Across the commodity spectrum, a lot of analysts have been predicting a very significant shortage in supply in the coming years, and investment in new exploration is critical to fill a lot of these gaps. To start off, where do you see the most critical supply gaps appearing in this space?
There are supply gaps across the whole space, on the midstream side in the graphite space, high purity manganese, lithium, and copper as well. Now, if you included an ESG component in that, nickel would shoot straight into the top three as well. And we have this interesting juxtaposition in the nickel market at the moment whereby a lot of contracts have been signed up with perhaps not particularly environmentally friendly production or development assets in Asia, in Indonesia in particular, by Western world OEMs.
Interesting you bring up the OEMs getting into this space not necessarily considering a lot of the ESG factors. How do they manage that? Especially when it comes to the end of the line coming into the electric vehicles space. How is that ESG versus energy transition playing out?
It’s actually a very interesting question because what we have expected to happen, particularly from the Western world and European OEMs, hasn’t actually come to pass. We had expected the European OEMs to havemuch more of an ESG focus. What we’ve had is effectively a fight to lock in near-term material, but no investment in medium-and longer-term material by funding exploration and development projects. Regarding ESG-friendly nickel, there are some world-class projects in Canada, in Brazil etc., but we’re just not seeing OEMs committing any capital to that.
So, you started to get into different types of commodities, such as lithium and nickel, and different jurisdictions. What kinds of projects do you see currently getting funding and where are the funding gaps?
We are starting to see funding flowing into advanced development level projects but still lacking funding going into early-stage projects. And if we look regionally, certainly capital is quite shy of going into Latin America because of political issues. One of the areas for me that I think is very exciting in places like Canada is that we’re starting to see capital chasing provinces that haven’t really been explored with modern exploration techniques.
What other interesting trends besides South America are you seeing possibly on the investment front? We talked a little bit about OEMs; how about the government’s role in pushing investment?
Certainly, up until now, governments haven’t been overly helpful, apart from the Chinese government, in pushing or setting directions for their mining industries. We’ve obviously got the US government with the Inflation Reduction Act, which will hopefully catalyse investment in raw materials in US-friendly regions. Australia and Canada have also allocated funding. I have to say that the EU has been a disaster area in terms of encouraging investment in raw materials within the EU because it’s just been too highly regulated and there’s too much planning uncertainty for projects trying to get off the drawing board in the EU.
In Latin America as a whole, governments have flip-flopped around a bit in terms of encouraging the mining industry. Obviously, you’ve got political uncertainty in countries like Peru, which are key to development in the copper space.
So, it’s very difficult to draw generalizations. It’s very regional and it varies very much by material as well.
We’ve seen a lot of dialogue recently, and this also relates to the US Inflation Reduction Act, about growing regional supply chains for these key metals in the energy transition. Do you see these regional supply chains emerging? Are they impacting the exploration and the funding space moving forward?
If we want to develop successful electric vehicle industries that are not reliant on China, we’re going to have to develop regionalized supply chains. Now, Europe was the early mover on this, but they really haven’t gone anywhere in the last three or four years. The USA, with the new government, has come in and I actually really like the Inflation Reduction Act.
Canada is sitting right to the north of the USA; it has five out of six critical raw materials needed for the battery industry. So, it makes sense to utilize those resources and it presents lots of opportunities for the Canadians. The Europeans now must follow on from the IRA but because Europe is so fractured, it’s very difficult for Europe to compete.
We’re also seeing the emergence of supply chains in Asia Pacific; in Indonesia and Australia, and potentially some interest from India.
There’s been a lot of notes about labour shortages for the industry and lack of machinery needed. How is this impacting the exploration industry and what can be done moving forward?
It’s a core problem, I think. In the first issue of Battery Materials Review, several years ago, we discussed this problem of a shortage of personnel in the mining industry. It’s an ageing workforce as much as anything else. It’s not been helped by the pandemic which has impacted the ability of labour to move around.
We don’t just need to see capital coming into the companies, we also need to see capital coming into educational institutions. We need to see a full push all the way through the supply chain. Sourcing capital for this space is not helped by a lot of ESG-focused investors refusing to invest in upstream industries.
Is ESG-focused investment the way forward?
It’s important that we as an industry embrace environmentally and socially responsible investment. But I think it’s very important for the industry that it communicates what it’s doing on ESG. One of the areas where the mining industry is failing on is communication. And if the industry is to get the backing that’s vital to the success of the energy transition, we need that communication.
I’ve said it before and I’ll say it again, there will be no energy transition without investment in primary metal extraction.
There’s a big white elephant around recycling. Now, we’ve got a lot of government funding going into recycling, but unless you actually produce primary metal first, there’s not going to be enough material to recycle.
