The US has approved construction of a massive new lithium mine in Nevada and extended tax breaks to some miners as part of its strategy to break Chinese dominance over the supply chains of critical minerals. Australian producer Ioneer on Thursday said it had received a federal permit for its Rhyolite Ridge lithium-boron mine, a project that could produce enough lithium to power about 370,000 electric vehicles a year. The silvery-white metal is an essential ingredient in the production of rechargeable batteries and critical to the future of the EV industry. Rhyolite Ridge is the first approval of a lithium mine by the Joe Biden administration, which has offered Ioneer a $700mn loan to help build a project that would quadruple US lithium production when completed in 2028. Since 2002, only three US mines have come online for critical minerals, none of which are located on public land. Ioneer shares surged 15 per cent in New York trading after the approval was reported to close at $7.92. Western producers have struggled to compete with Chinese rivals in the production and refining of critical minerals because of higher costs, tougher regulatory standards and delays caused by legal challenges. Extracting and processing of lithium has a significant environmental impact as it uses large amounts of water and energy, as well as toxic chemicals such as sulphuric acid. Ioneer’s project has faced opposition from conservation groups, which warned it could push an endangered species of flower to extinction. US regulators said they had worked with the company to modify its project and develop a protection plan for the Tiehm’s buckwheat flower, enabling the mine approval to proceed after a six-year review. Bernard Rowe, Ioneer’s managing director, said its Nevada mine would help to break US customers’ reliance on Chinese companies, which account for more than two-thirds of global lithium refining capacity. “We’ve got one of the largest lithium and boron deposits in the world . . . Its basically ready to build,” he said. In an attempt to kick-start mine and processing construction, Washington published new guidance on Thursday enabling producers to claim tax credits on mining and extraction costs of critical minerals, as long as they process some of the material. There is no shortage of lithium in the US. This week the US Geological Survey said it found between 5mn and 19mn tonnes of lithium reserves located beneath southwestern Arkansas, potentially enough to meet projected 2030 world demand car battery lithium nine times over. Yet most of the world’s lithium is mined in Australia or extracted from large salt water lakes in South America and then processed in China. Analysts said the mine approval and tax breaks were important steps in Washington’s efforts to incentivise the creation of a domestic lithium mining and refining industry to supply the EV sector. James West, analyst at Evercore ISI, an investment bank said: “Extracting lithium from US-based mines or salt-rich brines is important to boost American supply chain security and ensure that a domestic EV industry is not reliant on China.” Only one lithium mine is operating in the US, Albemarle’s Silver Peak mine in Nevada, which produces about 5,000 tonnes of lithium a year. Site preparation is under way for another mine and processing plant — Nevada’s Thacker Pass, which is led by Vancouver, Canada-based Lithium Americas and backed by General Motors. It was approved by the Donald Trump administration in January 2021, and the Biden administration has announced a $2.3bn federal loan to help develop the mine. But Ioneer will face competition from several lithium producers, which have announced plans to open new US mines and processing plants amid an attempt to tap incentives in the Inflation Reduction Act. Oil producers ExxonMobil and Occidental are among several companies pursuing pilot lithium projects in Arkansas and California, respectively. Ioneer estimates its Nevada project will cost more than $1.2bn to complete. In 2021 it signed a funding deal with South Africa’s Sibanye-Stillwater to sell it half the Nevada project for $490mn, on condition of winning approval. It also has deals to supply lithium to carmakers Ford and a joint venture between Toyota and Panasonic.