Tuesday 7th July 2020

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Posts tagged ‘china’

A critical first for the U.S.

June 26th, 2020

Ares Strategic Mining has near-term plans for the country’s only fluorspar operation

by Greg Klein | June 26, 2020

The way James Walker tells it, Utah’s Lost Sheep fluorspar mine was down to a part-time operation for just two men. Having seen better days between 1948 and 2007, operations dwindled to the point that “a couple of old guys were just driving a loader straight into the face of the fluorspar and putting that into bags. The grade was so rich that was all they had to do. So they just did that a couple of days a week and then they’d go off and fish most of the time.”

Ares Strategic Mining has near-term plans for the country’s only fluorspar operation

VP of exploration Raul Sanabria at
one of the project’s fluorspar showings.

Sounds idyllic, but the president/CEO of Ares Strategic Mining TSXV:ARS saw far greater potential. Walker was looking for a project “that was close to cash-flow and didn’t need a huge investment like $20 million to boost production,” he relates. “We looked over a couple of hundred projects and this one came up. It had been overlooked because the mineral itself wasn’t very well known. It was the only mine in all of America that was permitted and producing fluorspar.”

A year of effort consummated in February with Ares’ 100% acquisition which, along with additionally staked claims, delivered a 586-hectare potentially near-term producer that would comprise an American mining monopoly.

That’s based on a bold plan to move forward without the usual 43-101 de-risking stages. Walker attributes his confidence partly to the project and partly to the market.

As he said, fluorspar isn’t well known. But it’s highly coveted nonetheless. Also known as fluorite and more technically referred to as calcium fluoride (CaF2), it’s considered a critical mineral by the U.S. and EU.

Acidspar, the higher-priced fluorspar grading over 97% CaF2, is used to create hydrofluoric acid for refrigerants, pharmaceuticals and electronics, among other applications, and is also used in lithium-ion batteries and aluminum production. Lower-priced metspar, grading under 97%, goes into steel and cement production.

China produced over 57% of world fluorspar supply last year, according to U.S. Geological Survey data, followed by Mexico at 17%. With no significant production of its own, the U.S. has been importing about 66% of supply from Mexico, 13% from Vietnam, 8% from South Africa and 6% from China. Several of the world’s mines have been operating at or near full capacity, the USGS added. Roskill considers China likely to become a net fluorspar importer.

Ares Strategic Mining has near-term plans for the country’s only fluorspar operation

Assays are pending from last spring’s
delineation and exploration drill campaigns.

Ares’ work so far has Walker enthusiastic.

Although assays are still to come, last spring the company sunk 12 holes totalling 900 metres to delineate the old guys’ target area. Another five-hole, 300-metre exploration program revealed visible fluorspar in three holes. Metallurgical tests, meanwhile, upgraded Lost Sheep material beyond 97% CaF2, into the higher-priced acidspar level. That highlights the potential for bulk mining instead of selective extraction, Walker says.

He foresees possible production by October or even September with an initial 15- to 20-person operation. The mine plan calls for an adit to intersect a fluorspar-bearing pipe which would be drilled and blasted from the bottom. An underground loader or conveyor belt would move material to a truck which would carry it to the company’s own crushing, grinding, flotation and bagging facility.

“We also have a stockpile of discarded low-grade just sitting there. The other guys couldn’t sell it, they didn’t have a refining process.”

An impressive vote of confidence quickly came from the Mujim Group, a multinational fluorspar mining and distribution company. Soon after Ares announced the Lost Sheep acquisition, Mujim engineers visited the property. A strategic partnership resulted, with the group buying a 9% stake in Ares. Mujim managing director Bob Li joined Ares’ board earlier this month, bringing with him experience running fluorspar mines in Thailand and Laos, along with fluorspar trading companies in India, China and the Emirates. He’ll advise Ares on topics ranging from equipment selection and mining methods to processing techniques.

Walker himself is an engineer, not a common background for a junior mining CEO but especially suitable for a near-term producer. He’s worked on design projects for nuclear reactors, submarines, chemical plants, factories, infrastructure and automotive machinery, as well as mine processing facilities.

In charge of the Lost Sheep mine plan is Keith Minty, a mining engineer with 26 years of project development and operation experience over three continents. “He’s helped put nine mines into production that are way bigger than ours,” enthuses Walker.

