renewable energy and battery metals - sykes & trench - nov 2017 - centre for exploration...

AIG Battery & Strategic Metals Conference

Perth, Australia: 10th November 2017

THE IMPACT OF THE

RENEWABLE ENERGY

TRANSITION ON

BATTERY AND

STRATEGIC METAL

MARKETS

John Sykes1234 & Allan Trench125

1. Centre for Exploration Targeting, The University of Western Australia (UWA); 2. Business School, UWA;

3. MinEx Consulting, Australia; 4. Greenfields Research, United Kingdom (UK); 5. CRU Group, UK

Image: Shutterstock

WHAT IS THE ENERGY TRANSITION?

The impact of the renewable energy transition on battery & strategic metal markets

13 Nov 2017The impact of the renewable energy transition on battery & strategic metal marketsSlide 2 of 35

Image: Shutterstock

THE WORLD IS ENTERING THE ‘ENERGY TRANSITION’


BATTERIES

• Power storage / averaging

• Portable energy

• Rechargeable (reduced waste

& energy efficient)

RENEWABLES

• Theoretically infinite

• Non-carbon emission

generating (at source)

• Distributed sources

Increased

energy

demand

Increased

environment

focus

Increased

transport

Images: Shutterstock

CREATING NEW OPPORTUNITIES FOR ENERGY METALS


RENEWABLES METALS

Uranium

Rare earths (neodymium,

praseodymium &

dysprosium) – in the

generator magnet

Silicon & germanium;

Gallium-arsenide;

Copper-indium-gallium-selenide (CIGS);

Cadmium-telluride

Images: Shutterstock; Wikipedia; solarchoice

Lead-acid Alkaline (zinc-

manganese)

Lithium-ion

(graphite & cobalt)

Nickel-cadmium

/ zinc

Nickel metal (lanthanum-

rare earth) hydrideVanadium redox

BATTERY METALS

https://commons.wikimedia.org/wiki/File:NiCd_various.jpg

https://www.solarchoice.net.au/blog/imergy-vanadium-flow-batteries-australia

STRAINING SUPPLY CHAINS: CREATING ‘CRITICAL METALS’


antimony, arsenic, barium, beryllium, bismuth,

boron, cadmium, chromium, cobalt,

gallium, germanium, graphite,

indium, lithium, magnesium,

manganese, mercury, molybdenum, niobium,

PGMs, rare earths, rhenium,

selenium, silicon, silver, strontium, tantalum,

tellurium, thorium, tungsten, vanadium

Components of ‘criticality’

ECONOMIC

PARADIGM

Important uses

STRATEGIC PARADIGM

Potentially geopolitically

restricted production, e.g.

USDOE critical metals reports

SUSTAINABILITY PARADIGM

Potentially environmentally /

socially restricted production,

e.g. EU critical metals reports

‘China produces 95%

of the rare earth

metals…’

“Dust emissions from the

mining of… graphite had

become a major issue, air

pollution from dust had

become… known as

graphite rain.” - Olson, 2017

Sources: Sykes et al., 2016a,b

https://minerals.usgs.gov/minerals/pubs/commodity/graphite/myb1-2014-graph.pdf

WE CANNOT ‘REDUCE, REUSE AND RECYCLE’ TO GROWTH


1 10 100 1000 10000 100000 1000000100000001000000001E+09

Gallium

Indium

Lithium

Cobalt

Silicon

Vanadium

Nickel

Rare Earths

Germanium

Copper

Manganese

Zinc

Graphite

Selenium

Cadmium

Lead

Tellurium

Arsenic

Theoretical Total Available for Recycling (tonnes)

0 20 40 60 80 100

Gallium

Indium

Lithium

Cobalt

Silicon

Vanadium

Nickel

Rare Earths

Germanium

Copper

Manganese

Zinc

Graphite

Selenium

Cadmium

Lead

Tellurium

Depletion Index for Material Available for Recycling (years)

Data: USGS

https://minerals.usgs.gov/minerals/pubs/historical-statistics/

WE CANNOT ‘REDUCE, REUSE AND RECYCLE’ TO GROWTH


We mine ‘commodities’ but recycle ‘products’ thus not all commodities are

amenable to high levels of recycling

45%

55%

Lead Production (2012)

Primary Secondary

Landfill ‘mining’ maybe as socially and environmentally

problematic as conventional mining

Image: Guardian (Javad Tizmaghz)

Source: ILA

37%

33%

10%

5%

5% 1%9%

Lithium Consumption (2015)

Batteries Ceramics & GlassLubrication PurificationFlux AluminiumOther (inc. pharma)

Source: USGS

https://www.theguardian.com/world/gallery/2011/sep/28/indonesia-landfill-mountain-scavengers-in-pictures

http://www.ila-lead.org/lead-facts/lead-production--statistics

THE MINING SECTOR AND INVESTORS HAVE PILED IN!


