Policy

• China bans exports of gallium, germanium, and antimony to the US in response to chip sanctions. The intense sequel to China’s 2023 export ban has arrived: earlier this week, the Chinese government announced an export ban on gallium, germanium, antimony, and superhard minerals. Back in the summer of 2023, China had curbed the export of eight gallium and six germanium products, and the following winter, the country restricted the export of technology to make rare earth magnets, so this is far from unprecedented. However, this iteration is much more sweeping and comes on the heels of the Biden administration’s restrictions on the sale of American and foreign high-bandwidth memory chips necessary for AI applications to China, clearly showing this is a retaliatory action before a pro-tariff Trump administration. How can the U.S. handle this? Start aggressively exploring for, mining, and refining more critical minerals domestically. We can push diplomacy or nudge allies to produce more (China has been especially sharp with investment in Africa), but there’s plenty of room for the incoming Trump administration to jumpstart domestic exploration and production to lessen the blow of a metals trade war.

Copper

• Top copper miner Chile gets back to pre-pandemic output levels. With ore grades declining, major miners are spending billions to open new mines, increase mine throughput, and improve copper recovery from existing operations. Chile’s state-owned miner Codelco reported that the company exceeded its own monthly production goal in October, and overall mines in Chile have been as productive as they were in 2019. While copper and the incredible Chilean economic growth are intertwined, production in the last couple of years has been lackluster. As we see more political and economic attention diverted to the energy transition, Chile is strategically positioning itself to capitalize on increased demand for the red metal.

  

Rare Earths

• Madagascar lifts its 2019 suspension on Energy Fuels’ Toliara critical minerals project. The Colorado-based firm is well-known for its uranium production, operating the only conventional uranium mill in the US (White Mesa in Utah) and several small mines. Though uranium is a large and critical market, management wanted to diversify towards the also growing markets for titanium, zirconium minerals, and rare earth elements. As a result of this, Energy Fuels acquired the Toliara project through its purchase of Australian mineral sands developer Base Resources in April 2024. Resource-rich developing countries battle the dilemma of being too strict on foreign extraction which limits government revenue while trying to avoid the resource curse, so hopefully, this move signals a step toward collaboration that attracts investment while safeguarding long-term economic stability.

Lithium

• Lithium Argentina is seeking to redomicile in Switzerland. Ask someone, “Where do you want to domicile your company?” and Switzerland will probably be among the options. Lithium Argentina, following the earlier move of Solaris Resources, has opted to domicile the company in Switzerland, specifically Zug. You don’t need to be watching the mining industry to know the absurd amount of companies registered in the low-tax canton - 38,547 at the end of 2022. In mining, Zug is almost synonymous with mining and metals trading giant Glencore. However, this move is not totally unexpected even ignoring the obvious tax benefits. This move follows Solaris Resources’ departure from Canada this year following a national security review of Zijin Mining’s C$130M in its Warintza project in Ecuador. Lithium Argentina’s main project Cauchari-Olaroz is a joint venture with Chinese company Ganfeng (44.8%/46.7% split respectively). Though western opposition to Chinese investment and partnerships is increasing, the capital and technical expertise that the Chinese bring is something most partners cannot match. The question now for miners may be: is it worth the move to accept Chinese capital?

Uranium

• Possible tariffs worry Canada uranium miners as they boost output to meet US demand. President-elect Donald Trump’s proposed 25% tariffs on all Canadian and Mexican goods has rattled many in the commodities world. Canada is a vital source of metals and critical minerals, including uranium where the country is the second largest producer, with 85% of production being exported. With Russia banning the export of uranium to the US earlier this year, Canadian companies like Cameco are pushing to increase production to fill the supply gap. Though tariffs can be a tool to incentivize domestic manufacturing or sourcing of raw materials, mines take time to come online. Canada is a critical ally and supplier to the US, thus Canadian uranium producers like Cameco are in a better position than most others to negotiate against tariff proposals and capitalize on a strong push by Western nations to source from allies.

  

Other Mining News

• Northern Star Resources to buy De Grey Mining in $3.3 billion (A$5 billion) deal. Northern Star is the largest gold miner in Australia with 1.65-1.8 Moz expected production in FY2025. Their all-share deal with one of Western Australia’s most exciting gold explorers represents a 36.8% premium on De Grey’s Friday share close of $0.99 (A$1.52). The jewel in the crown is De Grey’s Hemi project which is expected to produce over 500,000 ounces of gold over its first five years. Consolidation has been a big theme in mining over the past few years, especially among the majors like Rio Tinto and BHP, but seeing blockbuster deals like this (which could be one of the largest price tags for a gold project in recent memory) shows the continued bullish sentiment of the gold market.

