The authors point out that 2023 was the first time that more than 50% of BRI engagement was through investments where Chinese investors take equity stakes as opposed to construction contracts, which are typically financed through loans provided by Chinese financial institutions or contractors, often accompanied by guarantees from the host country.

Last year Africa overtook the Middle East as the no. 1 target of BRI projects after a 114% jump in investments and a 47% jump in construction projects on the continent. Investments in Latin America and the Caribbean also doubled last year.  

China’s BRI-related investment in metals and mining reached $19.4 billion in 2023 according to the study, a 158% jump compared to 2022 and the highest on record.  

Minerals and metals investment focused on the green energy transition with copper making up the lion’s share of new project announcements last year, followed by sizable lithium, nickel and uranium spending under the BRI. 

Apart from a giant new copper processing facility in Saudi Arabia, mining investments were focused in Indonesia and various countries in Africa and South America.  

Examples include vertical integration investments by the world’s largest battery manufacturer CATL, which bought shares for a nickel mining concession in Indonesia from PT Aneka Tambang (Antam).

Lithium projects in Mali attracted investment from Chinese firms Jiangxi, Ganfeng and Hainan Mining (through the acquisition of Kodal Minerals) while Zhejiang Huayou Cobalt commissioned a lithium processing plant in Zimbabwe.

Downstream investment in battery and electric vehicle manufacturing also soared, reaching nearly $10 billion, according to the report. The largest investors under the BRI last year were CATL, accounting for more than 15% of overall spending, followed by Zijin Mining at 11%.  

Zhejiang Huayou Cobalt contributed nearly 9% of the total while CMOC (formerly China Molybdenum) and Minmetals each had a 5%-plus share of the $92.4 billion total investments in 2023. 

For 2024, the Griffith Asia Institute sees further growth of Chinese BRI engagement with a strong focus on country partnerships in renewable energy, resource-backed mining and related technologies including EV batteries.  

China consumes more than half the world’s metals and an even greater proportion of iron ore and battery raw materials – and gloom about the country’s economic prospects amid a property and stock market crisis have only added to bearish mining sentiment. 

In a new trading desk note Marcus Garvey, head of Macquarie commodities strategy based in Singapore, and a team of analysts have identified the first green shoots for the sector (and 34 charts to back it up):   

“January’s full set of PMIs (World manufacturing new orders up 1.2pp to 49.8) looks like a potential turning point for the global industrial cycle, with bullish implications for industrial commodities demand.”

Expectations of a smaller reduction in US interest rates this year than previously anticipated have supported the dollar and put metal prices under pressure which usually move in the opposite direction. 

Nevertheless, says Macquarie: “Commodity prices have a far more consistent relationship with global growth than with FX.”

The investment bank also points to US goods demand which it says “increasingly looks to be reaccelerating,” and from a higher base. Macquarie also sees the potential of a developed market manufacturing recovery and a restocking cycle in Europe.”

And while China has so far held off on broad based economic stimulus, fixed asset investment in infrastructure, led by renewables, and certain sectors including autos (particularly electric cars) have shown notable strength.

“Ultimately, if commodity prices are lifted by a pick-up in global industrial production, the implications for goods inflation may become self-inhibiting, by reducing the scope for further central bank easing. 

“But that is an ex-post problem, not an ex-ante one, suggesting to us that dips should now be bought. 

“Selectively at least, in those markets where fundamentals are already relatively tight or have the potential to tighten quickly. Especially if positioning gets short.”

Musk premiered the Cybertruck smashed-window and all in November 2019. The Cybertruck – only the sixth production vehicle in the Tesla stable – sports the company’s proprietary 4680 cells first revealed at its now infamous Battery Day event in 2020.  

The 4680 is a soda can sized cell with a nickel-cobalt-manganese (NCM) cathode and is already powering the 84.6 kWh performance version of its Model Y assembled in Texas. 

The Cybertruck AWD and top of the range Cyberbeast model up that capacity to 122.4 kWh, according to Tesla filings with the US EPA.

Buyers can add a separately installed range extender to get the truck close to the 800km (500mi) driving range initially promised and qualify it for Biden administration’s $7,500 subsidy scheme until the base model becomes available.

Pre-orderly conduct

There is no firm number on the pre-orders Tesla has received. A crowdsourced tally put it as high as two million – a figure that is now widely quoted in the press – while Musk confirmed it is over one million. 

Given the hype surrounding the Cybertruck, two million fans who only had to put down $100 (now $250) for the privilege does not sound outlandish. 

How many Cybertrucks Tesla can produce is also far from being bolted down. 

Tesla told investors last year the company can produce anywhere between 250,000 and 500,000 units per year, but installed capacity at Giga Texas for this year is reportedly only 125,000. 

Elon Musk did admit in December that the Texas plant was in “production hell” and Tesla has a well-earned reputation for overpromising and underdelivering, but in 2023, Tesla did manage to up production 35% to 1.85 million vehicles. 

Mutatis Mutandas

Irrespective of model-version, Tesla’s triangle truck is a battery metals beast. 

If Tesla produces 125,000 Cybertrucks this year, the company would have had to procure around 14,000 tonnes of graphite, 11,000 tonnes of nickel, 10,000 tonnes of lithium carbonate equivalent, 1,400 tonnes of cobalt and 1,300 tonnes of manganese, according to data from Adamas Intelligence, Toronto-based EV supply chain research consultants.

Easily doable and at current prices for these battery metals a bargain, even if you take into account yields all the way up and down the supply chain. Cell manufacture is notoriously tricky and as much as 30% of the raw material entering through the factory ends up as black mass.

At the low end of Tesla’s Cybertruck production target – 250,000 – mining quickly becomes a weightier matter for the company now worth just $582 billion in New York after a horrendous start to 2024. 

Add in those Cybertruck owners who opt for an extra pack in the back and there are tonnes of reasons why Tesla could consider upping its mining investments. 

Under this scenario – still highly conservative given the immense interest in the Cybertruck – Tesla needs the entire nickel output of Glencore’s Murrin Murrin mine in Western Australia and over half its cobalt. 

Fulfill the million preorders and Tesla needs to offtake 100% of Glencore’s annual nickel production, which the Swiss miner said will be between 80,000 and 90,000 tonnes in 2024 and everything Mutanda produced last year. 

Two million? Hope that no-one orders the range extender and Cybertruck assembly lines would need to add half a Norilsk for the nickel (presuming it’s allowed into Texas then) and two-thirds of Glencore’s entire cobalt production. 

Finished stainless steel is about 8%-10% nickel – so there’s that too.

Battery day and night

Natural graphite has been on its own wild ride – down some $300 from this time last year to the early $500s a tonne now. 

To power 1 million Cybertrucks, Tesla needs the natural graphite of the world’s number two producing country, Madagascar, according to the USGS. 

If most drivers want to go the extra mile add half the output of world number three Mozambique or most of fourth-ranked Brazil.    

Much like those that mine the devil’s copper and the goblin’s ore, lithium mining companies – and their investors  – have gone through seven heavens and nine circles of hell since the Cybertruck’s 2019 debut. 

Lithium carbonate equivalent was exchanging hands for $8,500 a tonne at the time on a global weighted average basis, according to Benchmark Mineral Intelligence, a London-based price reporting agency and satellite battery factory tracker. 

November 2022 LCE topped $80,000 a tonne. Today it is around $14,400 a tonne. 

When it comes to LCE, one million Cybertrucks with no big black box in the back, need one Greenbushes, the world’s largest hard rock lithium mine. 

That is, provided the Sino-Australian venture does not cut back further on production to ride out the downturn.

At the end of 2023, the MINING.COM TOP 50* ranking of the world’s most valuable miners reached a combined $1.42 trillion, up a healthy, if far from spectacular $48.7 billion over the course of 2023. Mining’s top tier is also worth $330 billion less than in March 2022.

Metal and mineral markets are volatile at the best of times – the nickel, cobalt and lithium price collapse in 2023 was extreme but not entirely unprecedented. Rare earth producers, platinum group metal watchers, iron ore followers, and gold and silver bugs for that matter, have been through worse.

Mining companies have become better at navigating choppy waters and as a whole the majors performed fairly consistently last year despite geopolitical and market turmoil, but within the ranking, 2023 fortunes were made and lost over what seemed like days.

The forced closure of one of the world’s biggest copper mines – and the subsequent collapse of owner First Quantum Minerals stock – served as a stark reminder of the outsized risks miners face over and above market swings.

Panama root canal

After months of protests and political pressure, at the end of November the Panama government ordered the closure of First Quantum Minerals’ Cobre Panama mine following a ruling by the Supreme Court that declared the mining contract for the operation unconstitutional.

Public figures, including climate activist Greta Thunberg and Hollywood actor Leonardo Di Caprio backed the protests and shared a video calling for the “mega mine” to cease operations, which quickly went viral. 

That mining cobre is at the nexus of the green energy transition is clearly an irony lost on those trying to save the world.  FQM is seeking arbitration and completely winding down operations will take time, but a reopening of Cobre Panama is not on the cards. 

From 25th position in the ranking at the end of March 2022 and a valuation well above $20 billion, the November-December sell off saw FQM drop out of the top tier altogether, ending 2023 at number 58 with a market cap below $6 billion. 

Cobre Panama supplied more than 40% of the company’s revenue, and with nickel prices plummeting FQM has also been forced to suspend operations at its Raventhorpe mine in Australia. 

Amid the inevitable takeover rumours now in circulation, shares in the Vancouver-based company have rallied in 2024, but still not enough to reenter the top 50.

No. 12 with a bullet 

If 2023 was an annus horribilis for FQM it was mirabilis for Amman Mineral Internasional. Stock in the Indonesian firm surged by 269% from its July debut in Jakarta to reach a market capitalisation of more than $30 billion at the end of last year – and number 12 in the ranking. 

That valuation is quite an achievement on annual revenue of $2 billion no matter how fat margins are at the company’s Batu Hijau copper and gold mine.  Batu Hijau is the third largest mine worldwide in terms of copper equivalent output (but no match for Cobre Panama when it comes to the orange metal alone)  and has been in production since the turn of the millennium. Amman is also developing the adjacent Elang project on the island of Sumbawa. 

Amman Minerals’ ascent has minted at least six new billionaires and the stock appears to be building on its success in 2024, rising by double digits in January already.

Indonesia’s other major mining IPO, Harita Nickel, was on a different trajectory altogether. After listing in April and raising $672m, the company has had a tough go of it and the stock has shed more than 38% since then as nickel prices continue to decline.

Shiny gold, dull silver, tarnished PGMs

The price of gold hit an all-time record on December 1, 2023.  But bullion’s best ever level passed without the usual fanfare and despite bullish indications for 2024, gold mining stocks did not exactly storm the rankings of the most valuable miners.

Over the course of 2023 gold and royalty companies on the MINING.COM TOP 50* ranking of the world’s most valuable miners added a collective $20.8 billion in market cap. 

And judging by gold miners’ performance so far this year, gold above $2,000 is not providing enough support. Newmont is already down 17%, Barrick has shed 13% and Agnico Eagle shareholders are 9% poorer. 

The number of precious metals companies in the top 50 has also been relatively stable over the years. With Newmont’s absorption of Newcrest now complete, the open slot was taken up by Kinross, which spent a few years in the wilderness. 

Anglogold Ashanti was just edged out by Jiangxi Copper for position number 50 on the last trading days of 2023, but based on its performance so far in 2024 the London-listed company is already back among the top tier. Indeed Anglogold is the only major gold player in the black year to date.

Silver has not been able to ride gold’s coattails and the top 50 has not had a silver specialist for a few years after Fresnillo dropped out (now at #61) and while Pan American Silver has come close in recent years at the end of last year it made it to #58 only. 

The exit of platinum and palladium majors like Sibanye Stillwater and Impala Platinum, now both valued at less than $4 billion, made space for Royal Gold to reenter at 47 at the end of last year, up from 57th in 2022. 

After a dismal 2023, the sole remaining PGM specialist Anglo American Platinum looks likely to lose more ground this quarter as palladium and platinum prices continue to slide into the new year.

Not too tough at the top 

London-listed Anglo American has had a rough year in part due to its exposure to platinum group metals and control of AngloPlat, and is now valued at $30 billion after peaking at $70 billion in March 2021.  

Were it not for the London-listed company’s iron ore operations, the 40%-plus slump in share value may have been deeper. Rumours that Glencore may be sniffing around now that the Swiss behemoth’s bid for all of Teck Resources has soured is also keeping Anglo from falling further down the rankings .  

Investors in Anglo, with a history going back more than a hundred years on the South African gold and diamond fields, have had a particularly wild ride over the last few years. In January 2016, Anglo’s market cap fell below $5 billion after it came close to suffocating under a pile of debt.  

Against expectations, iron ore seems to be holding above $120 a tonne, Chinese property bankruptcies and Beijing’s tepid stimulus response notwithstanding. 

Iron ore’s resilience despite Chinese troubles has also kept the share prices of the other diversified majors, which make their fattest profits from the steelmaking ingredient, from skidding. 

The top 10 mining companies have been able to keep their share of the total above 50% for a few years now. Not quite the magnificent seven, but size does matter in mining, particularly when access to capital is no longer a headache but a migraine. 

Expectations of another active year of M&A in the sector is likely to make the Top 50 top-heavier, especially now that it’s painfully obvious just how one-commodity companies like the lithium stocks can so easily be derailed. Coal miners’ strong 2023 suggests there are still exceptional minerals that prove the rule.   

Lithium losers 

After defying gravity early on, the combined losses for lithium miners in the top 50 climbed to nearly $30 billion in market cap over the 12 month period. Four counters occupy the worst performance table for 2023. 

The M&A drama surrounding Liontown, Albermarle and Hancock Prospecting turned out to be a soap opera and Chile’s move to take control of its lithium industry now appears far less consequential than feared.

Despite the precipitous decline in lithium prices in 2023, after hitting all time highs above $80,000 a tonne in November 2022, none of the battery metal miners’ stock performance was dire enough to drop out of the Top 50.

The merger of Livent and Allkem to form Arcadium Lithium could in fact up lithium mining’s representation in the ranking to seven should Pilbara Minerals’ January bleeding be stanched. But with lithium prices far from stabilizing, the battery metal’s presence in the top 50 may fade further. 

Pilbara Minerals, which unlike its peers was still able to show share price gains last year,  joined the Top 50 last year, bringing the number of companies based in the Western Australia capital to five, surpassing the tally of Vancouver, BC as the top home base in the ranking. 

With the exit of First Quantum, three mining companies in the top 50 call Vancouver home while the return of Kinross saw the ranks of Toronto-headquartered miners move back up to four.  

Nuclear options

Uranium prices more than doubled during 2023 and recently hit triple digits for the first time in 16 years. The breakthrough for the nuclear fuel comes after a decade in the doldrums following the Fukushima disaster in Japan.

Canada’s Cameco made the best quarterly performer list once again in Q4 and after doubling in market worth in 2023.  The Saskatoon-based company now sits at no 23 in the ranking after jumping 22 places since end-2022.    

The value of shares in Kazatomprom, the world number one uranium producer, topped $10 billion at the end of 2023, placing it at position 38.  Until last year the state-owned Kazakh company was outside earshot of the Top 50 since its dual-listing in London and Astana in 2018.  

None of the smaller uranium companies are likely to pierce the top 50 by themselves, but combinations among the rank and file may edge in when countries aiming to ditch fossil fuels stop thinking they can have their yellowcake and eat it too.

*NOTES:

Source: MINING.COM, Morningstar, GoogleFinance, company reports. Trading data from primary-listed exchange at December 28 2023 to January 2, 2024 where applicable, currency cross-rates January 2, 2024. 

Percentage change based on US$ market cap difference, not share price change in local currency.

As with any ranking, criteria for inclusion are contentious. We decided to exclude unlisted and state-owned enterprises at the outset due to a lack of information. That, of course, excludes giants like Chile’s Codelco, Uzbekistan’s Navoi Mining, which owns the world’s largest gold mine, Eurochem, a major potash firm, and a number of entities in China and developing countries around the world.

Another central criterion was the depth of involvement in the industry before an enterprise can rightfully be called a mining company.

For instance, should smelter companies or commodity traders that own minority stakes in mining assets be included, especially if these investments have no operational component or warrant a seat on the board?

This is a common structure in Asia and excluding these types of companies removed well-known names like Japan’s Marubeni and Mitsui, Korea Zinc and Chile’s Copec. 

Levels of operational or strategic involvement and size of shareholding were other central considerations. Do streaming and royalty companies that receive metals from mining operations without shareholding qualify or are they just specialised financing vehicles? We included Franco Nevada, Royal Gold and Wheaton Precious Metals on the basis of their deep involvement in the industry.

Vertically integrated concerns like Alcoa and energy companies such as Shenhua Energy or Bayan Resources where power, ports and railways make up a large portion of revenues pose a problem. The revenue mix also tends to change alongside volatile coal prices. Same goes for battery makers like CATL which is increasingly moving upstream, but where mining still makes up a small portion of its valuation.  

Another consideration is diversified companies such as Anglo American with separately listed majority-owned subsidiaries. We’ve included Angloplat in the ranking but excluded Kumba Iron Ore in which Anglo has a 70% stake to avoid double counting. Similarly we excluded Hindustan Zinc which is listed separately but majority owned by Vedanta.

Many steelmakers own and often operate iron ore and other metal mines, but in the interest of balance and diversity we excluded the steel industry, and with that many companies that have substantial mining assets including giants like ArcelorMittal, Magnitogorsk, Ternium, Baosteel and many others.

Head office refers to operational headquarters wherever applicable, for example BHP and Rio Tinto are shown as Melbourne, Australia, but Antofagasta is the exception that proves the rule. We consider the company’s HQ to be in London, where it has been listed since the late 1800s.

Please let us know of any errors, omissions, deletions or additions to the ranking or suggest a different methodology.

Livent invests in EnergySource Minerals DLE technology ILiAD

Livent announced it has acquired a minority stake in ILiAD Technologies’ parent company, a subsidiary of EnergySource Minerals. The companies did not disclose financial details of the deal. 

The ILiAD absorption DLE technology has been under development for seven years, principally for the Salton Sea geothermal resources in California. Livent will have the right to license ILiAD at its Hombre Muerto operation in Argentina where commercial utilization could begin as early as 2025. Livent is also reviewing opportunities to apply it elsewhere within its portfolio.  

As previously forecasted by Adamas, M&A in the 3rd party DLE space is gaining momentum. The move is particularly fascinating when considering Livent’s 25-year history with absorption DLE. A closer look into Livent’s operational metrics reveals deficiencies in their water, energy and carbon footprint. This possibly explains why we’re seeing this deal today.

Bolivia signs $450m deal with Russia’s Uranium One

Bolivian state’s YLB has signed a deal with Russia’s Uranium One to the tune of $450 million.

The funds will be used over several years to build a pilot plant at the Uyuni salar. 

The initial scale will be 1 ktpa lithium carbonate before eventually scaling up to 14 ktpa. 

A tangible development in Bolivia’s long-awaited entrance into lithium production. The mammoth lithium reserves at Uyuni will undoubtedly require significant technical work, given their challenging brine characteristics and elevation. 

Winsome Resources releases long awaited maiden MRE at Adina

Winsome Resources announced this week a maiden Mineral Resource estimate (MRE) for its Adina project in Quebec, Canada.

The MRE stands at 58.5 Mt grading 1.12% Li2O (100% inferred) using a 0.6% cut-off. The resource is based on 27,600m of drilling along a 1.3km strike length at 100 x 100m spacing. 

A separate 25,000m of results are being assayed with an MRE update expected in H1 2024. The company also expects to undertake a further 50,000m drill program in 2024. Five drill rigs are currently on-site conducting infill and extensional drilling along the full 3.1 km strike of identified spodumene mineralization. 

The drill program has been exceptionally efficient, yielding 2.14 Mt/km. The results solidify Adina as a premier North American hard rock deposit worth paying attention to in 2024. The two pegmatites identified at Adina are adjacent to one another, thick, high grade and near surface which offer attractive open pit potential. 

Volt Lithium releases Rainbow Lake PEA

Volt Lithium released its PEA for the Rainbow Lake oil field brine project in Alberta, Canada, this week.

The company envisions a three-phase 1 / 5 / 23 ktpa LiOH DLE operation over a 19-year life of mine. The study features the company’s proprietary DLE process which has undergone pilot scale testwork. 

Total CAPEX required is $1.5 billion (including 10-15% contingency) while operating costs range from $3,276/t to $4,454/t LiOH ($3,722/t to $5,165/t LCE). Volt has also entered into a capital expenditure recovery program and cost sharing arrangement with a private oil and gas company which features in the project economics. Using a flat price of $25,000/t LiOH the NPV8% post-tax comes in at $1.1 billlion. 

With average grades of 49 – 92 mg/L Li, it is easy to be skeptical of the low operating costs featured in this PEA (though the cost estimates are class 5 which encompasses a +50% uncertainty margin). The purported synergies with a 3rd party E&P company are also an intriguing feature worth paying attention to as more details emerge. 

Arizona Lithium adds 0.6 Mt LCE to Prairie MRE

Arizona Lithium this week announced an update to their Mineral Resource estimate (MRE) at the Prairie project in Saskatchewan, Canada.

By appending more land packages, 0.6 Mt LCE was added onto their resource base for a total of 6.3 Mt LCE at 105 mg/L Li concentration (71% in the inferred category). 

The company is preparing a PFS due for release this month which will feature the company’s proprietary ion exchange resin. 

The news is unlikely to have a material impact to the project economics which should be revealed next month. 

Atlas Lithium secures $50m funding for Minas Gerais project

Atlas Lithium has received commitment of funding from China’s Chengxin and Yahua for $50 million, it announced this week. Funds will be used to construct Phase 1 of the Minas Gerais project in Brazil. 

$10 million will be placed as new equity at a 10% premium to recent VWAP, while $40 million will be product prepayment. The funding is in exchange for 80% offtake of Phase 1’s 150 ktpa spodumene concentrate output, split equally between the two parties.

The company is scoping out a modular dense media separation (DMS) concentrator design. A maiden resource and PEA is yet to be announced, although targeted for Q1 2024, while a DFS for Phases 1 & 2 (300 ktpa) is targeted for Q2 2024.  

This funding is very encouraging for one of the fastest development stories we’ve seen. However, hand-in-hand with speed to market is pronounced design and execution risks which the company will need to tightly manage going forward.

Green Technology Metals releases PEA and obtains ML

Green Technology Metals released PEA results for the Seymour/Root project in Ontario, Canada this week. The company also announced it has received the project’s Mining Lease.

The phased development starts with Seymour’s $212 million DMS-only plant producing ~207 ktpa of 5.5% Li2O concentrate. Root’s $350 million DMS & Flotation plant would extend this production rate out for a total of 15 years. LOM operating costs are calculated at $938/t SC5.5. Using a weighted average price of $2,029/t SC5.5 FOB Thunder Bay, the NPV8% comes in at U$892 milllion. 

An optional $798 million chemical plant was scoped at Thunder Bay which could produce 24,400 tpa LiOH. The plant adds an incremental NPV8% of $238 million. 

The company looks to accelerate the project’s development with a DFS and possible FID planned in 2024. 

Having to build two separate concentrators for a 15-year project weighs heavily on capital efficiency metrics. Further, operating costs are relatively high, owing to such factors as location, a 21.1 strip ratio and 1.09% Li2O average grade. 

Latin Resources adds 18.3 Mt to Colina deposit MRE

Latin Resources announced this week an updated Mineral Resource estimate (MRE) for the Salinas project in Minas Gerais province, Brazil.

18.3 Mt was added to the principal Colina deposit, which now sits at 63.5 Mt grading 1.3% Li2O. 41 Mt are now contained within M&I categories, up from 30 Mt. 

In addition, a separate deposit known as Fog’s Block was defined at 6.8 Mt grading 0.9% Li2O. The project’s global MRE now sits at 70.28 Mt grading 1.27% Li2O. 

Drilling is ongoing with 16 diamond drill rigs, as the company looks to define Mineral Reserves. DFS is targeted for completion in mid-2024. 

The Colina deposit appears to be mostly tapped out in terms of scale. As such, resource growth is dependent on prospects along strike. To this end, an aggressive 16x rigs will be used for infill drilling prior to the DFS, while some highly prospective targets offer upside potential. 

Power Minerals releases PEA for its Rincon DLE project

Power Minerals released the PEA results for its Rincon project in Salta province, Argentina. The project employs SunResin DLE technology to extract ~7,000 tpa Li2CO3 over 14 years from its 292 kt LCE resource. 

The estimated CAPEX came in at $216.55 million with an operating cost of $7,786/t Li2CO3. Using an average lithium carbonate price of $27,600/t the NPV10% post-tax came in at ~$309 million.  

The operating costs are in the upper percentiles relative to DLE competitors, even much higher than competing Latin American companies looking at using SunResin. It is possible the especially rural location of the project is probably driving this, and/or the high sulphate contained in the brine.

