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Global Economy

VW wants to take a stake in Canadian mines

The high demand for electromobility is also increasing the need for the raw materials required for battery production. The largest German automotive group, Volkswagen, now wants to invest in mines in Canada in order to secure access to important raw materials. "We do not open our own mines, but we want to invest in Canadian mines and mine operators," said Thomas Schmall, the group board member responsible for technology and batteries.

The main focus is on the strategically important long-term supply agreements with which the car manufacturer wants to secure quantities and prices – for example as part of a joint venture with the Volkswagen battery subsidiary PowerCo. A letter of intent is to be signed with the Canadian government for this purpose.

Nickel, Copper and Cobalt in Canada

"Canada has practically all the raw materials we need for battery production," Schmall said. "There are large volumes of the highest grade nickel, plus copper, cobalt. And there's a lot of mining activity." 20 to 30 percent of a mine's annual production could then be purchased by the PowerCo at a fixed price, and the mine operator could then sell the rest on the world market.

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

Raw material cost drivers for battery cells

80 percent of the costs for battery cells are raw material costs, said Schmall. "The big car manufacturers used to think it was enough to buy cell factories. Today we know that we have to go much deeper into the value chain." With the mine operators, VW wants to work with a maximum of a handful of interface partners. The Fraunhofer Institute for Systems and Innovation Research ISI wrote in a study that due to the increasing proportion of material costs in a battery cell, access to raw materials and components will represent a key competitive component in the future.

Overall, the Volkswagen battery subsidiary PowerCo, together with partners, wants to invest a double-digit billion amount in the development of the global battery value chain. In Canada it could be a single-digit billion amount, it said. According to this, Volkswagen would be the first western automotive group to take a direct stake in mine operators on a larger scale.

Other corporations secure access

According to company circles, Volkswagen's competitor Mercedes-Benz also wants to sign a declaration of intent on raw materials on the sidelines of Scholz's visit to Canada.

Other car manufacturers secure access to the important raw materials through contracts. Last year, the American electric car manufacturer Tesla signed a four-year contract with the Australian company Syrah Resources, which operates a graphite mine in Mozambique. At the end of July, the American automotive group Ford announced that it had signed letters of intent with a number of mining companies for the raw materials nickel and lithium. These include the Australian mining giant BHP.

Most of the raw materials required for battery production are still mined abroad. Most of the world's cobalt reserves are in the Democratic Republic of the Congo; Australia and Indonesia follow behind. Lithium mining is concentrated in countries like Australia, Chile, Argentina and China. When it comes to graphite, China plays an important role. The most important countries for nickel mine production last year included Indonesia, the Philippines and Russia.

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