A lithium technology startup backed by mining giant Rio Tinto has raised roughly $17 million to test a process that could help unlock untapped lithium sources in the U.S. and lessen China’s grip on global refining of the battery metal.

Melbourne, Australia-based ElectraLith closed the 27.5 million-Australian-dollar Series A funding round with support from Chevron Technology Ventures, the venture-capital arm of the U.S. oil giant, and In-Q-Tel, a venture-capital firm in Virginia funded by the Central Intelligence Agency, said Chief Executive Charlie McGill.

The round was led by Main Sequence, a fund founded by Australia’s national science agency that invests in so-called deep technology that focuses on science and engineering innovation.

ElectraLith is developing technology that McGill says would produce battery-grade lithium hydroxide from a variety of sources without using water or chemicals, or needing to ship it to a refinery for additional processing.

“And what that means is we can go to Utah, Louisiana, Arkansas, and we can go to brines that are not economic or not viable, and we can get lithium from them,” McGill said. “That is exactly what we need to do to get away from the Chinese dependence.”

Like for many critical minerals, China plays an outsize role in processing lithium—importing raw forms that it refines into compounds such as lithium hydroxide for use in batteries. Around two-thirds of the world’s lithium is refined in China. That has raised concerns among the U.S. and its allies, which have sought to build more diverse supply chains as the energy transition accelerates.

Officials say Beijing has shown it is willing to use its dominance to unsettle Western supply chains—by supercharging supply then, in some minerals, restricting exports. China earlier this month proposed export restrictions on technologies used to extract and process lithium.

Last August, ElectraLith said it had successfully produced battery-grade lithium hydroxide from several sources in a lab using its technology.

The company intends to use the Series A proceeds to set up its first direct lithium extraction and refining, or DLE-R, pilot plant—and then possibly two more.

The technology has the potential to significantly reduce lithium production costs and make onshore processing more competitive, according to Rio Tinto, the world’s second-biggest mining company by market value.

“With potential to unlock otherwise unviable resources and to bring refining closer to the source, DLE-R has strategic implications for both extracting and processing critical minerals,” said Olivia Jones, a Sydney-based investor for In-Q-Tel.

Current methods of lithium production mostly involve extracting the lightweight metal from hard rock or pumping the salty brines that contain lithium out of the ground into vast ponds where evaporation separates it from other elements.

ElectraLith Chief Executive Charlie McGill.

Briny water is among the most promising resources for lithium in the U.S. Exxon Mobil is drilling for lithium-laden brines in the Smackover formation of southern Arkansas. Other companies are working to tap California’s Salton Sea.

While lithium prices have experienced a sharp fall from record highs over the past two years, producers continue to plan new projects, betting the metal will be in demand for electric vehicles and energy storage for decades to come.

ElectraLith, a spinoff from Australia’s Monash University, isn’t alone in testing newer, still-experimental lithium extraction methods that could help increase supplies.

Direct lithium extraction, or DLE, technologies have the potential to significantly increase global production of lithium “much like shale did for oil,” Goldman Sachs analysts said in a 2023 report. Many DLE technologies use a chemical process to isolate lithium. Some would likely still require large amounts of water and power to run on a large scale.

ElectraLith, on the other hand, uses a membrane to extract lithium from brine using a process called electrodialysis. It repeats the process with a different type of membrane to refine it.

“By removing the water and removing the chemicals, not only is it good for the environment but it removes all of those costs,” McGill said.

ElectraLith was set up in 2021 with roughly A$2.3 million in seed funding from Rio Tinto, Monash and London-listed IP Group, which specializes in the commercialization of intellectual property. It got a nearly A$1.8 million seed extension from the trio in late 2023.

They also participated in the Series A, along with Houston-based Fathom Fund, Vista Energy, Marathon Petroleum, Australian pension fund Hostplus and Breakthrough Victoria, a venture-capital fund for Australia’s Victoria state.

McGill, who served in the U.S. Navy for six years from 1997, ultimately as aide to the secretary of the Navy in the Pentagon from 2001 to 2003, joined ElectraLith in mid-2023. He said he expects ElectraLith to begin testing the technology at Rio Tinto’s Rincon lithium operation in Argentina’s Salta Province by early next year. Two additional pilot plants may follow—ideally one for Smackover brine, and another possibly elsewhere in the U.S. or in Chile, he said.

The startup is building a customer pipeline, but still has to prove the technology can work at scale.

“The catch is, we’re still in the lab,” McGill said he tells investors and customers. “The catch is, we’re raising a Series A to scale the membrane and scaling membranes is a tricky business. We’ve got a year of development ahead of us and the very first thing we’re going to do is put this to work at Rio Tinto’s Rincon site. And, so, that is the catch.”

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