Ares Strategic Mining has near-term plans for the country’s only fluorspar operation

CEO James Walker foresees operations
by September or October.

VP of exploration Raul Sanabria’s 20-year background includes five years with the Minersa Group, an industrial minerals company that’s Europe’s largest fluorspar producer. Denise Nunes brings over 20 years of experience as a process engineer and metallurgist to manage Ares’ bench testing and design a processing facility.

“We’re quite well-connected in the mining world so we have access to the best personnel for this project,” Walker emphasizes.

He points to financial backing too. Sprott Capital Partners helped broker a private placement that closed on $1.97 million in February. Haywood Securities acted as financial adviser on an over-subscribed private placement that closed on $1.13 million earlier this month. Walker anticipates a debt financing with Sprott on completing the mine plan.

In northern British Columbia, meanwhile, the company acquired the Liard fluorspar project last April. The highway-accessible 476-hectare property comes with historic, non-43-101 resources for seven areas. A joint venture, possibly with Mujim, might be the vehicle to drive the project, Walker says.

Other acquisitions are possible too, especially in the U.S., he adds. Should all go to plan with Lost Sheep, Ares would hold an American mining monopoly on fluorspar. That’s a distinction Walker would like to maintain.

Watch a January interview with Roskill analyst Adam Coggins on fluorspar demand and prices.

Terry Glavin contemplates an unprecedented crisis

June 19th, 2020

…Read more

A look at Canada’s future

June 8th, 2020

…Read more

Terry Glavin comments on the 56 million respirators and masks reportedly shipped to China in the first week of the Wuhan shutdown

June 2nd, 2020

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Commerce Resources’ Quebec rare earths project gets international academic attention

June 1st, 2020

by Greg Klein | June 1, 2020

Not a subject that normally excites investors, tailings management is nevertheless an important consideration for advanced-stage projects. A previously announced academic article on Commerce Resources’ (TSXV:CCE) Ashram rare earths deposit now comes to an international audience.

Commerce Resources’ Quebec rare earths project gets international academic attention

Written and researched by a six-person team led by PhD candidate Sophie Costis, Assessment of the Leaching Potential of Flotation Tailings from Rare Earth Mineral Extraction in Cold Climates was published last month in Science of the Total Environment, an international peer-reviewed journal.

The study results from tailings characterization test programs still underway by le Centre Eau Terre Environnement of l’Institut national de la recherche scientifique (INRS).

Funding comes from a $300,000 grant provided jointly by le Fonds de recherche du Québec—Nature et technologies and le Ministère de l’Énergie et des Ressources naturelles. Although the program was scheduled to finish next December, Commerce and INRS hope to extend the project through the same funding sources.

An earlier presentation on her Ashram research won Costis first prize in the Geoscience Research Challenge held by l’Association Québécoise des Sciences de la Terre. Her award was announced in November at the Quebec Mines + Energy conference in Quebec City.

“We continue to be impressed by the quality of work being completed by Sophie Costis and the team at the INRS, and are very happy to have been able to be involved and contribute to REE research in Quebec, and now globally,” said Commerce president Chris Grove.

The company’s work continues on the northern Quebec Ashram rare earths-fluorspar project, which hosts two of the 35 minerals considered critical by the U.S. Rare earths have been an increasing cause of concern to the American government, which relies heavily on China for these elements essential to defence, medicine and clean energy technology, among other applications.

Apart from a friendly jurisdiction, Ashram benefits from carbonatite host rocks with relatively simple monazite, bastnasite and xenotime mineralogy that’s familiar to conventional rare earths processing.

See other news about flowsheet studies for Commerce Resources’ Ashram rare earths deposit.

Read more about Commerce Resources.

Poll shows Canadians back sustainable production of critical minerals

May 13th, 2020

by Greg Klein | May 13, 2020

A Mining Week announcement from the Mining Association of Canada expresses public opinion on an issue of increasing prominence. A survey by Abacus Data shows almost 90% of respondents “like the idea of Canada being a preferred source for critical minerals and would like to see government take a number of steps to support this approach,” MAC reported.

Poll shows Canadians back sustainable production of critical minerals

Increasing demand, supply chain weaknesses, and rivalries in trade and geopolitics have heightened concern for raw materials necessary for the aerospace industry, defence, communications, computing, medicine and clean energy.

