Mapping European Critical Mineral Policy and the Impact on Regional Pipelines

[Music] man vanik uh we Arch at Arch we manage a private Equity critical minerals strategy um that does exactly what it say have we only invest in critical minerals and we invest largely in public companies even with a sort of long-term private Equity holding strategy investing in a combination of sort of Cornerstone stakes and small royalties Kera um MD of electrial energy in Hong Kong we provide a consulting services on the EV and Battery industry from mining rocks to building battery packs to putting the EVS the whole uh supply chain and of course policy as well great that's me yeah Rob bis from Ino energy um we're currently investing into uh early stage startups in the energy transition area so anything from um hydrogen right the way through to uh emobility and circularity one of those areas also is the the battery value chain so we have about 30 Investments across the value chain from raw materials through to recycling um and now we're launching a new fund focus more on um evaluation phase demonstration phase uh projects um particularly those in Europe um that are seeking to fill the current very large gap in the um Upstream value chain uh today and um we are partnered with dimit which is a French uh Venture and infrastructure fund uh on that particular um project um we're currently in the marketing phase building the pipeline of opportunities um and looking to um get uh get going with capital deployment probably from uh 2025 all right great so um you know to kick off the panel I thought we could kind of take a a backwards look before we take a forwards look so you know um one of the obviously the biggest um policy that's that's come out regarding critical minerals has been the IRA in the US so um maybe we could talk about a few Lessons Learned um from kind of this launch and you know where do you think it's driven the most change both in the US and globally and you know is it enough to meet the current industry needs in terms of um metals exploration and all of that so um whoever wants to start us off here I can jump in um I actually just got back late last night from um a round table um with the Department of energy um in the US and a number of other actors including valet and riotinto on decarbonizing critical mineral Supply chains and a lot of that had to do with the fact that there isn't a sufficient supply chain of Next Generation critical minerals and chemicals because critical minerals for the battery supply chain are largely High Purity Chemicals not um not the actual mineral itself um and what was very interesting is is that the the players that were there including some oems and they all want the critical minerals um but what's what's really missing and what they're searching for is a way to uh get the risk Capital into the first stages because right now with the IRA um and the doe if if you can demonstrate that you have uh a sustainable plan for building your project and you can get it into Western markets um there's definitely uh debt financing available guaranteed with export guarantees from both the European Union and uh the the US uh the issue is uh sufficiently drisking the projects um with things like demonstration plants uh to and and the risk Capital required to get it there I think that's what and and and that's where they're struggling to find someone to get the projects to the point where they are financeable um and I think a lot of things are being looked at one of the interesting things and I don't know given you guys are are more on the on the upstream or uh the downstream end of it um the frustrations I'm hearing from a lot of people are that the the OEM are really having trouble they're not signing the off takes because they don't really know the spec they need which makes it difficult for the Upstream guys as well as the downstream guys because you can't really get a project ahead until you know exactly what spec you need to build it to or the chemical to yeah yeah um I was just thinking this morning the IRA is almost two years old and August will be two years old and really we've seen very little uh development in terms of critical minerals coming from the US primarily or North America coming on to the market anytime soon um so um you know as you asked what what Lessons Learned I think there's a lot of lessons to learned here particularly for the UK which still has to really set their policy out in terms of really securing materials uh and Europe to a certain extent that few things have worked in the IRA and a few other things haven't um yeah big problem with the oems is they don't know what they need in some cases they don't want to know because they I often interact with oems in Us in terms of supplying raw materials and um their their most common answer is you know our battery maker deals with that you talk to the battery makers they'll say our cam maker deals with that and then you go down the chain uh so nobody will tell you what spec they want uh they because they don't know really um because the specs are constantly changing but um yeah I we've seen like the Investments they've made in the ira basically been with a lot of startups who have no experience in industry and they're suffering those kind of problems that a runway for startup is which is making producing graphite producing nickel sulfate we need some larger players and you mentioned a few of them I think valine uh maybe even glenor or others riotinto um to really put serious Capital into producing battery grade Metals uh or chemicals mostly chemicals um uh and I think us has an appetite for that it be less so here I think because it requires a lot of investment and it's