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Lithium Rare Earths Graphite Lithium (again)

Talison Lithium to raise $194m in IPOBusiness News WA,24 Nov 2009

RARE EARTHS BECOME HOT COMMODITIES – US IPO UP FIVEFOLD IN 10 MONTHS

TheBull.com.au, 06 Jun 2011

Why these graphite

miners have soared

more than 87%The Motley Fool,

24 Jun 2014

Lithium-ion

battery demand

sends shares in

miners soaring,

but analysts

predict bubble

will burst

ABC, 14 Jun 2016

They’ve got the power: Battery stocks charging up, analysts say

The Sydney Morning Herald, 2 Jul 2014

Uranium

Investors put

stock in

uraniumABC, 24 May 2006

https://www.businessnews.com.au/article/Talison-Lithium-to-raise-194m-in-IPO

http://www.thebull.com.au/articles/a/20330-rare-earths-become-hot-commodities---us-ipo-molycorp-up-400-in-10-months.html

http://www.fool.com.au/2014/06/24/why-these-graphite-miners-have-soared-more-than-87/

http://www.abc.net.au/news/2016-06-14/lithium-ion-battery-demand-fuels-stock-bubble/7510624

http://www.smh.com.au/business/theyve-got-the-power-battery-stocks-charging-up-analysts-say-20140702-zst1i.html

http://www.abc.net.au/worldtoday/content/2006/s1646337.htm

…BUT IT HAS NOT BEEN AS SUCCESSFUL AS HOPED!


Molycorp files for

bankruptcy as rare

earth prices drop- Bloomberg, 25 June 2015

Graphite junior Triton Minerals in shock collapse- The Australian, 4 March 2016

Valence

Industries

enters

voluntary

administration- Australian Mining, 20

July 2016

Year-end turn in rare

earth prices seen as

Lynas losses near $1b- The Sydney Morning Herald, 10

March 2016

Integrated

business

still a Galaxy

away- The Australian

Mining Review, 27

March 2013

RB Energy shutters Quebec lithium mine as financing failsFinancial Post,8 Oct 2014

Great Western

Minerals is

Bankrupt- Newswire, 3 Dec 2015

* Galaxy Resources’ Mt Cattlin mine

re-opened in 2017 (Source: ABC)

* Triton

Minerals re-

listed later in

2016 (Source:

Proactive

Investors)

https://www.bloomberg.com/news/articles/2015-06-25/molycorp-files-for-bankruptcy-proposes-debt-restructuring-plan

http://www.theaustralian.com.au/business/mining-energy/graphite-junior-triton-minerals-in-shock-collapse/news-story/a9b01339dda3db444b119f7b918c3f31

https://www.australianmining.com.au/news/valence-industries-enters-voluntary-administration/

http://www.smh.com.au/business/yearend-turn-in-rare-earth-prices-seen-as-lynas-losses-near-1b-20160309-gnf5u3.html

http://australianminingreview.com.au/integrated-business-still-a-galaxy-away/

http://business.financialpost.com/news/mining/rb-energy-shutters-quebec-lithium-mine-as-financing-fails

http://www.newswire.ca/news-releases/great-western-minerals-is-bankrupt-560496951.html

http://www.abc.net.au/news/rural/rural-news/2017-01-03/galaxy-resources-waves-off-first-lithium-shipment/8159118

http://www.proactiveinvestors.com.au/companies/news/169989/triton-minerals-countdown-to-re-listing-starts-now-169989.html

ENERGY METALS MARKET GROWTH HAS BEEN VARIED


0

100

200

300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Growth of metal market groups

2005-14 (US$ billions)Base Metals Precious Metals

Minor Renewables Metals Minor Battery Metals

Minor Critical Metals

Battery Metal 2006-15 Price Change

Rare earths 257%

Lithium 155%

Graphite 126%

Manganese 51%

Zinc 32%

Lead 18%

Cobalt -5%

Nickel -51%

Cadmium -51%

Vanadium -47%

Source: USGS (2015)

For category definitions see appendices

Renewables Metal 2005-14 Price Change

Silicon 114%

Arsenic 83%

Germanium 32%

Selenium -10%

Tellurium -13%

Copper -19%

Uranium -23%

Gallium -28%

Indium -36%

DO WE HAVE EVIDENCE OF THE

TRANSFORMATION OF METAL MARKETS?