“China has been a major supplier of these minerals but Canada has an opportunity to play a larger role in this marketplace as customers look for products made to high environmental standards,” MAC stated, pointing to its Towards Sustainable Mining program.

Among the survey’s findings:

  • 88% of respondents want Canada to increase its role in producing critical minerals for world markets

  • 86% want to encourage international investment in Canadian critical minerals and metals companies that are sustainability leaders

  • 83% want to encourage Canadian production of critical minerals to compete with China

  • 81% want to promote interest in Canadian critical minerals by drawing attention to Canada’s high standards of sustainability

MAC commissioned the online nationwide poll. Conducted between March 3 and 11, it surveyed 2,600 people weighted according to census data. Abacus gave the results a margin of error of plus or minus 1.92%, 19 times out of 20.

Canada is a top five country in global production of 15 minerals and metals, including several critical minerals essential to new technologies such as cobalt, copper, precious metals, nickel, uranium. We have the potential to expand in lithium, magnesium and rare earths.—Pierre Gratton, president/CEO,
Mining Association of Canada

“More than a decade of Canadian leadership in responsible mining practices is giving us an additional edge, and we see more investors and customers examining how their suppliers approach environmental responsibility,” said MAC president/CEO Pierre Gratton. “The market is growing and Canada’s opportunity is clear.”

In January Canada and the U.S. announced their Joint Action Plan on Critical Minerals Collaboration, which the Canadian industry expects will attract investment and encourage further development of supply chains. The plan follows a number of American initiatives to reduce its dependence on rival countries, especially China.

MAC also pointed to the Canadian Minerals and Metals Plan, a federal-provincial effort intended to enhance competitiveness, innovation and native participation in mining.

“Canadians may not all have a detailed knowledge about the mining sector,” added Gratton, “but they can clearly spot the chance to leverage our advantages in terms of abundant resources and the high standards of responsibility that our industry is known for. They know that winning a bigger share of this growing market means more well-paying jobs and stronger communities.”

According to figures supplied by MAC, mining contributes $97 billion to national GDP and 19% of total domestic exports. Employing 626,000 people directly and indirectly, the industry is proportionally Canada’s largest private sector employer of natives and a major customer of native-owned businesses.

Robust or bust

May 7th, 2020

Will supply chain challenges culminate in a long-overdue crisis?

by Greg Klein | May 7, 2020

It might take premature complacency or enormously good fortune to look back and laugh at the Early 2020 Toilet Paper Panic. But from today’s viewpoint, bumwad might be the least of our worries. There won’t be much need for the stuff without enough food to sustain life. Or water. Medicine, heat and electricity come in handy too.

Sparsely stocked supermarket shelves have been blamed on hoarders who thwart the industry’s just-in-time system, a process credited with “robust” reliability when not challenged by irrational buying sprees. Consumer concern, on the other hand, might be understandable given the credibility of official positions such as Ottawa’s facemask flip-flop and initial arguments that closing borders would actually worsen the pandemic.

Will supply chain challenges culminate in a long-overdue crisis?

A North Vancouver supermarket seen in mid-March. While
stockpiling has abated, supply lines show signs of stress.
(Photo: Steeve Raye/Shutterstock.com)

Meanwhile Canadian farmers worry about the supply of foreign labour needed to harvest crops, dairy farmers dump milk for lack of short-distance transport and deadly coronavirus outbreaks force widespread closures of meat and poultry plants across Canada and the U.S.

Highlighting the latter problem were full-page ads in American newspapers from meat-packing giant Tyson Foods. “The food supply chain is breaking,” the company warned in late April. “Millions of animals—chickens, pigs and cattle—will be depopulated because of the closure of our processing facilities.”

Within days the U.S. invoked the Defense Production Act, ordering meat plants to stay open despite fears of additional outbreaks. 

Just a few other pandemic-related food challenges in Canada include outbreaks at retail grocers, a shortage of packaging for a popular brand of flour and an Ontario supermarket warning customers to throw away bread in case it was tainted by an infected bakery worker.

Infrastructure supplying necessities like energy, fuel, water and communications faces pandemic-related challenges of its own, including availability of labour and expertise.

Supply chain complexity has been scrutinized in The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. One example from author David S. Abraham was the electric toothbrush, a utensil comprising something like 35 metals that are sourced, refined and used in manufacturing over six continents.