highly risk unless you have the uh uh the US government backing up and some of those Investments they're very risky especially with the kind of new players stepping into the space so yeah I think risk is the I agree with you risk is is a big a big issue right now who you put your money into yeah I agree with both of you and I think one thing you've noticed with the IRA is that particularly for the grant funding it has gone to projects that you would say maybe either you know industrialization of Technology that's coming from elsewhere so saying okay you can set up this PL but it's you know just a blueprint of somebody else's you know established technology uh or it's very new technology that needs some grant funding to to sort of move it along and help with private Finance but of course what what you haven't seen so much is an update of those projects on how they've actually been coping with raising the private capital Capital to to to be able to unlock the the grant funding um so that's that's one side of it I think also very little of that Capital has gone to Upstream particularly for the mining side and I think one reason for that is the the controversy around mining it politically it's not a very good industry uh to fund because you know often that mining side comes with a lot of social uh push back and it's the same in Canada it's the same in Europe um you see the policy and the funding not going to the sort of very start of the value chain in terms of those sort of projects so I don't think the IRA is in isolation is necessarily the only one that has its faults in that area um and in the same time both for for Canada and Europe um you know a lot of the capital has been more readily available to to Midstream and and downstream projects that you know have largely been sort of industrial ization efforts of existing technology I I would say um and and the question is you know now with potential change in sort of presidency what will happen um to that will will it will it sort of stall um will there be some sort of renewed efforts to get um moving on the the mining side but as you say I think when you get project to sort D risky phas there is capital available same in Europe if if you can get to uh you know FID and and your project is um has been well uh developed then yes you can get funding I suppose you know markets and economics sort of aside whether or that is a investable opportunity but I was just jumping in there um I've spent a lot of time in Washington lately um and in Brussels um with the critical raw materials act and what I've seen is that um you're very correct really that funding is only available to projects who are at at FID and for anything battery chemicals related in the critical mineral supply chain you need a demonstration plant you need a proof of concept nobody's willing to invest in new technology and the only people's actually ready and capable of signing off takes are still the Chinese who have the only commercialized technology for building that that that battery supply chain well the Chinese and the the Japanese and the Koreans are included in there but it's definitely coming from Asia uh if you actually look at the off take agreements that are coming from Western oems they're they're very Loosely worded umus to be perfectly honest because they don't know what spec they need so if you want access to funding out of Europe or um Washington um you really need to be at FID on a fully drisk project and there's a lack there's still a dir of um risk Capital as I see it and and sort of knowledgeable risk Capital to invest in the development stage guys to get them ready for that I mean it's partially what we do but we wish we weren't some of the only guys doing it um on the subject you brought up it's actually there's a silver lining to all this one of the only subjects both parties seem to agree on that has bipartisan support in the US is that redomicile manufacturing combating China industrial strength and developing an internal critical minerals strategy um and financing it is is very important to the future of us industry um so I I think you can be I don't know if they'll still call it the IRA should the administration change but I I think that one way or another the support for it will be there but you you you kind of hit the nail on the head while the government might be supporting it and the policies might be supporting it um the gener the generalist investing that makes something truly work the the the the money flows into it are still not there American investors in my experience and European investors they're much more Comfort they're comfortable in the downstream the upstream and Mining still scare the crap out of them excuse my French yeah okay and and I think on your point that you know one of the key drivers for us launching this new fund was to address that shortfall of capital for the sort of phase of development um so yeah we see you know Venture going in early that's a tough market today but it's still uh out there um and you said you know when projects get to um FID or you know TRL 9 level um they can be funded and that there's debt available there's Strategic Equity you know there's Capital out there but it's this beenin in the middle that is really struggling and um we've seen some national efforts in in Europe for example to fund some of those projects now which is good um but you know private side it's it's still lacking and and that's the area we we we kind of looked at you know in energy is very focused on um very early stage you know preed seed stage companies um and yeah then you know someone like di who's our partner is is sort of there but also with infrastructure end defic it but in the middle right