Deep Insights #50 Mining2023 Battery Metals Outlook with Peter Major

Episode 50 January 19, 2023 00:22:28
Deep Insights #50 Mining2023 Battery Metals Outlook with Peter Major
Deep Insights with Mining Review Africa
Deep Insights #50 Mining2023 Battery Metals Outlook with Peter Major

Jan 19 2023 | 00:22:28


Show Notes

The growing adoption of electric vehicles is driving a rapidly increasing demand for rechargeable batteries and their input commodities. In this episode, the Director of Mining at Modern Corporate Solutions PETER MAJOR gives HLENGIWE MOTAUNG a forecast for the short and long-term future of battery metals into the year 2030.

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Episode Transcript

Speaker 0 00:00:00 The growing adoption of electric vehicles is driving a rapidly increasing demand for rechargeable batteries and their input commodities. Hi, I'm Rochelle Beta, and in this episode, director of Mining at Modern Corporate Solutions Pizza major give Schlink GI Mok a forecast for the short and long-term future of battery metals into the year 2030. Speaker 2 00:00:28 Hello and a warm welcome to Deep Insights on Mining Review Africa. My name is Seng Mo, and thank you for joining us today. Now, the growing adoption of electric vehicles is driving a rapidly increasing demand for rechargeable batteries and their input commodities, including lithium, cobalt, nickel, graphite, manganese, copper, and aluminum. So in today's episode, we take a look at mining in 2030, particularly in the battery metals space. My guest today really need no introduction, but I really must give it. Born in Vancouver, British Columbia in 1955, graduated in Montana schools of mines in 1981 and came to South Africa in 1982 to work for Harmony Gold Mine. He completed his sa Mine Manager certificate, then an MBA from the University of Cape Town. Began his investment career in 1989 with Alan Gray Cape Town for two years as a goldmine analyst. He then spent 10 years as a senior fund manager and head of mining at Netcore Investment Bank. He joined CDAs in 2006, where he is the director of mining, focusing on private equity capital raising m and a activity in the mining and resources sector. Merchants has taken over CDAs since January, 2019 where he continues his same role. Ladies and gentlemen, help me welcome South Africa's Mining veteran Peter Major. Peter, welcome to Deep Insights and thank you for joining us today. Speaker 3 00:02:16 Thanks for the great introduction. <laugh> Kiwi, you could be my agent anytime, <laugh>. Speaker 2 00:02:22 We'll, Speaker 3 00:02:23 We'll probably get sued for publicity. Incorrect Speaker 2 00:02:27 Adversity. It would be my pleasure. <laugh>, Speaker 3 00:02:29 But you, it shows correct? Yeah. Mining veterans. Probably the best way to Speaker 2 00:02:33 Describe it. Definitely you are, and it's such an honor to be talking to you this, this morning, Peter, but let's just get into it. Let's talk about the future of, um, battery metals. As I've mentioned, uh, previously off air and in my, in my email that, um, as a renewable energy boom is fast approaching battery metals have, have taken the center stage in the, in the, in the mining landscape. And we're looking to find out just how much the future looks for these minerals. And I think that's where your analysis comes in. And, and we'll start with with cobalt. Let's start with cobalt. The DRCs cobalt reserves accounts for nearly half of the world's, um, reserves of the metal. Given the high demand and and tight avail availability, I must say, how does Africa, particularly the D R c, prepare for an upswing like this one for, um, to, to secure longer term supply Speaker 3 00:03:30 Kiwi? When you say how does Africa prepare for the cobalt boom, I, I think that question you could use for about anything in the future for Africa. How does Africa prepare for investment? How does Africa prepare for moving materials, especially bulk materials like iron, manganese, copper ore? So should Africa be doing anything different because of cobalt demand? Not really. If Africa was just preparing itself for investment, they would already be doing all the right things for cobalt. In other words, they need stable institutions, they need good infrastructure. You know, you need a, a functioning airport functioning telecommunications. You really need functioning electricity, highways, and I, I dare say most of all, you need a functioning railroad. And w we realized this back in the 18 hundreds that Africa needed a functioning railroad before we even had electricity invented before we had telecoms and, and a functioning railroad was put in place for most African countries. Speaker 3 00:04:40 But we've let it go down. We've lived the highway, the trucker, the taxi mafia dictate all over Africa. They don't really want to railroad. So yeah, let's go back. What do we do to prepare for the cobalt boom? We've got the cobalt, not just the Congo, but the country surrounding the Congo, especially Zambia and Angola and, and a little bit, you know, Botswana, South Africa. But you're right, DRC alone has 50% of what the world's currently using, and they could go to 70, 80% or if the world demand doubled, but they couldn't ever double their production