Dissecting a 2017 smartphone, the U.S. Geological Survey found 14 necessary but mostly obscure elements. As a source country, China led the world with nine mineral commodities essential to mobile devices, and that list included rare earths in a single category.

In a recent series of COVID-19 reports on the lithium-ion necessities graphite, cobalt, lithium and nickel, Benchmark Mineral Intelligence stated: “From the raw material foundations of the supply chain in the DRC, Australia, Chile and beyond, through to the battery cell production in China, Japan and Korea, it is likely that the cells used by the Teslas of the world have touched every continent (sometimes multiple times over) before they reach the Model 3 that is driven (or drives itself) off the showroom floor.”

Will supply chain challenges culminate in a long-overdue crisis?

Consumers might not realize the complex
international networks behind staple items.

Or consider something more prosaic—canned tuna.

That favourite of food hoarders might be caught in the mid-Pacific, processed and canned in Thailand following extraction of bauxite (considered a critical mineral in the U.S.) in Australia, China, Guinea or elsewhere, with ore shipped for smelting to places where electricity’s cheap (China accounted for over 56% of global aluminum production last year). Then the aluminum moves on to can manufacturers, and transportation has to be provided between each point and onward to warehouses, retailers and consumers. Additional supply chains provide additional manufactured parts, infrastructure, energy and labour to make each of those processes work.

Still another supply chain produces the can opener.

Daily briefings by Canada’s federal and provincial health czars express hope that this country might “flatten the curve,” a still-unattained goal that would hardly end the pandemic when and if it’s achieved. Meanwhile the virus gains momentum in poorer, more populous and more vulnerable parts of the world and threatens a second, more deadly wave coinciding with flu season.

And if one crisis can trigger another, social order might also be at risk. Canada’s pre-virus blockades demonstrated this country’s powerlessness against a force not of nature but of self-indulgence. Even a cohesive, competent society would have trouble surviving a general infrastructure collapse, a scenario dramatized in William R. Forstchen’s novel One Second After. When transportation, communications, infrastructure and the financial system break down, so do a lot of people. Dangerous enough as individuals, they can form mobs, gangs and cartels.

How seriously Washington considers apocalyptic scenarios isn’t known. But prior to the pandemic, the U.S. had already been taking measures to reduce its dependency on China and other risky sources for critical minerals. Now, Reuters reports, COVID-19 has broadened American concerns to include other supply chains and inspired plans for an Economic Prosperity Network with allied countries. Questions remain about the extent that the West can achieve self-sufficiency and, in the U.S., whether another administration might undo the current president’s efforts.

Certainly globalist confidence persists. The Conference Board of Canada, for example, expects a slow return of supply chain operations to pre-pandemic levels but a renewed international order just the same. “Global co-operation is needed not only to tackle the health crisis, but also to restore trust in global supply chains and maintain the benefits that the growth in global trade has brought over the last two decades.”

Will supply chain challenges culminate in a long-overdue crisis?

New cars leave the manufacturing hub and disease
epicentre of Wuhan prior to the pandemic.
(Photo: humphery/Shutterstock.com)

One early COVID-19 casualty, the multi-continent diamond supply chain, already shows signs of gradual recovery according to Rapaport News. Despite mine suspensions, “there is more than enough rough and polished in the pipeline to satisfy demand as trading centres start to reopen. Belgium and Israel have eased lockdown restrictions, while India has allowed select manufacturing in Surat and special shipments to Hong Kong.”

Also struggling back to its feet is global automotive manufacturing. Writing in Metal Bulletin, Andrea Hotter outlines how the disease epicentre of Wuhan plays a vital role in making cars and supplying components to other factory centres. “If ever there was a masterclass in the need to disaster-proof a supply chain, then the COVID-19 pandemic has provided a harsh reminder to the automotive sector that it’s failing.”

So regardless of whether apocalyptic fears are overblown, there are lessons to be learned. As Benchmark points out, COVID-19 has disrupted “almost every global supply chain to such a profound extent that mechanisms for material sourcing, trade and distribution will likely never be the same again.”

In the meantime, a spare can opener or two might be prudent. Or maybe several, in case they become more valuable than bullion.