you map it out you say who's operating in the middle of that very few very few people um and and despite the despite the the the the Tailwinds of the IRA um the other you know us policy the loan programs now the section 302 uh import duties European critical raw materials at next year in Industry act they they're all political and you know somewhat semi quasi or full Financial tools but yeah not in the space where things are needed to get moving you were talking about demonstration plans um when's the last time you heard heard a Chinese company building a demonstration plant or a pilot line they don't do it right they just build the plant well to be fair though and this is something that I think is a real problem with the narrative in our space China 20 years ago started investing in critical mineral battery and full battery supply chains and 70% of the world's batteries are still made there and they own the offes and they mine it they own the off takes they own the chemicals and all of the cathod Nan materials they get it they don't need to necessarily build a pilot plant or um I've actually seen companies build pilot plants in China for using like dle technology and stuff like that but the point is they have it already so they know it works they can just test the material in their existing plant but if you want to build a PL the only way you get Western Funding is if you're willing to build the some part of the plant outside of China right it has to be less than 25 or 30% owned by a Chinese entity um it's quite protectionist which and the Chinese are willing to license their technology because they have it and it's commercialized and it works right so that's why you don't need a de demonstration plan but if you want to I understand it if you want to get you know hundreds of millions of dollars to build something on new technology you need to know it works before you do it yeah and the reason the Chinese don't do it is because they've already done it yeah they've commercialized the tech about under our time frame we don't really need there's like a 100 different dle projects all going to demonstration phase like uh as you said technology is already out there uh more on the spge bean side for carbonates but you know it's cook cookie cutter at this stage if you're willing to work with the Chinese other than that you're financing a lot of companies uh who are we tend to support I mean it's obviously Case by case but partnering with the Chinese and their experience is just smart business you have to be careful don't get me wrong but I I think from an investment perspective from our perspective investing in guys who have commercialized this and done it for 20 years execution risk is everything in the mining sector and and that is the safer bet than trying experimenting with new technology um and the Chinese are quite commercial uh they know that there's the trade war is hotting up it's not going anywhere anytime soon um and so the ianes want to maintain their ability to sell to Western markets are are happy to consider building plants outside of China I'm partnering with um either Downstream us or um European or us or um uh Upstream around the world I at least that's our experience in the companies that we're looking at investing in yeah they don't typically go out anywhere they partner locally everywhere they go usually look from my perspective mining's risky enough I'm not sure I we're not alone in not loving technology risk or execute yeah yeah I don't know how you guys feel about it sorry do we have any questions from the audience just looking at the two sides of the Atlantic um who who decides which which are the critical minerals I mean I I've seen um the Americans put money into a nickel project um in Africa for example and yet nickel seems to be in pretty abundant Supply right now um and I'm not even sure if it's on the European list of of critical Metals um and you know graphite we've seen the Americans put some money into I don't know if we've seen European money go in I mean is there actually a defined list of um on both sides of the Atlantic and presumably separate defin lists where the Americans have nickel on there I guess and and then the final part of the question is is is uranium getting on to anybody's list at the moment no um so there's 68 minerals on the US list it's quite extensive and there's 34 28 um minerals with another smaller list of strategic minerals on the European list they've all published official lists of what is critical to them which means a supply chain at risk um but prioritization on that list I mean there's a lot of tiny little things like cesium on it a prioritization in that list in terms of what they really really need um there's still politicians right they get given a list by USGS of what what is critical which Supply chains does the US need um either for technology or or for their industry um that they don't control or have sufficient control over their supply chain on natural graphite being what being a high-risk one tungsten's on it um but they the politicians tungston as another good example like nickel of something which has been in the doldrums for quite some time so why is tungsten so critical it's critical because they don't have direct access to it in the US it's on their list because 100% not quite right but I close to 100% of tungsten used in US industry is imported um and if you look at the global supply of tungsten uh the offtake agreements um are sitting with China so China controls those Supply chains so the risk is Will America continue to be able to get the tungsten they need for their industry um it has nothing to do with whether or not tungsten is sufficiently supplied um all of the information