EVIDENCE OF PAST TRANSFORMATIVE MARKET GROWTH


0

100

200

300

400

500

600

700

800

900

1900

1909

1918

1927

1936

1945

1954

1963

1972

1981

1990

1999

2008

Growth in market size indices of

copper and aluminium 1900-2014

(1900 = 1)

Cu Index Al Index

0

50

100

150

200

250

300

1900

1909

1918

1927

1936

1945

1954

1963

1972

1981

1990

1999

2008


copper and nickel 1900-2013

(1900 = 1)

Cu Index Ni Index

0

5

10

15

20

25

30

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010


copper and uranium 1950-2013

(1950 = 1)

Cu Index U Index

Data: USGS

INSTIGATED BY DISCOVERY, SUPPLY AND DEMAND


Nickel

Discoveries in Sudbury &

New Caledonia

Bulk open pit

mining

Flotation & smelting

advances

Demand for

armour

Ability to handle

radiation

Uranium

Demand for

nuclear

weapons

Demand for

nuclear power

Bulk mining for very low

grade radium

Radium-uranium

discoveries in the

Congo

Aluminium

Bauxite discoveries

in North America

Bayer and Hall-Heroult

processes

Aviation demand

Bulk open pit mining

Source: Sykes et al., 2016b


WHICH ENERGY METALS HAVE POTENTIAL

FOR TRANSFORMATIVE GROWTH?




SOME ENERGY METAL MARKETS ARE LESS CONSTRAINED


Metals Constraints removed

Graphite Discovery Sup. Use

Copper Dis. Supply Use

Germanium Dis. Sup. Use

Indium Dis. Sup. Use

Tellurium Dis. Sup. Use

Arsenic Discovery S Use

Gallium Dis. Sup. Use

Selenium Dis. Sup. Use

Silicon Dis. Sup. Use

Cobalt Dis. S Use

Lithium D Sup. Use

Metals Constraints removed

Nickel Dis. Sup. U

Vanadium Dis. Sup. U

Lanthanum D S Use

Lead Discovery S

Cadmium Dis. Sup.

Manganese Dis. S U

Zinc Dis. S U

Neodymium D S Use

Praseodymium D S Use

Dysprosium D Use

Uranium D SFully u

nco

nst

rain

ed

Fully u

nco

nst

rain

ed

Most

constrained

Least

constrained

Source: Sykes et al., 2016a

SOME ENERGY METALS MARKETS HAVE MORE POTENTIAL


Fin

al m

ark

et si

ze p

ote

ntial

Lack of discovery, supply & demand constraints on the market

High potential and few constraints

Low potential but few constraints

High potential but many constraints

Low potential and many constraints

Nd

Si

Se

As

Te

Cu

Ga

Ge

In

Pr

DyU


Co

LiLa

V

Cd

Mn

NiZn

Pb

C

BUT ENVIRONMENTAL & SOCIAL FACTORS ADD COMPLEXITY


Energy transition

requires electric

vehicles

Increased

mining of rare

earths in China

Questionable

environmental and

social impacts

Switch back to ferric

magnets required?

Electric vehicles

require better

motor magnets

Rare earth

magnets are

technically better

Image: Reuters

Based on: Widmer et al., 2015

Rare earth magnets case study

http://www.reuters.com/article/us-china-rareearth-idUSBRE83707G20120410

http://www.sciencedirect.com/science/article/pii/S2214993715000032

SOME ENERGY METALS ARE ENVIRO-SOCIALLY

CONSTRAINED


Ability to r

eso

lve c

onst

rain

t

Type of market constraints

Resolvable societal constraints

e.g. conflict

Unresolvable societal constraints

e.g. toxicity

Resolvable technical constraints

e.g. processing challenges

Unresolvable technical constraints

e.g. geological scarcity


Pr

USe

DyGa Si

Nd

As

Cu

Te In

Ge

Co

Li LaV

Cd

Mn

Ni

Zn

Pb

C

HOW WILL THE MINING SECTOR BE

IMPACTED BY THE ENERGY TRANSITION?