Visual Capitalist: The impact of critical minerals on U.S. national security

April 28th, 2020

by Nicholas LePan | posted with permission of Visual Capitalist | April 28, 2020

See Part 1: The United States and the new energy era’s lithium-ion supply chain

In 1954, the United States was fully reliant on foreign sources for only eight mineral commodities.

Fast forward 60-plus years, and the country now depends on foreign sources for 20 such materials, including ones essential for military and battery technologies.

This puts the U.S. in a precarious position, depending largely on China and other foreign nations for the crucial materials such as lithium, cobalt and rare earth metals that can help build and secure a more sustainable future.

America’s energy dependence

This visualization comes from Standard Lithium TSXV:SLL and it outlines China’s dominance of the critical minerals needed for the new energy era.

Which imported minerals create the most risk for U.S. supply chains and national security?

 

The new energy era The impact of critical minerals on U.S. national security

 

Natural resources and development

Gaining access to natural resources can influence a nation’s ability to grow and defend itself. China’s growth strategy took this into account, and the country sourced massive amounts of raw materials to position itself as the number one producer and consumer of commodities.

By the end of the second Sino-Japanese War in 1945, China’s mining industry was largely in ruins. After the war, vast amounts of raw materials were required to rebuild the country.

In the late 1970s, the industry was boosted by China’s reform and opening policies, and since then China’s mining outputs have increased enormously. China’s mining and material industries fueled the rapid growth of China from the 1980s onwards.

Supply chain dominance

A large number of Chinese mining companies also invest in overseas mining projects. China’s going out strategy encourages companies to move into overseas markets.

They have several reasons to mine beyond Chinese shores: to secure mineral resources that are scarce in China, to gain access to global markets and mineral supply chains, and to minimize domestic overproduction of some mineral commodities.

This has led China to become the leading producer of many of the world’s most important metals while also securing a commanding position in key supply chains.

As an example of this, China is the world’s largest producer and consumer of rare earth materials. The country produces approximately 94% of the rare earth oxides and around 100% of the rare earth metals consumed globally, with 50% going to domestic consumption.

U.S.-China trade tensions

The U.S. drafted a list of 35 critical minerals in 2018 that are vital to American national security and, according to the U.S. Geological Survey, the country sources at least 31 of the materials chiefly through imports.

China is the third-largest supplier of natural resources to the U.S., behind Canada and Mexico.

Rank Country U.S. minerals imports by country (US$, 2018)
#1 Canada $1,814,404,440
#2 Mexico $724,542,960
#3 China $678,217,450
#4 Brazil $619,890,570
#5 South Africa $568,183,800

This dependence on China poses a risk. In 2010, a territorial dispute between China and Japan threatened to disrupt the supply of rare earth elements. Today, a similar threat still looms over trade tensions between the U.S. and China.

China’s scale of influence over critical minerals means that it could artificially limit supply and move prices in the global clean energy trade, in the same way that OPEC does with oil. This would leave nations that import their mineral needs in an expensive and potentially limiting spot.

Moon shot: Building domestic supply and production

Every supply chain starts with raw materials. The U.S. had the world’s largest lithium industry until the 1990s—but this is no longer the case, even though the resources are still there.

The U.S. holds 12% of the world’s identified lithium resources, but only produces 2% of global production from a single mine in Nevada.

In the clean energy economy of the future, critical minerals will be just as essential—and geopolitical—as oil is today.—Scientific American

There are a handful of companies looking to develop the U.S. lithium reserves, but there is potential for so much more. Less than 18% of the U.S. land mass is geologically mapped at a scale suited to identifying new mineral deposits.

The U.S. has the resources, it is just a question of motivation. Developing domestic resources can reduce its foreign dependence, and enable it to secure the new energy era.

See Part 1: The United States and the new energy era’s lithium-ion supply chain

Posted with permission of Visual Capitalist.

U.S. calls for expanded domestic uranium supply, nuclear R&D and infrastructure exports

April 23rd, 2020

by Greg Klein | April 23, 2020

US calls for expanded domestic uranium supply, nuclear R&D and foreign infrastructure competition

Nuclear energy provides about 20% of American electricity,
serves vital military purposes and offers geopolitical opportunities.

 

The strategy vows to pull the American industry “back from the brink of collapse and restore our place as the global leader in nuclear technology.” An advisory group established by U.S. President Donald Trump last July has issued recommendations to revive the country’s nuclear supply chain, end foreign reliance, encourage R&D, and compete globally with Russia and China to supply nuclear energy infrastructure.