because they don't have electricity, they don't have railroad, they don't have decent highways, they don't have decent telecom financial. So really, if government just tries to make the country more attractive for investment, they'll be doing a great job making it better to increase cobalt production. Speaker 2 00:05:39 So, so in other words, Africa just needs to get infrastructure on par. We just need to be attractive to investors. Speaker 3 00:05:47 Yeah. We can improve the big things, railroad and power and telecoms fast enough. Speaker 2 00:05:54 So there's been recent developments right towards, um, a slight decline on the average, uh, cobalt content in automotive batteries. So this decline does it, where does it place cobalt in 2025? Uh, do we, are we going to Speaker 3 00:06:11 Steep right now? Yeah. Right now the world's furiously trying to reduce the cobalt required, but the production of batteries and autos is going up even faster. So in other words, even if they could have the amount of cobalt needed in batteries, they need almost double and triple the batteries in the next two or three years. So it's, it's almost balancing each other out. But the world is working hard because cobalt is a rare expensive metal. The world is working hard to find substitutes and there are some promising metals. Some are well known already, you know, manganese nickel. Yeah. But cobalt, right now, the way we're building our lithium ion batteries mm-hmm. Cobalt does such a great job because it's like the governor, it, it, um, it balances out the electricity transfer, the electricity generation. Mm. If if you didn't have cobalt in your cell phone, they would be blowing up all the time because as soon as the, the battery charge goes down, bang. Speaker 3 00:07:16 And, and so cobalts really needed the way our batteries are currently constructed. Mm-hmm. But they're altering how these batteries are constructed all the time. Not just the lithium batteries. Yeah. You're even trying to replace lithium mm-hmm. <affirmative>. So this is how the free market works. Mm-hmm. <affirmative>, you got 220 countries mm-hmm. <affirmative>, and when there's a real demand, exceptional demand for one product like cobalt, other countries find out, oh, we also have a little bit of cobalt we can produce. Yeah. Um, and the recyclers find out, oh, we can recycle more cobalt than we thought we could because the price is going up. And then all the mad scientists say, oh, we think we can come up with a battery with even less cobalt because the price has gone up. So all these people and ideas and industries are working separately, but it has that kind of smoothing effect. Speaker 2 00:08:08 Mm. Now, when you talk about lithium, I think I read a study by Meso Autotech. This is a technology company that says that lithium demand has almost doubled as well from 2017 at 255,000 tons to 450, uh, thousand tons in 2022. What can we expect on lithium production? And what are, what are the demand projections between now or 2025 to say 2030? Speaker 3 00:08:38 Oh, the, they're definitely for another doubling of demand in less than five years. And now I've seen projections doubling that in another five to 10 years. But that's gonna be easier than cobalt. Um, the majority of the lithium produced today comes from Australia and comes from South America. In fact, Australia is producing almost 50%. Mm-hmm. So we know their infrastructure is very world class. Yeah. Mm-hmm. Their institutions, you know, judiciary, legislation, financial, it is pretty first class. Speaker 2 00:09:14 Yeah. Speaker 3 00:09:15 So Australia can certainly, with more money, they can increase it. Can they double it alone? Probably pretty close. Uh, they need a lot of money. Yeah. But when you add Australia with Chile, Bolivia, and Argentina, who's probably another 30, 35% of the world, they can definitely benefit improving their infrastructure, improving their government, and more money. Money solves almost every problem, non demand. So there's less problem doubling our lithium Yeah. Uh, production in the next five years than Cobalt. Speaker 2 00:09:51 So let's, let's just take lithium in the within context of Africa. Nip the main sources of lithium globally are, are the brine and hard drug deposits. Right. So production from brine is more economical. While hard drug deposits are somewhat more challenging to, to process. How can countries like Zimbabwe, rich in hard drug lithium find ways to maintain sustainable production costs? Especially on the Benefication side? Speaker 3 00:10:23 Yeah. Zibo always very good case in point, because they had a big lithium tin tan online decades ago, and it was always low grade, but it was a huge resource. And, and Zimbabwe had low costs, um, their, their labor costs throughout, you know, management. Yeah. Zimbabwe was a cheap country and a rich country to live in. So people were happy to live there and make less money than they would in London, Paris, New York. Yeah. Mm-hmm. So that's it. Zimbabwe had good weather, good deposit, um, lots of food, lots of electricity cheap. Can they have that again? Yes, they can if they really want it, if government really wants it. Mm. But we haven't seen many African countries that prove Speaker 