MINING IS IMPACTED BY THE ENERGY TRANSITION TOO


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Surface Mine UG Mine Mill

Other

Steel

Equipment,Tyres & Parts

Explosives &Reagents

Fuel &Electricity

Labour

Data: CostMine, July 2016

Solar power at Sandfire Resources

Degrussa mine, WA

All electric underground mine planned

by Goldcorp at Borden, Canada

Wind power for copper mines in Chile

owned by Barrick

‘Flexicycle’ using biodiesel power at

Pueblo Viejo, Dominican Republic (Barrick)

http://www.sandfire.com.au/operations/degrussa/solar-power-project.html

http://www.goldcorp.com/English/blog/Blog-Details/2016/Its-Electric---Goldcorp-Sees-the-Mine-of-the-Future-at-Borden/default.aspx

http://www.barrick.com/responsibility/environment/energy-climate-change/

http://www.wartsila.com/energy/references/north-am-caribbean/quisqueya-i-ii-dominican-republic

http://www.barrick.com/responsibility/environment/energy-climate-change/

…WITH MULTIPLE FACTORS CAUSING THE TRANSITION


Movement towards all

electric underground

mines

Focus on

greenhouse gas

reduction

Health concerns

surrounding diesel

emissions in

confined spaces

Improved

battery

technology

Volkswagen

NOX & SOX

emission scandal

Movement

towards

underground

mines

Focus on social &

environmental

footprint of

surface mining

Fewer surface

mineral deposits

awaiting

discovery

MOVEMENT TOWARDS ALL

RENEWABLE ELECTRIC

UNDERGROUND MINING?

Improved

automation and

remote technology

Safer

underground

mines

WHAT DOES THE FUTURE LOOK LIKE FOR

MINING & RENEWABLES COMPANIES?




NAVIGATING THE ENERGY TRANSITION IS COMPLEX


Wonderland

1984

Left behind

High tech

Discworld

NOW

(An unknown

number of

economic cycles

to come)Low tech

(Beyond which is

the unknown)

‘Economic paradigm’

‘Sustainability

paradigm’

‘Strategic paradigm’

‘Transition’

Images: Amazon

FIRST SURVIVE OUR ‘OLD WORLD’ OR ‘DISCWORLD’


OLD

ECONOMY

STRATEGIC

RESOURCESINEQUITYPROTECTIONI

SM

STRATEGIC

RESOURCES

ISIS

BIG

MINING

ECONOMIC

PARADIGM

COAL

POWER

POLLUTION

WASTEPETROL

CARS

…with an unknown number of economic cycles to come, so you have to be good at ‘business as usual’

BOOM &

BUSTBIG OIL

KNOW WHEN TO STEP THROUGH THE ‘TRANSITION’


…but into which future?

Image: Shutterstock

…ALL WE KNOW IS THAT IT CAN BE VOLUNTARY OR FORCED


WONDERLAND NINETEEN EIGHTY-FOUR

(common in Eastern culture) (common in Western culture)Images: Maya Eilam

http://www.mayaeilam.com/#intro

THEN THRIVE IN THE FUTURE: WONDERLAND?


GREEN

ECONOMY

STRATEGIC

RESOURCESSILICON

VALLEYPROTECTIONISM

STRATEGIC

RESOURCES

ISIS

DISRUPTIONSUSTAINABILITY

PARADIGM VOLATILITY

CETA DEAL

INNOVATIONPARIS

AGREEMENT

Disruptive innovation within a global regulatory framework allows leads to voluntarily energy transition

GLOBALISATION TESLA


THEN THRIVE IN THE FUTURE: NINETEEN EIGHTY-FOUR?


NEW

WORLD

STRATEGIC

RESOURCESBREXITPROTECTIONISM

STRATEGIC

RESOURCES

ISIS

OLD

WORLD

MILITARY-

INDUSTRIAL

COMPLEXTRUMP

STRATEGIC

PARADIGM

WARPROTECTIONISM

PUTIN

ISIS

Geopolitics and conflict forces a government-led energy transition in the fossil-fuel poor parts of the world


WHAT DOES ALL THIS MEAN FOR MINING

COMPANIES AND THEIR INVESTORS?




THERE ARE DIFFERENT IMPLICATIONS FOR EACH SCENARIO


Business capabilities

• Spot new technology by working with innovators ‘on the

ground’;

• Understand niche markets before they become the next big

thing;

• Be able to scale globally quickly.