Stating the U.S. Congress “has provided broad bipartisan and bicameral support for U.S. nuclear energy,” the Nuclear Fuel Working Group starts with proposals for a revitalized mining, milling and conversion chain. In addition to streamlined permitting and licensing, the report calls for government purchases of uranium to expand the national reserve. Such quantities would “directly support the operation of at least two U.S. uranium mines and the re-establishment of active domestic conversion capabilities.”

The working group estimates the reserve would need 17 to 19 pounds of U3O8 beginning this year and domestic conversion providing 6,000 to 7,500 tons of UF6 beginning no later than 2022. Beginning possibly in 2023, 25% of domestic enrichment should be available for defence.

The military needs low-enriched uranium to produce tritium for nuclear weapons and highly enriched uranium to fuel navy nuclear reactors. Current stockpiles hold sufficient uranium to 2041 for weapons and into the 2050s for navy propulsion.

The report also foresees the development of micro-nuclear reactors for military bases in the U.S. and abroad, strategically ending their dependence on the grid. “In a future of increasingly electrified warfare, power delivery becomes increasingly critical to mission success.”

A far-reaching goal would enhance international stature by competing with Russia and China to install nuclear energy globally. “Establishment of nuclear infrastructure incorporates large-scale cross-cutting economic, security and geopolitical relationships between the purchasing nation and the technology-providing nation for the ensuing 100 years,” the working group points out. American neglect “has empowered Russia and China to establish long-term relationships with nations, inimical to U.S. national interests.”

Using state-owned and supported enterprises, the rivals bolster their geopolitical advantage.

Russia—a nation that has “weaponized” its energy supply as an instrument of coercion—dominates nuclear markets. Russia is advancing its economic and foreign policy influence around the world with $133 billion in foreign orders for reactors, with plans to underwrite the construction of more than 50 reactors in 19 countries. China, a strategic competitor that uses predatory economics as a tool of statecraft, is currently constructing four reactors abroad, with prospects for 16 more reactors across multiple countries, in addition to the 45 reactors built in China over the past 33 years, and the 12 reactors currently under construction in China.

Meanwhile, the United States is entirely absent from the global new build nuclear reactor market with no foreign orders. The United States is missing out on a nuclear reactor market that the U.S. Department of Commerce estimates is valued at $500 billion to $740 billion over the next 10 years.

Nowhere are the predatory tactics of state-owned enterprises more evident than in the realm of export financing.—U.S. Nuclear Fuel Working Group

The group urges American financing institutions to support the civilian industry against foreign state financing. “Nowhere are the predatory tactics of state-owned enterprises more evident than in the realm of export financing.” The report also encourages expanded, government-funded R&D in co-operation with private projects, along with education and training.

“The decline of the U.S. industrial base in the front end of the nuclear fuel cycle over the past few decades has threatened our national interest and national security,” commented U.S. Secretary of Energy Dan Brouillette. “As a matter of national security, it is critical that we take bold steps to preserve and grow the entire U.S. nuclear energy enterprise.”

Predictably, the report drew praise from U.S. producers. With two mines and a mill, Energy Fuels TSX:EFR noted it’s the country’s biggest uranium producer “and holds more uranium production capacity and more permitted uranium resources than any other U.S. company.” Another domestic producer, Ur-Energy TSX:URE operates the Lost Creek ISR mine and moves its Shirley Basin project through advanced licensing.

In the wake of pandemic-caused mining suspensions around the world, uranium prices have surged past $33 a pound from approximately $27.35 at the end of March.

Li-ion under the pandemic

April 20th, 2020

COVID-19 cuts energy minerals demand but heightens future shortages: Benchmark

by Greg Klein | April 20, 2020

The pandemic will shrink lithium-ion battery demand by at least 25% this year even prior to further economic setbacks. But electric vehicles hold greater likelihood than many other industries not only for recovery but growth. Current reductions in lithium, cobalt, graphite and nickel supply will only mean greater need later this decade, according to Benchmark Mineral Intelligence.

COVID-19 cuts energy minerals demand but heightens future supply shortages

In an April 16 webinar presented by managing director Simon Moores and head of price assessments Caspar Rawles, the two warned that pandemic conditions and responses will worsen an already critical supply scenario later this decade.

