is what you where the bulk of their control is in the lithium iron phosphate space so those are really the key impediments and of course the key competitive drivers, the cost driving down the cost by basically by vertically integrating the supply chain and that's kind of where we saw the opportunity and where we stand right now and that facility can very much be a demonstration facility for what we choose to do here in Arkansas and other jurisdictions around the world and really enables us to accelerate and deploy the manufacturing technology, much larger plants and do it much faster yeah one more bit of trivia on that plant as it was becoming an economic I actually used to move the lithium sulfate back to China in Gangphen converted into lithium hydroxide and shipped it back but that model is dying as China kept improving their quality and their raw material infrastructure and we didn't, we just didn't keep up but let's get back to your situation now while we're waiting for David to partner with you in the interim you've done some partnerships with RIOs, sumitomo metal mining, you've got some, you've done some forward thinking things but what's the real impediment now? Who's going to, where's the capital going to come from? So as Joe mentioned we have sumitomo metal mining which is one of the most vertically integrated miners in the space they're a very active strategic partner, RIO Tinto, we actually have support of the Pentagon through the DPA Title III Act, support of the Canadian government, the Quebec government so we've got a lot of backers really kind of driving and really who are really bought into the vision of what we're trying to do here but yeah it requires capital to move this forward, it requires a market you know today all of the LRP cells are manufactured in China, there's 200 gigawatt hours of cell production announced here in the U.S but none of it is actively making cells yet. Do you reframe that just for how much cathode is actually made right now in North America? Half a percent? Yeah half a percent it's tiny, it's tiny, it's dropping a lot. Even less than the U.S. lithium production. So you've got all the cell production and the cell producers are right now by their cathode materials from China and their precursor from China and so really the we have a generational opportunity to localize it here in North America and we can't do it by copying China because well we can't handle the waste water we won't be able to compete from a cost structure. What we need to do is invest in technology and that's kind of one of the great things that's happening here in Arkansas because of DLE, because of the SMAC over, there is a requirement. You've got to invest in technology to get that lithium into batteries and very much the same thing in the midstream as well. We have to reinvent the way we make cathode materials. It's all the same raw material inputs but it does define the form they come in. Instead of iron sulfate from China we can go from iron metal or iron oxide to finding the right suppliers of that are going to be really important. We can be the first big off-taker of lithium carbonate. Those are all important factors in here but ultimately it's about timing. When is the cell production going to be available? When are they going to be compelled to buy from North American suppliers rather than Chinese suppliers? And that also plays a really fundamental role in this. So we're very active in the U.S. government, with the Canadian government, with other governments around the world. There's a lot of interest in the U.S. government. Just on the subject of sort of AI and data centers, I think it's really important to understand what we've seen in the change of administration. So the last administration, as you said, was very favorable on batteries. But the tax credits and everything they were put in place, there's a big loophole there. As long as you assembled the battery packs in the U.S., you had eligible tax credits, even though you're buying Chinese batteries. And the prohibited foreign entities that have kind of rolled in now under the one big beautiful bill, actually put the next piece of policy in place to close that loophole. And I think, you know, actually, that's one thing that China has done very well over the years. They're always evolving their policy. Yeah, they tweak policy every year. Every year. And I think this is a sign of the kind of tweaking that needs to happen because there's always unintended consequences from policy. And you have to be able to adjust. And what we're seeing here is an adjustment that I think is actually very favorable and it's going in the right direction. So I just wanted to add to that because it's very important for the data center and the energy storage and the AI stuff. Because it will help incentivize and localize supply chains. This episode is also brought to you by MLC. Are you looking for the highest purity calcium products to produce battery-grade chemicals? Look no further. MLC is your reliable partner. Check out Lyme4Lithium.com for more information about MLC's calcium solutions and expert support. That's L-I-M-E, the number 4, L-I-T-H-I-U-M.com. You have any other thoughts on where Ford comes down on how you encourage Kajol. So at least from where I come, it's Ford and Perk, which is a technical battery center of excellence. So what basically we do is we approach event tier 3, tier 4 companies, which Ford hasn't done in the past. So like we are not just trying to buy batteries but like we are trying to understand the know how of batteries. So in the same process we have had some qualifications done for some of the tier 3 companies. And also depending on the necessity we also had some JVs. Or like it all depends on like how the market is. But the main important point is that like we are trying to build that knowledge base in the areas of recycling as well. And I think that is something Ford is very interested in at this point. Here this may sound like an oddball question but obviously you want to do the best for Arkansas in your role. But are there any opportunities because of capital has been invested in other states? Is there any opportunity to partner with other states to help get what you want? I mean there is already battery capital going into other states. Yeah I certainly think there is opportunity to partner and look at it for more of a regional perspective. You know when David wants to invest capital he is not looking at state lines. He is looking at where best to put an efficient plant and deploy capital to provide the greatest return. And county lines, municipal boundaries, state lines don't come into play. Obviously policy on those state lines make a difference. So yeah I do think there is an opportunity there. We haven't gone down that path yet but certainly there is an opportunity. Okay Dan in everybody else this question is for everybody, it is really about geopolitics. China is always just characterized as the bad guy which I am not going to dispute that in some sense. But what can we learn from what they have done because they have done a brilliant job. So back 15 years, just 15 years. The Chinese couldn't sell