Vulcan Energy launches €40 million DLE optimization plant

Vulcan Energy launched its Lithium Extraction Optimization Plant in Germany last week.

The plant tests the brine-to-LiCl intermediate DLE flowsheet which was designed and refined from earlier pilot plants. The purpose of the plant is to optimize operational parameters, train staff and for product qualification. 

The plant uses absorption-type DLE technology on a geothermal brine resource containing 181 mg/L Li. After power generation and DLE steps, reverse osmosis concentrates eluate prior to purification steps which includes ion exchange and crystallization of select impurities. 

The product is a 40% lithium chloride which proceeds to a separate electrolysis and crystallization process to create lithium hydroxide. 

The operational readiness of advanced DLE projects such as ZCL might catch some observers off guard as projects ramp in coming years. 

SQM acquires 20% stake in French DLE company, Adionics

The world’s largest lithium producer, SQM, announced in its 3rd quarter results the acquisition of a 20% stake in French direct lithium extraction company Adionics. 

The deal was worth $20.3 million valuing the firm at $101.5 million. Adionics is developing its cold lithium extraction and hot regeneration process which derives from its research in desalination.  

SQM has a target to reduce water consumption by 50% by 2030, yet little information has been released to date as to how. Given this timeframe, DLE technology acquisition would be the most logical option. DLE technology acquisitions is a trend we expect more broadly throughout the decade.

Lake Resources adds 2.5 Mt LCE to MRE

Lake Resources announced this week an updated MRE for its Kachi DLE project in Catamarca province, Argentina. 

The total resource now stands at 10.6 Mt of LCE (up from 8.1 Mt) with a 223 mg/L Li concentration. Confidence has improved with 69% now in measured and indicated categories (up from 36%). 

The expansion results from step out wells which encountered lithium bearing brines over 600m deep. 

The material update is the M&I upgrade as it feeds into the upcoming DFS reserve estimate. The scale of the resource, although impressive, offers strategic value in the long term only as it is beyond the comprehension of a financeable plant size. 

Standard Lithium announce DLE test work results

Standard Lithium released DLE test work results from its demonstration plant in Arkansas this week. 

The plant uses Koch Industries LiPROTM LSS, an absorption type DLE system. Over a given 2-month period the process was able to recover 96.1% of lithium on average in the DLE step only. Impurity rejection averaged over 99% and boron rejection averaged over 95%. 

The parameters exceed the goals of the company set in its last DFS publication, which is encouraging. If these recoveries are to be relied upon, the effective whole-of-process Li recovery could be some of the highest in the industry.

Infinity Lithium unveils ‘new look’ Scoping Study for the San Jose project in Spain

Infinity Lithium announced updated Scoping Study results for its San Jose zinnwaldite project in Spain this week. The company envisages an underground mine feeding a 2 Mtpa hydromet plant. Crushed ore is put through a high-pressure sulphuric acid leaching process to produce lithiumsulphate before neutralization, impurity removal and causticisation to lithiumhydroxide. Relative to the 2021 PEA which used a flotation and sulphate roast water leach process, recoveries are now 90% (from 53%) resulting in 33 ktpa of lithium hydroxide output (up from 19.5 ktpa). 

The initial CAPEX is $1,544 million (including 20% contingency), while the operating cost EXW Spain is estimated at $5,922/t LiOH.H2O including by-products ($6,730/t LCE). Using a flat price of $27,000/t LiOH.H2O the NPV8% comes in at $2.87 billion post-tax.  

The ambitious project now shares a capital intensity in line with Thacker Pass and perhaps equally as difficult regulatory and technical challenges. The project will sure test the determination of Europe on its quest for lithium self-sufficiency.

Sibelco – Avalon joint venture finalised

Avalon Advanced Materials and Sibelco have closed a joint venture agreement, first announced in June 2023. Avalon contributes its Canadian hard rock lithium assets in return for ~€34.87 million (~C$51.3 million) JV cash contribution, resulting in a 60/40 Sibelco-Avalon JV. Concurrently, Avalon has issued a private placement to Sibelco raising C$10 million for 19.9% of Avalon’s shares together with a C$3 million secured loan. 

The deal involves the PEA stage Separation Rapids petalite-lepidolite project and the exploration stage Lilypad cesium-tantalum-lithium(spodumene) asset. Avalon is working with Metso to develop a petalite concentrate to lithiumhydroxide processing facility in Thunder Bay, Ontario. 

Although not your typical spodumene M&A event, the JV is a healthy development for Ontario and its lithium-bearing mineral projects which need some encouragement when competing with the likes of Quebec or Western Australia. The implied valuation of C$143/t LCE is decently high when considering market conditions and the rate of progress seen on the project. 

POSCO signs MOU to invest in oilfield brines

POSCO has signed an MOU with a private investment company Invest Alberta Corporation with the intention to invest in oilfield brine lithium extraction projects. 

The scope is broadly set to evaluate exploration and development opportunities with viable commercial processes for lithium extraction. 

Invest Alberta Corporation will provide administrative support, critical resource development information, tax incentives, and networking opportunities. 

In a culture where MOUs are taken seriously, so should the intentions of POSCO here. The company is not shy with trying different approaches, such as its phosphate precipitation technology being put into practice at the Hombre Muerto salar, Argentina. 

Azure Minerals enters binding takeover bid with Chile’s SQM

Azure Minerals has entered a binding scheme implementation deed with SQM for A$3.52 cash per Azure share. Azure’s core asset is 60% ownership of the pre-resource Andover hard rock project in the Pilbara region of Western Australia. The deal implies a project valuation of A$2.71 billion ($1.71 billion) on a 100% basis. The Creasy Group holds the remaining 40% and is free-carried to FID. 

SQM was an early investor in Azure, picking up 19.99% of the company for A$20 million in January this year. Following drill success, the company revealed SQM had made a takeover offer at A$2.31 per share, which was not pursued. 

Andover has an exploration target of 100 to 240 Mt grading between 1.0% to 1.5% Li2O. 

The hefty valuation implies a resource somewhere in the middle of the exploration target. Given the project’s vast network of pegmatite outcrops with initial proof of spodumene mineralization, this outcome would not be unreasonable, however it will be many years before value is realized. Highlighted once again are the great lengths mining insiders are going to secure the rock.

SQM moves in on 1,411 km2 of prospective Pilbara land

SQM has agreed to acquire up to 40% interest in Pirra Lithium, a privately held JV with tenements in the Pilbara region of Western Australia. 

A 30% interest will be acquired from JV partner Hoama Mining for A$2.5 million cash with the remaining 10% earnt via A$3 million JV contribution. 

JV partner Calidus Resources retains its 40% stake by contributing A$2M. Hoama is also contributing additional tenements to the JV on a earn-in basis and may earn back shares now worth ~7.3% should a resource of >20mt @ >1.0% Li2O be delineated. 

SQM appears to target repeat success following its pre-discovery investment into neighboring Azure Mineral’s Andover project.  This strategy is either an objective growth opportunity or continued diversification from its Chilean operations following the country’s nationalization initiatives.

Atlantic Lithium obtains mining license for Ewoyaa project

Atlantic Lithium has been granted a Mining License for its Ewoyaa lithium project in Ghana. 

The terms include an increased Government of Ghana free carried interest of 13% (from 10%) and a 10% royalty rate (from 5%). 

In addition to the previous announced 6% earn-in interest from the Minerals Income Investment Fund of Ghana, Atlantic will own 40.5% of the project once in production, down from 45%. 

For one of Africa’s most promising development projects this is a significant de-risking event. Although the deal destroys value to Atlantic shareholders relative to previously held assumptions, it is a typical compromise observed in late-stage projects especially when the underlying commodity has seen value appreciation.

Azimut / SOQUEM confirm Adina extension with 78m visual spodumene intercept

Azimut Exploration and Quebec province-owned SOQUEM have intercepted spodumene pegmatites at their Galinée project adjacent to the Winsome Resources Adina discovery. 

Intercepts of up to 78.4m were made, the geometry of which is interpreted to be a possible subparallel zone above Adina’s “Main Zone”. Another intercept of 26.85m is interpreted to be an extension directly down-dip of the Main Zone. Assays are pending. 

The company’s drill program has also been extended to >5,000m to further delineate the extensions.

Although not entirely unexpected, the news is notable as it adds color to the significant and evolving story of Winsome’s Adina discovery. 

Vulcan receives A$200m letter of support from Australian ECA

Vulcan Energy has received a conditional, non-binding letter of support for A$200M of debt finance from Export Finance Australia. 

Funds will be used for Phase One of its Zero Carbon Lithium Geothermal DLE project in Germany. To date, similar in-principle agreements have been received from French, Italian and Canadian ECAs. 

Phase One’s DFS CAPEX estimate of €1,496 million is set to be updated in the upcoming Bridging Study. Thereafter, equity financing will formally commence in November 2023. Vulcan is targeting project level debt-to-equity ratio of 65:35%. 

This broad-based ECA support is an encouraging lead-in to equity negotiations, which will be crucial in realizing one of the European continent’s (and the industry’s) most ambitious projects.

Lithium Energy updates Solaroz MRE

Lithium Energy Ltd has published an updated MRE for its Solaroz brine project in the Olaroz salar, Jujuy province, Argentina. 

The contained lithium remains unchanged at ~3.3 Mt LCE, though 2.4 Mt LCE has been upgraded from inferred to indicated category. The total resource brine concentration sits at 305 mg/L (from 310 mg/L).

The resource specific yield dropped ~36%, from 11.4% to 7.3%, upon inclusion of lab porosity test data to correlate with downhole BMR porosity data. The previous MRE relied solely on BMR results from 3 of 8 wells.

Highlighted is the risks in publishing a resource with immature datasets. Here, the old 3.3 Mt LCE inferred resource has effectively reduced to 2.1 Mt LCE only to be offset with the inclusion of additional volume.

Albemarle – Liontown Resources takeover fallout

Albemarle has pulled out of its A$6.6 billion ($4.2bn) takeover bid for Liontown Resources citing “growing complexities associated with executing the transaction”. 

The move follows Gina Rhinehart’s accrual of 19.9% of Liontown shares. The company was placed into a trading halt before releasing details of a funding package aimed at bringing Kathleen Valley into production. 

The package consists of A$376 million equity (via institutional placement and a shareholder purchase plan) and A$760M debt (from a syndicate of commercial banks and government credit agencies). The equity is being raised at A$1.80 per share, a substantial drop from Albemarle takeover offer of A$3.00 per share. 

The eye-watering 40% drop in valuation is a spectacular conclusion to this high-profile M&A saga. Highlighted are the divergent views of lithium production value by strategic interests versus financial speculators at present.

Chilean lithium strategy underway with binding Lithium Power offer

Lithium Power International (LPI) has entered a binding scheme implementation deed with state-owned Codelco for A$0.57 cash per LPI share, with an implied valuation of ~A$385M. LPI’s core asset is the shovel-ready Maricunga brine project in Chile.

The deal is supported by LPI’s board “in the absence of a superior proposal”, and is subject to approval from shareholders, an independent consultant and the Australian Government’s FIRB. The project’s declared resources total 2.88 Mt LCE, while a 2022 DFS using a volume-weighted-average price of ~$24,800/t LCE placed a NPV8% of $1.41Bn post-tax. 

No matter the chosen evaluation metric, the valuation is considerably lower than recent Argentinian deals. This is reflective of an M&A process lacking competitive price discovery, as to bid is to compete directly with government.

Bullish for locking up future supply, the precedent should not inspire confidence for Chilean developers as it speaks more to asset nationalization than it does “private-public partnership”. To be fair, the accompanying Tsingshan news is a solid example of the latter.

Chile selects Tsingshan Antofagasta lithium cathode plant proposal

China’s Tsingshan (under subsidiary Yongqing Technology) will invest $233.2 million in a 120 ktpa lithium iron phosphate (LiFePO4) cathode plant in northern Chile. Chilean President Gabriel Boric recently visited China where the announcement was made. 

As part of the deal, Tsingshan has preferential pricing on 11,244 tpa of lithiumcarbonate from Chile’s SQM (until 2030). Chilean economic development agency Corfo announced a similar deal for Chinese company BYD back in April 2023. 
Tsingshan’s plant will create 668 jobs but is also aimed at “transferring knowledge” to Chile as part the broader National Lithium Strategy. 

The initiative is a bold but clever means to upskill local industry while using favorable access to the word’s lowest cost lithium units as incentive.

Develop Global achieves key milestone in Essential Metals acquisition

Develop Global Limited (DVP) has progressed through a positive shareholder vote for the takeover of Essential Metals (ESS). The transaction conducted via 1:6.18 equity swap valued the project at A$152.6 million when initiated in July 2023. 

The target asset is the scoping study level Pioneer Dome project near Kalgoorlie, Western Australia, which hosts a 11.2 Mt resource at 1.16% Li2O. A number of formalities remain until the transaction is finalized, including a Federal Court of Australia hearing and an independent consultant review, set to conclude on or about the 6th of November 2023. 

First initiated with a failed bid from Tianqi Lithium, the 11-month long sale process received an 93% affirmative vote which is unsurprising given the deterioration of market conditions throughout 2023.

Lithium Ionic publishes PEA and updated MRE for Bandeira project

Lithium Ionic announced its PEA results based on an updated MRE for its Bandeira project in Minas Gerais, Brazil this week. The project now hosts 29.5 Mt grading 1.37% Li2O, including 2 Mt and 11.72 Mt at 1.40% Li2O in measured and indicated categories respectively. 

The company envisages an underground mine feeding a 1.3 Mtpa DMS plant, producing both a spodumene concentrate 5.5% Li2O product along with a SC 3% Li2O product via a DMS tailings recovery circuit. The initial CAPEX is $232.8 million, while the all-in sustaining cost CIF China is estimated at $469/t SC5.5 equivalent. Using a CIF $1,859/t SC5.5 price the NPV8% comes in at $1.6 billion post-tax. 

Another formidable Minas Gerais project is scoped out. What the development plan achieves on such a tiny tenement may surprise skeptics. The DMS-only plant is comparable to Sigma and Latin, however with the sublevel stoping, throughput is capped and as a result CAPEX intensity is considerably higher. Impressively, OPEX is contained at a level between Sigma and Latin which in a global context is not a bad place to be. 

Anson Resources project consolidation adds 45% to MRE

Anson Resources announced a 45% increase to its mineral resource estimate to 1.5 Mt LCE for its Paradox brine project in Utah, USA. The additional resources derive from the acquisition of the neighboring Green Energy LithiumProject.
 
The combined resource now has a lithium concentration in brine of 112 ppm and 3,023 ppm bromine. The advanced stage oilfield brine project aims to use Sunresin’s absorption + membrane direct lithium extraction technology which is operational in China. 

The project consolidation is a positive step for Anson, however, its rank remains among USA peers using “unconventional” technology with high CAPEX intensity, posing challenges.

Core Lithium adds confidence and ~400 kt to BP33 resource

Core Lithium announced a mineral resource upgrade for the BP33 resource, now 89% in measured and indicated categories (from 69%). 

In aggregate, 400 kt of ore has been added for 10.5 Mt at 1.53% Li2O (from 10.1 Mt at 1.48% Li2O) for an incremental +9 kt of contained Li2O. 

The underground target is the second in a line of ore bodies to be exploited at the Finniss lithium operation, near Darwin, Northern Territory, Australia. 

The project now totals 31.1 Mt of resources (not including depletion from Grants). Underground development is subject to a final investment decision in early 2024. 

Any increase in confidence, whether in resource or metallurgy, is especially meaningful to Core at this stage as it recovers from its subpar DMS-only concentrator ramp-up.

Green Technology Metals adds 2 Mt to Root Bay MRE

Green Technology Metals announced a mineral resource upgrade for the Root Bay resource, adding 2 Mt for a total 10.1 Mt grading 1.30% Li2O (from 8.1 Mt at 1.32% Li2O) for an incremental +23 kt of contained Li2O. 

Root Bay is now the company’s largest single resource, spanning 1.3km and remains prospective along strike. There are currently two drill rigs on site testing extensions with an 8,440m 46-hole drill program. 

The momentum of resource building at Root Bay is encouraging, although tonnes continue to be added at considerable depth. Furthermore, the success is at odds with the companies plans to develop the asset after Seymour and accompanying hydroxide facility, a decision likely due to favorable infrastructure connectivity.

Azure Minerals releases metallurgical testwork from its Andover project

Azure Minerals announced sighter metallurgical testwork results from its Andover lithium project in the Pilbara region of Western Australia. Three samples tested from the “Target Area 1” showed sub-economic HLS / DMS results which were not disclosed.

Flotation testwork on one sample at a grind size of P100 212 µm returned a concentrate grade of 5.59% Li2O at 82.37% recovery. Mineralogical analysis on this sample returned 2.05% iron(III) oxide, a key deleterious element. Moving forward, flotation testwork will be a focus as seven drill rigs continue resource definition on site.
The results advocate a fine grind whole-of-ore flotation with magnetic separation, translating to theoretically higher capital and operational costs. In the context of Azure’s recently rejected A$901 million takeover bid from SQM, the news highlights the criticality of metallurgical testwork as a pre-condition to tonnage & grade value realization. This holistic perspective is central to Adamas Intelligence’s analysis process.

Tantalex Resources publishes PEA for the Manono Tailings project

Tantalex Resources announced its PEA results for its Manono Tailings project in the Democratic Republic of the Congo this week.

The company conceptualizes historic tin mine tailings as feed for a 1.6 Mtpa DMS + fines flotation plant, recovering a spodumene concentrate 5.5% Li2O product for shipment out of Dar Es Salaam, Tanzania.

The initial CAPEX is $148 million, while the cash cost FOB is estimated at $1,002/t SC5.5. Using a flat price of $2,800/t SC5.5 FOB, the NPV10% comes in at $764 million pre-tax.

The valuation seems unreliable given aggressive price assumptions, project sizing and 6-year life of mine. However, with more drilling and tin & tantalum credits the plant may be justified, particularly if underpinned by development of the regions principle lithium project (AVZ Minerals).

Sibanye Stillwater gives the green light to Keliber Oy Phase Two

Sibanye Stillwater announced the approval of phase two of its Keliber integrated lithium project in Finland this week. The second phase includes the concentrator and develops the first of four open pits. Phase one’s 15,000 tpa lithium hydroxide refinery kicked off construction in February.

The total project capital estimate was also updated to €656 million, which is 11.5% higher than the €588 million estimate from the October 2022 DFS. Included is €10 million worth of flowsheet upgrades purported to increase recoveries, ensure environmental compliance, and maintain the project’s net-present value.

Continued momentum in Europe’s first integrated hard rock lithium project is encouraging. The late-stage capital cost upgrade is not uncommon particularly in the context of global inflationary pressures.

In a surprise move, China’s top battery manufacturer CATL will supply Tesla with lithium iron phosphate (LFP) batteries for Model 3 production at its newly built $2 billion factory outside Shanghai.

A follow up a year later confirmed the blow was bigly:

Cobalt, nickel free electric car batteries are a runaway success

Few months in, LFP Model 3 already commands 5% of global EV market, counts for 21% of Tesla battery capacity hitting roads–even before key patent expiry next year. 

The iron fist    

It’s January 2024, and unfortunately for said cobalt and nickel bulls the blow from the iron fist is even more severe than feared. And the runaway success has become a battery-powered juggernaut.  

During that month nearly four years ago when Elon Musk first announced the move to LFP batteries, the cathode chemistry contributed less than 50 tonnes to overall battery metal demand, according to Adamas Intelligence, Toronto-based research consultants tracking demand for EV batteries by chemistry, cell supplier and capacity in over 110 countries.

The 50 tonnes LFP batteries used were a fraction of the nearly 13,000 tonnes of lithium, graphite, nickel, manganese and cobalt that found their way into the batteries of electric passenger cars sold during February 2020.

NCM (nickel-cobalt-manganese) and Tesla-Panasonic’s NCA (nickel-cobalt-aluminum) dominated the market for electric cars at the time. LFP fares badly against ternary cathode batteries in terms of energy and power density and therefore charging time and range. LFP’s cold weather performance is also significantly worse, but is hard to beat when it comes to cost, is better at thermal stability not catching fire and lifespan. 

Musk had long voiced concerns about nickel supply – once saying that he called up all the big mining CEOs to ask them to please make (sic) more nickel. Thrifting out cobalt was also a priority at the Texas-based electric car pioneer with Musk saying publicly that Teslas were virtually cobalt-free while simultaneously inking offtakes with Glencore. 

At the time, LFP was associated with tiny and tinny city runabouts like the Wuling Hongguang Mini EV Macaron (not making that up and yes, there is a cabrio version and it’s called the FreZe Froggy in Europe), end-mile delivery vans, buses and other special purpose vehicles. 

Range then as now was a top concern for those looking to electrify and the Wuling Mini EV (a GM joint venture creation now available in the top-of-the-range Gameboy Edition; look it up) only managed around 100 miles in lab conditions. 

The Mini EV surpassed the Tesla Model 3 as China’s bestselling EV in 2020. A sticker price of less than $6,000 clinched it.

Like other outlets, this one was skeptical of the idea that LFP fitted well with Tesla’s luxury and sporty carmaker image.

We were wrong. Sorry again Mr Musk.

Build your nickel, cobalt free dreams

Weeks after Tesla’s Shanghai surprise, LFP received what turned out to be an even bigger boost to its build out.  

In March 2020, BYD “unsheathed to safeguard the world” its Blade batteries. The Shenzhen-based auto and battery manufacturer’s breakthrough technology compensated for the inherent energy density limitations of LFP by cramming more cells into battery packs. 

BYD even said at the event (online only – this was March 2020 after all) it was happy to share the technology with all interested parties. Much was made of the safety of LFP over NCM. BYD shifted its entire range to LFP.

The month of the unsheathing Tesla supplied new owners of its S,3,X models and just launched Y, nine power hours for every one BYD did.  

Today BYD’s full electric range outsells Tesla in good months. Factor in its popular plug-ins – also LFP only – and BYD is nearly 600,000 car lengths ahead of Tesla.  Tellingly, BYD started out as a battery company in the 1990s.

BYD, in which Warren Buffet famously bought a stake in 2008 for $232 million that is still worth some $6 billion after years of steady divestment, sells one out of every five EVs around the world. That’s despite being largely absent from markets outside China (BYD supplies Tesla’s Berlin factory with LFP batteries). 

LFP now also runs the gamut of vehicle segments.  All the way from the Wuling Hongguang Nano EV (for those who found the Mini a bit too bulky) to BYD’s gigantic YangWang U8. The YangWang wagon can do a 360 degree tank turn, float on water and sail at 1.62 knots and retails for $150,000, making it China’s most expensive EV. It also weighs 3-and-half tonnes (another comparative downside of LFP). 

The cheaper of the pack 

During the first ten months of 2023 LFP cornered 31% of the global EV battery market in GWh terms despite virtually zero LFP manufacturing capacity outside China. By the time final registrations for the calendar year are tallied, it may well be a third.

Nickel and cobalt containing batteries are now cut out of over half the Chinese market in GWh terms. With China leading the pack, on a cumulative basis LFP recently overtook NCM 523 (roughly 50% Ni, 20% Co, 30% Mn) as the top cathode technology in the global EV parc. Adamas battery capacity data is based on vehicles delivered to end-customers, not wholesale markets or sales to dealerships.

LFP is now also firmly in the driver seat at Tesla. The vast majority of newly sold Model 3s around the world this year have been LFP powered.  And the LFP-version of the Model Y occupies the top spot in China in terms of battery capacity deployed.  

The cost advantage of LFP shrank considerably as lithium flirted with $80,000 a tonne in 2022, but the decline has been swift since then. In China, spot prices for lithium carbonate are below $16,000 a tonne, hydroxide used in hi-nickel batteries dipped below $15,000 last week and spodumene averaged $1,300 a tonne – all down by 80% in 2023 with losses accelerating into the new year, according to Benchmark Mineral Intelligence.

The bounce caused by the trucker strike in central Africa and worries about DRC elections have turned into a dead cat and cobalt enters 2024 below $30,000 a tonne.

Coupled with the chaotic highs on London nickel markets giving way to a steady decline to the mid $16,000s a tonne on the LME, lithium’s losses have turned LFP cheap and cheerful again. 

Thanks a tonne 

The 50 tonnes of LFP induced demand of February 2020 is now 27,000 tonnes per month, to which you can add another few 100 tonnes from best of both worlds LFP-NCM combo batteries finding their way into more and more EVs.  

From just over 33% in 2019 before LFP’s coming out year, nickel’s share of global active battery material demand has now fallen below 25%.  From a nicely carved niche of 8% in 2019, cobalt clings on at less than 5% now.  Manganese is down from close to 9% to 6%. 