2 00:11:12 Str up for it. Mm. Speaker 3 00:11:13 Yeah. Yeah. That prove, they wanna alter their policy and legislation to put them at the bottom end of the cost curve. Mm-hmm. And yes, it is hard rock, but most of Australia's lithium is hard rock. Mm-hmm. Um, the grades are different in Zimbabwe, the type of, or is different, but it can be beated there, but you need good infrastructure. You need good electricity, good transport mm-hmm. <affirmative> to Beate. Mm-hmm. So, and they can do it. It, it's just a willingness by the willingness existing government. Speaker 2 00:11:47 Hmm. Let's move on to manganese. South Africa holds the largest reserves of manganese at 640 million tons. Um, 150 million B EVs a year will be built. Those are, uh, battery electric vehicles. They will be built by 2030 with some electric vehicle, uh, battery packs weighing up to 500 and a hundred kg of that being manganese. Right. But recent studies reveal the detrimental effects associated with manganese. Like manism, for instance. This is a medical condi condition from Parkinson's disease. So people who work and live around, um, manganese smelters are likely to be exposed, um, to such. So while we fervently, uh, journey towards being carbon free and saving the planet and wealth, South Africa stands a great chance, um, to benefit greatly as a manganese supplier. How do we ensure that the excessive mining of these minerals does not compromise people's health? Speaker 3 00:12:59 There's lots of ways to handle that. Mm-hmm. The toxicity of manganese comes mainly through when you, you're breaking it down metallurgy in a furnace. Mm-hmm. Just like lead. Yeah. You can mine lead, you can even grind it, mill it. Mm-hmm. And it's not that toxic. It's not deadly. But when you put it in a blast furnace and and you oxidize it Yes. With heat, that's, that's when the fumes and the debris around there become toxic. A lot of this is understanding it now that we understand this and, and unfortunately we are stand it through a lot of people being damaged. Mm-hmm. And South Africa doesn't have nearly the manganese smelters it used to either, you know, because of our electricity going up and being unreliable, we export most of our manganese in bulk. Mm-hmm. So there's a lot less people coming down with the disease here. Yeah. Now, should we get stable cheap electricity? Should we want to beate it? We we understand it much better. So the dust control will be much better. People will wear respirators. Um, all the handling facilities will be watered down and, and ventilated much better. So that's not too big a problem, just like dealing with uranium. Yeah. When people didn't know how deadly and bad uranium was, they were all exposed to it. Now we can measure it so well mm-hmm. <affirmative>, nobody ever needs to get even a mild dose above what he should. So Speaker 2 00:14:26 Dealing with the health and safety aspect, precautions of manganese will put us in a better state. Speaker 3 00:14:33 Yeah. It's, there's a lot of metals weren't dubious more risky than, than manganese. And yes, you're right. The world produces 50 million tons a year. Mm-hmm. <affirmative>, South Africa produces about 20 million. Mm. And most of that is exported in its raw form. So it, it's not toxic, it's not harming people. It's the part in the blast furnaces that, that we now understand much better so that all worker safety can be taken care of there. Speaker 2 00:15:03 Mm-hmm. But also, where do we see manganese in, in 2030? Speaker 3 00:15:08 If you look at how much manganese goes into batteries? Mm. I don't even think it's 2% of all the manganese produced. Mm. 90% goes in steel. Mm. So if battery use doubles, if manganese battery use doubles Yeah. Tomorrow, can we go from 2% to 4%? Yes. You know, the price would only marginally, probably go up a few cents per ton because of the battery demand. Okay. Okay. That's for a more specialized manganese. Um, but there's no problem producing more manganese. Speaker 2 00:15:43 So now Peter, let's move on to graphite. According to a study I I I went through from benchmark mineral intelligence, there will be a global graphite deficit starting in, in actually started this year. And the demand, um, from the battery sector is expected to rise 30%, I think annually until 2030. Meanwhile, China controls 84% of the global supply. So how, how do we get the graphite from China? I mean, China is at least a decade ahead of the west, and as in terms of, you know, the capability of producing batteries. And it's presumed that they will likely want to keep many of the minerals for themselves. So what do battery and auto manufacturers need to do in order to successfully source graphite? Speaker 3 00:16:35 You, you can fight a war on many fronts. So, like we spoke about cobalt earlier, the first thing is you better stay friends with China. If you're right, China produces the most natural graphite, maybe 60% of world production. And I think it's 80 90% of the synthetic graphite is produced in China. Mm-hmm. So they have spent billions and decades. They know how to produce it. The best graphite, the cheapest. So you're right. They got a 10 year head start on us. So let's stay friends with China so that we get all we need. Let's in