'Is the Electric Vehicle Revolution Real?' with Marin Katusa of Katusa Research

[Music] okay so what I'm gonna do most of my portfolio is actually energy I'm a big believer in the energy guy because guess what without energy Bitcoin doesn't work without energy all of these Minds don't work so energy really is the lifeblood of the economy globally and the energy market is so much bigger than the mining world I love the mining aspects but you really have to focus on energy for your portfolio so I'm gonna give you a good kind of crash course what you need to look about from the past present future so where are we today compared to where we were a decade ago look at the growth nuclear is base load and it ain't going anywhere that's a key theme here to understand a decade ago we're consuming as much nuclear power as we are today a decade ago however look at the green energy it went from you know three percent less than 3 percent to 14 percent of the North American energy consumption by far the largest growth and a lot of people are gonna say to me well Marin that's because of Obama and subsidies and all these different things and you're right that was the case back then that is no longer the case and trust me this is one of the hardest things to explain to even guys like my partners Doug Casey and he's like wow are you sure it's economic today yes it is that's the flat-out truth but look at that big red circle natural gas and coal made up of just a little over two thirds of the North American energy consumption a decade ago the two combined or 55% it's still the behemoth it's still the white it's this herd of elephants it's not just the elephant in the room it's a herd of elephants and I'm going to argue that that's going to decline significantly regardless of what Trump says the trend is your friend and I'm going to show you the economics behind all of this so the reality is is that over the last decade how and why is what I'm going to go and we're talking about huge changes like 90% decreases and we're still nowhere compared to where we're going I'm going to challenge everybody here and basically talk about ELQ owes the levelized cost of energy equivalent so you look at solar used to be a hundred bucks per megawatt is what you needed to make it economic you're looking now 30 bucks that means 3 cents per kilowatt hour think about that that is massive you could become the crypto king in the world for all the crypto people who are excited about that all you have to ask is what is the power cost the biggest pop cost of any of these mining like you know whether you talk Frank Holmes hive or you know these companies is what is your cost to power right that's the key factor look at wind also about a hundred bucks per megawatt a decade ago it's now almost cheaper than solar but what is the Achilles heel of solar and wind as Rick rule says you know the problem is night time and what happens if the wind doesn't blow that's very true but the technologies getting to the point where we'll be able to store the energy at site so for example a lot of people don't realize that Texas is the Saudi Arabia of wind power believe it or not and yet you know Warren Buffett and his report talked about how you know Idaho and Utah and all these great places so I rewrote his thing and said actually no Texas is the Saudi Arabia not the northern states but here's the interesting part a hundred years ago the oil market barrels the actual barrels that people stored oil in were worth more than the actual oil in where we are today in green energy is the equivalent of having oil production without massive storage that's where we are in the green energy revolution the revolution 2.0 is when we get to the storage and rather than puking out the power into the grid when you don't need it because when the turbines are churning the power gets created and they tap it into the grid it's not optimized we will get there in the next decade or two and that sounds like a long time but it's not really not because these projects have infinite lives that's the beauty of it you know a solar field in 30 years those panels can be refurbished but those are low cost because it keeps dropping 25 years is the life frame of a turbine a geothermal plant these things if they're properly managed they can go for hundreds of years so you look at the wind cost huge reductions in seven years by just two-thirds and the trend is going to continue so how is this going they're becoming not only cheaper through competition they're getting a lot bigger to show you the size difference of where we're getting at you look at just two decades ago these things were kind of small if you've got drive-thru Palm Springs and you go through the Californian desert you'll see these really small turbines then they get bigger and bigger we're gonna get to the point in the next 10 15 years where the turbines are gonna get larger than the Washington Monument that is wild today a small turbine is bigger than the Statue of Liberty and just like in the mining industry your fleet you can sell finance so GE has invested heavily into this where they will finance these turbines and they will also insure them and they'll maintain them for you okay so we know that it's going big the surface areas are getting better the efficiency is gonna get better but it's not just the Americans okay Saudi Arabia just signed over a gig and a half at one point seven cents per kilowatt hour and that's guaranteed a gig and a half is 1500 megawatts that is a big big project that's a nuclear reactor and a half okay so if the Saudis and the Chinese are investing heavily into this you have to pay attention we've made a quantum leap globally kind of like how