Winners & losers

• In a globalised world only one or two battery technologies,

hybrid car companies, and renewable energy sources will

win, so backing the right idea early is critical.

• However advantage is only ever temporary, as the next big

thing is already on its way – innovate ruthlessly to stay on

top.

Business capabilities

• Work closely with government to ensure you understand their needs and

get the big contracts;

• Global scaling is impossible;

• Understand your local market, and what technologies can work in your

part of the world.

Winner & losers

• In a divided world many ‘just good enough’ energy technologies will exist,

supported by government and their geopolitical need, so picking ‘a

winner’ is less important – government relationships are more important.

• The slow changing nature of government and the focus on defence of the

state means that within each block this is a stable, slow changing world

with long-lasting competitive advantage.

WONDERLAND NINETEEN EIGHTY-FOUR

Because it is not possible to see what the world will look like after the energy transition mineral explorers, miners, renewable energy companies, hybrid car

companies, battery makers and other companies affected by the energy transition need to be prepared to thrive in both scenarios:

A STRATEGIC APPROACH TO THE ENERGY TRANSITION


• The energy transition will likely have a substantial impact on some currently minor metal markets;

• Some minor metals markets have the potential for transformational growth becoming a major ‘battery metals’ and/or ‘renewables metals’ industrial

sector (together the ‘energy metals’);

• However, of the energy metals some face more severe constraints on geological discovery, technical supply and demand growth, as well environmental

and socio-political constraints;

• The mining industry will therefore have a major impact on which minor metals will become available for mass consumption as energy metals by

renewables and battery companies;

• However, some battery metals such as lithium, vanadium and nickel and renewables metals such as silicon and gallium do seem to have more potential

than the others;

• In turn, as a major energy consumer in remote locations the mining sector will be impacted by and may be a driver of the energy transition;

• In the end, the socio-political context of the energy transition will determine what sort of future we progress into; with different implications for the

‘energy metals’ sector in each;

• For the affected businesses navigating the energy transition will be difficult as it is not obvious when it will arrive, or what it will look like when it

does;

• Mining, exploration, renewables and battery companies seeking to capitalise on growth in the ‘energy metals’ sector need to:

– Target those metal markets with the most potential for substantial market growth;

– Approach these metal markets in a holistic manner, removing discovery, supply, demand, technical, environmental and socio-political constraints;

– Be ready for a three stage approach: survive the present, see the energy transition, and thrive in the future (whatever it is).

THANK YOU


Contact details:

• John Sykes: [email protected]

• Allan Trench: [email protected]

We’d like to acknowledge the efforts of the Centre for Exploration

Targeting scenario planning team whose work contributed to this

presentation:

• John Sykes, Allan Trench, T. Campbell McCuaig, Jonathan Bell, Jeremie Giraud,

Constanza Jara Barra, Ahmad Saleem, Dave Stevenson and Jan Tunjic.

We’d also like to acknowledge the following collaborators for their

contributions to this research:

• Sam Davies, Aaron Dixon, Mark Jessell, Heta Lampinen, Cam McCuaig, Paul Miller,

Nico Thebaud & Josh Wright.

Image: Shutterstock

mailto:[email protected]

mailto:[email protected]

REFERENCES

• Sykes, J. P., Wright, J. P., Trench, A., & Miller, P. 2016a. An

assessment of the potential for transformational market

growth amongst the critical metals. Applied Earth Science,

125:1, pp21-56.

• Sykes, J. P., Wright, J. P. & Trench, A. 2016b. Discovery,

supply and demand: From Metals of Antiquity to critical metals.

Applied Earth Science, 125:1, pp3-20.


Image: Shutterstock

APPENDICES




CATEGORY DEFINITIONS FOR SLIDE 10


• Precious metals: gold, platinum groups metals & silver

• Base metals: aluminium, copper, lead, nickel, tin & zinc

• Renewables metals: arsenic, gallium, germanium, indium, rare earths, selenium, silicon, tellurium & uranium

• Minor battery metals: cadmium, cobalt, lithium, manganese & vanadium

• Other minor critical metals: antimony, barium, beryllium, bismuth, boron, chromium, magnesium, mercury,

molybdenum, niobium, rhenium, strontium, tantalum, thorium, titanium & tungsten

renewable energy and battery metals - sykes & trench - nov 2017 - centre for exploration...

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