I've seen from wood McKenzie and mccy who are is that the nickel Market is in over Supply until at least 2027 probably till 2030 and in terms of my priorities Nel's not on my list right I agree I mean it's very hard to see what the incentive is for a domestic producer I mean we've got a significant stake in an american-based nickel company but hey I mean if the if the pricing remains bad it's it's not a great investment to be in whether somebody thinks it's a critical metal or not um you know and so actually the list on the one hand is kind of interesting but and it's helpful if you can get some sort of government money for stage development obviously but it doesn't really provide any help with the with the economics at the end of the day it's all Market L economics it's not I think it's not like they're going to pay a premium for domestically produced tungsten there's no no talk of that is there there's a really um big misnomer and misunderstanding in the market um the idea that it's critical kind of infers that it's in short supply or hard available or that there's a a short to medium term um Supply shortage um and that's not actually how critical minerals are defined critical minerals are defined simply by do we need it for our industry and do we have access to it or do we control access to it so as we mentioned tungsten and nickel are in great Supply just America doesn't control enough of that Supply which is why it's on their critical minerals list um it has nothing like it's it's simply it's it's really about risk to supply chains for who it's very critical minerals lists are very jurisdictionally located unfortunately the guys who are in charge of doing out the money don't necessarily prioritize like oh it's on a list we can give you money even if the economics of the actual project are really bad to be perfectly honest it's not something any of us would invest in no no and I think the other side of it is that um when you look at the the critical materials that you're not going to see um you're not going to see any incentives that directly provide a premium that makes projects in certain countries where that material is needed economic I guess what you see is other policies that incentivize that asset um that either you know for example provides lowc cost capital or where there are some protectionist measures on the industry that benefits the value chain and therefore you know can absorb a sort of higher cost operation there could be a premium on it like in Europe there's going to be have the domestic supply of nickel will have to end up in the batteries yeah um starting 2027 and well that has to be proven to be domestic Nick autism um well you could yeah domestically European extracted um um so I guess one one you know one good example is is something like magnesium so in the US um the US has a high import Duty on magnesium Imports which supports the only us us magnesium as the only us producer of of magnesium metal because that metal was seen as being strategic to the military use um and you know generally industry wasn't as concerned with the the high the high of a premium um but that that that's a kind of rare case the question is now these new tariffs that were introduced Only Yesterday by by the US government um on certain materials for um you know critical industry um in particular the the battery value chain and the and the vehicle I didn't see that so they're replicating what they've got on magnesium on some other yes are they yeah exactly but but I suppose ultimately what happens is the the consumer us we lose out because it makes the cost of the goods more expensive because you haven't got n nickel's a funny one though if Indonesian nickel is not is going to be on that list or not allowed into the US yeah for Chinese Association nickel Market will if it's non Indian nickel Plus what's going on in Russia could have a deficit again but what are they going to do is it you going to get a bated Market where Indonesian and Russian nickel is excluded and they pay a premium for American nickel there's an indirect to that as well so their need nickel is still like 80% used by the stainless steel industry um and they can ban taking it from Indonesia I don't think they're going to do it from Indonesia actually but I think they are but the reality is the Chinese built all those plants or funded all those plants so all of that off take is going to China but between 40% in Indonesia and at least 20% in Russia 60% of the world's nickel Supply is via China but it goes directly into their um into their batteries and their batteries and their stainless steel are then sold as end products so you can ban nickel it doesn't matter they're sell what they're actually selling to America and the world is the stainless steel and the batteries that already have the nickel in them yeah if if those batteries can get into the country now but yeah stainless steel got a tariff as well y 100% um but and are they going to e permitting like if you want American production of stuff a little bit of help on the permitting side might be a good way of getting production too sorry I'm just um there's a real I've seen this in Europe and in America as I said the policy makers have realized how important domestic Supply Supply chains that lead to the west and domestic production is but and I put a huge caveat they still and they've tried to streamline processes and this and that but local opposition social opposition in both Europe and North America America to mining projects is still incredibly high so even though you have Federal support and federal money the permitting I saw some recent research by um Capital IQ the average time to develop a nickel project right now