the Americans created you know the Internet and then the wire telephone and then the Chinese and Indians just leapt into the cell phone revolution and then they have WeChat and $0.10 that's where we are in green energy so what is the net effect of all of this so you look at the North American wind generation it's a a decade ago we're at 29 terawatts which is the equivalent of 5 million homes today you can get to 44 million homes and it's going to grow more like I said it's not North American specific look at this onshore and offshore how much money is being invested this is exponential growth and this is real investments it's not planned and proposed you know 479 gigawatts that is big and what's it going to eat into is it going to eat into the nuclear market no it's going to eat into the coal and natural gas that's the reality because of the air pocalypse that is going on in you go to New Delhi in India and China it is a tough place okay so where are we going here where is the trend moving forward how many people believe in what I'm saying that green energy is real and the costs are without subsidies economic ok so I still got half to convert well let's get to solar more people are employed in the solar industry just in California then in the whole coal and nuclear nuclear sector in America and it's growing it's becoming more efficient so how did the cost decrease significantly the silica costs they're down over ninety five percent in the last decade imagine if you could say your copper costs are down 95% and the green evie revolution that would change the game that's what's happened for solar here we're talking about utility scale solar projects I'm not talking about you putting up a few solar panels on your roof top at home I'm talking utility scale utility scale starts at 20 megawatts okay and it's down 85 percent since Obama's been in power for the costs this is a real deal and because your input costs are down significantly your input costs silica unfortunately the Americans are trying to make a the administration the Trump administration is kind of saying it has to be made in America doesn't really make sense if you're I'm a you know this morning Rick was going you know there's a difference between mercenary capitalists and financial capitalists and all these different things unfortunately the Asians can make these panels much cheaper than the Americans can and they have their own form of subsidies but the reality here is is that the solar panels even if they're built in America are over 85 percent cheaper today than they were a decade ago and the trend will continue and the big cost was the poly-silicon costs you know you're down by 97 percent that is massive and it's not there's no shortage of poly silica do not think that you know it's like a rare-earth or anything like that so talk about the efficiency how are they going to we haven't even cracked the efficiency on these a decade ago you're looking at an efficiency if you're lucky about 15% we're now at 46% efficiency so that's going to increase plus remember on site utility storage is coming and that's gonna even optimize the returns for these companies so what's the end result you're looking at today over seven million homes are powered by solar today and a decade ago it was less than a hundred thousand this is meaningful this is a trend and I'd argue this as a trend way bigger than crypto in any of this even though crypto sexy and blockchains a sexy word and all that this is real and it's being invested and the best part is is other people have lost fortunes to get the technology to where we are today for us to benefit from this so where's the global power look at the Asia Pacific growth that is gonna be where the massive growth is that we aren't even tapping into and if you look what's going on with the massive buyouts please you don't need to buy my newsletter my life's not going to be changed whether you subscribe or not I do this for enjoying we've got a whole free publication I publish how all the big private equity groups are buying out these companies there's no secret I was one of the largest shareholders at Altera and why is there a consolidation going on because there's a mad rush for these long-life low-cost assets because if you're so much money in the markets and if you're a big pension fund how are you doing PL in a low interest rate market green projects are one of the best investments for these big pension funds in the world and here's the best part of it the big oil companies they're starting to really wake up I wrote a piece called the green barrels of oil equivalent I'm having some of the biggest oil companies now reach out to me going hey can you talk to our board and explain the math behind this the directors are reaching out to me it is going to be a trend in the future G bows as I call them is real just like buoys or barrels of oil equivalent for natural gas it's a six to one metric on energy equivalent but it's not six to one on a financial equivalent so these projects now imagine if a Exxon can say hey based off of a G Bo I'm net carbon neutral and these big energy projects are hundreds of thousands of barrels of oil equivalent per day of production of oil that's where the trend is going you know it's an irony here that a lot of people don't know most of all the big uranium projects that are been discovered there were my big oil companies like Esso that actually discovered them a lot of people don't know that they had tax breaks to incent incentivize themselves to explore for other sources of energy it's going to come back so I hope for the people who didn't put up their hand that you recognize that green energy is no longer a science experiment between