Nickel’s waning battery metal share comes despite the rapid adoption of nickel rich chemistries for NCM batteries. In early versions of NCM the metals were applied in a roughly 1:1:1 ratio. In 2023 this mix makes up 1% and that’s probably dealerships moving stock forgotten on a lot somewhere.  

So far this year NCM 811 with nickel in excess of 80% has cornered more than a fifth of the market in GWh terms, surpassing NCM 523 (roughly 50%+ nickel), according to Adamas. Tesla-Panasonic’s third generation NCA also contains over 80% nickel while NCM cathode chemistries with 90% nickel have been available for a while. 

Since lithium carbonate equivalent tonnages and LCE prices are almost always quoted in industry literature it’s easy to forget that tonne for tonne nickel is in fact THE battery metal and on a 100% metal content basis total demand for cobalt and manganese is not that far behind lithium. (New Year’s resolution: Always divide by 5.323.)  

Or in the words of Musk in 2016 well before LFP: “Technically, our cells should be called nickel-graphite, because the primary constituent in the cell as a whole is nickel. There’s a little bit of lithium in there, but it’s like the salt on the salad.”

Blade runners

So what would a world look like without blade runners like BYD’s Dolphin, Seal, Han, Song and YangWang and Fangchengbao luxury and off-road brands? What if Tesla opted to employ NCM and NCA for all their vehicles?  Or if the LFP cells supplied by CATL – the world’s biggest EV battery maker by a country mile – did not displace a third of its NCM output?

Hold onto your hard hats. It’s not pretty. 

The combined battery capacity of EVs (including conventional and mild hybrids) is likely to surpass 700 GWh in 2023, a 45% gain over 2022 and is more than five times the size it was in 2020 and the basket of battery metals in newly sold EVs should easily surpass one million tonnes, Adamas predicts.

On an annual basis potential nickel tonnes lost this year is likely to top 107,000 tonnes. For cobalt, the metal that went unwanted because of LFP would be more than 38,000  tonnes or roughly 20% of global production last year.  Producers of manganese for the battery supply chain would have enjoyed 58,000 tonnes greater annual demand.

Add tonnes lost to LFP to actual use for the year, and you get to 94,000 tonnes of cobalt demand from the EV sector. That’s more than half of cobalt mined each year ending up in the EV industry. For nickel that number is 375,000 tonnes and manganese 127,000 tonnes. 

Adamas crunched the numbers on the basis of mid-market NCM 5-Series being the battery doing the work of LFP, not NCM 811. Under the latter scenario the what-could’ve-been for nickel miners would naturally be even more eye-watering.       

Also keep in mind the kilograms that end up in every EV are fractions of what would have been procured upstream. 

A factor that is sometimes omitted from estimates of metal requirements is low yields in the conversion and manufacturing process.

CATL disclosed 50% yield in its factories early on, exacerbated by ramp up challenges, but even at a steady state your average cell producer turns as much as 30% of the metals entering factory gates into black mass. Between the mine mouth and the gigafactory many more tonnes are never recovered. 

Battery bulge 

Despite the havoc wreaked by LFP, other trends are nickel and cobalt’s friends. The combined battery capacity of EVs sold last year surged by 45% year on year and is running well ahead of new registrations which are up 33% globally, according to Adamas data.  

Battery capacity is a better gauge of metal demand than unit sales alone and not only are packs bulking up, the shift to high-nickel batteries has some way to go. 

Last year, the sales weighted average full electric vehicle – including LFP-powered units – sold globally contained just under 25 kilograms of nickel in its battery, 7% more than in 2022. The average battery in plug-in hybrids, which are soaring in popularity, particularly in China, had 6.4kg of the devil’s copper, a 12% year on year jump.  

The big battery bulge is also keeping cobalt weightings from falling more quickly amid ongoing thrifting. On average full electric cars sold globally in 2023 contained 4.8 kilograms and plug-in hybrids 2.2 kg up 5% and 2%.

Nickel’s not classy 

It’s perhaps too easy to blame LFP for today’s Ni-Co situation although it was earlier predictions for spectacular demand growth from electric cars that spurred much of the investment in new supply and in the case of nickel, new industrial processes, in the first place.

Global nickel exploration (and by extension cobalt) budgets, according to S&P Global Market Intelligence are up 19% last year to a remarkable $732 million, nearly a quarter of what is being spent expanding or finding new copper resources.  Nickel only reached annual output of 3 million tonnes last year and that’s after years of robust growth – the copper industry is nearly eight times the size. 

Most of the nickel mined around the world still ends up as stainless steel and soft demand from the construction and manufacturing sector on the all-important Chinese market has seen vast surpluses in non-class 1 nickel – not suitable for the battery supply chain – build up.

However, when it comes to demand from the EV sector, nickel class matters less today. Large chunks of the China-Indonesia nickel-pig-iron industry are pivoting towards LME and battery -friendly products (not so environmentally friendly though).

A rapid ramp up in Indonesia nickel mining, thanks to a slew of new high-pressure-acid-leach (HPAL) projects (even attracting investment from as far afield as Dearborn) which are about as environmentally conscious as they sound, only adds to the weak fundamentals. Indonesia is already responsible for half of global nickel output and Chinese investment in the archipelago is not slowing. 

Cobalt blues

Cobalt probably had most to gain from the EV revolution. It’s a small highly concentrated market, with few big players and sparkling per tonne prices.  

Indeed, Glencore was the first major to herald a new dawn for mining thanks to electric cars, telling investors in 2017 that “as early as 2020, when electric vehicles would still make up only 2% of new vehicle sales, related metal demand already becomes significant.”

That prediction proved conservative – global penetration reached over 5% in 2020.

But cobalt thrifting had become more of a priority after the 2018 spike to above $100,000 tonne scared automakers and ESG-transgression hunters went looking for breaches in the Congo.

Nearly all cobalt supply is a byproduct of nickel and copper mining. As far back as 2019, BMW’s offtakers pounced on what is the only primary cobalt mine in the world. Jervois halted construction on its Idaho project March last year, but Canada’s Fortune Minerals may provide an opportunity for enterprising automakers.

In an irony that would not be lost on cobalt promotors, rumours are swirling that Glencore is considering suspending production at Mutanda again to shore up cobalt prices (as it is, Mutanda’s output is down 15% due to lower grades). 

It worked in 2019 when Mutanda still had 20% of the market, but new supply not just from the Congo but also Indonesia where laterites come with a thick layer of cobalt would mute the impact this time around.

Cobalt just does not have much going for it at the moment. Vast cobalt stockpiles from Tenke Fungurume in the DRC are still being sold downstream and the copper-cobalt mine’s Chinese owner’s expansion plans are well under way. Tenke could soon rival Mutanda as the world’s largest cobalt mine and CMOC overtook Glencore as the world’s number one cobalt producer in 2023. 

A new railway through Zambia to Tanzania’s Dar es Salaam port will also alleviate cobalt’s lasting logistics problems, which have underpinned prices in the past. 

EVs overtook all else when it comes to cobalt demand a few years ago now, so a fall-off at the margins coupled with the small size of the market can quickly and thoroughly depress prices.  

Manganese meh

Manganese is often overlooked in the battery metals space and the excitement stirred by Volkswagen’s newly-formed PowerCo battery subsidiary back in March 2021 has long dissipated.  At the time, the world’s no 2 carmaker said it’s building six new plants and is looking at high-manganese batteries for its mid-range vehicles. 

But last month Volkswagen said a fourth European battery factory is postponed indefinitely, much to the relief of Czech taxpayers who unlike their Canadian counterparts now won’t have to shoulder billions in subsidies and tax breaks for the honour of having a large battery factory.  

Tesla has also expressed interest in manganese, with Musk saying last year high-manganese batteries could be an alternative to LFP, but there’s been little news since then. 

Besides, with ore production of 20 million tonnes per year, LMFP and other high-manganese chemistries were never going to light a fire under manganese at the mining level. 

That said, downstream battery ready compounds do become scarce from time to time and manganese sulfate in China has not succumbed the way lithium, cobalt and nickel have. Manganese sulphate is down 29% over the last year, changing hands for less than $700 a tonne in China.  

US, EU 2. Affordable Chinese EVs 0

Other development that could keep the LFP wolf from the door on markets outside China a bit longer are geopolitics and a growing mercantilist approach to trade in the world’s largest economies. 

While Chinese-made EVs have close to zero presence in the US, Europeans can and often do choose Geometry, HiPhi, Lynk & Co, Ruixing, Seres, Aeolus, Zeekr,  XPeng, Weltmeister (one of China’s earliest EV startups ribbing Wolfsburg and co), and others over homegrown automakers like Volkswagen, Peugeot and Fiat. 

Get behind the wheel of a Tesla, Citroen, BMW, Dacia, Honda, Renault or Smart and there’s also a good chance you’re driving a made-in-China vehicle.  Last year in terms of battery capacity rolled onto roads, nearly a fifth of the EVs bought by Europeans were made in China.  

The EU’s probe of Beijing’s subsidies to its EV industry is all but inevitable to result in tariffs and other measure to limit access to EU car markets while in the US, long-awaited new rules on so-called foreign entities of concern (FEOC) all but eliminates direct Chinese involvement. 

In 2024 EVs that contain any battery components manufactured or assembled by China will not be eligible for the US federal tax credit, currently a maximum of $7,500 per vehicle. The incentive cut-off date for any lithium, nickel, cobalt and graphite or other battery metals produced by, or which make their way through China, is 2025. Rare earths used in nearly 90% of all EV motors are already subject to IRA rules.  

Not much more than a handful of electric cars sold in the US would qualify. On top of that a bipartisan group of lawmakers also recently asked for Trump era duties of 25% on Chinese automobiles to be doubled and to close any loopholes should China locate factories in Mexico, for instance. 

The new guidelines may allow US automakers to cut licensing and technology deals with Chinese companies. This should give a green light (although that’s far from clear) to ventures like Ford’s partnership with CATL for its LFP plant in Michigan, and Tesla’s venture in Texas with the Chinese behemoth.  

Ford made much of the fact that BlueOval – which is now going to be 40% smaller than originally envisaged – would produce LFP batteries, calling it a “key part” of its US EV plans allowing it to “scale more quickly, making EVs more accessible and affordable for customers.” Given the success of Tesla and BYD with LFP, US automakers are bound to follow in their tracks. 

Benchmark Mineral Intelligence sees LFP factory growth outside China at factors more than NCM build-out. But that would not nearly be enough for the rest of the world to embrace the technology at the same speed and scale as China, which itself is expected to grow LFP cathode capacity by more than three times by the end of the decade, according to the London-headquartered research firm and pricing agency. 

FEOC FOMO

The new EV provisions pitted automakers against mining firms with the former arguing that barring China from directly participating in the US mine-to-megawatt supply chain would be close to impossible given the short timelines and would delay EV adoption by Americans by pushing up costs. 

The FEOC rules are intended to complement the Inflation Reduction Act’s requirement that any EV subsidy is conditional on a percentage of all material inputs being sourced either domestically or from a US free trade partner. Currently the threshold is 30% and will rise to 80% in 2027.

An exception was made for foreign subsidiaries of privately-owned Chinese companies in friendly countries, like Australia and Indonesia, but even these entities may fall afoul of the rules if they are deemed to be under the control of the Chinese government.  Even off-take agreements with Chinese buyers – and for EVs they act as close to a monopsony – may be deemed to bring too much CCP influence to bear.

Miners, justifiably, want rules that speed up and incentivize domestic production, not least because the time from resource discovery to mine production is often counted in decades.  The convoluted US permitting system also provides almost zero certainty that investments in new mines will pay off – no matter to what extent miners dot environmental i’s and cross social license to operate t’s.  

The one-two punch by US and European authorities may end up bringing the much talked about – and yearned for – premium pricing for metals and minerals supplied by Western firms. What it won’t do is make EVs cheaper or reignite sales growth in these markets.

The road not travelled 

While nickel-rich EV batteries will always have a large niche, it’s difficult to shake a sense of what could’ve been: 

The latest and greatest Model Y – the global bestselling EV on a GWh basis – coming out of Tesla’s Texas factory has a NCM 811 battery which uses kilograms of cobalt that approach double digits and more than 50kg of nickel. The Cybertruck uses NCA for now, but the bestselling truck in the US, the Rivian R1T is moving to LFP so that the California startup can stop making up in volume what they lose per sale.

Imagine selling 20 million a year – as Musk promised – of these workhorses. Instead, the unwanted tonnes of Ni-Co-Mn will only pile higher and higher. Or stay buried.  

According to China’s automobile association, November was the first one million month for electric car sales and December is likely to top that. The US market is expanding by more than 50% year on year and penetration rates are still in single digits.  

Germany is betting its industrial future, if not its national pride, on the ability to catch up to China in the electric car business. But at the moment three gasoline powered cars leave autohaus lots for each with a charging cable in the frunk. 

South Korea is the world’s sixth largest EV market in terms of battery power rolling onto roads in 2023 and the only country that rivals China in battery output despite the absence of LFP capacity. Yet EV penetration is 11% south of the DMZ. As for Japan, its power hours fall short of Belgium’s.             

How much of China’s lead can be ascribed to LFP remains up for discussion considering all the moving parts in the EV supply chain. But it’s safe to say China would not have been able to deploy more battery power in electric cars last year than the next 50 countries combined if it hadn’t. 

Sodium on the podium

Vehicle electrification is the biggest thing to happen to the automotive and mining industries in a century. The green energy transition more broadly is allowing mining to step outside the shadow of oil and gas. 

Crucially, for the first time metal extraction aligns with the goals of the environmental movement (even though the message does not seem to be getting through). 

But the story of how LFP crashed into battery metals illuminates something else about mining. 

Apart from gold which is money, the arrival of EVs has exposed the industry to the vagaries of technological change like never before. 

LFP has severely dented nickel and cobalt prospects and after all metal pricing is all about the marginal tonnes. The next thing to come out of a lab could turn the mine that took decades to build into a white elephant. Substitution has and will keep miners awake at night.  

Can sodium-ion batteries do to lithium-ion what iron phosphate did to nickel and cobalt?

BYD broke ground on its first $1.3 billion sodium-ion battery plant just today. Three former Tesla executives have set up a sodium-ion company and the first sodium-ion EVs could go on sale soon and sodium could also salt the field of stationary energy storage. 

Until now graphite has been immune to changing chemistries, but the hard carbon anode used for sodium-ion cells can be made from food scraps. Can solid state lithium batteries, which can also do away with graphite for the anode, nix the parts sodium doesn’t?

Crude awakening

Unlike in mining, oil and gas demand destruction is not an intrinsic part of technological progress – at least not one that can play out over a few short years like cobalt and nickel free cells. As the outcome of COP28 showed, it must be imposed.  

Indonesia, Russia and the Philippines control some three-quarters of global nickel supply, 70% of the world’s cobalt comes from the Congo and additional tonnes will mostly come from Indonesia. 

If copper – ground zero for the energy transition – was crude and output could be turned up or down after a secretariate meeting in Vienna, Chile would be Saudi Arabia and all the Gulf states combined. It would be Peru’s sovereign wealth fund dangling $1 billion in front of a French soccer player. 

But as platinum group metal watchers must realise by now, establishing an Opec+ style cartel will forever be a pipe dream in mining. 

Nickel is not the new gold and no, lithium is not the new oil. 

Yet here we are. 

Back at the salt mines. 

A year where the gold price sets an all-time record should be unalloyed good news for the mining and exploration industry, which despite all the buzz surrounding battery metals and the energy transition still represents the backbone of the junior market.

Metal and mineral markets are volatile at the best of times – the nickel, cobalt and lithium price collapse in 2023 was extreme but not entirely unprecedented. Rare earth producers, platinum group metal watchers, iron ore followers, and gold and silver bugs for that matter, have been through worse.

Mining companies have become better at navigating choppy waters, but the forced closure of one of the biggest copper mines to come into production in recent decades served as a stark reminder of the outsized risks miners face over and above market swings.

Panama shuts down giant copper mine

After months of protests and political pressure, at the end of November the Panama government ordered the closure of First Quantum Minerals’ Cobre Panama mine following a ruling by the Supreme Court that declared the mining contract for the operation unconstitutional.

Public figures including climate activist Greta Thunberg and Hollywood actor Leonardo Di Caprio backed the protests and shared a video calling for the “mega mine” to cease operations, which quickly went viral. 

FQM’s latest statement on Friday said Panama’s government hasn’t provided a legal basis to the Vancouver-based company for pursuing the closure plan, a plan that the industries ministry of the central American nation said will only be presented in June next year.

FQM has filed two notices of arbitration over the closure of the mine, which has not been operating since protesters blocked access to its shipping port in October. However, arbitration would not be the company’s preferred outcome, said CEO Tristan Pascall.

In the aftermath of the unrest, FQM has said it should have better communicated the value of the $10 billion mine to the wider public, and will now spend more time engaging with Panamanians ahead of a national election next year. FQM shares have bounced in the past week, but is still trading more than 50% below the high hit during July this year.

Projected copper deficit evaporates

Cobre Panama’s shutdown and unexpected operational disruptions forcing copper mining companies to slash output has seen the sudden removal of around 600,000 tons of expected supply would, moving the market from a large expected surplus into balance, or even a deficit.

The next couple of years were supposed to be a time of plenty for copper, thanks to a series of big new projects starting up around the world.

The expectation across most of the industry was for a comfortable surplus before the market tightens again later this decade when surging demand for electric vehicles and renewable energy infrastructure is expected to collide with a lack of new mines.

Instead, the mining industry has highlighted how vulnerable supply can be — whether due to political and social opposition, the difficulty of developing new operations, or simply the day-to-day challenge of pulling rocks up from deep beneath the earth.

Lithium price routed on supply surge

The price of lithium was decimated in 2023, but predictions for next year are far from rosy. Lithium demand from electric vehicles is still growing rapidly, but the supply response has overwhelmed the market.

Global lithium supply, meanwhile, will jump by 40% in 2024, UBS said earlier this month, to more than 1.4 million tons of lithium carbonate equivalent.

Output in top producers Australia and Latin America will rise 22% and 29% respectively, while that in Africa is expected to double, driven by projects in Zimbabwe, the bank said.

Chinese production will also jump 40% in the next two years, said UBS, driven by a major CATL project in southern Jiangxi province.

The investment bank expects Chinese lithium carbonate prices could fall by more than 30% next year, dipping as low as 80,000 yuan ($14,800) per tonne in 2024, averaging at around 100,000 yuan, equivalent to production costs in Jiangxi, China’s biggest producing region of the chemical.

Lithium assets still in high demand

In October, Albemarle Corp. walked away from its $4.2 billion takeover of Liontown Resources Ltd., after Australia’s richest woman built up a blocking minority and effectively scuppered one of the largest battery-metals deals to date.

Eager to add new supply, Albemarle had pursued its Perth-based target for months, eying its Kathleen Valley project — one of Australia’s most promising deposits. Liontown agreed to the US company’s “best and final” offer of A$3 a share in September — a near 100% premium to the price before Albemarle’s takeover interest was made public in March.

Albemarle had to contend with the arrival of combative mining tycoon Gina Rinehart, as her Hancock Prospecting steadily built up a 19.9% stake in Liontown. Last week, she became the single largest investor, with enough clout to potentially block a shareholder vote on the deal.

In December, SQM teamed up with Hancock Prospecting to make a sweetened A$1.7 billion ($1.14 billion) bid for Australian lithium developer Azure Minerals, the three parties said on Tuesday.

The deal would give the world’s no.2 lithium producer SQM a foothold in Australia with a stake in Azure’s Andover project and a partnership with Hancock, which has rail infrastructure and local experience in developing mines.

Chile, Mexico take control of lithium

This week Chile’s President Gabriel Boric hailed the formation of a new government-controlled lithium partnership that fuses assets of state-run Codelco with private miner SQM, as the leftist leader advances his push for greater public control over the battery metal. 

SQM said it would partner with copper giant Codelco for the future development and production of the metal in the Atacama salt flat, in a tie-up set to kick off in 2025 and run through 2060.

The deal gives Codelco majority control in line with the president’s plans announced in April to strengthen state control of lithium to generate more broad-based benefits from surging demand and to allow only public-private partnerships to participate in its exploitation.

For much of the year, the firms had been locked in talks over the future of lithium mining and production in the salt flat, located in Chile’s north and the home to 90% of the nation’s lithium reserves. The South American country has the world’s largest proven lithium reserves.

Mexican President Andres Manuel Lopez Obrador in February signed a decree handing over responsibility for lithium reserves to the energy ministry.

Lopez Obrador urged the private sector to work with the new state miner, saying the size of the investment needed means the government needs partners.

But analysts argue that companies are more likely to focus near-term investments in Chile or Argentina’s sprawling salt flats, where industries are more established and policies more market-friendly.

In August, Chinese lithium giant Ganfeng said Mexico’s mining authorities had issued a notice to its local subsidiaries indicating nine of its concessions had been terminated.

Gold to build on record-setting year

The New York futures price of gold set an all-time high at the beginning of December and looks set to surpass the peak going into the new year. 

London’s gold price benchmark hit an all-time high of $2,069.40 per troy ounce at an afternoon auction on Wednesday, surpassing the previous record of $2,067.15 set in August 2020, the London Bullion Market Association (LBMA) said.

“I can think of no clearer demonstration of gold’s role as a store of value than the enthusiasm with which investors across the world have turned to the metal during the recent economic and geopolitical turmoils,” said LMBA’s chief executive officer Ruth Crowell. 

JPMorgan predicted a new record back in July but expected the new high to occur in the second quarter of 2024. The basis of JPMorgan’s optimism for 2024 – falling US interest rates – remains intact:

“The bank has an average price target of $2,175 an ounce for bullion in the final quarter of 2024, with risks skewed to the upside on a forecast for a mild US recession that’s likely to hit sometime before the Fed starts easing.”

Even as gold climbed new peaks, exploration spending on the precious metal dipped. A study published in November overall mining exploration budgets fell this year for the first time since 2020, dropping 3% to $12.8 billion at the 2,235 companies that allocated funds to find or expand deposits.

Despite the sparkling gold price, gold exploration budgets, which historically have been driven more by the junior mining sector than any other metal or mineral, dropped by 16% or $1.1 billion year-on-year to just under $6 billion, representing 46% of the global total. 

That’s down from 54% in 2022 amid higher spending on lithium, nickel and other battery metals, a surge in spending on uranium and rare earths and an uptick for copper. 

Mining’s year of M&A, spin-offs, IPOs, and SPAC deals

In December, speculation about Anglo American (LON: AAL) becoming the target of a takeover by a rival or a private equity firm mounted, as weakness in the shares of the diversified miner persisted.

If Anglo American doesn’t turn operations around and its share price continues to lag, Jefferies analysts say they can’t “rule out the possibility that Anglo is involved in the broader trend of industry consolidation,” according to their research note.

In October, Newcrest Mining shareholders voted strongly in favour of accepting the roughly $17 billion buyout bid from global gold mining giant Newmont Corporation.

Newmont (NYSE: NEM) plans to raise $2 billion in cash through mine sales and project divestments following the acquisition. The acquisition brings the company’s value to around $50 billion and adds five active mines and two advanced projects to Newmont’s portfolio.

Breakups and spin-offs were also a big part of 2023 corporate developments.

After being rebuffed several times in its bid to buy all of Teck Resources, Glencore and its Japanese partner are in a better position to bring the $9 billion bid for the diversified Canadian miner’s coal unit to a close. Glencore CEO Gary Nagle’s initial bid for the entire company faced stiff opposition from Justin Trudeau’s Liberal government and from the premier of British Columbia, where the company is based.

Vale (NYSE: VALE) is not seeking new partners for its base metals unit following a recent equity sale, but could consider an IPO for the unit within three or four years, CEO Eduardo Bartolomeo said in October.

Vale recruited former Anglo American Plc boss Mark Cutifani in April to lead an independent board to oversee the $26-billion copper and nickel unit created in July when the Brazilian parent company sold 10% to Saudi fund Manara Minerals.

Shares in Indonesian copper and gold miner, PT Amman Mineral Internasional, have surged more than fourfold since listing in July and are set to keep rising after its inclusion in major emerging market indexes in November.

Amman Mineral’s $715 million IPO was the largest in Southeast Asia’s biggest economy this year and counted on strong demand by global and domestic funds.

Not all dealmaking went smoothly this year.

Announced in June, a $1 billion metals deal by blank-cheque fund ACG Acquisition Co to acquire a Brazilian nickel and and a copper-gold mine from Appian Capital, was terminated in September.

The deal was backed by Glencore, Chrysler parent Stellantis and Volkswagen’s battery unit PowerCo through an equity investment, but as nickel prices slumped there was a lack of interest from minority investors at the stage of the $300 million equity offering which ACG planned as part of the deal.

Talks in 2022 to acquire the mines also fell through after bidder Sibanye-Stillwater pulled out. That transaction is now the subject of legal proceedings after Appian filed a $1.2 billion claim against the South African miner.