a lithium chemical outside of China for battery use. Nobody had the quality. But they had started years. It took the leading companies in China 10 years to be able to sell their lithium chemicals to the Koreans and the Japanese cathode makers. And ultimately they just took everything from them by and large. But what lessons can we learn about their long term view and their strategy of investing ahead of the curve. I will start with you Dan and we will just work down the line. China realized 20 years ago they weren't going to be able to challenge the world on internal combustion engines. And they had a very public direction and policy towards electric vehicles and of course energy storage. And so they made that move really really early while the rest of the world was doing their thing. So and those investments weren't just they didn't just kind of try to put battery plants in place. They built an ecosystem and I think that's probably one of the most important things they did. They built an ecosystem that was able to thrive on itself. And by doing that they were able to get better and better and better at what they do. Faster, the deeper their products have improved dramatically from a quality point of view even in the last few years. And so I think what's important first of all is the ecosystem part of it. The other one is they developed supply chains that work in China. And those and that requires processing and requires refining and processing that works for the raw materials they can either import or extract in China. And by developing those supply chains they've been able to drive down costs and being able to get economies of scale to levels that put us a decade behind them right now. So the challenge that I see is really it really comes down to putting the right processes in place, the chemical processes to ultimately control that supply chain. And as evidence this summer China started putting restrictions on their processing technology on their intellectual property on processing lithium processing precursor processing. Lithium iron phosphate and other materials processing the highest quality batteries and they're putting restrictions on the export of that because they have a big lead and they're trying to protect that lead. And if there isn't a clear signal of where we need to focus our efforts I don't know what there is. It's really they recognize that's where their strength is that's where the bottleneck is as I described when I opened it up and that's what that's where they have the bulk of the control. And it's about really trying to break open that bottleneck and we're not going to do it without an ecosystem we can't just do it with a battery plant it's going to be the whole system coming together. That may be the most important lesson to learn David your thoughts. I was going to say that's such a good question I imagine there's a whole chapter in your book on on that answer. I think Dan said it very well and I'll just simplify it to say have a strategy stick with it know where you have a right to play and invest behind it. And then consistency of policy over time with minor tweaks here and there. Yeah, I have a short story on this like 10 years back I was I met a guy who worked for B.Y.D. and he's a driller. So he know like the B.Y.D. companies know go all the way back down till drilling just to get the raw material and this was 10 years back so like they exactly know how to do these things. I'm not advocating for vertical integration but like it is something that we have to probably understand like how things go or like how the materials are going all the way through the supply screen. B.Y.D's first lithium investment was actually over 20 years ago. It was not the first one was not successful but I mean they started they started early. You have thoughts? I mean the only thing I had it really not much to Dan's answer but you know vertically integrated supply chain in this in North America with the federal government strongly backing it and a consistent long term strategy. At this point this group is the only thing keeping you from lunch but I do want to close with one quick answer from each of you. From your perspective if we were sitting here when sitting here five years from now what success look like. Where are you Dan? Well success I think for Arkansas success for national security and supply chain security is that we are refining and processing materials that go all the way into the battery and into the into their applications and ultimately back through a circular loop into the economy through recycling. That is success from North American context and frankly anywhere in any jurisdiction in the world that is looking for I think independent supply chains that are secure long lasting sustainable and benefit the local economy. It is the only way it is going to happen is really that full supply chain because that is what success looks like. You can say 40 start somewhere. That was phase one right. I would say if the DLE comes out on a commercial scale and if actually lithium is being produced in that phase then I think that would be good. And finally I just say you know the lithium refining lithium carbonate production in the state and the region is occurring and there's all we're beginning to build the ecosystem that Dan talked about to help us continue to innovate and catch up to where China is. All right we're going to end it there and if any of people in the audience have not availed themselves of a view of Dan socks I suggest you do it before you go to lunch. These are coveted nano one socks actually so thank you everybody and let's give the panel I thank you to our panelists the round of applause. To those of you who have never been to a lithium or industry conference that is a pretty typical vibe on a panel at least when I'm the moderator I do try to keep it interesting and keep people engaged and if necessary make references to socks which they were impressive. I am recording this on December 5th release on December 6th while I was editing today I received a text message that a close family and personal friend that I had known since before I started school more than 60 years ago. Head passed away and the only reason I bring a personal matter like that up in a podcast is because as we move into the Christmas season you see more family and friends maybe then you normally would at parties and things and. When you get to be a certain age you start having people that were significant in your life die and it's hard. My only point here is that no matter how old you are take the time to let people that mean a lot to you know it I think you'll feel better and I'm sure they will too. And to avoid closing on a down note I will let you know that in about a week I will be recording a year end episode with my friends and well known lithium expert Daniel him as if you have any questions you'd like asked of Daniel. Go to global lithium dot net backslash contact or if you have my contact information you can contact me directly. Daniel's a wealth of knowledge I look forward to closing out what's been an interesting year with a good discussion with Mr. Jimenez. Thanks again for listening.