today and 2025 1.7 trillion dollars has been committed to these and you're looking at where is next year's L coast and the reality is wind and solar remember this is el COSO it's a levelized cost it's net to net it's equal peer-to-peer this is not incorporating subsidies for wind and not subsidies for coal you look at wind it's under 30 bucks a megawatt solar is a little bit more natural gas because it's so low in price and it's gonna continue to stay low okay so that's a big point here because natural gas and coal or thermal coal or competitors to one another then you look at nuclear and where nuclear's changed I want everyone to fundamentally understand this the only reason nuclear isn't competing with wind and solar is because of the upfront costs for these massive big projects there's massive inflation that's what the problem is it's not about the utilities playing it off the producers when when a company like Toshiba or Westinghouse goes bankrupt because these capex they can't build these things on their own balance sheets they thought it cost eight billion dollars and it turns out to be thirty billion dollars because they have the American unions to deal with and all the delays and the permitting and all these things the future of solar is going to be smaller reactors and think of it as lego where it'll be containers and as the city grows you add on more containers and that's gonna be where you know whether it's a pebble bed reactor or any of these new technologies coming out that's what Bill Gates and Warren Buffett and a lot of smart rich guys are investing in so if you think nuclear is dead you really need to shake your head and geothermal what is the big cost with geothermal drilling costs that's also going to be decreasing because of the success of the oil and gas sector you know the largest drill rig I took my club I think it was in the summer of 2016 it was called the Thor rig in in Iceland and the rig is the biggest rig in all of Europe and it's powered by green energy at the plant and it was drilling the deepest ever geothermal well but it was twenty million dollars to drill that in ten years it'll probably be five to six million dollars and I'll get into why that's happening so right here is a rig when I was out at the Blackbird site in the Montney and this well a decade ago would cost you 16 to 18 million dollars today four to five million dollars so if you think that that can't happen in geothermal you're completely wrong it's going to why did this happen drilling time these are expensive rigs you got all these Roughnecks I call them these grease monkeys out there making a lot of money because you're in the middle of nowhere and it's a very tough job very dangerous but they're reducing the number of guys they need they're reducing the number of days it takes you take 45 to 50 days to drill an equivalent well that takes now 14 days that's a huge decrease in cost plus you have more horsepower drilling the drill bits are getting better the better fluids for each formation they've really unlocked this and it's gonna continue to get better so for example sorry that this is really tough to get to to see but really what this says is drilling days versus depth if you look at in 2012 which is just five half a decade ago you're looking anywhere between 60 days to drill 5,000 meters and now it's under 20 days to get to 6,000 meters and the costs are down significant and it's going to get better so advanced completions you look at a 20 day completion what's fracking it now you could do 2 to 3 days and I was explaining to an engineer yesterday last night he was going man I'm Erin I've never heard of this reef rack or you just screwing with us I go no I coined this phrase a few years ago think about it just like if you can reprocess tails at a mining facility why can't you go into a well that's already been drilled think about this now the infrastructures in place and now with better technology the the slumber JS of the world the Baker Hughes of the world for every foot that they drill vertical and horizontal they get 10 gigs of real-time data remember they used to take this data some redneck would come and put it into their things send it to the lab it take two weeks to get the data back and then they would kind of tweak it now it's real-time there's computers telling them exactly what to do go a little bit deeper let's frack here let's put a little bit more sand in let's put let's send let's pump it up a little bit higher pressure that's where we're going we haven't even started refracts remember when you go into a well you don't get all of the oil in there's an enhanced oil recovery Z ORS you can do slick waters there's so many ways to enhance your oil production and we're still in you know we're just starting fracking 2.0 that's another reason why natural gas is going to stay low because there it's all about the liquid rich just make sure that any project you're in you got to be in the lowest cost quartile general rule of thumb if your payback isn't less than 12 months in the mining sand in the oil and gas sector stay away if a mining project has less than 3 year payback that's the lowest cost in quartile that's how much better and the profits are in the energy sector and then for example when I was involved in starting a company called Cuadrilla which was Europe's largest shale company and last night Doug Casey was kind of ragging on me for selling a bit too early because we would have made another 25 times our money talking about an 8 stage to 16 stage frack was science fiction a decade ago now they're talking about a hundred and twenty-eight stage fracks 164 stage fracks we're there today it's incredible and the science is