SK On Signs Additional 'Lithium Supply' Contract in Australia... Accelerates Response to US IRA

10% Stake Investment in 'Lake Resources'
Agreement to Supply 230,000 Tons of Lithium Over 10 Years
Memorandum of Understanding Signed with Global Lithium Company
Visible Achievements in Response to IRA

[Asia Economy Reporter Choi Seoyoon] SK On is strengthening its supply chain for raw materials of electric vehicle batteries by consecutively signing contracts with Australian resource development companies. This supply chain diversification strategy in response to the U.S. Inflation Reduction Act (IRA) is showing tangible results.

On the 12th, SK On announced that it had invested 10% equity in the Australian company Lake Resources the day before and signed a long-term contract to supply a total of 230,000 tons of eco-friendly high-purity lithium. The equity investment is planned to be completed by the first half of next year through participation in Lake Resources' third-party allotment capital increase.

The supply will start from the fourth quarter of 2024 and continue for up to 10 years. For the first two years, 15,000 tons per year will be supplied, and thereafter 25,000 tons per year, with a basic 5-year contract and an option to extend for an additional 5 years. The total supply volume of 230,000 tons is enough to produce 4.9 million electric vehicles.

Founded in 1997 and listed on the Australian Securities Exchange in 2001, Lake Resources currently owns and is developing four lithium brine assets (Kachi, Cauchari, Olaroz, Paso) and one lithium mine (Catamarca) in Argentina.

SK On will receive lithium from the largest among these, the Kachi brine. The Kachi brine is located in Catamarca Province, Argentina, which, along with Bolivia and Chile, forms the South American "Lithium Triangle" and is known for producing a large amount of high-purity lithium. This area is also being developed by global lithium companies such as Albemarle and Livent, as well as the Korean company POSCO.

SK On is considering refining the Argentine lithium supplied by Lake Resources in countries that have free trade agreements (FTA) with the U.S. and then supplying it to its North American plants. Electric vehicles equipped with batteries produced this way may qualify for purchase subsidies under the Inflation Reduction Act regulations.

Cooperation with Lake Resources is also expected to enhance SK On's competitiveness in environmental, social, and governance (ESG) aspects. Lake Resources produces lithium in an eco-friendly manner using the "Direct Lithium Extraction (DLE)" technology developed by Lilac Solutions, a U.S. company invested in by Bill Gates and MIT-led funds. Compared to traditional brine evaporation methods, this technology uses less land and reinjects filtered brine back into the strata, reducing water usage during production. While the lithium recovery rate of conventional brine evaporation methods is around 50%, the DLE method achieves a recovery rate of 80-90%.

SK On has been striving to diversify its raw material supply chain to support global production expansion and respond to geopolitical instability. In particular, in line with the Inflation Reduction Act, which requires that a certain proportion of battery minerals be extracted or processed in the U.S. or countries with which the U.S. has FTAs to qualify for electric vehicle subsidies, SK On is responding swiftly.

On the 28th of last month in Perth, Australia, Jin-sook Ryu, SK On's Strategy Officer (fourth from the left), and Ron Mitchell, Global Lithium Managing Director (third from the left), are taking a commemorative photo after signing a Memorandum of Understanding (MOU) for the stable supply of lithium. Photo by Global Lithium

Prior to Lake Resources, on the 28th of last month, SK On signed a memorandum of understanding with Australian company Global Lithium Resources to ensure stable lithium supply. Global Lithium is developing two large-scale mines in Australia, the world's largest lithium producer and a country that has an FTA with the U.S. SK On plans to later find a cathode material partner to process the lithium concentrate (spodumene) supplied by Global Lithium into lithium hydroxide.

For minerals mined in countries without FTAs with the U.S., such as in the contract with Lake Resources, SK On plans to refine the materials in North America or other locations through partners after purchase and then supply them.

Ryu Jinsook, SK On's head of strategy, said, "Through this contract, we can stably supply lithium to our North American battery plants," adding, "Both companies will continue efforts to secure sustainable raw materials through mutual cooperation."

David Dickson, CEO of Lake Resources, stated, "The contract with SK On will be an opportunity to expand our eco-friendly lithium production capacity," and added, "We look forward to cooperating with SK On on other projects for high-purity lithium supply in the future."

This content was produced with the assistance of AI translation services.