the meantime, you know, simultaneously in parallel, let's start sourcing it from other deposits. And Africa has lots of good graphite deposits. Yeah. Mm. Um, and we've got a lot of factories and technologies in North American Europe that are working at starting to make artificial graphites, synthetic graphite mm-hmm. <affirmative>. Speaker 3 00:17:29 And that's much better. It's more expensive, but it's better than the natural graphite that you have to mine and then beneficiate. Mm. So a lot of battery manufacturers are working on doing without graphite. So it's, it's all these different fronts that are happening simultaneously. And what triggers that is usually the price, the price and availability. And, and we know as soon as availability gets tight, the price automatically goes up. Mm. And that's, that's the warning light and the siren that tells all these other subsidiary ways of getting graphite, Hey, speed up your act. You know, find a replacement for graphite. Mm-hmm. Find another country that produces it. Find somebody else to beate it. Mm. Stay friends with China. Speaker 2 00:18:15 Um, so, so basically the industry is trying to balance itself out with regards to battery metals on in terms of what works and what doesn't. Speaker 3 00:18:23 Yeah. And I'll tell you, forecasting has never been more difficult. I'm, I'm not sure when it was easy to predict the future, but Mm. Say when man discovered steam engines Yeah. You know, 1800, 17 90, then he could focus on that then man discovered oil or production of commercial oil, oil Speaker 2 00:18:43 Could solely focused on that. Mm. Speaker 3 00:18:45 Yeah. Focus on that. And then it was another 40, 50, 60 years before he thought, oh, we can use the gas as well. Yeah. Yeah. And, and how about when we discovered electricity, what, 1880, you know, 1890, all of sudden we focused on copper. That was the best way of transmitting electricity. Mm-hmm. So I think the future was a lot easier. Then even nuclear, you know, uranium made nuclear energy. Now you have to focus on so many spheres of the future. Ooh. What kind of battery? Lithium sodium, calcium, uh, lead acid. Vanadium. Redox. Man, there's so many different batteries. Yeah. How do we find the metals for each one? How do we improve the efficiency? Which one's gonna die out? It, the future's never been harder to Speaker 2 00:19:33 Predict, <laugh> to predict. I can't imagine. So now let's, let's talk about, this is the bonus question. In your opinion, which African battery metal companies are set for exponential growth towards the renewable energy boom. And why Speaker 3 00:19:51 I, I didn't prepare for that question before this interview. So I'm, I'm pretty embarrassed. <laugh>, and you know, I, I'm so localized in South Africa mm-hmm. That this is where you start and you say, yeah, gee, do we have any battery companies here? Well, Seban will tell you they're, they're focusing on battery metals and Yeah. They know Arm and Azaro say they're starting to focus mm-hmm. <affirmative>. And hey, if this vanadium iron, redox battery, then Kuumba's gonna say they're focusing on more iron or for, for their battery. Yeah. But I, I know what you're getting at. Yeah. Which graphite producer should we be looking at? Mm-hmm. Which lithium producers should we be looking at? Yes. Um, and I'm, I'm biased because I've done a lot of work for a little company called Marula, and it is so small and nimble mm-hmm. <affirmative>, and it's getting on the, the very bottom of the cost curve buying battery, metal deposits. Speaker 3 00:20:45 Mm-hmm. <affirmative>, like graphite, like copper, and like lithium. And the, the share is trading it just a few cents. And so, yeah, I'm kind of partial. It's like voting for your brother. Yeah. <laugh> you should be looking at. But, um, I, I think, I think it's worth looking at the ones that get the deposits, but make sure the deposit looks economics. So you're gonna need an analyst or a geologist to help you choose, um, the ones that are popular and well known. I think the market's already taken the meat out of them. Okay. And so I don't have good advice here. Mm-hmm. <affirmative>, I, I hope most fund managers aren't using me to advise which battery metal companies to get. I, I doubt they are. Speaker 2 00:21:25 So for now, for now, we'll stick to Marula. <laugh>. Okay. Peter. But, um, we've come to the end of, um, this, this session. Thank you so much for your time for sharing such, uh, that's put great insight on the future of battery metals. Um, we wish you the very best, uh, with the rest of your tenure at, uh, at emergence and, um, happy holidays. Speaker 3 00:21:46 Thank you very much. You too. And please call me if you're in Cape Town. We'll, we'll talk more about this over a nice glass of wine. Speaker 2 00:21:55 Absolutely. <laugh> Peter, major ladies and gentlemen, director of Mining at Merchants and very dear to the South African mining landscape. We've come to the end of this podcast. Thank you so much for listening. Until next time, Speaker 0 00:22:10 Bye-bye. Thank you for listening. Remember to like, share, and subscribe to deep Insights. For more mining news, visit mining Until next time, goodbye.

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