Copper

• Hot off the heels of the MinExpo mining equipment conference in Las Vegas, the quickly modernizing mining world continues to focus on automation and electrification. Mining equipment giants are announcing battery-electric autonomous equipment, such as Liebherr’s T 264 dump truck. Majors and juniors alike are increasingly talking about battery metals, particularly copper, with prices rising in recent months, but lagging the gains of other industrial metals like iron ore, which saw a recent price rise based on Chinese stimulus.

• Rio Tinto aims to produce copper in Arizona by the end of the decade. While copper mining activity in the United States has been eclipsed by Canada and Australia’s production in recent history, Rio Tinto’s Resolution and increasingly stronger support from the U.S government, including the Department of Defense, aims to change that. Successfully negotiating with indigenous groups and navigating the permitting process could position Rio Tinto's Resolution project as an integral solution in addressing how the U.S. will meet surging copper demand stemming from the energy transition. 

• Panama sees exports of stockpiled First Quantum copper as viable. After being shut down by Panamanian authorities over widespread environmental protests and contractual disagreements, First Quantum and the government have gotten closer to reaching a truce and reopening the Cobre Panama mine. Both sides are hoping to reach an agreement by next year. Pressures are mounting on both sides: First Quantum still has mined copper sitting around and Panamanian leadership needs to cement public trust as they enter into an important political period of social security reform and ensure President Jose Raul Mulino is successful. The government’s shift in attitude towards the mine can also be partially attributed to the economic pressure of credit agencies’ downgrades. 

• Zijin wants its Africa copper mine to rival the world’s biggest. Kamoa-Kakula in the Lualaba province of the DRC is one of the world’s largest copper deposits. Joint-owner Zijin plans to ambitiously scale up Kamoa-Kakula's production to 1 million tons, a 25% increase from its previous maximum production projection of 800,000 tons. This would bring the mine's output closer to BHP's Escondida, the highest-producing copper mine in the world. This expansion is yet another instance of marquee copper supply additions to fulfill rampantly growing copper demand. 

• Copper smelters warn of closures as crunch talks get underway. Ah, the world of TCs – no, not total compensation; think treatment charges. TCs are what smelters charge for concentrate to be processed. In a world where copper concentrate is hard to come by, those TCs have been forced into negative territory because smelters are fighting over one another to obtain concentrate. In other words, smelting capacity has increased substantially, especially in Asia and Africa, while actual mined ore has lagged. While negative TCs are a boon for miners who do have concentrate, copper producers have to be extra careful so not to let too much smelting capacity go offline due to the dismal pricing. Adding more gas to the fire is that notoriously hard negotiator Antofagasta is setting the TC benchmark this year. Like lithium, how long low prices take to bring refined copper back to equilibrium remains to be seen. Here’s a great Twitter thread for further reading.

• TotalEnergies considers foray into copper trading, top executive says. Want to take it further than investment to demonstrate your interest or commitment to metals? Try starting your own metals trading operation. Total has done exactly that, along with its trading house peers of Vitol, Gunvor, and Mercuria. While recent weeks have returned the glamor of volatility to oil, on the aggregate firms like Total view metals as an avenue that has long-term tailwinds (energy transition demand) and increased volatility. Another motivation to enter metals for Total specifically is to wean itself off its reliance on LNG as a driver of earnings. But let’s be clear – base metal markets are far past their infancy. New market participants have to be aware that there are existing sophisticated market participants who have already optimized the dollars on the table.

Rare Earths

• Defense Metals, Saskatchewan Research Council team up to strengthen Canada’s REE supply chain. In recent years, Western countries have become more aware of retaining control over the rare earth element (REE) supply chain in the interest of national security, as China has not been afraid to show its current dominance. In light of this, Defense Metals and Saskatchewan Research Council (SRC) have entered into an MOU (memorandum of understanding) that intends to synergize the two entities and advance REE exploration and eventually production in Canada. SRC also initiated the first production of REE in Canada with its processing facility unveiled in mid-September. 

Lithium

• Kodal Minerals flags possible delay in first production at Bougouni lithium project. Rain, rain, go away: Mali’s first lithium production may be delayed due to heavy rainfall. Kodal Minerals, which is competing with Leo Lithium to become Mali’s first lithium producer, has pushed back expected maiden production at Bougouni to Q1 2025, with shipments of key mining equipment potentially delayed with the heavy rainfall hitting vital transportation routes. In separate news, Kodal is hoping in talks with the government to transfer its mining license for Bougouni to a newly established entity with the Chinese Hainan Group, who owns 51% of the project. 