Uranium upsurge

In late November uranium prices scaled $80 per pound for the first time in 15 years, driven by a resurgence in demand for nuclear power and supply disruptions.

Global yellowcake supply might reach 145 million lb. this year or next according to the World Nuclear Association. But annual demand is already at 180 million lb. and the industry group expects it to nearly double to 300 million lb. by 2040.

Some 60 nuclear plants are under construction globally and more are planned. Countries like Germany and Japan that considered phasing them out are reversing course.

Activity in northern Saskatchewan’s Athabasca uranium hotspot is intensifying. NexGen received environmental approval for its Rook I project in November, the province’s first OK for such a project in two decades. Denison Mines released a feasibility study for its Wheeler River project before investing in junior explorer F3 Uranium’s Patterson Lake North property.

Also, IsoEnergy took over Consolidated Uranium in September. Uranium Energy spent C$570 million over the past two years buying Uranium One, UEX Corp. and Rio Tinto’s Roughrider project. Cameco and Brookfield Renewable Partners in October closed their deal to buy Westinghouse’s nuclear plant construction unit for $7.9 billion.

Nickel nosedive

In April, Indonesia’s PT Trimegah Bangun Persada, better known as Harita Nickel, raised 10 trillion rupiah ($672 million) in what was then Indonesia’s largest initial public offering of the year. 

Harita Nickel’s IPO quickly turned sour for investors, however, as prices for the metal entered a steady and long decline. Nickel is the worst performer among the base metals, nearly halving in value after starting 2023 trading above $30,000 a tonne.

Next year is not looking great for the devil’s copper either with top producer Nornickel predicting a widening surplus due to lacklustre demand from electric vehicles and a ramp-up in supply from Indonesia, which also comes with a thick layer of cobalt:

“…due to the continuing destocking cycle in the EV supply chain, a greater share of non-nickel LFP batteries, and a partial shift from BEV to PHEV sales in China. Meanwhile, the launch of new Indonesian nickel capacities continued at a high pace.” 

Palladium also had a rough year, down by more than a third in 2023 despite a late charge from multi-year lows hit at the start of December. Palladium was last trading at $1,150 an ounce.

China flexes its critical mineral muscle

In July China announced it will clamp down on exports of two obscure yet crucial metals in an escalation of the trade war on technology with the US and Europe.

Beijing said exporters will need to apply for licenses from the commerce ministry if they want to start or continue to ship gallium and germanium out of the country and will be required to report details of the overseas buyers and their applications.

China is overwhelmingly the top source of both metals — accounting for 94% of gallium supply and 83% of germanium, according to a European Union study on critical raw materials this year. The two metals have a vast array of specialist uses across chipmaking, communications equipment and defence.

In October, China said it would require export permits for some graphite products to protect national security. China is the world’s top graphite producer and exporter. It also refines more than 90% of the world’s graphite into the material that is used in virtually all EV battery anodes, which is the negatively charged portion of a battery.

US miners said China’s move underscores the need for Washington to ease its own permit review process. Nearly one-third of the graphite consumed in the United States comes from China, according to the Alliance for Automotive Innovation, which represents auto supply chain companies.

In December, Beijing banned the export of technology to make rare earth magnets on Thursday, adding it to a ban already in place on technology to extract and separate the critical materials.

Rare earths are a group of 17 metals used to make magnets that turn power into motion for use in electric vehicles, wind turbines and electronics.

While Western countries are trying to launch their own rare earth processing operations, the ban is expected to have the biggest impact on so-called “heavy rare earths,” used in electric vehicle motors, medical devices and weaponry, where China has a virtual monopoly on refining.

According to a new study by S&P Global Market Intelligence, overall mining exploration budgets fell this year for the first time since 2020, dropping 3% to $12.8 billion at the 2,235 companies that allocated funds to find or expand deposits.

Gold budgets, which historically have been driven more by the junior mining sector than any other metal or mineral, dropped by 16% or $1.1 billion year-on-year to just under $6 billion, representing 46% of the global total. 

That’s down from 54% in 2022 amid higher spending on lithium, nickel and other battery metals, a surge in spending on uranium and rare earths and an uptick for copper. 

But the dominant role gold plays in exploration – and therefore the industry’s future remains clear from the fact that the combined money flowing into green energy transition metals (or future facing commodities as some majors like to label them) was not enough to offset the decline in gold.

Gold exploration budgets, like most mined commodities, peaked in 2012 when the precious metal accounted for nearly half the more than $20 billion spent. 

Gold juniors represent 38% of the allocation to exploration this year and reduced spending by the sector was responsible for the bulk of the overall reduction in budgets. 

It also follows the years-long trend in the gold sector identified by S&P Global where exploration has shifted to minesites and away from grassroots exploration. 

The top region for gold exploration thanks in no small part to its vibrant junior sector, Canada, saw a roughly $400 million drop in budgets. Only in Asia Pacific did allocated resources increase compared to 2022 although not by much and from a low base. 

Junior jaundice 

The pullback among gold explorers represents a significant drop compared to last year when the sector spent more than the majors searching for the precious metal. 

It is an indication of the difficulty junior exploration companies have had over the last year or so of tapping markets for new funding. 

On a quarterly basis, gold financing for junior and mid-size mining companies was the lowest in Q3 since the September quarter of 2018.

Overall financing, excluding majors at $8 billion year-to-date was the lowest since 2019 and less than half raised over the same period last year. 

Like with exploration budgets, the overall decline in financings came despite mining companies involved in specialty commodities managing to raise 46% more in the year to end-September than the same period last year.  

Overall the 41,086 holes drilled around the world from January to mid-Oct 2023 in search of non-ferrous metals and minerals represent a 23% decline compared to last year. 

Gold drilling is down by 36% over the same period. With the gold price back in touch with $2,000 an on geopolitical safe have demand and the weakness across base and battery metals, it’s not inconceivable that gold’s share of exploration budgets top 50% again soon.

Basic base metals    

Base metal budgets increased to 33% of the total, led by a $327 million increase in spending on copper, the metal at the centre of the energy transition, and a significant $117 million jump in outlays to find or expand nickel deposits.  

The bulk of nickel exploration funds are directed at Canada where budgets for the stainless steel alloy and battery metal are now approaching $300 million.

“You’d have to go back to 2006/2007 to find a year in which the collective base metals attracted more money for exploration than gold,” says Kevin Murphy, research director metals and mining S&P Global Commodity Insights. 

Copper in 2023 represents less than a quarter of mining exploration spending despite a double digit gain from 2022 to $3.12 billion, mostly by major miners and not juniors.

Murphy says copper exploration lagged behind other metals when it came to the shift of exploration to minesites, but this year despite growing budgets overall grassroots exploration for copper declined compared to 2022. 

Nickel exploration budgets are also being spent on minesites with more than half of the $732 million budgeted this year aimed at replenishing reserves and extending mine lives. Majors carry out 54% of global nickel exploration, a rising share.     

Lithium is the new old gold

Lithium exploration budgets almost doubled this year after doing the same in 2022. In total $830 million was allocated to finding and expanding lithium resources in 2023, the third most explored non-ferrous commodity.

“Lithium is a young commodity for both exploration and development and it reflects this in a lot of different ways,” says Murphy.  

The sector is entirely dominated by juniors at the moment with 82% of the exploration work carried out by smaller companies. “Whenever there’s a lot of interest in a commodity, the juniors tend to follow suit.”

The undeveloped nature of the lithium mining industry also shows up in the stages of development with grassroots, late stage exploration and feasibility making up the vast majority of field work being carried out. 

A not insignificant portion of exploration for lithium is being carried out by governments which at 4% works out to more than $30 million from public coffers.  

Large budget increases were seen all over the world led by Latin America and specifically  Argentina, which hosts the largest undeveloped resources of the battery metal. 

Australia produces half the world’s lithium currently and it’s the second most funded region for exploration followed by Canada, where budgets have doubled year on year to in excess of $160 million. 

Exploration in the US also jumped substantially – the country is home to the second largest undeveloped resource of lithium globally.   

Murphy expects lithium budgets to grow “although it’s tough to say just how much, simply because a lot of this is going towards late stage and feasibility work”:

“And of course, once a feasibility study gets completed, that’s a very large expenditure that falls away. There is the potential that we could see a small dip in lithium in the coming years.”

Also impacting future funding of lithium exploration is a precipitous and unrelenting slide in prices for the metal, now around $20,000 a tonne, from a peak north of $80,000 in November last year. 

Uranium upsurge, REE ramp up

S&P Global now tracks 121 active projects grouped under what it calls specialty commodities and includes lithium, cobalt, graphite, rare earth, uranium and others, a near six-fold increase from two years ago. 

Platinum group metals and diamond exploration has been on a downtrend for about two decades, according to the research company and until recently that was also true for uranium.

However a rebound in spot prices for the nuclear fuel – now trading at its highest in more than a decade after scaling $70 a pound last month – saw a more than $35 million bump in exploration budgets in 2023. 

There’s growing realisation, even among environmental groups, that the move away from fossil fuels is too heavy a lift for unreliable wind and solar energy alone. 

Rare earths, also expected to play an important part in the green energy transition due to extensive use in electric motors and wind turbines, received a massive bump in funding for exploration in 2023 given the industry’s overall size – just shy of $50 million more than last year.   

At the end of Q1 2022, the MINING.COM TOP 50* ranking of the world’s biggest miners hit an all-time record of a collective $1.75 trillion as copper spent time above $10,000 a tonne, real nickel trades were being made above $40,000, lithium shipped for over $60,000 and everything from gold and platinum to uranium and tin were rallying hard. 

Uranium prices have doubled since then to above $60 a pound, tin is also trading higher, although well below its March 2022 peak while gold’s recent safe haven rally means the precious metal is also trading higher compared to March 2021.

Iron ore, where the top diversified mining companies dig for most of their profits, has also held up remarkably well, trading at $120 a tonne this week, little changed from end-June.  

Base and battery metals however have entered a deep slump since those heady days. Copper, zinc and aluminium are firmly in bear market territory down by a fifth or more, nickel and palladium investors are nursing 40%+ losses, cobalt is nearing record lows and lithium prices are hovering above $20,000.

After defying weakness on metals markets due to high expectations of strong future demand, particularly for copper, lithium and nickel, mining stock valuations have now succumbed. 

At the end Q3 2023, mining valuations for the industry’s top tier have slumped a total of $516 billion since the all-time highs. Declines so far this year total $145 billion for a combined market value of $1.38 trillion – back to levels seen at the end of September 2021.  

Just how bad sentiment is across the board is evident from the best performer list for Q3, which includes for the first time three counters which lost ground over the period. 

Archipelago ascent

The first Indonesian company to make it into MINING.COM’s ranking of world’s 50 most valuable mining companies, Amman Minerals Internasional, has surged 213% in US dollar terms since its July debut in Jakarta to reach a market capitalisation just shy of 450 trillion rupiah, or more than $28 billion.

Amman Minerals is the owner and operator of the giant Batu Hijau copper and gold mine in production since the turn of the millennium and is developing the adjacent Elang project on the island of Sumbawa. 

Elang is one of the world’s largest undeveloped copper and gold porphyry deposits and is currently in the feasibility stage. Elang boasts 4.7 million tonnes of proven and probable copper reserves and over 15 million ounces of gold.

Indonesia has become a red-hot IPO market this year and Amman was the largest of the year so far raising more than $700m in its IPO, and now sits at number 11 on the ranking. 

Bloomberg reports Amman Minerals’ ascent has minted at least six new billionaires, including chairman Agus Projosasmito, whose stake in the company is now worth $2.7 billion. The miner’s spectacular market performance has also added $4 billion to the net worth of Anthoni Salim, who helms one of Indonesia’s largest conglomerates, taking the tycoon’s paper billions to within shouting distance of double digits.

Indonesia’s other major mining IPO, Harita Nickel, is on a different trajectory altogether. Listed on the Indonesian Stock Exchange  in April raising $672m, the company has had a tough go of it and the stock has shed more than 60% since then as nickel prices continue to decline.

Lithium losses

The strength of the lithium sector outside China had been remarkable given the precipitous decline in prices for the battery metal since hitting all time highs above $80,000 a tonne in November last year. 

But during Q3 the slump in prices of the battery raw material caught up with the six stocks represented in the Top 50, for a combined loss of over $30 billion in market cap over the three month period to just over $70 billion. 

Measured from their 52-week highs the correction in the sector has been brutal – Perth-based Pilbara Mineral has bled 31% in market cap, making it the best performer. Mineral Resources has given up 37% while the declines for Albemarle, SQM, Ganfeng and Tianqi have been over 50%.  

Pilbara Minerals, which unlike its peers is clinging onto year-to-date gains,  joined the Top 50 last quarter and brought the number of companies based in the Western Australia capital to five, surpassing the tally of Vancouver, British Columbia as the top home base in the ranking.

The chances of another Perth-based lithium miner, IGO, of entering the Top 50 has dimmed. With a market cap of $5.4 billion, the company is down to the mid-60s in the ranking. 

The merger of US-based Livent and Australia-Argentina lithium miner Allkem, expected to close before 2023 is out, may also not be enough for the combined firm to enter the Top 50. Together the two companies are now worth $7.4 billion, which would edge out AngloGold Ashanti for the last spot, but the fortunes of lithium and gold going into 2024 are diverging widely.  

The blocking tactics of Gina Rhinehart’s Hancock Prospecting against the takeover of Liontown Resources by Albemarle turned out to be successful with the US lithium giant deciding to walk away from the deal this week.

Liontown’s 127% surge this year afforded the Perth-based company a market value of $4 billion before the collapse of the takeover which halted trading in the stock. Liontown on Thursday said it has secured the necessary funding to bring its Kathleen Valley project into production.

Enriched uranium

In September, uranium scaled $60 per pound for the first time since 2011. The breakthrough for the nuclear fuel comes after a decade in the doldrums following the Fukushima disaster in Japan.

The World Nuclear Association predicts world reactor requirements for uranium to surge to almost 130,000 tonnes (~285 million pounds) in 2040. That’s up from an estimate of 65,650 tonnes in 2023. 

A significant portion of the WNA’s upward growth adjustments can be attributed to the accelerated adoption of Small Modular Reactors (SMRs) as part of decarbonisation efforts for a range of industries from shipping to data centres with powering remote mine sites near the top of the list for SMR potential.

Canada’s Cameco makes the best performer list over the three months again in Q3 after spending much of the post-Fukushima period in the wilderness. The Saskatoon-based company enters the top 30 for the first time after jumping 19 places so far this year.    

The value of shares in Kazatomprom, the world number one uranium producer, topped $10 billion at the end of Q3 placing it at position 36. Until this year the state-owned Kazakh company was outside earshot of the Top 50 since its dual-listing in London and Astana in 2018.  

Diversified drop

BHP’s market position has also been supported by uranium prices as the Melbourne-based company boosts output at its Olympic Dam operations. 

The world’s top mining company’s market value has declined by less than 8% year to date for a $142 valuation, outperforming other diversified heavyweights Rio Tinto, down 17%, Glencore (–21%), Vale (–25%) and Anglo American (–38%). 

London-listed Anglo American has had a rough year in part due to its exposure to platinum group metals and control of Anglo American Platinum, and is now valued at $32 billion after peaking at $70 billion in March 2021.  

Investors in Anglo, with a history going back more than a hundred years on the South African gold and diamond fields, have had a particularly wild ride over the last few years. In January 2016, Anglo’s market cap fell below $5 billion after it came close to suffocating under a pile of debt.  

The dramatic slump in palladium prices (down 38% this year) and platinum (–16%) have also seen AngloPlat drop to its lowest position ever at a valuation of $10 billion, down from nearly $40 billion end-March 2021. 

Former PGM high flyers Impala Platinum and Sibanye Stillwater, both valued around the $4 billion mark today, have lost sight of the Top 50 altogether. 

*NOTES:

Source: MINING.COM, Mining Intelligence, Morningstar, GoogleFinance, company reports. Trading data from primary-listed exchange at Sep 29-Oct 5, 2023 where applicable, currency cross-rates Oct 7, 2023. 

Percentage change based on US$ market cap difference, not share price change in local currency.

As with any ranking, criteria for inclusion are contentious. We decided to exclude unlisted and state-owned enterprises at the outset due to a lack of information. That, of course, excludes giants like Chile’s Codelco, Uzbekistan’s Navoi Mining, which owns the world’s largest gold mine, Eurochem, a major potash firm, and a number of entities in China and developing countries around the world.

Another central criterion was the depth of involvement in the industry before an enterprise can rightfully be called a mining company.

For instance, should smelter companies or commodity traders that own minority stakes in mining assets be included, especially if these investments have no operational component or warrant a seat on the board?

This is a common structure in Asia and excluding these types of companies removed well-known names like Japan’s Marubeni and Mitsui, Korea Zinc and Chile’s Copec. 

Levels of operational or strategic involvement and size of shareholding were other central considerations. Do streaming and royalty companies that receive metals from mining operations without shareholding qualify or are they just specialised financing vehicles? We included Franco Nevada, Royal Gold and Wheaton Precious Metals on the basis of their deep involvement in the industry.

Vertically integrated concerns like Alcoa and energy companies such as Shenhua Energy where power, ports and railways make up a large portion of revenues pose a problem as does battery makers like CATL which is increasingly moving upstream, but where mining still make up a small portion of its valuation.  

Another consideration is diversified companies such as Anglo American with separately listed majority-owned subsidiaries. We’ve included Angloplat in the ranking but excluded Kumba Iron Ore in which Anglo has a 70% stake to avoid double counting. Similarly we excluded Hindustan Zinc which is listed separately but majority owned by Vedanta.

Many steelmakers own and often operate iron ore and other metal mines, but in the interest of balance and diversity we excluded the steel industry, and with that many companies that have substantial mining assets including giants like ArcelorMittal, Magnitogorsk, Ternium, Baosteel and many others.

Head office refers to operational headquarters wherever applicable, for example BHP and Rio Tinto are shown as Melbourne, Australia, but Antofagasta is the exception that proves the rule. We consider the company’s HQ to be in London, where it has been listed since the late 1800s.

Please let us know of any errors, omissions, deletions or additions to the ranking or suggest a different methodology.

Paul Mitchell, Global Mining & Metals Leader at the management consulting firm says the latest ranking of the top 10 business risks for mining and metals in 2024  which is based on interviews with 150 executives involved in the sector “highlights the complex operating environment miners will face in 2024”: 

“Responses to these risks are now clearly embedded into the strategies of the best operators — particularly environmental, social and governance and license to operate — and will remain priorities for a number of years to come.”

Respondents to the survey say scrutiny from all stakeholder groups is increasing, particularly around ESG issues and, according to EY mining firms that get ESG right will enjoy “significant benefits, including improved access to capital, a healthier talent pipeline and stronger licence to operate.”

While a “healthier talent pipeline” has become less of a worry for mining executives (now tenth on the list of top risks), “improved access to capital” is now considered the second most important priority for major miners after ESG as the massive outlays required by the green energy transition become a firm boardroom agenda item. 

Growth capital not growing

A renewed focus on growth capital could mark something of a turning point for the mining industry. 

Average shareholder returns by the top 30 miners have increased by a compound annual growth rare of 22% from 2019 to 2022, according to the EY report.

Despite a return to mega-profits at the top tier, the focus has remained on dividends and capital discipline, not gearing up for growth. 

Over the past 20 years, expansion capital spending across the industry has typically run above 20% of top line profits, which is to be expected in an industry with depleting assets and falling grades. 

The last couple of years have seen this metric slip to around 10% as companies continue to favour shareholder returns over building new mines.

So far however, growth capital for the energy transition does not appear to be flowing into mining with the report finding iron and steel, gold, and coal companies attracting the most capital since 2022. Not exactly Mining 2.0 money.

The report states that capital raised through debt and equity in the first seven months of 2023 has remained steady ($196 billion compared with $192 billion in the same period of 2022) and according to the authors “this trend is expected to continue into 2024.”

There is no doubt lithium and nickel are attracting attention as mainstream investors and outside capital jump on the electric car bandwagon, but steep price falls for these commodities this year may see many cool on EV raw materials sooner than expected. 

It’s also noteworthy that money raised for copper – the crux of the energy transition – is down 28% in 2023 while specialty metals investment is down by almost 50%, despite the many “critical minerals” lists drawn up by countries over the last few years.

In the first seven months of 2023, mining and metals companies issued $1 billion of green bonds, down from nearly $4 billion in the same period of the prior year. EY expects the trend of linking ESG bonds to specific projects, for example renewable energy, biodiversity and investing in local communities, rather than large overall targets, continuing.

Get the balance right

Building new mines has become a trickier proposition with new ESG requirements adding significantly  to capex costs – and not just for greenfield projects.  The financial woes of Codelco struggling to lift output from a decades low at its existing operations serves as a warning to the rest of the industry.

Recent volatility has exacerbated the problem of capital productivity that has long concerned the mining sector, adding that apart from increased input costs, higher interest rates are pushing up the cost of capital, says EY.

A review of 132 development projects requiring more than $1 billion of capital investment showed nearly one in five faced cost overruns, with an average blowout of $500 million.

EY says miners “should be mindful of the need for older projects to meet newer ESG requirements, which may include electrification, green energy and low water usage, to win financing.”

EY highlights the challenge miners face to “balance returns with responsibilities” and quotes one executive who said “new mines need to be carbon neutral from the outset” and another who stated “you can no longer develop brownfields if there is no green power supply”:  

“As miners adapt models and make more difficult investment decisions, they will need to make sure they bring investors along on the journey. 

“With interest rates unlikely to decline soon, companies may need to work harder to balance sustainable alternatives with economic returns.“

“Global markets are now flooded with cheaper Chinese electric cars and that price is kept artificially low by huge state subsidies. This is distorting our markets,” von der Leyen told the European parliament in Strasbourg, and just to make sure the scale of the problem is not lost on anyone she added that European carmakers “are often undercut by competitors benefiting from huge state subsidies.” It’s huge.

Considering the high stakes and troubling outlook that particularly the German mass market automakers like Volkswagen are facing, the eventual imposition of tariffs or other measures to limit Chinese carmakers’ access to Europe has an air of inevitability to it. 

European carmakers already have a number of successful joint ventures inside China and at the beginning of last year Beijing scrapped ownership restriction for foreign carmakers entirely, so how the country could further open up its market to the EU is unclear.

Mad at made-in-China

Chinese EVs are scarcer than Chinese-made electric golf carts in the US and the subsidies incentives under the $430 billion-plus Inflation Reduction Act (IRA) are designed to keep it that way. 

The Biden administration’s grants, subsidies incentives and loans to build its EV supply chain under the IRA led to consternation in Brussels over how to respond.  The European Green Deal (EGD) is huge, and just to to reiterate, it’s huge – at least €600 billion from the continent’s covid recovery plan is being funnelled into the program. 

For the EU, bolstering its eastern flank to defend its car industry is a logical next move.

The middle kingdom’s vehicle exports surpassed South Korea in 2021, then overtook Germany in 2022, and this year will take top spot from Japan. Trade data indicates a total of 2.8 million vehicles were exported from China during the first 7 months of 2023 including 1.8m ICE-powered vehicles, a 74% jump compared to last year. 

At the recent Munich auto expo 50 Chinese companies displayed their wares and even the most ardent euroland car lovers agreed, they stole the show. 

There may be a case to make that China’s growing success on European car markets is the result of predatory practices and Beijing pouring money into its industrial champions, but if the IRA and the EGP is not a dollar short, it’s more than a day late. 

China powers ahead, in Europe

The rapid success of Chinese automakers in dominating all aspects of the global mine-to-megawatt supply chain – the key to EV affordability – over little more than a decade is short of astonishing. How Chinese electric cars, which are shot through with high-tech features often not found in US and European-made vehicles, were able to leapfrog the West, is not.

Europe has reason to worry.  From a standing start, China has now cornered a full fifth of Europe’s EV market.

Adamas Intelligence tracks electric passenger car registrations and the metals contained in their batteries in over 100 countries. The Toronto-headquartered research consultants’ EV Battery Capacity and Battery Metals Tracker shows that in the first half of 2023, 19% of all GWhs delivered to EV (and hybrid) buyers in Europe, including Britain and non-EU states, were contained in China-made EVs and packs.

In absolute terms, the battery power exported to Europe from China has grown more than 51% year to-date – a total of 14 gigawatt hours. And China is stepping on the accelerator. The month of June saw 71% more made-in-China GWhs end up in Europe compared to June 2022, cornering a full fifth of the market.

Cheap but good

European car-buyers probably won’t be pleased if the European Commission’s response leads to higher EV prices and less variety (as it likely will). 

Adamas data show the best-selling electrified car in China in 2023 is the BYD Song Plus DM-i plug-in hybrid, with a range of 1,000 km, including 150 km in fully electric mode. It goes for a song in its home country – just $27,000. Given the cutthroat competition there it can probably be had for even less. 