globally is eight 16 to 18 years right that's for any of the Canadian projects or anything like that um and that's 16 to 18 years is the average not including the fact that you know they got everything up in Indonesia less than eight right so they've averaged it's probably 20 years to get a a western project going and and everyone keeps saying Canada is a friendly mining jurisdiction I know and the I mean the the EU through the critical rers act introduced this fast track permitting process so it doesn't it doesn't skip any of the the requirements in terms of what you have to do to to get your permits but it almost puts you at the top of the list to get sort of priority treatments in terms of the government resource to get those projects going the problem is um espe especially in Europe I don't know about the US is that there is still the opportunity for people to um to to effectively uh take that to court to challenge it so that the the it doesn't override still the ability for those projects to get caught up in so I can in such cases I I helped consult on the development of the critical raw materials act and it does exactly what you say so they basically have gone to one they've passed it at the European level but forcing it on European member states is a lot easier said than done and they basically said you have you know six months one year to approve a project and review a project because it used to happen is they were just stuck in permitting in the local permitting process forever and so there's this European imposed because of the criticality um time frame for which they have to get through the stage in the process but it's still like 5 years long three it's still 2 to 5 years long depending on what stage the Project's at and individual communities block it and take it to court they fight it because they just don't want mining in their backyard but okay but why is why is the industry not getting the Eco Green groups educated in the necessity of mining development to get a green transition the mining sector has to go ahead why why you guys just bombarding the buies and saying you got to be on our side yeah and that that that's starting to happen now I think you see a lot of more education driven um sort of Outreach by the companies by the governments to say look you know if you want a green transition uh then you have to you know have mining you know you can't just replace oil and gas with nothing um but you know what would you rather have would you rather have you know high CO2 bad environments or would you have a want to mine somewhere up the road in your back Garden that you know is going to can be CO2 free and generates industry and that that's the you know that's a huge challenge anywhere to to kind of move people's sort of opinion because so I was um I was with the cop guys at this retreat thing I was at um for the last two days and the just transition guys um and the foreign Commonwealth and development office and it was all about how to decarbonize uh mining Supply chains and the understanding for the highlevel green movement and at the government level that critical minerals are absolutely essential to the energy transition is there but the actual green groups as we would call them are extremely local and their anti-mining sentiment is irrational and they have incredible pull with local governments so the high level understanding is there but don't ever doubt the ability of a local community that's highly motivated to stop mining in their own backyard especially in Europe and North America yeah that's why they're developing new tech like dle with Vulcan resources they could be producing lithium back in your backyard and you'll never know because it's extracting brins pumping them back in a very small footprint uh you know big attitude and that's why it might be big problem for the energy transition is not in our backyard and uh and for you know for years um it's been done all the extractions done elsewhere people in Europe and us are kind of happy with that personally I mean I have some real doubts about European projects just because I and and even American projects just because time is money and the delays and and time and the permitting and and development process make make the returns quite like they're they're a significant costly risk like an extra year or two on the development or three years because of random delays can really affect your investment returns um but as a rule of thumb my opinion you're welcome to disagree with me I would never invest in an open pit I would only ever invest in Europe in something that was underground because anything with an open footprint I just I do not believe it'll get permitted not in Europe in my opinion unless it's somewhere that's you know brianfield more accepted I think that's what you see particularly in the nordics there is more scope for that Northern is pretty decent and understanding they have a long history of Mining and Spain is also not as bad but in Germany it's only something like Vulcan that's pure underground that I think is going to work yeah you and some of their lithium projects and stuff like that can I ask one other question um what What new technologies are coming along that's going to disrupt existing Technologies in your opinion um well I mean that that's you know I guess that that's a pretty uncertain um sort of forecast in terms of what what might sort of disrupt the the kind of current status quo um I think the more interesting aspect is on this case on the mining side what what is going to change the way that you know materials are extracted from from the ground and we we see a lot of innovative technology in that area um but the question is how much of it is is