getting hopefully you can see where this multi stack potential think about layers of cake and now we go vertical we go horizontal now you can get up to 16 wells per pad and so remember you have to take down these rigs now these rigs can walk saves time from the same pad you can drill up to 16 wells that's incredible efficiency so what does this all lead to you're gonna get major improvement it used to be how could you drill into one section now oil companies are drilling across two sections of land okay think about that that's two miles horizontally that these companies are drilling I'm gonna ask Rick rule a decade ago was this science fiction Rick it's reality today horizontally and and they can calibrate these things to the feet and the pressure two miles horizontally that's massive so in our innovation has its international impacts here's the key when you compare the crude price to the inventories there's gonna have serious geopolitical shifts here and you see what's going on in Saudi Arabia it's clear what's going on in Russia there's gonna have interesting impacts to their balanced budgets is it interesting that Venezuela is a basket case yet look at the price of oil they need to balance their budget Nigeria Libya Bahrain and gola Ecuador Oman Saudi Arabia so I was MBS I call him the deputy Crown Prince who's gonna be the king of Saudi Arabia what better way to do a major financing than to go to all of my relatives who are my competition seize their assets and fund the growth of my kingdom I'm telling you two years ago I wrote an article it's on my website how everybody has to pay attention to this young guy he's going to be a survivor he's the real deal and what he's doing is so maka valiant and good on him for doing it then you got the Russians you know when OPEC had their meeting in 20 2009 the Russians were invited to observe they've been invited to OPEC but they won't do it and if they have a Soviet mentality to it they're not gonna follow what's good for OPIC or the oil markets because a lot of the oil that's already in production in in Russia there's thousands and thousands of wells that produce four to twenty barrels a day to them it's irrelevant if it's $100 oil or $20 oil they got to produce that oil because if they shut those fields down it's gonna cost a lot to pump it back up for the Russians they need higher oil prices for the Arctic drilling programs and attracting Exxon which by the way a lot of people don't know that Exxon which Rex Tillerson company was he was the main guy there for a decade has three times more acreage in Russia than they do in America just an interesting fact so that's where we're at so what's the uranium Black Swan here it comes down to one former Soviet state the Kazakhs as they say cos øx so in 2015 I gave the keynote at the world nuclear fuel summit and it was really interesting where the Russians came up to me and they were agreeing with everything and I went down and actually again sorry that this is so tight but here's every producing uranium mine in Kazakhstan and why are they so important to the game first of all they're 40 percent of the global primary uranium production and can the Kazakhs just shut down 20 percent so I created a financial model that says to the state the pension fund of Kazakhstan and say the is insane why would you produce 56 million pounds here's your natural declines of every single project because remember an is our project is very similar to an oil gas it has natural declines then you got to go to a new production zone production facility bring in the header houses but the cos øx are much better projects than what you can do in Wyoming or Texas for one reason they're pumping it full of acid and the projects are you know also top tier so you pump it with acid and talk to your projects you get much better production or recovery but the interesting dilemma here is is you still have the Russian influence okay what is the alphabet in Kazakhstan it's Russian Cyrillic when you look at the major projects in Russia they're Russian operated so will the Russians cut back to make sure Cameco or the Japanese or Arriva do well no so right now it's playing chicken who's gonna shut down first and even at 25 $26 a uranium the cossacks even the russians are not increasing their production zones they're not going to be replacing the natural declines and within two years the russia the Kazakh fields are going to hit their natural declines so the game in uranium is if you think it's gonna go to $40 tomorrow I don't think so but we've got a perfect market here to start taking your position if you've got a contrary in view I think two to five years not less than two but by you know early 2020 21 it's gonna make no sense for even the Russians to deplete their reserves at the current prices because they can't bring in they can't replace those reserves so here all the project declines and they're big ones like in KY they're all hitting their natural declines so it's happening we have reached peak Kazakh production and I don't like saying that word peak because I've never believed in you know I think there's just peak stupidity in the markets but peak production unless they're willing to replenish or replace the natural declines by bringing in new production zones it's not going to be replaced and here's the mathematic evidence I'm going to be publishing all this and here's every single mine that they have you wanting a picture and do your own research I put this up for all the Sprott analysts so they can catch up to us here do some research sorry I love taking Rick and I are good so here's the key takeaways the green energy revolution is real expect green energy to increase their market