For European car buyers struggling to cope with rolling energy crises the ability to drive from Berlin to Paris in an sleek compact SUV on a single charge won’t go unnoticed. (Neither would the rotating 13” TikTok-ready touchscreen.)  

The Song is not available in the US or Europe although Brazil has taken more than 1,000 deliveries in 2023. In China, BYD has sold Songs to the tune of 229,000 units in the first half of this year.

Chinese car shoppers enjoy an embarrassment of riches with 110 (yes, that’s one-hundred-and-ten) different brands and more than 300 different electrified models to choose from.

The Commission may be pleased to hear that the majority of Chinese EV exports to Europe this year were non-Chinese brands, including cars made by BMW and Dacia in China. The fact that the best part of these shipments were Teslas only complicates matters. 

Possibly slapping tariffs on the US electric car pioneer because it assembles EVs and uses batteries made in Shanghai won’t please Washington but makes it clear any legislation that comes out of the investigation won’t be easy to navigate.  

A fast boat from China

For miners supplying the battery metals, the EU-China EV spat is simply more fuel on the fire started by the IRA and continued by EGP.

Made-in-China EVs have hauled 30,000 tonnes of battery metals onto European roads so far this year.

Adamas data shows that the batteries of made-in-China EVs exported to Europe over the first six months of 2023 contained over 8,000 tonnes of lithium carbonate equivalent, representing 18% of Europe’s total consumption over that period, and an increase of 67% year-on-year. 

No doubt when sodium-ion batteries, already garnering market share in China, fully take off, Europe should expect even more salted roadways.

Similarly, 20% of graphite deployed onto Europe’s highways and byways through the first half of 2023 hit the road in China-made EVs and packs, totaling almost 13,000 tonnes year-to-date, up 68% year-over-year.

Over the same period, nearly 6,000 tonnes of nickel made its way to Europe from China in EVs with NCM lithium-ion batteries, representing 14% of all battery nickel deployed in the region year-to-date and a 46% increase in imports year-over-year.

Moreover, some 1,300 tonnes of manganese was exported to Europe from China in latter-made EVs and packs, making up 12% of all manganese deployed onto European roads through the first half of the year and a whopping 82% more than it imported the year prior.

Cobalt exposure was more modest, with approximately 1,000 tonnes of the thermal-runaway curbing battery metal deployed onto European asphalt in China-made EVs so far this year, constituting just 11% of all battery cobalt deployed in the region year-to-date, albeit a 62% rise in import tonnage year-over-year. 

Modest cobalt use in China-made EVs points to the fact that Chinese EV and battery makers’ chemistry of choice is cheap lithium iron phosphate (LFP), which in June made up 50% of the market there. LFP battery production for EVs outside China is virtually non-existent. 

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The likely outcome of the EU move is to halt or at least slow down China exporting the overcapacity that has built up in its domestic EV industry.

The 30,000 tonnes of battery materials sourced from all over the world by China’s EV and cell makers then exported to Europe will now have to find a different route.

China’s dominant position along the supply chain means it holds sway over battery metal prices and on some raw material markets acts as a monopsony.

Miners have long dreamt about attracting a premium for their products when delivered to Western markets where environmental, social and governance rules are stricter.

Von der Leyen’s talk of artificially low prices brings that reality one step closer.

Uranium scaled $60 per pound on Friday for the first time since 2011. The breakthrough for the nuclear fuel after a decade in the doldrums coincided with the last day of the World Nuclear Symposium in London.

The World Nuclear Association’s (WNA) biennial report provides long and medium term projections and insights into the more obscure corners of the global supply chain.

The report has done little to worry uranium bulls, the ranks of which has grown large in the past couple of years, as the role nuclear could play in the green energy transition becomes obvious even to long term critics of the renewable source.

The nuclear option

The WNA report predicts world reactor requirements for uranium to surge to almost 130,000 tonnes (~285 million pounds) in 2040. That’s up from an estimate of 65,650 tonnes in 2023.

Under the World Nuclear Association upper forecast that total rise to 184,300 tonnes and even its most pessimistic forecast – 87,000 tonnes in 2040 – translates to a healthy rise in demand for the commodity.

From the current 391 gigawatts electricity of operable nuclear plants, the WNA now projects capacity will reach 686 GW by 2040 under its base case scenario. It’s a hefty increase of 71 GW from the organisation’s estimates in its the 2021 report.

The bulk of new generating capacity will be located in China, which is aggressively pursuing nuclear energy to replace coal, which supplies the bulk of the country’s energy needs currently. The country has 23 reactors under construction, 23 planned and a further 168 proposed to add to its current operating fleet of 53 reactors. Worldwide 436 reactors are currently in operation and another 59 under construction.

Overall demand projections from the WNA have increased in the last update, with 4.1% CAGR demand growth expected through 2040, from 3.1% in its 2021 report.

SMR

The role small modular reactors can play in stoking demand has kept uranium watchers excited for decades, but now the promised spike in demand from these technologies are finally set to have a meaningful impact. Russia is a leader in the field with two floating SMR reactors entering commercial operation in 2020 and China is expected to turn the switch on a land-based reactor in 2025.

A significant portion of the WNA’s upward growth adjustments can be attributed to the accelerated adoption of SMRs and the body believes installed capacity will reach 31 GW by 2040.

In a note, BMO Capital Markets says the WNA’s forecasts for SMRs appear to conservative considering the potential of the technology’s use in everything from shipping to data centres.

The investment bank’s own forecasts point to 58GW of installed SMR capacity by the end of the next decade or around a tenth of nuclear generation capacity which is in line with the upper band of the WNA’s predictions.

Remote chances

BMO sees SMR boosting mining companies plans around decarbonisation of operations many of which are located in remote areas far from power grids. Many mines have replaced diesel generators with renewable sources like solar power, but for that you need ample space and the right climate:

“For others, particularly in colder climates such as Canada, we do see potential for micro-scale nuclear power solutions.

“Indeed, in much the same way as platinum producers are championing hydrogen-based trucks by installing them at their operations, we see an opportunity where uranium miners could potentially be pioneers in the use of SMRs.”

BMO believes remote mine sites have the best potential for SMR installations after marine freight and steelmaking.

Security and secondary supply

The report was likely already at the printers when the coup in Niger grabbed newspaper headlines – but the WNA does point to “geopolitical instability, notably resulting from the Russia-Ukraine” resulting in increased interest in nuclear power for energy security and sovereignty.”

“The same instability has had significant implications for the globalized market for nuclear fuel cycle services, with utilities, suppliers and governments in North America and Europe pursuing opportunities to diversify supplies,” the WNA says.

WNA believes in the near term, secondary supplies of uranium will continue to play a role in bridging the gap between supply and demand as it has for more than three decades. But there is good news for miners longer term and the WNA acknowledges in its report the need for new greenfield uranium projects.

“However, secondary supply is projected to have a gradually diminishing role in the world market, decreasing from the current level in supplying 11-14% of reactor uranium requirements to 4-11% in 2050.“

Secondary supplies include, among others, reprocessed nuclear fuel, down blending of highly enriched uranium in nuclear weapons, tailing re-enrichment and stockpiles from oversupply between 1950–1970, BMO explains. BMO estimates roughly 3.7 years’ worth of reactor requirements are currently held as inventory.

In its latest market assessment for the two weeks ending August 23, Benchmark Mineral Intelligence tracks an eye-popping 10.7% sequential decline in its lithium index, a sales weighted measure of global prices across grades.   

The index, now down by more than half in 2023, was dragged down by falling prices for hydroxide during the 2-week period due to poor demand for high-nickel cathodes in China, the dominant market for the battery material. 

Unusually, global prices for hydroxide at $33,508 a tonne fell to below that of carbonate. Lithium prices peaked in January this year with prices for both chemicals trading above $70,000 a tonne.

Continued weakness on the spot market in China with ex-works hydroxide now below $30,000, was filtering through to contract negotiations with CIF hydroxide prices in Asia falling 11%, according to Benchmark. 

Europe, North America follow Asia down 

The London-HQ’d research consultants says European and North American hydroxide prices suffered similar declines with buyers successfully negotiating lower hydroxide prices for both spot and contract volumes using lower prices in Asia as leverage. 

Prices in the EU and North America are now down 35% year to date, reaching an average of $40,000 a tonne with Benchmark noting the declines occurred “amid purchasing activity in these markets starting to pick up, following the summer lull period experienced in the northern hemisphere.” 

Carbonate shows a little fizz 

Amid the gloom on lithium markets there were some positive developments. According to Benchmark, the lower end of technical grade carbonate transactions rose by more than $500 a tonne in China over the two weeks: 

“Moreover, technical grade carbonate typically exhibits heightened sensitivity to shifting market trends, given the active participation of highly responsive traders focused on this grade.

“As such, Benchmark notes that this could serve as an early indicator of price declines easing in the near term.”

Spotty spodumene forecast

Over the assessment period spodumene concentrate prices only declined slightly to average $3,200 a tonne, down 50% so far this year.           

Following the sustained price declines in the lithium chemicals spot market in Asia, Benchmark anticipates that spodumene contract prices could fall further in the near term.

The Australian government’s most recent quarterly outlook predicts prolonged weakness for the country’s hard rock miners as new mines enter production and supply catches up to booming demand.  

Global output is set to come close to 1 million tonnes of lithium this year and is expected to ramp up to just under 1.5 million tonnes in 2025. That’s double last year’s worldwide production.  

Australia’s share will drop from 50% of global output today to 40% by 2025 despite a doubling of production to 596,000 tonnes by that time. Number two and three producers Chile and China are also expected to continue to grow while emerging production in Argentina, Canada and Zimbabwe will add to the rapid ramp up worldwide. 

The Toronto-based consultants, specialising in economic litigation found disputes between governments and investors involving mineral assets are growing rapidly – with 60% of all arbitrations over the last fifty years filed in the last decade. 

Between 2013 and 2022 the number of treaty arbitrations almost doubled from the prior period to 68 cases, with South America and Africa responsible for a growing number of disputes. Since 2016 nearly 80% of all cases filed originated in these two regions and the number of cases in Africa and Latin America are up 167% and 57% since 2016.

The analysis covered 118 investor-state arbitrations, 80% of which were administered by the International Centre for Settlement of Investment Disputes, a World Bank organisation. 78% led to an award while 22% were settled by the parties. A third of these are still pending, and of the concluded cases 18% were discontinued.  

Overall, gold and copper assets are involved in half of all cases followed by coal at 8%. 

The ‘S’ in ESG

CRA also conducted a survey of professionals engaged in mining arbitrations including in and outside counsel and mining company management and found more than 80% of respondents expect greater government intervention and regulation over the next 12 months. 

Three-quarters believe interventions related to ESG will increase. It’s not surprising that environmental issues – particularly water – will be the main source of disputes and a full 86% expect governments will more frequently use allegations of environmental breaches as either a defence or counterclaim in disputes. 

The authors note that the ESG emphasis is shifting towards social aspects including local community involvement and the focus on all stakeholders in a project rather than simply the shareholders of the company. That would include the thorny issue of artisanal or small scale mining. In short, a social licence to operate. 

Critical minerals 

Latin America, according to respondents in the CRA survey, could be responsible for 45% of disputes with the state followed by just under 28% in Africa over the next 12 months. The green energy transition is attracting significant investment in copper, nickel, lithium and cobalt extraction with these regions expected to play an outsize role thanks to their mineral endowment.

While gold has been the subject of the majority of disputes in the past, the CRA survey showed among industry professionals base metals are expected to make up 65% of expected disputes as the green energy transition shifts investment in the mining sector. 

Called critical minerals (the US just added copper to its list) are facing increasing state intervention and rare earth elements are perceived as at high risk by 52% of respondents. Both Mexico and Chile recently fundamentally changed the legal regime for lithium mining, showing just how exposed mining is to political developments. 

The expectation of a shift to industrial minerals is also underpinned by CRA analysis that show rising metal prices correspond with an increase in disputes. 

Most industry professionals surveyed believe during economic recessions the number disputes tend to rise as governments try to find ways of shoring up its finances and help struggling citizens. However, a fifth think there’s an inverse relationship.

All stages of development at risk

When it comes to susceptibility to commercial disputes it is more evenly spread around the world – Latin America still leads with nearly a third of expected cases, but one-fifth of disputes are likely in Asia and Africa respectively. 

Off-take and royalty agreements, which have proliferated as non-mining players like auto and battery makers race to secure long term supply, are cited as a major source of commercial disputes as the parties wrangle over pricing, quantity and quality as supply and demand dynamics change over the course of agreements. 

Given the inherent instability of the mining industry with regulatory regimes, market conditions, technology all capable of fundamentally changing the economic value of a project over its lifespan – often counted in decades if not generations  – without tight investment treaties, stabilisation or freezing clauses in contracts, disputes are almost inevitable to arise.   

CRA notes that 68% of mining arbitrations involve properties that have reserves – and contrary to expectations it is not early stage projects that face most opposition. 

Practitioners expect disputes to arise in properties at all stages of development, from exploration to production, with risk spread equally over the life of a project. 

Plain old politics

The average time from filing to award is five years, according to CRA, which not only illustrates how much effort and time disputes of this nature are required from boards and counsel but it also has obvious outcomes for financing. 

According to the CRA just under 80% of respondents in the survey said disputes lower the likelihood of obtaining financing for projects and mines. 

The most likely cause of a dispute between investors and governments arising is identified as politics (75%) while 57% cite disagreement on financial compensation. 

Only 8% think higher compensation through arbitration is what leads to disagreements, which is reflective of the gulf between claims and awards. On average, the dollar amount claimed was 26 times the amount awarded with a median of four times. In cases where details are known, awards ranged from a mere $1 million to $1.2 billion. 

In 44% of cases the money demanded exceeded the awarded compensation by a factor of ten. At the same time in only a quarter of cases the claimants were ordered to pay arbitration costs and 48% of cases associated costs were spread equally.

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And with robust prices and redhot demand over the past few years, copper mining companies have been raking in cash. 

The only thing missing from this scenario is, well, more copper. 

There are few major discoveries and even fewer new mines being built – and dwindling production at existing ones.  

Worries over supply shortfalls are occupying governments and boards and with the average lead time for a new copper mine well over a decade, copper users are seeking nearer term solutions to avoid a supply crunch.   

A new in-depth report by BMO Capital Markets examines the scope of copper demand destruction through thrifting and substitution, an issue that “has become a common thread in discussion” in the industry.  

And the numbers in the investment bank’s Coping Strategies for Copper Constraint by analysts Rory Townsend and Colin Hamilton are indeed eye-popping.

BMO says in the absence of any further substitution or thrifting, copper semis demand could reach 40.4 million tonnes per year by 2030. Its prediction of maximum demand is up from 31.8 million tonnes last year, or a 2022–2030 compound growth rate of 3%. 

But the authors say there is scope – and already instituted programs by original equipment manufacturers – to use less or substitute copper entirely including in electricity transmission and distribution networks, renewable generation capacity, communication cables, industrial air conditioning units, and the transport sector.

Fear substitution 

Through this process, the investment bank’s base case scenario sees the potential of just under 10 million tonnes of cumulative copper semis demand eliminated through 2030: 

“Our base case remains that substitution and thrifting occurs in a steady, incremental way that is good for prevailing commodity prices. 

“However, there is a growing risk that consumers are starting to design around potential constraints before they arise, particularly in the automotive sector. 

“Such ‘fear substitution’ would be a challenge to the longer-term demand thematic and would have the potential to significantly hurt both industry volumes and prices.”

If the base case expects the market to chug along nicely, under this “fear” scenario of aggressive substitution, BMO expects an additional 11.6 million tonnes of demand is under risk. 

That’s 21.5 million cumulative tonnes at risk through to the end of the decade, or put another way, annual demand of 35.2 million tonnes in 2030 (vs the 40.4 million tonnes) or a CAGR of 1.2% (vs 3%). 

Al is your pal 

Copper is four times as expensive as aluminium right now – a level up from near 1:1 in 2000 and cheap enough to see the metal replacing copper on a consistent basis, says BMO. While aluminium only has around 60% of the conductivity of copper, in many instances its lower weight could make substitution more compelling over and above cost considerations. 

Areas that may see thrifting are the greater use of high voltage direct current (HVDC) power lines that reduce metal intensity in transmission networks, the continuing move to fibre optic communications networks, and renewable generation projects, which are are often small enough to be connected directly to the distribution network and utilise lower voltage cabling which also typically requires less metal per kilometre compared to higher voltage cables, according to BMO. 

BMO forecasts the combined length of the global electricy transmission and distribution network to reach 110 million kilometres (68m mi) by 2030.

The investment bank sees air conditioning systems as an area most exposed, particularly in industrial applications where substitution is technically viable. The authors point to aircon giant Daikin, which has a target to halve its global copper consumption by the end of next year.

Down to the wires

EVs use substantially more copper than gasoline and diesel-powered cars, but auto and battery makers are hard at work reducing this. 

Thinner copper foil is being used in battery cells, the switch to 800V platforms is facilitating the use of thinner cables, the increased penetration of lower specification vehicles as we progress toward mass adoption, combined with the rightsizing of battery packs and electric motors, should all result in a reduction in copper intensity, says BMO.

BMO says the world ex-China averages 69kg of copper per light duty battery electric vehicle and BEVs in China average closer to 50kg, but “any projections that still include the fabled 80kg need to be adjusted.”

Tesla in May said that starting with the Cybertruck, which is in early production, the Optimus robot, and all future electric vehicles, will use a 48V low-voltage system, compared to the 12V system used in most cars. 

In traditional 12V systems, wiring and components must be larger and heavier to handle high electrical loads. With a 48V system, Tesla expects a reduction in battery weight and cost savings. 

“First approximation, that means we need only about a quarter as much copper in the car as would be needed for a 12V battery, so that’s a big deal because people often worry about whether there is enough copper,” Musk said. 

“Yes, there is.”

Still bullish 

BMO takes pains to say “it still believes in the long-term copper thesis and would argue we are still bullish the commodity over the medium term to long term.”

Even under its minimum demand/maximum substitution scenario, the copper market will enjoy positive growth including in non-energy transition related areas like construction, and that is after taking into account the all-important Chinese construction sector:

“Naturally, the future of Chinese property demand is often front of mind when it comes to areas at risk of potential structural decline. 

“That said, the focus of stimulus measures and developer focus will likely remain centred on housing completions and shanty town refurbishment, as opposed to new starts, which are typically more copper and aluminium intensive.”

At the end of the first quarter of 2022 metals and minerals were setting all-time records led by bellwether copper, which briefly traded above $5 a pound or more than $11,000 per tonne. Iron ore, the second most traded bulk commodity after crude oil and the cash cow for the top tier of the mining world, was above $150 a tonne. 

Both commodities are down by more than 20% since then – officially a bear market. 

At the end of Q1 2022, the MINING.COM TOP 50* ranking of the world’s biggest miners hit an all time record of a collective $1.75 trillion. 

Half way through 2023, mining valuations have slumped a total of $356 billion after giving up a collective $47 billion during the second quarter.

The Top 50 now has a combined market value of $1.38 trillion – back to levels seen end-June 2021.

Indonesian debut 

The first Indonesian company to make it into the top 50 is Amman Minerals Internasional, owner and operator of the Batu Hijau copper and gold mine and developer of the adjacent Elang project. 

Elang is one of the world’s largest undeveloped copper and gold porphyry deposits and is currently in the feasibility stage. 

Indonesia has become a red-hot IPO market this year and Amman was the largest of the year so far. 

The company debuted in Jakarta on July 7, raising more than $700m, and enters the ranking at no. 46 with a valuation just shy of $9 billion, or 135 trillion rupiah, up smartly since the IPO.

Harita Nickel, which listed in Jakarta in April raising $672m, has had a tough go of it and the stock has shed more than 30% since then as nickel prices decline at a similar rate. 

In USD terms Harita Nickel is worth less than $4 billion, which places the stock outside the 70 most valuable mining stocks globally.     

Lithium ranks grow 

Lithium producer Pilbara Minerals makes a spectacular entry into the Top 50 at position no. 42 after spending several quarters bubbling under the ranking. 

Pilbara Minerals shares are up over 40% so far this year, lifting its value to over $10 billion, surpassing that of fellow lithium miner and Perth neighbour, Mineral Resources. 

Pilbara Minerals, which is the ranking’s best performer for the quarter,  brings the number of companies based in the Western Australia capital to five, surpassing the tally of Vancouver, BC as the top home base. 

Another Perth-based lithium miner, IGO, has been climbing the charts and currently sits at number 52 in the ranking at a valuation just shy of $8 billion. Worth a collective $101 billion, lithium stocks make up 7.4% of the value of the Top 50.     

The strength of the lithium sector outside China has been remarkable given the precipitous decline in prices for the battery metal since hitting all time highs in November last year. 

Official projections from top producer Australia, responsible for half the world’s output of lithium, are for more pain over the next three years amid a production boom.  

The disappointing launch this week of lithium futures in Guangzhou China is another harbinger of weakness and points to further losses for shares in Ganfeng and Tianqi, already down 50% over the past 12 months. 

Potash problems

Fertiliser prices have been on a dramatic decline over the last year and after hitting 14-year highs in April last year on the back of the Ukraine war, potash at the port of Vancouver has now halved in value. 

Stock of sector heavyweights Nutrien, which cut its guidance and production at one of its Saskatchewan mines this month due to a port strike, and Mosaic have fallen sharply as a result, with the North American companies losing a combined $10 billion during the quarter. 

The retreat in the market cap of fertilizer maker ICL Group in Tel Aviv sees the company drop out of the Top 50 altogether.

While Russian potash is finding itself onto world markets, deliveries from Belarus remain below the pre-war total.

At the same time, large new projects are being developed including in Brazil, the world’s foremost importer of the crop nutrient, and in Canada, where the  province of Manitoba greenlit a new potash mine and processing plant in June.   

The Canadian government earlier this year injected $75 million into BHP’s Jansen project as the Anglo-Australian giant seeks to fast-track construction of the mine, which if built to full capacity will be the world’s largest. 

*NOTES:

Source: MINING.COM, Mining Intelligence, Morningstar, GoogleFinance, company reports. Trading data from primary-listed exchange at July 17, 2023 where applicable, currency cross-rates July 18, 2023. 

Percentage change based on US$ market cap difference, not share price change in local currency.

As with any ranking, criteria for inclusion are contentious. We decided to exclude unlisted and state-owned enterprises at the outset due to a lack of information. That, of course, excludes giants like Chile’s Codelco, Uzbekistan’s Navoi Mining, which owns the world’s largest gold mine, Eurochem, a major potash firm, and a number of entities in China and developing countries around the world.

Another central criterion was the depth of involvement in the industry before an enterprise can rightfully be called a mining company.

For instance, should smelter companies or commodity traders that own minority stakes in mining assets be included, especially if these investments have no operational component or warrant a seat on the board?

This is a common structure in Asia and excluding these types of companies removed well-known names like Japan’s Marubeni and Mitsui, Korea Zinc and Chile’s Copec. 

Levels of operational or strategic involvement and size of shareholding were other central considerations. Do streaming and royalty companies that receive metals from mining operations without shareholding qualify or are they just specialised financing vehicles? We included Franco Nevada, Royal Gold and Wheaton Precious Metals on the basis of their deep involvement in the industry.

Vertically integrated concerns like Alcoa and energy companies such as Shenhua Energy where power, ports and railways make up a large portion of revenues pose a problem as does battery makers like CATL which is increasingly moving upstream, but where mining still make up a small portion of its valuation.  

Another consideration is diversified companies such as Anglo American with separately listed majority-owned subsidiaries. We’ve included Angloplat in the ranking but excluded Kumba Iron Ore in which Anglo has a 70% stake to avoid double counting. Similarly we excluded Hindustan Zinc which is listed separately but majority owned by Vedanta.

Many steelmakers own and often operate iron ore and other metal mines, but in the interest of balance and diversity we excluded the steel industry, and with that many companies that have substantial mining assets including giants like ArcelorMittal, Magnitogorsk, Ternium, Baosteel, Adani Enterprises and many others.

Head office refers to operational headquarters wherever applicable, for example BHP and Rio Tinto are shown as Melbourne, Australia, but Antofagasta is the exception that proves the rule. We consider the company’s HQ to be in London, where it has been listed since the late 1800s.

Please let us know of any errors, omissions, deletions or additions to the ranking or suggest a different methodology.

Or, more specifically, ELT — end of life tires.

A 2020 study in Australia came up with some surprising numbers on the country’s off-the-road tire (OTR) industry. In 2019, the Australian mining industry generated a staggering 68,100 tonnes of used tires. 

Of that number 93% or 63,300 tonnes were disposed of onsite – either piled up or buried. A further 3% were sent to landfill (2,000t) while just 1% (700t) were recycled, with the remainder stockpiled or used in civil engineering. 

Tires don’t degrade, so anything that is not recycled becomes part of the landscape indefinitely.  There are likely millions of ELT buried or piled high at mining locations around the world – and there are only so many haul road safety berms, feeding troughs, playground surfaces and lawn mulch where rubber can find other end uses.