practical um you know for example you see dle um you see um you know uh init uranium extraction I think they're now looking for it for copper um I'm not so familiar with some of the other sort of metals what doesn't work on things like tungsten or graphite probably not um so that the difficulty is can you can you naturally shift um you know conventional mining practices in terms of their physical impact where deposit is I think that's going to be pretty tough um I guess where you see uh development which is largely I think driven by decarbonization of the downstream side um is towards sort of processes and products that's you know are less carbon intensive to to produce um and there's a lot of innovative development there you know across the board um you know you see it for steel for example one of the sort of highest sort of emitters um you see it for you know various steps of the battery value chain and even high-tech materials you know pad metalogy um you know direct metal um sort of uh production um you know without chemical or pomological sort of roots um so that that that's coming but I don't expect any of it to be really disruptive in the very short term what I would say is that technology that's changing is what's going to be dominant it's kind of like BHS VHS versus betamax back in the day which one was going to win and I do think that there's going to be a lot of different battery chemistries there's going to be horses for horses in terms of batteries but the largest electric vehicle Market in the world is China and um over 50% of their sales are lfp and increasingly they're using with Tesla something called lmfp they're adding manganes to the lfp formulation it's a cheaper car made with more reasonably available Mater cheaper reasonably um lithium iron and phosphate with some manganes in it and I think that you're going to see it's just a better value car for the BET for the value market and so I think lfp is going to be at least 50% in my lmfp is going to be 50% of the global electric vehicle Market in my personal opinion also when it comes to grid scale batteries sodium ion is really looking like it's going to be dominant also made with a cheaper material um for grid scale storage um and you'll see some other Technologies like um something called a zinc air battery um could be quite interesting I quite like there's a there's a misnomer in the green steel Market um everyone thinks it's steel made with hydrogen steel doesn't get made with hydrogen particularly easily um hydrogen is still there are a lot of issues with hydrogen um whereas if you put vadium and you reinforce steel with vadium the way the Chinese have been doing for the last 10 years you can knock the car you can knock the carbon footprint off because you need 30% less Steel in vadium reinforced steel so a 70% width does the same job as a 100% width of regular steel if it's reinforced with vadium which knocks off 30% of the carbon footprint therefore it's greens it's a Greener steel so I think you're going to see a lot of Material Science and battery technologies geared towards cheaper materials um that have sort of I don't even know if it's new technology it's just a new way of looking at at practical smart Evolutions in my opinion the batteries aren't going to change anytime soon the lithium iron phosphate and nmc is what we're going to have lfmp they don't have big plans even in China for lmfp the next decent uh yeah but it's still going to be lithium based we've had the same batteries for 40 years uh they're throwing everything at it ER so for large scale commercial so the the big factor when I talk to mining companies we're going to invest in a nickel a pit but we're reading we're reading next week There's new chemistry coming and nickel's not in it uh but realistically they'll never be able to remove nmc from the chain or uh lfp still nmc is a dominant battery outside China look nmc has a big role to play but we're talking about slowly but surely up to 2050 taking the mix of 7 to 10% % electric vehicle sales up to like 50 right that's still a huge role so even if it's 5050 nmc that's still five times more electric batteries and materials that we need for all of it the question is can we produce enough nickel for 50% of the market to be nmc batteries I'm not sure we can but the thing on sodium I look sodium is not a hype train I was just so China produced 600 kilowatts of sodium batteries last month that's that's 10 EV packs I mean uh there's nothing happening in sodium there um so because the price of lithium crashed that so these you know you all know the metals markets but depends on the price of materials now sodium's not been too much discussed because lithium is is in a sweet spot for the Chinese um but I agree with you uh it does make sense for energy storage uh but you know you have to build a whole new supply chain for that yep there's not not a sodium cattle material of choice there's not Electra they don't really know even how does sodium intercol in the high carbon is it a physical is what kind of reaction there's a lot unknowns about sodium I uh I I feel like this conversation could keep going uh for another hour or two but I do have to cut us off because we're at time um I want to thank my panelists for making my job so easy today I didn't have to say a word you guys just went with it so that was really insightful um and thank you for joining and thanks for the questions from the audience I'm sure our panelists will be around for a little bit longer if you want to continue the discussion so thank you thanks

Channel: 121 Mining Investment TV

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Length: 38min 14sec (2294 seconds)

Published: Thu May 23 2024