share and they're going to be eating eating into coal and natural gas stay focused on areas of high margin and the pure play power producers the pure green play are going to trade out of premium hydro projects we'll trade at a premium to the wind and solar because of there's so few out them think of hydro projects as gold projects think of solar and wind as maybe silver and copper projects there's no shortage of oil ladies and gentlemen there's a geopolitical risk that premium will come in but expect oil prices to stay range-bound natural gas is going to be very tough and when you look at an oil company make sure you stay focused on liquid rich production make sure costs you get your full payback within 12 months and always invest in the lowest cost producers and the best basins I have three minutes for questions yes sir I think electric vehicles are real and I don't care if it's Tesla GM Japanese cars the Korean cars the reality is it's real and where it's going to happen is everyone's like yeah but they can't build the infrastructure sure they can and they are okay and batteries are gonna get better just like I proved the solar costs are gonna come down the speed to you know for example Tesla just came out with their big rigs yeah there's a lot of issues because a driver there's something called the e regulation where they are electronically by GPS regulated and if the charging time isn't fast enough during their absolute regulated break time it's not going to take so the battery charge times they're gonna improve we're gonna get there and the cars are sexy and cool you know Rick rule just bought a really expensive Tesla Roadster no we didn't yes George the evie revolution cobalt for sure lithium there's a lot of lithium okay remember it's the lightest metal it's number three on the periodic table so be very careful with lithium you don't need to buy these junior companies that we have lithium great my backyard has lithium right the reality is is for producers control eighty-five percent of the global production so your asset has to be good enough to either disrupt the market or move the needle for one of the big boys other than that stay away and copper copper is the easiest way to play it okay coppers a win-win and here's the interesting part if an Eevee wants to become more efficient it needs more copper so the the faster the car the more copper you want to go electric trucks more copper so coppers the the regardless of what battery see cobalt you're playing on the battery revolution they're going to go to solid state batteries nobody knows yet which battery is gonna be the winner it's kind of like right now we're in research emotion or blackberries in the batteries something like the iPhone could come out for the battery so we don't know but regardless coppers the winner and I'm betting big on copper here Rick do you have any questions nope yes sir so here's the the question is is what happens if these revolutions in green energy come and eat into the uranium it won't because the key to any complex economy you want to diversify energy matrix you don't want to depend on anything and we're still not at baseload power for this green for other than geothermal but geothermal is like so small in the green revolution so the reality here is is that the best power and the cheapest power for these utility remember these big utility companies owned gas plants and coal plants and wind plants and then they have these uranium plant nuclear plants that they have in and nuclear makes up less than 2% of the operating cost of a nuclear facility so the price of uranium going 100 dollars is irrelevant to the utility but natural gas going to five dollars in mcf makes natural gas plant completely uh neck so there's that any elasticity yes we're not there yet but that's gonna be the 2.0 and it's coming correct but I'm talking utility scale not residential scale I have time for one last question yes sir okay here's the yes so the question is is electric vehicles make sense in China absolutely and that the president of China has mandated that the cars production is going to hit their numbers and it's one thing for president Trump to say that it's another thing in China and if you don't want to follow the rules you know what happens in China so yes it's going to happen and it's gonna be very different they're gonna have when I say electric vehicles it could be little mopeds little tuk tuks that are electric it's a very different in China and India know the biggest growth in green energy today it is but the biggest growth in the world is actually in China for green energy they're investing hundreds of billions of dollars today and there the biggest growth is in China they're going green but it's so big that right now it's cold but they're trying to get away from it okay that's everything on my end up next is Rob McEwen with me you

Channel: Cambridge House International Inc.

Views: 93,188

Rating: 4.5644126 out of 5

Keywords: Gold, Silver, stocks, Cambridge House, Resource, Investing, Conference, event, tech, money, energy, katusa

Id: l0cF2JYZ8Tg

Length: 30min 52sec (1852 seconds)

Published: Wed Dec 20 2017

Reddit Comments

[u/Hyric89]

Modified the title for better accuracy. All forms of energy get covered here. EVs don't get a mention until the end.

[u/sarge1000]

For years I argued with my work buddies, if you can't drink the water or breath the air, that's when things will change. Looks like we are heading to a Star Trek future with energy. Looks like Marin can see the future, but just can't predict it. I would like the United States Of America to take the lead on clean energy, for better profit.

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