Needless to say, for an industry struggling to burnish its ESG credentials, tires are a big black mark on its environmental reputation and an easy target for green activists.

Last month MINING.COM toured a facility in the heart of Chile’s copper region and home to many of the world’s largest open cut mines, in a showcase for how this intractable problem can be tackled.  

Joint venture 

Kal Tire, a British Columbia, Canada-based family-owned business that traces its roots to the early 1950s, operates a first of its kind tire recycling plant in La Negra, an industrial area outside Antofagasta and the mining epicentre of the world’s top copper producer.  

Dan Allan, Senior Vice President of Kal Tire’s Mining Tire Group, says the company is not trying to reinvent the wheel: “We did not set out to be the biggest or take over the world with tire recycling. 

“Our mining customers had a problem and we worked to find a solution.”  

Kal Tire’s operations in Chile, the first outside its Canadian home base, started in 1997 and today the company’s  mining division provides services to more than 150 mine sites across five continents. 

The thermal conversion plant started running on a trial basis in 2021 after around three years of R&D (initially in Italy) and entered commercial operation this year.  

In September last year Kal Tire signed a joint venture deal with Japanese conglomerate Mitsui & Co. to expand and further develop the business. Mitsui’s annual revenues are nearly $100 billion and the company has extensive investments in mining and metals around the world.  

Carbon black  

Pyrolysis is a decades old, relatively simple process but setting up a plant to handle so-called ultra-class tires used on mining trucks is a specialist undertaking. A single truck tire can weigh as much as five tonnes, so simply transporting it from often remote locations is a challenging and costly task. 

Kal Tire’s recycling facility has the capacity to process five 63” or 1.6m diameter tires weighing 20,000 kilograms every day. The process creates 8,000 kg of carbon black, 6,500 litres of oil, 4,000 kg of high-tensile steel (sought after as scrap for steelmaking) and enough synthetic gas to fuel the plant itself for seven hours. 

Mining truck tires are typically manufactured with mainly natural rubber with only a small percentage of the synthetic equivalent. Close to 100% of the constituent material going into the facility  can be repurposed and the plant has been designed to be scalable and, crucial in this part of the world, can sustain earthquakes of up to 8 on the Richter scale.  

Legislation roll-out  

Chile is a leader in pushing for greener tires with a new law that mandates that 2023 through 2026, 25% of all mining tires must be recycled. This rises to 75% in 2027 and 100% by 2030. Estimates put stockpiles of used OTR tires in the country at 500,000 tonnes. 

Kal Tire set up the venture with input from the Chilean government and Allan says legislation is a key driver of greater recycling in the global industry. 

South Africa has introduced a small recycling levy on new tires but efficacy of the program, given the economics of tire recycling, remains in doubt. Australia and other countries are looking at instituting programs while Canadian legislation, introduced in 2016, covers shredding and repurposing of rubber, not full recycling.  

Stand-alone industry

Allan could not be drawn on exactly where and when Kal Tire Mining may build a plant next, but given the ESG impetus in global mining and ever-stricter environmental rules being put in place by regulators, its expansion plans may not take long to become public. 

Allan fully expects other entrants into the market and tire recycling to be a stand-alone industry with tire manufacturers like Bridgestone or Michelin, despite their size and resources, unlikely to enter the market in a significant way. 

How mining tire recycling may evolve around the world is not yet clear either. Given the size and remoteness of many mines, on-site solutions may work better in certain instances given transport logistics and costs while in other regions a central hub approach may be the ideal solution.  

Where it fits into miners’ economic  structures is also being considered and Allan believes shifting tire recycling from operational costs to remediation budgets may offer a solution.

rCB industry growth 

Allan says Kal Tire does not have to look for customers for the plant’s recovered carbon black (rCB) – it’s a rapidly growing industry with some analysts predicting CAGR above 30% for the next five years. rCB can be used to produce tires and a variety of plastic products, inks and coatings. 

North America is the largest market for rCB and pricing in the first quarter of this year was pegged at some $2,300 a tonne (high grade FOB Texas).  And that is after some steep declines in 2022 over worries about growth in the automotive sector.  

Construction is about to start on the next phase of the plant to further refine and standardise the carbon black output through processes that include milling and pelletizing .  

Earlier this month the recycling plant received International Sustainability and Carbon Certification (ISCC) PLUS, a voluntary program to advance standards for chemically recycled materials to promote the so-called circular economy.

Allan says the question he’s asked most frequently is – what about conveyor belts? 

What to do with end of life conveyor systems – some of which, like at the Mt Saddleback mine in Western Australia, run for 51 kilometres or nearly 32 miles – is as big a headache for the mining industry as tires. Kal Tire has researched the issue, but decided given the different composition and unique properties of conveyors, it requires a different  set of solutions. 

Last resort 

Kal Tire’s Chile office employs some 330 workers and counts as customers a number of mines in the region synonymous with the global copper industry. 

Particularly at open cut mines, tires can easily be in the top five concerns for miners in terms of operational costs, says Allan. At roughly $60,000 per tire for the largest sizes, outfitting six-wheeler dump trucks is an expensive undertaking. 

Without damage – which even at these sizes can be caused by something as simple as a pebble getting stuck in the tread  – the tires last only around 6,000 hours. 

And in places like the bone-dry Atacama, conditions for tire wear and damage is in fact favourable.

Somewhat counterintuitively, water is a tire’s biggest enemy, said Carlos Zuniga, General Manager of Kal Tire Chile during a tour of the adjacent repair and vulcanization plant. 

“Tire recycling is always the last resort,” says Zuniga. “The main priority is to extend the life of the tire.”

Unlike nickel where swings have been equally wild, the action was not a paper-based futures short squeeze or other trading aberration but real-world transactions.  The frenzy during the second half of last year meant anyone that could find a way to bring lithium to market did so – from direct shipping ore from Africa to lepidolite ramp ups in China to tailings reprocessing and, such as there were, recycled material. 

That meant the corrections were just as steep as the ascent with prices halving or falling as much as 70% from the records set last year.  And of course the inevitable rebound over the last few months as interest in the sector reached fever pitch and China’s reopening gathered steam. 

According to Fastmarkets, London-based research consultants and pricing agency, there were 45 lithium mines operating in the world in 2022, with 11 expected to open this year and seven next year.   With so much public and private money rushing into the sector the buildout is likely to dampen prices according to the Australia’s resources ministry. 

But bringing new lithium production to market has always been a tricky prospect with building delays, budget blowouts and technical challenges a marked feature of the industry.  And government intervention like the recent nationalization of the industry by the Chilean government, Mexico’s new mining laws, a Chinese environmental crackdown and global opposition to new projects – notably in Serbia where development of Rio Tinto’s massive Jadar mine is stalling – further add to the uncertainty. 

Risky business

Gene Morgan, CEO of brinefield services company Zelandez, tells MINING.COM that unlike oil and gas exploration and extraction, there is nothing cookie cutter about lithium mining.

“Oil and gas feedstock is relatively similar and processing is more or less the same wherever you are in the world. But with brines, for example, in South America, every brine is chemically different. It requires a bespoke process and I think that’s the challenge for the industry.”

Morgan, who founded the company in 2018 after a career in oil and gas, says the amount and quality of lithium in a brine deposit is difficult to estimate accurately. Zelandez, which works across 30 projects in South America and is now entering the US,  uses borehole magnetic resonance – something akin to an MRI scanner but for rock –  to analyse the deposit. 

The technical challenges do not end once the brine is above ground and processing into lithium chemicals requires several steps, including pumping, evaporation, precipitation, and filtration, which are not the same from one brine to the next, says Morgan.

Further downstream there are complexities too with battery manufacturers requiring different-specification products and stringent certification processes. Morgan says “carmakers realise they have to move upstream to secure supply but the risk profile of mining is just so much greater than what they are used to with manufacturing.”

“It scares them a lot but they have no option in order to avoid putting all their EV plans at risk.  But the influx of money because of the provisions of the IRA (US Inflation Reduction Act) over the last six months have been incredible.  The IRA  has really changed the game.”

The new fracking

While most lithium projects in North America are hard-rock, Zelandez believes the IRA will see many brine projects come out of the woodwork. Clayton Valley, the only lithium mine in production, is of course a brine operation and there are a number of other brine assets  in the US including in the California, Nevada region. 

Morgan says lithium production in the US carries the legacy of the shale oil and gas boom which made the country the largest producer in the world surpassing Saudi Arabia years back. 

Lithium in the US will eventually “punch above its weight” in terms of producing assets and Morgan expects new technologies like DLE (direct lithium extraction) and reinjection will open up the space just like fracking and horizontal drilling achieved in shale oil. 

Oil and gas workers can also help alleviate the acute skills shortage that exists in lithium which is starting from such a low base as both industries require a similar understanding of geology and exploration techniques for fluid resources.

“There’s probably 50 companies around the world with DLE technology. It’s extremely competitive and there are only so many projects. The technology is still fairly immature and we’re only just seeing some entering the commercial stage. There will be few DLE winners.”

Morgan says despite the fact that DLE is still in the early stage, the technology is needed to meet demand because you just cannot do it with evaporation ponds alone – “there are just too many challenges around – either you lack evaporation rates or you may have high impurity levels which make conventional processing just too difficult.”

DLE can be applied to very low grade oil field brines or high grade salars, but says Morgan, one technique won’t work on all brine deposits; it has to be tailored to the specific chemistry: “It’s very bespoke.”

Saluting salars 

Zelandez believes the talk of Chile “nationalising” its lithium  industry is overblown:

“It was a path set long ago and now that the rules are clearer and the uncertainty has gone away it gives companies confidence to invest.”

Indeed, after an initial pullback on the news of Chile’s public-private model, shares of SQM and Albermarle, the sole lithium producers in Chile, have rebounded. Lithium production in the South American nation, the world’s number two producer behind Australia, is set to increase over the medium term and in another show of confidence on Friday SQM signed a massive new long-term supply deal with Korean battery maker LG Energy.

At the same time investment in Argentina’s lithium resources is booming as deals with the EU, India and China transform the country’s mining and refining industry. 

Morgan, who is based in Bolivia,  says the country’s lack of progress has been frustrating, but recent announcements including a deal between state-run YLB and CATL, the Chinese battery giant, is setting the scene for quicker development. 

There is also a growing acknowledgement inside the country that lithium is a key pillar for the future of the Bolivian economy “and with elections coming up, lithium is going to be front and centre”.

It’s not just upstream that is being transformed, chemical processing and conversion is being restructured just as fast says Morgan with not just the US but countries like Japan – where Morgan recently visited – also see the need for a rapid decoupling from China where 70%-plus of global chemical processing is taking place at the moment. 

“From a supply chain perspective it just makes sense to do conversion in the same place you have gigafactories.”

Price floor

Morgan does not see the lithium-ion EV juggernaut slowing down any time soon despite ever changing government subsidy and investment criteria and new technologies like the commercialisation of sodium-ion batteries, fuel cell powered vehicles or the uptake alternatives to lithium for use in energy storage systems like vanadium redox flow technology. 

“You have ten years of significant development of  lithium-ion batteries in terms of performance and chemistries, but crucially it’s the investment in the global supply chain over the past decade.”  

“Investment in battery factories is roughly three to four times the pace of the upstream so lithium mines can’t be built quick enough.”

“There’s going to be a massive need to keep building mines into the 2030s, but then add the fact that we’re only just starting to see the beginnings and understand the true size of the energy storage market and that could be as big if not bigger than the demand from EVs.”

As for pricing Morgan does not see lithium going for less than $20,000 a tonne in the foreseeable future adding that spot prices in the $70–80,000 a tonne range seen last year wasn’t helpful either: 

“At $20,000 to 30,000 a tonne downstream is still making margin and upstream still has incentive to invest.” As for spodumene, Morgan sees $2,000 a tonne as the likely floor for the feedstock.

In its quarterly report released on Monday, the Australian government said it expects spodumene prices to decline slightly from an average of $4,368 a tonne in 2022 to average $4,357 a tonne in 2023 as the precipitous decline from record spot prices in the second half of last year take time to feed into long-term supply contracts.

However, 2024 will see a dramatic drop-off in contract value for Australia’s hard rock miners with prices declining nearly 40% year-on-year to $2,740 a tonne on average during the year and fall further to $2,149 a tonne in 2025. 

That compares to an average of just $671 a tonne over the three years to 2021 according to the Department of Industry, Science and Resources. Some 96% of Australian exports are destined for China.

Lithium hydroxide prices in 2023 are forecast to be almost a third below last year’s average of $69,370 a tonne and will decline further next year to $35,415 a tonne before easing to just above $30,000 in 2025. 

Mid-point prices for spodumene concentrate (6% Li20 FOB Australia) in the two weeks to end June were pegged at $3,500 a tonne by Benchmark Mineral Intelligence, a decline of 45% so far this year.  Benchmark’s assessment for lithium hydroxide spot prices in Asia came in at $47,000 a tonne.

Australia blames growing global output for the predicted decline in prices with production set to come close to 1 million tonnes this year ramping up to 1.5 million tonnes in 2025, double production levels in 2022. 

The country’s share will drop from 50% of global output today to 40% by 2025 despite a doubling of production to 596 kilotonnes by that time thanks to expansion of existing mines, including Greenbushes, Wodgina, Pilgangoora, Mt Marion and Mt Cattlin and production from new mines Finniss, Mt Holland and Kathleen Valley.

Number two and three producers Chile and China are also expected to continue to grow while emerging production in Argentina, Canada and Zimbabwe will add to the rapid ramp up worldwide with the latter countries growing market share from 5% to 20% by 2025. 

Australia says the outlook could be impacted by recent announcements out of  China of intensifying environmental scrutiny of the country’s lepidolite producers and Chile where a new state lithium company will take control of its lithium industry.

In February 2023, Chinese government investigations led to closures of some producers (mainly lepidolite) in Yichun, Jiangxi province, due to unlicensed mining and environmental breaches. 

While Chile announced plans to nationalise the lithium industry in April 2023, the government stated its intention to honour current lease arrangements that extend out to 2043 for Albemarle and 2030 for SQM. As a result, this announcement is assumed to not materially impact production by 2025 according to the report.

Recycling is expected to make up only 2–3% of lithium supply from 2022 to 2025.

Last week, the London-HQ company sold the two Brazilian properties for $1.065 billion, $65m of which is associated with a contemplated gold royalty on Serrote.

The transaction is a prime example of what Michael Scherb, Appian founder and CEO, told MINING.COM in 2018 is the firm’s investment philosophy: 

“Mining is the perfect industry for applying long-term value investing principles because it’s so cyclical, and you let the industry create the entry and exit windows for you through its volatility and irrationality.”

Few metals give nickel a run for its money when it comes to volatility. When Appian bought Atlantic Nickel in 2018 the price averaged just over $13,000 a tonne and on its way to today’s $25k the devil’s copper briefly topped $100k. And if someone said in 2018 that not one, but two automakers would fund the investment to buy the mines, few would have called that rational.

Roll call

But with the mining and car industries undergoing once-in-a-century disruption and a vastly different geopolitical landscape than five years ago, the deal put together by Artem Volynets, CEO of ACG, a special purpose acquisition company (SPAC) almost seems like a no-brainer. 

Not that a $1 billion transaction with these many wheels within wheels – royalties, equity and debt, off-takes, locked boxes and backstops – and with marquee names from mining and automaking all coming together could really be called that. 

And definitely not on such a tight schedule: ACG only listed in October, raising $125 million in London and signed the first term sheet with Appian in November. 

MINING.COM sat down with Volynets, ex chief of Rusal who led the Russian aluminium giant’s blockbuster 2010 Hong Kong IPO and, over a 25+ year career put together $30bn in public and private deals, to discuss the founding transaction for what will now be called ACG Electric Metals.  

With Glencore and mining investment firm La Mancha as equity investors, the deal also brings together Stellantis and Powerco, Volkswagen’s wholly-owned battery maker. Amsterdam put up $100m for an equity stake (and a board seat) and Wolfsburg pre-paid for nickel. 

“We have seen over the last six months that car companies have two strategic objectives,” says Volynets:

“One is to secure long term supply of metals used in electric cars just given the sheer scale of the change in the car industry. 

“Secondly, the end-to-end visibility of the supply chain is extremely important. 

“Coupled with low carbon metals, carmakers’ can credibly tell their customers not only will they not pollute the environment going forward the process of building the car has not polluted the environment.” 

Premium player

Volynets says Santa Rita’s low carbon footprint, primarily due to being hydro-powered, is the big differentiator. In addition, nickel sulphide, which accounts for just 10% of worldwide nickel projects, not only boosts green credentials but keeps costs low. 

“That’s why something like nickel sulphide is very sought after. The fact that we are a rare combination of low carbon and already producing…also made us attractive to car companies.”

Santa Rita, set to shift underground in 2027, has a 33 year mine life with production of 15–24ktpa of nickel equivalent boosted by copper, cobalt, gold and PGM byproducts. Serrote will produce 20ktpa copper equivalent over 12 years. Last year according to Appian’s figures Santa Rita and Serotte achieved adjusted EBITDA of around $260m.

ACG’s effective ownership date is January 1, 2023. ACG joins a crowded field, however. Nickel output has been ramping up aggressively in Indonesia – which is already producing half the world’s nickel. Jakarta’s Harita Nickel was also responsible for one the biggest mining IPOs in years. 

But with emissions from the Asian country’s laterite ores being as much as six times more than that of sulphide, ACG wants to sell itself as a “premium producer.” 

“I do believe low carbon metals produced and refined in the right jurisdiction will attract a premium. Not at the moment, but we’re in for the long game and if we continue to add similar types of assets to our platform, focusing on the premium part of the end-user chain I do believe in time we would trade at a premium as well,” says Volynets.

Go West

Apart from a bet that ACG can trade on its environmental credentials, the $1 billion valuation, which according to ACG comes at a discount to peers in the battery metal space, the transaction is also wagered on much-discussed supply chain polarisation.

Not just between the West and China, but crucial to the nickel market, also a move away from Russia, which in the past has met the bulk of Europe’s needs. 

“It is happening. The Western car companies want to see the raw materials coming from countries considered in the Western sphere of influence. The world is polarising and so are supply chains.” 

Whether Europe’s metal markets can return to its state prior to February 2022, Volynets is blunt: “We are in the middle of a cold war 2.0 and it would take decades to unwind unfortunately”.  

In the mining world it’s not just the West and China’s decoupling and the Russian-Ukraine war that is creating upheaval. 

In Latin America, Chile has tightened its already strong grip on mining companies and Mexico recently green-lighted a new mining law that has stunned foreign investors. Under a new left-wing government, would Brazil be in danger of similar disruption?  

“The new government is actually the old government which presided over the country’s significant expansion of the mining industry. There are many companies operating in Brazil and of course prominent state-owned operators. No expectation of significant changes.”

Roll up

Volynets considers ACG a “platform” and will look beyond copper and nickel, although the two metals will remain a top priority. 

As for the current scramble for lithium projects, exemplified by General Motors’ $650m investment in Lithium Americas in January, Volynets is waiting for “stability” in the market to be in a better position to price assets in the sector, but adds that “M&A can be opportunistic”. 

“My team and the team in Brazil have been in the sector for many many years and it’s a small industry. Everyone knows each other so I know we’ll have some interesting opportunities coming our way.” 

“We only consider jurisdictions acceptable to the Western supply chain and we started ACG Electric Metals with a low carbon footprint and we’d like to stay at the low end. 

“The next several deals will only be assets in production. We look at companies with a single or maybe two assets which may be below the radar of the big boys.”

“We do intend to roll up single assets. As experience shows starting with BHP Billiton that this is the right strategy. 

“My first mentor in mining was Brian Gilbertson [who built up Billiton through acquisitions and merged it with BHP to become the group’s first CEO] and he said ‘Artem you’ve got to think big’. And that’s what we are trying to do.”

The index reached a high in March last year, spurred by a post-covid recovery but was quickly dragged down by a weakening global macroeconomic picture, surging energy costs and a less than inspiring recovery in China, responsible for the bulk of consumption in most sectors.

Steven Seget, Project Blue director and co-founder, says short-term critical materials price rises will be largely driven by battery and EV materials prices with lithium, nickel sulphate and rare earth prices set to recover sharply over the next three months. 

Lithium prices will increase by around 20% as purchasers return to the market and build sufficient inventory to meet improved battery demand outlooks. Purchasing activity will continue to build, supported by higher-cost producers in China according to Project Blue:

“However, across the 30 different critical materials prices, the picture will continue to be mixed over the short term. Some critical materials prices, including graphite, magnesium and titanium, are likely to continue to fall over the period as they address more market specific challenges impacting their supply chains.”

Cobalt market in flux

The cobalt market could be at an inflection point. Prices for cobalt concentrate exported to China is down a whopping 75.4% year on year while prices for LME metal have dropped 57%, but Project Blue is finding evidence that payables are now creeping up, thanks to logistical issues in the Congo. 

Reuters reported in late May that the DRC government has plans to hike its stake in Sicomines joint venture with Chinese firms from 32% to 70% as part of an overhaul of the central African nation’s $6 billion infrastructure-for-minerals agreement. 

The Tshisekedi Government appears concerned that too much of the DRC’s copper and cobalt resources were given away during the Kabila era, with little benefit to the country, says Project Blue.

The DRC also halted Eurasian Resources Group’s Boss Mining copper-cobalt project over environmental concerns but “the suspension is unlikely to impact the cobalt market much as things stand but could remove roughly 2–3 kilotonnes of material from an oversupplied market in 2023.”

Project Blue says current cobalt prices probably constitute a floor and the market will stabilise over the coming weeks.

Slocum and Anderson offer ESG risk management advice for the extractive and industrial sectors around the world with dozens of projects that range from off-shore pipelines in Angola, bauxite mines in Brazil and gas infrastructure in Kazakhstan to gold mines in West Africa, to an oil company in India and offshore wind in the US. 

Acorn’s work includes due diligence, capacity building, environmental and social studies and stakeholder engagement including through in-country partnerships and a network of experts.

Emblematic Grasberg 

Slocum, who has 30 years of experience in social,  environmental and integrated hazard identification assessments (IHAZID), was due to depart for Grasberg, the iconic Indonesian copper and gold mine, and that’s where the conversation started. 

Grasberg, operated by Freeport McMoRan in the mountains of West Papua, has been in operation since the 1960s and some 25,000 workers are on site.

The mine is in an area where separatist groups have long campaigned for the independence of the province and sporadic violence takes place to this day. Grasberg has other challenges, including, to put it mildly, difficult terrain, remoteness, seismic activity, very high rainfall, and tailings issues. 

Slocum says a complex operation like Grasberg is emblematic of the work Acorn does around the world:

“Operationally Grasberg is a very successful mine. Engineering and financial risks can be managed – it’s the societal risk, the community risks that are trickier to handle, but they’re not impossible, right? 

“That’s Acorn’s business – applying the same kind of rigor with social science to these issues. It can be done reliably.”

Changing guard

Slocum says the mining industry is undergoing a changing of the guard and “the new guard gets it.”  There is now an understanding that “We’re not going to be in business if we don’t do things that are the way of the host communities.” 

Anderson, who has worked as a communities and social performance practitioner in the mining industry for 17 years with, among others, Rio Tinto and Newmont, is forthright about how the makeup of the industry has changed.

“When I joined Newmont 20 odd years ago and when I would be in an executive committee meeting or even a board meeting, I’d look around the room and there would – I have to be really frank here – they were all old, white fat men and you knew whether they were Americans or Brits or Australians or South Africans or Canadians. They were all from the same mold. 

“Today when I go into a meeting like that, more than half are women. I think it’s a major change marker and it’s something that’s pushing a different approach at the very highest level.”

Not the money 

Anderson acknowledges some problems with the notion of ESG but takes issue with critiques, often from the right, that it is simply a woke concept and that it’s a “warm and fuzzy” issue:

“It’s not warm and fuzzy – it’s a business imperative. As an anthropologist, it’s the S that stands out for me. One of the misunderstandings that is so widespread within the industry, but also within governments is that this is really just about how much more you pay – whether it’s in the form of building hospitals and schools, or royalties and so on. 

“The space between a community and its stakeholders is a critical one that has to be managed well, but one of the last things it’s about, is spending money.”

Juukan Gorge

In 2020,  Rio Tinto destroyed caves at Juukan Gorge in West Australia that showed evidence of human habitation stretching back into the last ice age to make way for iron ore diggings.  The blowback led to a clean out of senior management at the world’s number two miner. 

Acorn recently completed a project for an undisclosed global mining company (not Rio) to roll out a heritage management system at all of its mines.  

“I think a lot of mining companies were gunning for Rio – I can’t believe they did that! And then they go back to their operations meetings and say, you know what, that could happen to us,” says Slocum. 