That “lost quarter” of a 25% reduction in demand will likely be just the beginning, Moores said. “If there’s going to be a longer economic impact, which is most likely going to happen, a severe economic impact globally, then of course we lose more than a quarter.”

Yet exponential growth should continue for Li-ion battery megafactories. Five years ago just three such plants were in production or planned, with capacity totalling 57 gigawatt hours. By 2018 the number of plants climbed to 52, for 1,147 GWh. This year the figures jumped to 130 plants totalling 2,300 GWh now in production or slated for completion by 2030. That’s enough for 43 million EVs averaging 55 kWh each.

That future seems distant, compared with the current production limitations brought on by health-related mine suspensions, along with delayed expansions and development of new mines. Transportation challenges also loom large, such as the South Africa lockdown that restricts cobalt transshipment from the Democratic Republic of Congo.

As the pandemic cuts supply, it curtails demand as well. Chinese automakers, the main producers of EVs, have largely shut down.

Lithium faced over-supply well before the pandemic, prompting cutbacks among majors like SQM, Albemarle, Ganfeng and Tianqi. “Also we saw that the majority of Tier 2 or 3 converters in China were already planning on going offline due to the low pricing we’ve seen in the market,” Rawles said.

So what that means down the road is those expansions which really need to be happening now to meet the future demand are not happening.—Caspar Rawles,
Benchmark Mineral Intelligence

“The key thing is that downturn in conversion capacity in China will mean that the backlog of spodumene feedstock material that’s sitting in China will take longer to work through, so we’re looking at a longer-term potential low-price environment,” he explained. “That threatens the economics of new projects of course and an increased risk of price volatility going forward…. So what that means down the road is those expansions which really need to be happening now to meet the future demand are not happening.”

What does a typical (35 GWh) NCM Li-ion battery plant consume in a year? Benchmark estimates 25,000 tonnes of lithium hydroxide or carbonate, 6,000 tonnes of cobalt hydroxide, 19,000 tonnes of nickel sulphate and 33,000 tonnes of graphite.

“The supply chain won’t be able to build quick enough to meet this electric vehicle demand,” emphasized Moores. Even if estimates of EV growth were cut by 25% to 30%, “you’re still not going to have enough mining capacity, chemical capacity in the supply chain to make these. The lithium-ion supply chain has to grow by eight to 10 times in a seven-year period, and now that might be pushed to a 10-year period.”

You’ve got a big lithium problem on the horizon, [supplying] only 19 million EVs, compared to the 34 million we think we’re going to need.—Simon Moores,
Benchmark Mineral Intelligence

Production from current mines and those likely to enter operation suggest about 900,000 tonnes of annual lithium supply by 2030, enough to power about 19 million EVs. That constitutes “a big, big problem,” Moores said. “You’ve got a big lithium problem on the horizon, [supplying] only 19 million EVs, compared to the 34 million we think we’re going to need.”

Showing “a similar trajectory,” cobalt supply estimates come to 228,000 tonnes by 2030, enough for only about 17.9 million EVs.

“The mining companies are being super-cautious or even beyond super-cautious, considering we’re going to need 34 million EVs-worth. And even if that goes down to 25 million, you’re still way off,” he added.

Future demand will continue to be dominated by China, Benchmark maintains. Of the 130 battery plants currently expected by 2030, China would host 93. The country’s capacity would equal about 1,683 GWh, enough for 31 million EVs averaging 55 kWh. A dismal second, Europe follows with 16 plants totalling 413 GWh for 7.4 million EVs. The U.S. would have just seven plants for 205 GWh and 3.7 million EVs.

Currently producing about 73% of Li-ion batteries, China’s forecast to maintain that proportion with about 70% of global production in 2029.

For all that, Moores said European megafactories and Tesla’s U.S.-based Gigafactories set an example for supply chains in other industries.

“What the coronavirus has shown is that truly global supply chains in the 21st century don’t work. They’re too fragile, there’s too many question marks out there. Even pre-coronavirus that was the case…. The battery industry was well ahead of the curve on localizing the supply chain as much as possible…. That will continue, I think it’s a blueprint for other industries to follow. The battery supply chain is ahead of the curve on that.”

But, he cautioned, “the U.S. has to take on the same scale as China.”