Press Release

Mining will Power the ‘Green Revolution’

It is said that everything one touches is either grown or mined. The adage has never been more evident than during the onset of the Fourth Industrial Revolution, which generally entails the computerization of previously separate technologies (Industry 3.0) into single, mobile and often autonomous things.

Nowhere can this change be more clearly seen than in the revolutionizing effects smartphones had on daily life and, going forward, the impact of the changeover from internal combustion engines to battery-powered electric vehicles (EV). In a global post-COVID-19 recovery, the uptake of EVs looks to accelerate rapidly. With it, demand for the critical battery-making metals such as nickel, cobalt and lithium, is expected to rise.

We’ve already seen prices for these metals edge higher, in some cases dramatically, such as in the case of cobalt and nickel in recent months.

A recent Electric Vehicle Trends report by Deloitte expects EV sales to grow to 11.2 million by 2025 and 31.1 million by 2030, from just 2.5 million in 2020. In this context, it is worth looking at these metals in more detail. It will soon become apparent why more mining investment in these critical metals is needed to transition to the green economy successfully.

According to recent estimates from analysts at Roskill, global lithium carbonate demand, one of two primary forms of the metal, will top one million tonnes of lithium carbonate equivalent (LCE) in 2026. That is almost double the outlook for 2021 and signals a medium-term requirement to build additional capacity. However, this won’t happen if lithium prices are not high enough to incentivize new production.

Lithium carbonate prices fell to US$7,500 LCE per tonne in the first quarter of 2020, before recovering to $9,500/t by the end of 2020.

The recent spike was likely caused by many battery manufacturers in China restocking after running down supplies during COVID-19 shutdowns or supply chain issues.

While it appears there is currently enough product to meet demand, the growing uptake of EVs means a supply gap will likely emerge by the end of this decade, requiring a fundamental change within the industry and the scale of development projects.

A move towards high-nickel cathode materials to increase batteries’ energy density also accelerates demand growth for the more expensive lithium hydroxide.

Facing increased demands from applications, the larger size, capacity, power, longevity, and safety requirements of lithium-ion batteries used in EVs have led to a change in their battery metals composition, most notably in cathode materials, where nickel loadings tend to increase.

However, the battery-grade material prices are driven mainly by the stainless-steel market, which accounts for about 70% of global nickel demand.

Roskill expects to see demand for nickel sulphate, the form suitable for battery making, grow from around 90,000-100,000 tonnes contained nickel in 2020, to 2.6 million tonnes by 2040. The increasing trend towards nickel-rich battery chemistries such as nickel-manganese-cobalt-622 and nickel-manganese-cobalt-811 will further support this demand, most notably in European EV markets.

Supply deficits looming

The nickel sulphate industry is responding to this growing demand with new capacity coming online in Asia and Europe. High-pressure acid leach (HPAL) operations in Indonesia, where China is investing in developing these new mines, will also help meet the global demand growth for nickel sulphate.

However, not all this new nickel supply is suitable for batteries and requires costly upgrading. Recent news by China to supply more battery grade nickel using nickel matte has affected prices but the long term future for this critical metal remains robust.

When it comes to the most controversial of the battery metals, several EV manufacturers, such as Tesla, have announced their intention to reduce or remove cobalt from battery cathodes because of its scarcity, high cost and ethical concerns around mining it in the Democratic Republic of Congo.

However, the metal is fundamental for increasing the energy density and life of lithium-ion batteries, and its thermal stability prevents batteries from overheating and potentially catching fire. So, at this point and even in the long-term, talking about cobalt-free batteries for widescale commercial use is nothing more than just talk.

According to Roskill figures, demand for the metal is expected to more than double over the next decade from 136,100t in 2020 to 280,000t by 2030. Production will be dominated by copper-cobalt concentrate, which is forecast to account for 70% of mine supply in 2030.

Although cobalt prices briefly rebounded after Glencore mothballed Mutanda in the DRC in 2019, prices fell to a 10-month low of US$12.90/lb in mid-2020. But rising demand and the tightening in both feedstock and refined markets between 2021-2022 should support a strong recovery in prices.

Mutanda is the world’s largest cobalt mine and it alone could place the market in surplus or deficit, depending on what Glencore decides to do. A restart of Mutanda could ease the supply tightness in cobalt feedstocks for the coming years, but also translate to softening prices.

Meanwhile, ESG investment principles and the battery industry’s overreliance on cobalt produced in the DRC complicate the cobalt supply chain.

As you can see, the green revolution will require larger volumes of mined metals than ever before to produce the metals so critically important for humanity to wean itself from fossil fuels. The future indeed looks green, underpinned by sustainable mining.

Anthony Milewski

About the Author

Mr. Anthony Milewski is the chairman of Nickel 28 Corp. and the non-executive chairman of Gigametals.  He has spent his career in various aspects of the mining industry, including as a company director, advisor, founder and investor.  In particular, he has been active in the commodities related to decarbonization and the energy transition, including nickel, cobalt, copper and carbon credits. Anthony has served on the London Metals Exchange Cobalt Committee, which includes representatives from the largest mining and commodities companies globally, to represent the interests of the industry to the board of directors the LME.

Mr. Milewski previously worked at Renaissance Capital and Skadden, Arps, Slate, Meagher & Flom LLP in Moscow, where he focused on advisory and transactional work in metals & mining and oil & gas sectors.  He has lived and worked in Africa and Russia, including a year as a Fulbright scholar, and has spent considerable time in Central Asia. Anthony Milewski holds a B.A. in Russian history from Brigham Young University, an M.A. in Russian and Central Asian Studies from the University of Washington, and a J.D. from the University of Washington.