Rio was aware of the significance of Juukan Gorge, but says Slocum, “you have to go beyond awareness and understanding of heritage in the places you mine and make sure that you have the organizational structure in communication and resiliency to make decisions about these issues. “

Anderson believes with issues like these there is once again a generational shift: “I started working mining in Australia and as an anthropologist who’d spent years working with Aboriginal people, I speak two Aboriginal languages. In the early 90s, the [attitude] was if we saw an unusual rock formation, let’s just bulldoze it and not tell anyone about it, let’s just do it before it becomes a problem and look the other way.”

“But of course, nowadays the scrutiny with social media and the dramatic take up in Indigenous communities worldwide of cell phones has meant that nothing a mining company does is out of reach and observation anymore. [The concept of] cultural heritage has moved beyond stone axes and rock painting to intangibles like local languages and communities’ cultural lives.”

Slocum says ironically, the Rio incident may actually cause some real positive developments by putting a spotlight on these issues. 

Banks and shareholders 

To the question whether much of the talk around ESG in mining amounts to little more than lip service as opposed to evidence of fundamental change within the industry, Slocum is ambivalent: 

“There are some things that are happening that are forcing companies to do more of this.  The GISTM (Global Industry Standard on Tailings Management), the Copper Mark, ASI (Aluminum Stewardship Initiative) are all initiatives forcing companies to do gap assessments to join the club, get the certification or the financing.”

“But is that a fundamental shift coming? I guess I would say the jury’s out on that. But I think it’s more than surficial. 

“It’s probably not so much things like the Copper Mark, and it’s certainly not regulatory driven, but the lenders are really, really pushing some very meaningful change. [Lenders and shareholders] are saying it has to be sustainable because they’re going to follow up on it and say, well, we’re pulling our money out. And we’ve seen that in Brazil at a project we’re on right now.”

Anderson says it is significant – and somewhat surprising – that banks’ involvement in mining has evolved to the point where institutions “pull their money out because the project hadn’t achieved free, prior and informed consent from the Indigenous people. That’s happening right now.”

China in Africa

The role of Chinese investment in mining, specifically in Africa, has come under the spotlight in places like Congo and elsewhere. The DRC, for instance, has embarked on a program of revisiting and rewriting mining deals in the country made by Chinese companies, in one instance leading to the suspension of export licences for the massive copper and cobalt mine Tenke Fungurume. 

While Western companies are heavily scrutinized and under pressure from their own shareholders and outside activist groups, the perception is that Chinese investors get away with environmental, safety and other breaches.   

Slocum believes while some of it is overemphasized, much of the flak Chinese companies are getting is earned. 

“It’s not across the board, but we have seen on the ground communities in Africa that have experienced kind of disproportionate and unnecessary environmental impacts from Chinese projects and there are also significantly lower employment of locals because companies use Chinese contractors and labour,” says Slocum.

Anderson adds, “doing things by the book is delusional because the book is still being written and the fact that you follow the law is almost never sufficient in the S area of ESG.”

“I remember an African politician saying, well, you guys come and you invest your money, but you have all these strings and you say you gotta do this.  And we gotta do that. The Chinese just come and give us the money and then they get the contract and they do the work, but I think a lot of African countries are regretting their open arms to China, which meant unfettered activity at the local level.”

Artisanal miners

The DRC is in many ways the nexus for mining and ESG and another issue that the industry has to deal with – and has not dealt with very successfully so far – is artisanal mining. Just the term itself is contentious – small scale mining may be a better description. Or simply illegal mining.

Anderson, who is past chair of the International Council on Mining & Metals (ICMM) Human Rights and Indigenous Peoples Working Group, says there’s a discourse that casts small scale miners as “romantic heroes” as if they are “up against the big miners who are stealing all the ground that they could normally make a living from.

He says that in West Africa, where he worked extensively as Newmont’s external affairs director, in countries like Guinea, Liberia, Ghana and Cote d’Ivoire, small-scale mining is organized crime and in most cases, it’s not even locals that are involved.

“In many cases, they’re roving gangs and it’s increasingly done with Chinese money, and even Chinese nationals themselves are involved in these activities.”

In places like Ghana, where Anderson lived for six years, there is a growing realization by the government and citizens that illegal miners have contaminated just about all the waterways in the country for their own criminal activity.  

I think it’s estimated that something like 30% of Ghana’s gold production annually leaves the country without any taxes or royalties because it’s done through small-scale and mostly illegal mining.”  

Even when official channels are used, small scale mining is ripe for abuse. A 25-year deal published last week by the DRC that hands a little-known UAE firm exclusive rights to export artisanal gold at preferential rates raised eyebrows.

On the opposite side, the formal mining companies complain that small-scale miners infringe on their concessions, and they get blamed for pollution and other issues like influx of crime and other illicit activities around these mines.

“Big companies often refuse to deal with it because they say, look, this isn’t our country it’s up to the government to do. And the ICMM tried valiantly about 10 years ago to bring together small miners and large miners, and there was a guidance note produced which I was involved in.

“But basically, most big miners haven’t realized how to deal with it, and I’m not sure anybody has fully, except to have the government send the military in and burn all the equipment and to jail the people and so on.

“African countries have to ask  ‘do we want large scale anarchy as we can see in eastern DRC, or do we want a well-regulated investment with big miners wherever they come from, who knows what they’re doing in terms of environment management and the community’?” 

Slocum thinks the Glencores of the world that are willing to go into an environment like that will apply consistent standards anywhere they work, depending on local conditions of course. 

“But It takes a lot of probably hard gut checks to decide – is this what we want and if we’re in the country already do we want to stay there?”

Greenwashing

The exponential growth needed in mining as a result of booming demand during the energy transition will inevitably bring greater awareness of the industry among the broader public. 

Mining is a tiny industry compared to global oil and gas – Saudi Aramco has a larger market capitalization than the 100 biggest mining companies in the world. But thanks to electric cars mining is stepping out of Big Oil’s shadow and the vast NGO and environmental protesters complex is taking notice. Is Big Mining ready?

Slocum says Acorn International is working with Rio Tinto and others in Guinea following a series of community complaints against Compagnie des Bauxites de Guinée (CBG) in which Rio Tinto and Alcoa have a majority share and the state has 49%. The complaints have reached the ombudsman of the World Bank and International Finance Corporation (IFC) for mediation.   

“They are hesitant, as are many, to make their case known better because they’re going to be seen as greenwashing or white washing.”

Slocum believes the NGOs and lawyers acting on behalf of the community are casting them as the big bad company and instead of embarking on a charm offensive about the good that they are doing in the community, the miners “are just by putting the facts out there – the good and the bad.

“I think it’s a guarded industry and that’s good. In the past there’s been too much whitewashing and greenwashing, and I think there’s a feeling now like we don’t want to get too far out ahead of that. But they are catching a lot of flak as a result.” 

“These NGOs, they’re smart, they’re going after the money chain. So now it’s the car companies that are putting pressure on miners,” says Slocum. 

Anderson says in his experience in the developing world it’s the other way around: “The nationalized mining companies are the ones that drive over the locals, especially when they’re of a different culture or a marginalized group of people.”

Going mainstream

The Guinea bauxite story reached the mainstream media in the US, with the Washington Post running a major feature on it last month. You can also read about cobalt mining in Vanity Fair (“too dirty even for Elon Musk”) and iron ore mines in the New Yorker, and car companies getting into mining per NPR as publications search for a new blood diamond narrative.  

Miners seem unable to counter these narratives effectively: 

“And the David vs Goliath story may be a hackneyed one, but it’s also what the public kind of buy into. Look at these big corporations – they’ll do anything for profit and run over the little guy,” Anderson says.

And, says Anderson, the David vs Goliath angle is also a cop-out by journalists because rather than dipping into the facts journalists prefer to pre-empt “any accusation that they are paid off by the company if you say anything good about them.” 

Anderson believes mining is in some ways unfairly picked on, “because we dig big holes in the ground.”

“That said, there is also an internal industry problem. Mining is a technical discipline and mining people are not very good at communicating with the outside world.”

Mining everywhere

Recently Anderson, who is also research associate at the Colorado School of Mines, was speaking at the University of Denver in the School of Theology “of all things”, and about 40 students, some of whom were older, “ended up having an amazing debate about mining.”

“When I talk to this sort of crowd, I would say look around the room – every single thing that’s not wood came out of a mine. Everything.  So we don’t even have to just look at critical minerals. We cannot live the way we live without mining.”

While making the case for mining being essential to daily life is not difficult, Anderson does not believe this is the message to take to the public. The approach should be more localised:

“But that’s not to say we need to talk about it more. You need transparency where you develop ways so that stakeholders – not talking about shareholders here – can see for themselves how they will benefit and become advocates themselves. 

“In many parts of the rural and remote areas of the developing world, mining is the only chance for any economic investment that’s going to lift people out of poverty.”

NGO-industrial complex

The role of NGOs, a vast sprawling network of often well-funded activist organisations, in mining is only growing and in downtown Vancouver, where hundreds of junior miners maintain offices (or at least addresses) encountering the odd protest, especially during warmer weather is not infrequent. 

One such event MINING.COM saw featured two community members from an early stage project in Mexico flown into Vancouver by a New York-based NGO to hold banners and bang drums outside the developer’s offices. 

The scene outside the office was in stark contrast to video and images shared by the company showing one of several townhalls attended by 3,000 people from the local community where broad support for the project was given. 

“I’ve seen it myself many times, especially in my years at the corporate office in Newmont, where we’d have an AGM that was open to anybody, not just shareholders – and the NGOs would bring one or two people from the areas where we worked, who would spin this narrative about death and destruction.

But even in this arena, Anderson sees positive changes and a future that may be less antagonistic than before.

“I worked for  Newmont CEO, Wayne Murdy, and in my first few months he agreed to go to Toronto to take part in the mining and minerals for sustainable development event, which marked the beginning of the International Council of Mining and Metals and brought together CEOs of all the major mining companies and senior staff with all the major NGOs.

“I tried to organize a meeting between Murdy and some of these NGOs, and almost none of them would. They didn’t want to hear any story that went up against their prejudices.

“These days, several of those people and one of the leading lights in the mining critique business 20 years ago are now working for an NGO that’s incredibly constructive. Tough critics, but working towards a joint aim with mining companies. The most recent example that we’ve worked hard on is free, prior and informed consent for Indigenous peoples in Suriname where an NGO organized an independent group to facilitate the FPIC process.”

“That kind of partnership is getting more and more common, but [some of the reluctance] also comes from miners who say ‘I’m not going to deal with an NGO. They don’t like us. They lie.’ You know, they’re disingenuous and we still see examples,” says Anderson, referring to the Guinea mediation Acorn is involved in where one of the NGOs openly admitted that “the reason they didn’t want to go along with solutions was that it would stop their funding.” 

But, says Anderson, mining companies are becoming less averse to working with NGOs and there’s a growing realization that “it’s probably only 10% or 15% of the NGO world that are activists” and the rest of them are focused on genuine advocacy and development help for poor communities. 

US mining resolutions

As for the megatrends of the moment – the green energy transition and electric cars – how will that affect the broader mining industry? 

“I was a carmaker, I’d be very worried about the supply chain right now.  One of the interesting bellwethers of the trend is going to how the Biden administration approaches things like the Resolution Copper, a project which is in the top three worldwide unexploited copper deposits right here in our backyard.”

Discovered in 1995, the Resolution deposit in Arizona contains over 10m tonnes of copper and from an environmental Resolution ticks the boxes: It’s an underground high-grade mine using the latest block-cave technology that shrinks its environmental footprint. 

The world’s number one and two mining companies, BHP and Rio Tinto, have already spent $2 billion on Resolution, including reclamation of a historical mine. It was a pet project of late senator McCain and Resolution had the backing of both Obama and Trump. 

But Biden (temporarily) blocked it early on in his administration and just last month the timeline for approval was again up in the air after the US Forest Service said it does not know when it could produce its review, which is crucial to a land swap with Native Americans on the site of the proposed mine.

Three things

“In the 40 years I’ve worked with Indigenous peoples I have never met an Indigenous person that’s against mining. They want economic development because almost always they’re marginalized by mainstream economies. 

But there are three criteria that have to be met: 

“If they’re going to support you, one is that they have a say in the decisions about the project that affects them. Secondly, that the environmental and cultural aspects are looked after and respected and that doesn’t mean to say that there’s not a room for compromise. But thirdly, that they and their descendants benefit financially from it.

“If those three conditions are met, you’ve got very strong supporters there in whatever stakeholder the Indigenous people belong to.

“And I think a lot of mining companies haven’t really twigged to the fact that you can get very strong local support if you bring them in on significant decision making.”

Mitzi Sumangil, associate analyst at the US-based research firm, presented a graph showing the yawning gap between copper mining companies’ profits and capital spending.

Despite two consecutive years of bumper topline earnings north of $100 billion, expansion budgets haven’t budged, hovering in the early double digit billions. Barely more than 12% of ebitda, versus a long term average of more than double that. 

Expansion capital is also focused on brownfield projects, with the number of new mines over the last four years adding up to 15 compared to 32 over the same period a decade ago when profits were below $60 billion and on a clear downward trend. 

In 2015, when copper mining profits barely reached above $30 billion across the industry 12 mines went into production thanks to robust spending in the years preceding the bottom of the cycle.      

Sumangil says miners have become more conservative when it comes to investing in new projects and the trend continues to hold true:

“Companies have been recently focusing on extending the life of mines, especially of those high-grade ones and already profitable projects because, let’s be honest, it takes a lot of time to develop something new and it takes a lot of administrative effort.”

On the last point, Sumangil showed another graph detailing the lead time from discovery to production for the average copper mine. Which is 16.2 years. Stumble upon a turquoise outcropping today and you’ll start seeing the money roll in in 2040. 

Sumangil says even when accounting for concentrate capacity from uncommitted projects raw copper will still fall short of demand in scarcely two years: 

“This is a very ominous broader view of copper supply, and we expect it to be only worsened by stunted major discoveries, tight copper exploration budgets and of course, time-consuming exploration work.”

As a result, S&P Global believes despite fairly substantial estimated surpluses for the next three years, the copper price will hold up well through 2026 before scaling $10,000 a tonne again in 2027 when market deficits begin to appear.  

The Next Big Bull Market Could Be Copper

To those who happened upon your humble reporter’s work for the first time after being piqued (I know I was) by the WSJ article, let me start by saying:

You’re welcome! 

MINING.COM has always believed Orange Metal Good (OMG) and we appreciate a hard hitter like the WSJ joining us in banging the drum for copper. 

And congratulations for such a dramatic entry into the annals of copper market predictions. 

Even this website – where we are not afraid to talk our book – hasn’t made calls this bold. 

I was today years old

The piece starts with “I was today years old…”. 

Okay not really, but Heard on the Street articles don’t usually sound like overheard conversations in line at the Subway on 30 Broad Street, which is the level of this: 

“Traditionally seen as an economic indicator, copper is also poised to play a role in the world’s green transition. [Extra mayonnaise please, hold the mustard]” 

Indicator? Poised? A role? 

Whoa, there WSJ. Don’t get your readers too excited about copper’s coming kick up. May we suggest different phrasing for your big bull market prediction:  

Traditionally seen as essential for all facets of modern life, copper is also what makes the world’s green transition possible.

Our story begins shortly after the end of World War II… 

“Traditional economic indicator” is a reference to Dr. Copper, the metal so smart it has a PhD in economics (ugh). 

Wall Street deity Dr. Alan Greenspan, 97, whose first job in 1948 was analyzing metals demand for the National Industrial Conference Board, ditched that old chestnut fifty years ago:          

“Shifts in the economy’s makeup have reduced the role of industrial commodities, including copper, as indicators of growth and inflation.

“In the 1950s and 1960s, when timely data on industrial trends were lacking, I found copper prices a very useful proxy. That, of course, is less so today. 

“But I still cannot resist checking prices on both the London Metal Exchange and Comex on a daily basis.”

You and me both, Alan: At 10:48 33 CT 19 May 2023 Comex Globex Code HGN3 Most Active Jul 2023 $3.7305/lb & LME 3-month Grade A $8271.00 Open Outcry. 

The current thing    

Apparently not much happened in the decades since Dr. Copper lost tenure because after that intro Big Bull continues: 

Glencore’s “aggressive pursuit of Teck Resources has put a spotlight on the race to secure access to copper.” 

Leaving aside the fact that Glencore first approached Teck in 2020, MINING.COM would like to think that the spotlight “on the race to secure access to copper” (or as we would put it “on copper”) has been shining a little bit longer than a month.

None other than Glencore at its 2017 Investor Day, made the green energy transition (GET^TM) connection to copper explicit. 

“Electric vehicles will be disruptive to the world,” Chief Executive Ivan Glasenberg said in a thick Johannesburg accent. 

Hardly a revolutionary statement from the world’s top commodities trader – the first Tesla Model 3 had rolled off the assembly line four months earlier, but still beat the WSJ by five years.

The boys from Baar said additional demand from GET^TM will total 4.1 million tonnes by the end of this decade. 

That turned out to be conservative. Big Bull cites a Goldman Sachs study forecasting overall 40 million tonnes demand by 2030 and that GET^TM will be responsible for 47% of demand growth through 2040.  

High on its own supply predictions

You can’t go wrong quoting vampire squid numbers (or can you?), but when it comes to the other side of the market the WSJ’s case for a new high looks stomped on.

The International Copper Study Group has been doing the lord’s work since 1986 and predicts mine supply of 22.5 million tonnes in 2023. That’s after the Lisbon-based organisation revised down growth expectations.

It’s always downward btw, underpromising and overdelivering is just not a thing in this industry. Look up Olympic Dam or Oyu Tolgoi or an exception that proves the rule, Kamoa-Kakula. 

That leaves copper supply in need of a good number of escondidas (MINING.COM’s official measure of copper production equaling one million tonnes) between now and 2030.    

To be fair, WSJ’s copper bull market prediction acknowledges the copper industry’s supply challenges:   

“Current investment plans would probably fall far short of meeting that.” 

Apart from spelling definitely wrong, Big Bull too easily moves onto the positives: 

“Still, there are a few bullish trends for supply growth too, mostly related to politics.” 

Big Bulls’ bullish politics is the Inflation Reduction Act (IRA) and its tax credits and local sourcing requirements. The IRA will also “wrest from China control of the supply chain for clean power minerals”.

(Here are 10 graphs showing how devoid of reality that statement is. )

No diggity 

“A more bifurcated supply chain will raise costs for everyone, especially in the early phases of the green transition. But those higher material prices will also stimulate investment.

“Mineral processing is the key bottleneck, but that probably implies more upstream mining investment too.”

Apart from spelling definitely wrong again, one must wonder where the idea that processing is the key bottleneck comes from. 

Could it be from the Biden official who said this when the IRA was still being shopped around:

“It’s not that hard to dig a hole. What’s hard is getting that stuff out and getting it to processing facilities. That’s what the US government is focused on.” 

A cursory glance at US Geological Survey data would tell you that even if the US refines all the copper it mines every year it would still be short 600,000 tonnes.   

That the received wisdom in a publication like the Wall Street Journal is that refining is the key bottleneck, especially in an article making a call for the next big bull market, is just… [TK] 

Perhaps it doesn’t matter. Bottlenecks aren’t a problem if your bottle is empty.    

Ringing hollow

A quick look at what’s happening on the ground would dispel the idea that you can refine yourself out of a metal supply problem. Or that one copper company buying another adds to supply. 

MINING.COM visited Pumpkin Hollow in Nevada in 2018 ahead of commercial production a year later. It was the first copper mine in the US to start up in 13 years. Nevada Copper acquired the project in 2005 and the deposit was discovered in 1960. 

This is not an atypical timeline for a mine. 

Turns out it is hard to dig a hole, and to keep digging sometimes even harder. Production at Pumpkin Hollow was suspended in July last year. 

So that makes the last new copper mine in production in the US 16 years old. 

(Fun fact: America’s largest currently producing copper mine, Morenci in Arizona, started production in 1872.)  

Unresolved

But the hardest thing to do in the US is to start digging. 

Discovered in 1995, the Resolution deposit in Arizona contains over 10m tonnes of copper, making it the sixth-largest in the world. 

Resolution ticks the boxes: It’s an underground high-grade mine using the latest block-cave technology that shrinks its environmental footprint. 

The world’s number one and two mining companies, BHP and Rio Tinto, have already spent $2 billion on Resolution, including reclamation of a historical mine. 

It was a pet project of late senator McCain and Resolution had the backing of both Obama and Trump. But there was no diggity no doubt Biden would block it, and he did.

Calls brought by Arizona Senator Sinema and others for copper to be classified as a critical mineral – another politics-related bullish trend identified by Big Bull – may help Resolution get under the ground. Just maybe.

But it’s likely more wishful thinking. Having the capo di tutti capi of critical battery metals – nickel – in the orebody did not help Twin Metals in Minnesota. Biden torpedoed that too.

The IRA or the highway

“One key uncertainty is the U.S. Congress. Republicans’ opening move in the debt-ceiling battle has included a demand to undo parts of the IRA.”

If you want to be part of the next big bull market, gotta keep an eye on the debt ceiling, WSJ readers. 

Not fighting in the DRC, not falling grades in Chile, not protests in Peru, not changes in mining laws in dozens of jurisdictions around the world including top three US supplier Mexico, not regulation in the EU and Canada, not ore export bans in Indonesia and the Philippines, not the rate of EV uptake everywhere, not the fact that global copper mining is Opec on crack tranq, not measly exploration budgets, not lack of new discoveries, not mine construction timelines counted in decades, and not global copper stocks at less than seven days consumption. 

No; The Next Big Bull Market Could Be Copper thesis is dependent on US debt ceiling horse trading, subclauses of the IRA and the Republicans.  

Futures features

Dwell a bit on the absurdity of linking the next big bull market to possible alterations by the party most sympathetic to mining to provisions – most of which still need to be codified anyway – in a 755 page document. 

The financialization of commodities markets is a long-established trend. Daily copper trading on Comex averages more than a million tonnes per day (1 escondida) but far less than 1% is ever delivered.  

And investing in the industrial economy has long been considered passé, but it’s still a bit surprising that the WSJ and its editors don’t know how to value hard assets anymore.  

At best Big Bull’s argument may create a tradeable moment on Comex if you somehow shoehorn copper’s prospects into the intactness of the IRA and manage to convince enough of your readers.  

Besides, if you’re glomming everything onto the debt ceiling perhaps it is gold that should be classified as a critical mineral. Or platinum – to mint that magic coin.

Bad Balkan 

In the closing paragraph, Big Bull doubles down on the thesis that it’s the IRA or the highway for copper’s future: 

“But assuming the law remains intact, the U.S., China and Europe will all move aggressively to green their economies over the next decade. 

“The world will need much more copper to achieve that, especially if global supply chains keep Balkanizing.”

China has been moving aggressively for more than two decades – the country consumes more than half the world’s copper and is responsible for 42% of refined output. 

US consumption? 7%. The IRA is a day late and a dollar short – for everyone except lobbyists. 

As for balkanizing, Serbia opened a massive new copper mine less than two years ago. Built and owned by the world’s fastest growing copper company which is, unsurprisingly, Chinese. 

Of course, that’s not how the term was used in WSJ’s nice but nonsensical summation of the future of copper, but mining supply chains need more balkanization not less. See tranq above for more on that.

Copper’s modern era began October 2022  

Big Bull must’ve been a popular story, because three days later there was a follow-up article headlined The Green Revolution Is Here. Which Big Miners Are Prepared? rehashing the arguments (no emphasis added):

“New U.S. legislation points to the world being short of copper in a few years.”     

“Over the last six months mining firms have begun jostling to acquire copper assets. One major reason: The U.S. Inflation Reduction Act…”.

To its credit Which Big Miners at least introduces concepts like “dense thickets of permits”, “big new greenfield projects”, “capricious regulatory regimes in far-flung places,” the ““herculean” task of building new copper mines, and “luck”. 

But then spoils it all in the final paragraphs.

Copper blister

“Cyclical headwinds from the U.S. and China are also weighing on current copper prices, making big new investments harder to sell.”

So copper is not the next big bull market and no institutional investor believes the “probable surge in copper prices” mentioned in paragraph one? 

“Nonetheless, the big miners will need to plunge in eventually anyway.” 

Yes BHP and Rio, just build Resolution already. It’s been 20 years since you bought that property for goodness sake. Can’t put it off any longer. Did you not prepare?  

“The huge write-downs of assets like Alcan bought near the top of the last commodity supercycle are still seared into mining bosses’ memories. That is understandable.” 

They are seared into investors’ memories. You know, the ones who had their fingers burned, not those who accepted sinecures on mid-tier mining boards after being shown the door. 

M&A muddle  

“But the copper demand wave is coming. Those who don’t invest soon will almost certainly be forced to do so later — probably at much higher prices.”

If “much higher prices” refers to copper prices, make it make sense. 

It must refer to the prices/valuations of big miners’ takeover targets. So while big miners are busy suppressing seared memories they are missing out on the demand wave, but the takeover targets grow rich on said wave? 

Whatever paradox is being laid out here it does not seem to include the building of mines. 

As for exploration – the bedrock of the industry – it is completely absent from both articles.    

The new copper

It seems copper is having a moment in the WSJ. 

A search for “copper” in the last seven days sorted by relevance found 10 articles including some useful ones like It’s Time to Ditch Your (Supposedly) Nonstick Pans. 

I was going to write a stern letter to the editor after suffering through Big Bull and Which Big Miners but a search brought up Minnesota Rep Peter Stauber’s submission from a couple of weeks ago: Why Won’t Biden Pursue U.S. Mineral Independence?

The WSJ also covered the World Copper Conference in Santiago held last month. This is the first sentence:

“Metal markets seem to think copper is the new lithium.”

Okay that’s it. I give up. I’m outta here.

Chile’s President Gabriel Boric announced on Thursday night his government would nationalise the country’s lithium supply, applying a model where private companies will be forced to partner with the state to develop the local industry.

The long-awaited policy in the world’s second-largest producer of the battery metal includes the creation of a national lithium company, Boric said on national television. Copper giant Codelco, nationalized in the early seventies, and state miner Enami will be given exploration and extraction contracts in areas where there are now private projects before the national lithium company is formed.

The contract for Chile’s current lithium producers, world no.1 producer, Albemarle (NYSE: ALB), runs out in 2043, while the one for SQM (NYSE: SQM), the second largest globally, ends in 2030. Charlotte, North Carolina-based Albemarle and Santiago’s SQM are responsible for about a quarter of global production. 

Investors dumped the marquee names in brisk trading on Friday with SQM losing more than 17% in value in early afternoon trade to a 52-week low while Albemarle gave up 9%, also hitting a year low. Albemarle, now worth just under $21 billion in New York, is down 47% from its peak valuation while SQM, trading 42% below its year-high, has a market cap of $17.5 billion.   

Without naming the two giants, Boric said he hoped that lithium miners already present in Chile would be open to negotiate state participation before the end of their contracts, although no details about state shareholding or other ownership arrangements were disclosed.

Friday’s news comes on top of a slide in lithium prices with Benchmark Mineral Intelligence assessment for the week ending April 19 showing a 7% sequential decline for battery-grade lithium carbonate inside China. At $28,625 a tonne, the battery metal is down 65% from its peak hit late November last year.

Tenke Fungurume, split 80-20 between CMOC and Gècamines, continued to produce the battery and aerospace metal after its export permits were pulled in July. 

According to Benchmark Source, stockpiles of at least 16,000 tonnes of cobalt hydroxide will take a year or more to be cleared and are likely to put further pressure on the cobalt prices already down by 75% since the peak a year ago to trade below $20,000 a tonne in April.

“On the one hand, this pending tsunami of product has already been baked into today’s bearish prices,” Daniel Fletcher-Manuel, head of prices, data and indices at Benchmark, said. 

“However, further price erosion through quarter two is likely as suppliers race to offload tonnage before CMOC fully resumes exports.”

CMOC has been expanding Tenke, currently responsible for some 15% of global output, and expects the additional tonnes to hit markets this year on top of the released inventories. Congo produces more than 70% of the world’s cobalt and mining inside the country is dominated by Chinese firms.

Benchmark Mineral Intelligence Cobalt Price Assessment expects the cobalt market to be in oversupply over the next three years as annual global production tops 250,000 tonnes by 2025, before a small but growing deficit appears through 2030.    

According to a report by Barcelona-based Focuseconomics, in a survey of more than two dozen investment banks and market research companies at the end of March, 10 analysts had upped their forecasts for the copper price in Q4 2023.

But the consensus forecast for average copper prices in the final quarter remains below current levels, however, at around $8,575 per tonne, with the lowest prediction at just $6,500 (Euromonitor) and the top end, a more inspiring $10,050 (Commerzbank).

The copper price is closely tied to the Chinese economy with the country responsible for more than half the world’s consumption of the orange metal. Of that, some 40% ends up in China’s construction sector. 

Despite a rosy demand outlook due to the green energy transition, historically low inventories, and supply growth uncertainty, weakness in China’s building sector has kept medium-term copper price predictions muted.

Imports falling

Data released on Thursday showed a surprise jump in Chinese exports after five months of declines. But the data is contradicted by other indicators, including factory gate prices falling at the fastest pace since June 2020.

While coal and iron ore imports were strong, customs data show China’s copper purchases falling: concentrate imports declined 7% year on year while unwrought copper imports fell nearly 20%.

At the current rate refined copper imports will fall below 5 million tonnes for the year compared to 5.9 million in 2022, while concentrate shipments will come in well below last year’s 25.3 million tonnes.

Copper prices are exposed to general economic trends thanks to its widespread use in industry, transport, construction and electric grids.

In a recent report, New York-based Neuberger Berman talks about “phantom tailwinds” for the global economy from China (and Europe) and suggests that investor enthusiasm about China’s potential to drive global growth and mitigate a US or global recession is likely misplaced. 

Recent Chinese stimulus, in the form of Total Social Financing, is the weakest in 20 years relative to the size of the economy, according to the investment firm. In addition, the government’s GDP growth target for 2023 is also the lowest since 1976, meaning little appetite in Beijing in fiscal support for growth.

Neuberger says the decline in imports of input products as well as the lack of strength in the currencies of commodity-rich trading partners including Australia, Canada, New Zealand and Brazil, are more evidence of weakness in the economy.

This time last year metals and mining were bubbling with high hopes for a post-pandemic Chinese economic resurgence, that inflation in the developed world would prove transitory and so would the Ukraine war, then barely a month in. 

At the end of Q1 2022, the MINING.COM TOP 50* ranking of the world’s biggest miners hit an all time record of a collective $1.75 trillion in value as everything from copper and gold to uranium and tin rallied hard.

But the rout was swift and by the end of June the TOP 50 had lost an astonishing $600 billion in combined value as China’s zero-covid lockdowns remained in place, interest rates were hiked to curb stubborn inflation and the Ukraine war roiled energy markets. 

Mining companies’ ratings have improved steadily since then, but at the end of Q1 this year the TOP 50 have only made up little over half the losses since the March 2022 peaks for a combined value of $1.43 trillion. That’s not far above levels seen end-March 2021 and up a relatively modest $49 billion since the end of last year.  

Copper charge

Primary copper producers have fared well over the last quarter, outperforming the broader market and adding more than 16% in value as the bellwether metal continues to benefit from bullish predictions.  

Following a string of acquisitions at home and abroad fast-growing Zijin Mining led the copper charge with a 21% gain for the quarter for a $46 billion valuation in Shanghai. 

Zijin overtook First Quantum as the world’s fifth largest copper producer based on 2022 attributable production after the latter’s squabbles in Panama (since resolved) saw output decline. The Chinese copper and gold company also has growing ambitions in lithium.

Poland’s KGHM, the world’s number 7 producer with output of some 540kt in 2022 fell out of the ranking more than two years ago and is now languishing at number 61 with a market cap of $5.7 billion in Warsaw.

Coal stays in the black 

Glencore’s rally, which saw the company maintain its March-2022 valuation throughout the year while other shares sank, went into reverse this year with the Swiss miner and trader only just holding the number three spot worldwide. 

Glencore’s unsolicited bid for Teck Resources, in the process of spinning off its own coal operations,  could, on paper at least, lead to that rarest of beasts – a mining company worth more than $100 billion. 

Only Rio de Janeiro-based Vale apart from the perennial top 2 has achieved that feat, albeit for short stretches at a time.

Teck enters the Top 20 for the first time after holding its value since the March 2022 peak with investors betting that a stand-alone copper entity, fed by coal profits from a sister company, will attract a new set of investors.     

While coal prices have begun to moderate, coal miners in the ranking have held onto most of the gains as large parts of the world turn to traditional sources of energy amid Russian oil and gas sanctions. 

Uranium stocks enriched 

Uranium counters also continue to find favour among investors amid volatile global energy markets with Kazatomprom re-entering the ranking in the final slot after a brief absence. 

Canada’s Cameco makes the best performer list over the three months after spending much of the post-Fukushima period in the wilderness.  

The Kazakh uranium producer, the world’s largest, pushed out Fresnillo as the Mexico City-based company suffers from silver’s relative underperformance to gold. 

Golden years

Newcrest Mining tops the percentage gain table thanks in part due to its absorption of Canada’s Pretium Resources. 

With a sweetened bid for the Australian miner from Newmont announced this week, a combined company could be worth around $55 billion and mark the return of a gold-focused company to the Top 10.

Bullion’s recent strength sees half the best performer list made up of gold companies, and representation in the ranking is destined to increase given merger fever among the lower rungs in the sector.

Platinum undercard 

Weakness in platinum prices and operational woes for South African producers amid a power crisis sees Impala Platinum fall to just outside the top 50 for the first time. 

Impala follows Sibanye Stillwater, which despite a diversification strategy away from South Africa and PGMs over many years and ranked at number 30 less than two years ago, dropped out a year ago.

Anglo American Platinum is the worst performer for the quarter, losing more than a third of its value this year. 

Lithium lingers 

Despite the sharp pullback in lithium prices so far in 2023, the five lithium stocks in the the Top 50 have held up well with a combined value of $97 billion. 

Positioned at number 52 and 53, both Pilbara Minerals and IGO could swell the presence of Australian lithium miners in the rankings although gold counters Endeavour Mining and Kinross (post its Russia exit) – both of which are partial to acquisitions – could get in the Top 50.  

Click on table for full resolution image:

*NOTES:

Source: MINING.COM, Mining Intelligence, Morningstar, GoogleFinance, company reports. Trading data from primary-listed exchange at April 3, 2023 where applicable, currency cross-rates April 7, 2023. 

Percentage change based on US$ market cap difference, not share price change in local currency.

As with any ranking, criteria for inclusion are contentious issues. We decided to exclude unlisted and state-owned enterprises at the outset due to a lack of information. That, of course, excludes giants like Chile’s Codelco, Uzbekistan’s Navoi Mining, which owns the world’s largest gold mine, Eurochem, a major potash firm, Singapore-based trader Trafigura, and a number of entities in China and developing countries around the world.

Another central criterion was the depth of involvement in the industry before an enterprise can rightfully be called a mining company.

For instance, should smelter companies or commodity traders that own minority stakes in mining assets be included, especially if these investments have no operational component or warrant a seat on the board?

This is a common structure in Asia and excluding these types of companies removed well-known names like Japan’s Marubeni and Mitsui, Korea Zinc and Chile’s Copec. 

Levels of operational or strategic involvement and size of shareholding were other central considerations. Do streaming and royalty companies that receive metals from mining operations without shareholding qualify or are they just specialised financing vehicles? We included Franco Nevada, Royal Gold and Wheaton Precious Metals.

Lithium and battery metals also pose a problem due to the booming market for electric vehicles and a trend towards vertical integration by battery manufacturers and mid-stream chemical companies.  Battery producer and refiner Ganfeng Lithium, for example, is included because it has moved aggressively downstream through acquisitions and joint ventures.   

Vertically integrated concerns like Alcoa and energy companies such as Shenhua Energy where power, ports and railways make up a large portion of revenues pose a problem, as do diversified companies such as Anglo American with separately listed majority-owned subsidiaries. We’ve included Angloplat in the ranking but excluded Kumba Iron Ore in which Anglo has a 70% stake to avoid double counting.

Many steelmakers own and often operate iron ore and other metal mines, but in the interest of balance and diversity we excluded the steel industry, and with that many companies that have substantial mining assets including giants like ArcelorMittal, Magnitogorsk, Ternium, Baosteel and many others.

Head office refers to operational headquarters wherever applicable, for example BHP and Rio Tinto are shown as Melbourne, Australia, but Antofagasta is the exception that proves the rule. We consider the company’s HQ to be in London, where it has been listed since the late 1800s.

• Please let us know of any errors, omissions, deletions or additions to the ranking or suggest a different methodology.

A chartbook released on Tuesday (ahead of the day’s action in New York) by Merk Investments, an investment advisor and manager of ASA Gold and Precious Metals (NYSE:ASA), a closed-end investment fund established in 1958, includes two long-term charts that show the disconnect between gold mining stocks and the bullion price. 

The current ratio between the metal and gold stocks as represented by the NYSE Arca Gold Mining Index, is not that far off historic lows struck in 2015 and shows that gold stocks have been underperforming gold for more than a decade. 

If the price of gold stays stable at today’s levels, gold stock valuations would have to more than double to bring it in line with the historical average since the early 1990s.

Balance would also be restored should the gold price halve of course, but there is no scenario where gold dipping into triple digits does not bring carnage to equities.

At the same time, despite the gold market’s rude health, gold mining stocks have also been deeply discounted when compared to the broader market in the form of the S&P 500.  

Global mining’s enthusiasm for brown and greenfield projects has fizzled over the last decade despite near universal agreement that in the coming decades demand for metals and minerals will boom due to the green energy transition.

BMO says while companies “have started to talk more openly about investment,” so far they are “doing little about it”.

Over the past 20 years, expansion capital spending across the industry has typically run above 20% of EBITDA, which is to be expected in an industry with depleting assets and falling grades (click here for a copper ore grade graph). 

The authors of the report point out that the past couple of years have seen this metric slip to around 10%, “with shareholder returns favoured even as free cash rose.”

“Given the timeline to bring a mine to market, this lack of investment is storing up issues for later in the decade, where balances look incrementally tighter.” 

Buying not building 

“Moreover, given it has never been harder to build a new mine owing to capex escalation concerns, shareholder resistance and environmental/ESG challenges, we see companies looking towards buying rather than building any growth,” says BMO. 

Given this, the investment bank sees the need for medium-to long-term pricing to trade at a premium to the cost curve “given the need to substitute or thrift demand in a number of metals, particularly those exposed to the fuel to materials transition.” 

Also in the report, where BMO has upped its price forecast for most of the commodities it covers (notably molybdenum +59%, gold +13%, and copper and zinc both +10%), is a section on changes to China’s raw materials model.

If mining companies in the West are planning to buy their way out of years of underinvestment in new assets, they will have stiff competition, not just at home:

“Ensuring availability of raw material supply is not a new policy for China, but it has clearly been moved up the agenda since last year’s NPC. 

“We view this as effectively a carte blanche to Chinese SOEs to invest in mines overseas again, both mining companies and, potentially, battery and automakers such as CATL and BYD.”

That figure means as much EV battery metal business was done in 2022 than the combined total of the preceding five years. And that came despite pandemic lockdowns for most of the year in the world’s largest EV market and turmoil in Europe, the world’s no. 2 electric car market, due to the Ukraine war. 

In fact, the value of battery metals deployed in December last year alone surpassed all of 2019 and 2020 combined. A rush in end-of-year registrations is a feature of the global vehicle market, but December was a blockbuster month in all aspects. 

Total battery capacity of the 1.64m EVs sold during December set a new monthly record, expanding 29% year on year to 63.6 GWh, according to Adamas Intelligence, which tracks demand for EV batteries by chemistry, cell supplier and capacity in over 100 countries. 

In order to produce the most accurate data, the monthly battery capacity deployed numbers in the MINING.COM EV Metal Index do not include cars leaving assembly lines, those on dealership lots or in the wholesale supply chain, only end-user registered vehicles.  

Blockbuster December

In December 2022, a record 38,061 tonnes of lithium carbonate equivalent were deployed onto roads globally (55% carbonate, 45% hydroxide) in the batteries of all newly sold passenger EVs combined, up 46% over the same month the year prior. 

Lithium prices were also peaking in December around $70,000 a tonne, which lifted the lithium subindex to $2.7 billion during the month, surpassing December 2021 by 280%. 

The same was true of nickel, with a record 27,676 tonnes in newly-sold EVs rolling off the lot in December, up 40% over the same month the year prior. The value of the nickel in hybrids and battery electric vehicles jumped to $856m, 15% above the previous record set in March last year when the London nickel market was in the throes of a crisis and prices spiked. 

Cobalt blues

The cobalt subindex dropped 28% however, after prices for the metal halved over the course of the year and declining cobalt use in batteries eroded growth in absolute deployment tonnage. 

According to Adamas data in the second half of last year average cobalt use in EVs was flat as LFP batteries continue to grow in popularity. In contrast, lithium use per vehicle jumped 17% as average battery pack sizes grew and the global EV sales mix reached 89% full battery-powered cars.   

In December 2022, a record 57,980 tonnes of synthetic and natural graphite were deployed, up 48% year on year setting a new record in terms of value as prices consolidated around the early $800s per tonne. 

January 2023 saw the index halve from December, dragged down by the end of government subsidies in China, and there is likely more weakness ahead given sharp decline in lithium prices in China in recent weeks, a ‘normalizing’ nickel price and ongoing troubles for cobalt both in terms of price and usage.  

The latest data from International Nickel Study Group shows a massive 22% year on year jump in January for global nickel production despite registering a decline in output from the December total.

At the current pace, mined nickel output is set to exceed 3.2 million tonnes per year. The jump was driven primarily by continued gains in Indonesian production which increased by over 41% compared to the same month last year. 

Refined nickel demand shrunk by 5% in January and rose by a more modest 2% compared to 2022. The January figures translate to annual demand of 2.8 million tonnes, to give an apparent market surplus of 255,000 tonnes, BMO Capital Markets points out.

Price rout 

Nickel prices have fallen by 28% this year to last trade at around $22,300 a tonne on Thursday. Reuters reports the discount or contango for the LME’s cash nickel contract against the three-month delivery contract increased to as much as $362 a tonne this week. The gap is the highest since December 2007 and a sign of significant lack of demand in the spot market.

Project Blue, a critical materials market intelligence firm, says the LME resuming Asian-hours trading (now postponed to Monday) should see liquidity pick up and offer a nickel price that better reflects market fundamentals. As such, the company sees prices continuing to normalise off their inflated highs over the next three months.

Glencore in its annual report on Thursday said a significant excess of non-LME grade units has incentivised the conversion of these units into nickel matte and nickel sulphate, both eligible for the battery segment and feedstock for LME grade production.

TMC’s project in the Clarion Clipperton Zone (CCZ) in the Eastern Pacific Ocean, between Hawaii and Mexico aims to bring online the planet’s largest undeveloped deposit of battery metals. The nickel, cobalt, manganese and copper are found in potato-sized rock-like nodules. 

The Benchmark study assessed, among others, the global warming potential, acidification, eutrophication, particulate matter formation and water consumption of mining, transport, processing and refining of the metals including an intermediate NiCuCo matte product and end-products nickel sulfate, cobalt sulfate and copper cathode. 

The comparison to producing the same metals via key land-based routes, including from Indonesian nickel laterites and mixed cobalt and copper sulfides and oxides mined in the Congo showed NORI-D performed better in almost every impact category. 

Currently the DRC is responsible for some 70% of global cobalt production, while Indonesia’s share of nickel output has grown to over 40%. NORI-D only underperforms when it comes to global warming potential and water consumption of cobalt sulfate from one land-based route from the DRC refined in China. 

When it comes to nickel production the comparative impacts are particularly dramatic – the study found that Vancouver-based TMC’s nickel sulfate product would outperform not just Indonesian nickel but all other key land-based production routes, lowering emissions by between 70-80% on average, including with 70% lower global warming effects.

New seabed mining code

The International Seabed Authority (ISA) has been working on a framework for deep sea mining since 2014 and is set to issue its approved mining code within months. 

It is estimated that 21 billion tonnes of polymetallic nodules are resting on the ocean floor in the CCZ. Almost 20 international mining companies have contracts to explore the region which collectively span an area of 1.28 million km², with 1.97 million km² of the region also under protection. Accounting for 90% of all nodule exploration activity, the area is considered the most prolific area for ocean mining. 

TMC through its subsidiaries holds exploration and commercial rights to three polymetallic nodule contract areas in the CCZ regulated by ISA and sponsored by the governments of Nauru, Kiribati and the Kingdom of Tonga.

Millions of years old, the nodules grow by absorbing metals from the seawater, expanding slowly around the core of a shell, bone, or rock.  

The English language government-run paper says China lags behind the West in terms of research, technology and hardware for seabed mining which it calls “a new frontier for international competition.”

Ye Cong of Wuxi-based China Ship Scientific Research Center, a subsidiary of the China State Shipbuilding Corp, said mining the metals found in nodules on the seafloor – mainly nickel, copper, cobalt and manganese – will “help us reduce the heavy reliance on foreign suppliers”. 

Ye is a member of the 14th National Committee of the Chinese People’s Political Consultative Conference, a policy shaping body, that was held last week. China Daily reports the state shipbuilding company is known for its deep sea submersibles like the Jiaolong (Sea Dragon) and the Shenhai Yongshi (Deep Sea Warrior).

Mining exemption 

Last week the United Nations agreed to the first ever High Seas Treaty after more than a decade of negotiations by member states. The treaty aims to set aside for conservation around 30% of the world’s international waters and provide rules for its exploitation.

Climate Change News reports deep sea mining is exempted from environmental impact assessment (EIA) regulations established under the UN treaty, which will remain the remit of the International Seabed Authority. 

ISA has been working on a framework for deep sea mining since 2014 and is set to issue its approved mining code within months. 

CCN notes that the ISA accelerated the pace of negotiations after the island state of Nauru “triggered an obscure provision forcing approval by July 2023,” adding that should the agency miss the deadline, “companies could submit a request to begin full-scale mining, even without any rules in place.”

The nodules are found on abyssal plain sediments at about 3,500–6,000m water depths and the USGS expects that about 35–45% of the demand for critical metals will come from deep-ocean mines by 2065.

The increase was driven by a strong recovery for the price of copper since hitting multi-year lows at the outset of the global pandemic. 

The copper price has doubled from March 2020 when the bellwether metal briefly fell below $2/lbs ($4,400 a tonne) and prices are set to stay elevated given the rosy demand outlook through the end of the decade.

Last year saw two large copper mines start up operations – Anglo American’s 60%-owned Quellaveco in Peru and Cukaru Peki (Timok) in Serbia, which is wholly-owned by China’s Zijin Mining. Teck Resources’ Quebrada Blanca in Chile will follow this year, while two other major projects, Udokan’s eponymous mine in Russia and Rio Tinto’s Oyu Tolgoi underground expansion, are currently under construction.  

S&P Global sees a market surplus over the next three years (–285kt this year) but after this bulge in additional tonnes coming online, the pipeline narrows substantially, with a nearly 400kt undersupply in 2026. 

S&P Global points out that fatter exploration budgets over the past several years – most of which being spent in Latin America – have not led to a meaningful increase in the number of recent major discoveries: 

“While copper reserves and resources have increased by 50 million tonnes compared with our analysis last year, most of the increase came from assets discovered in the 1990s,” say the authors.

Even the most skilled workers are supposed to fear for their jobs as chatbots like ChatGPT answer questions and solve problems that would take humans hours or days, instantly. Likewise, image generators like Midjourney can interpret our world and provide cutting edge visuals on any topic or peer into the future.   

Time to meet your new robot overlords.

A simple prompt to OpenAIs ChatGPT suggests machine learning needs a bit more study time. The same question was asked multiple times and weeks apart in case the millions of conversations since the natural language bot was opened to the public may have taught it something. 

It still got the simplest of questions on mining’s most important metal wrong. 

A quick crosscheck with the USGS bible finds not only the country level production volumes to be wrong (China has never produced more than 2 million tonnes in a year, the Chile figure is off by a half a million tonnes) but there is also a glaring omission. 

Where is the Congo? If the fact the USGS uses “Congo (Kinshasa)” to name the country threw it off, it’s a rudimentary mistake. The DRC produced 1.6m tonnes in 2020 – that’s a lot of metal to go missing. 

The confidence with which it relays the mistake and the certainty with which it sources the wrong answer from a trustworthy source is, to put it mildly, disconcerting. 

Let’s hope no-one in Washington is using ChatGPT to craft critical minerals strategies or global trade policy. (They most certainly are – ed.)

At the moment, image generators like Stable Diffusion, Dall-E and Midjourney are probably just a threat to the jobs of graphic artists and game designers, but the visuals created shows up AI’s distorted view of the mining industry and mineworkers.

The prompt to Stable Diffusion of “A group of miners get ready for the morning shift at a copper mine in the USA” produced the horrors below and changing it to “modern copper mine” altered little other than to add colour and update the hard hats.

Even if you ignore the warped faces, the general demeanour and ragged clothing the images still evokes dirt poor and exploited labourers similar to the many news photos from the Great Depression. 

Using the same prompt, Midjourney also thinks mining is the most depressing job in the world, performed by despairing old men assembling in gloomy bunkers ahead of a punishing day on the job.

Several iterations paint the exact same picture, all with the same New York mining disaster 1941 vibe.  

If nothing else, these images show the mining industry has a massive public perception problem and enticing young people to join the industry is, well, not a job that can be left to artificial intelligence.