• Rio Tinto in Talks to Buy Arcadium Lithium, Reuters Says. Rio Tinto looks to buy lithium producer Arcadium for a valuation of $4B to $6B. Instead of the usual organic lithium mineral development, Rio Tinto is smartly using M&A to expand its portfolio in an oversupplied lithium market. Weaknesses in the lithium market have been on both sides: demand for critical battery metal has waned due to lowering EV subsidies globally while production (surprisingly, not just from the Chinese) has boomed. However, spodumene (the mineral feedstock for lithium chemicals) costs have fallen but less so than lithium carbonate, causing many Chinese chemicals producers to consider cutting output to bring the lithium market back to equilibrium. 

Platinum Group Metals

• Sibanye-Stillwater lay offs impact 700. In another blow to American mineral production and processing, Sibanye-Stillwater is planning to lay off an estimated 700 employees due to disappointing palladium and platinum prices. Sibanye-Stillwater has attributed this price decrease to U.S imports of Russian palladium. In an effort to reconcile this, Montana senators Jon Tester and Steve Daines have introduced a bill to ban imports of Russian palladium. While this sounds great on paper, market participants always find ways to circumvent market controls if the product is superior or more price-effective. Instead, the focus should be on expanding American production of palladium and platinum, perhaps through grants to encourage building capacity expansion or more creative ways of recovering platinum.

Policy

• US Department of Energy announces $3B in grants to 25 companies for battery metals projects. Many of the recipients are focused on battery recycling, with companies like American Battery Technology Co receiving $150M and Cirba Solutions receiving $200M. However, some of the grants are going towards mining projects. Revex Technologies received $145M for the REV Nickel project. REV is a collaboration between Revex and Lundin Mining to extend the life of Lundin’s Eagle Mine by utilizing waste from the US’s only operating nickel mine. South32 was awarded $166M for the Hermosa project in Arizona to produce high-purity manganese sulfate monohydrate (HPMSM), an important battery chemical. South32 is targeting H2 2027 to bring the zinc-manganese-silver-lead mine into production. Element 25 was also granted $166.1M for another HPMSM production facility using manganese concentrate sourced from their wholly-owned Butcherbird mine in Western Australia.

• Vale backs Brazil critical minerals fund in nod to government. Vale’s 250 million reais seeding of Brazil’s first critical minerals fund (1 billion reais, or $180M, total) is the latest government push into the critical minerals business. The other backer is Brazil’s development bank BNDES, and the private equity fund will be managed by JGP Asset Management, BB Asset and Ore Investments. But for all the fanfare these enormous investments have received in the past few years, one must ask the question – is huge capital inflow enough to push the energy transition forward and/or protect domestic interests in critical minerals? Yes, fund size matters, but it remains to be seen how that capital is actually allocated. 

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The United States is short on helium. With rising prices and a depleting reserve, things are not looking great for our supply of this critical gas. But a new discovery in Minnesota may just hold the key to this vast supply challenge.

What is helium used for?

Helium, the second-lightest element, is a gas we hardly interact with but is critical to modern life. With the lowest boiling point of any gas, helium is used to keep objects extremely cool.

A few of the main uses for helium include:

• Cooling superconducting magnets in MRI machines

• Cold, inert environment to grow silicon and germanium crystals for semiconductor fabrication

• Shielding gas in tungsten arc welding of materials that have high heat conductivity (e.g., aluminum, copper)

• Industrial leak detection (helium has a smaller particle size than air, so it leaks quicker)

• Airships and weather balloons

• Cooling oxidizer/propellant loaded into rockets (the Saturn V used 13M cubic feet of helium per launch)

Helium consumption is expected to grow from 6.1B cubic feet in 2023 ($4.6B) to 8.1B cubic feet ($6.1B) by 2030.

Supply…

Unlike many critical materials, the US produces a significant proportion of helium, with 39.5% of global production (46.5% if you include a drawdown of the National Helium Reserve at Cliffside Field).

The US is even a net exporter of helium, exporting 20M cubic meters more than imported in 2023.

Helium is produced deep underground as a byproduct of the radioactive decay of uranium and thorium. The gas migrates upwards and becomes trapped in formations where the overlying rock is impermeable, often in pockets of natural gas.

The vast majority of helium is produced as a byproduct of natural gas extraction. Though often just 2-3% helium, these natural gas reservoirs are massive. Some fields contain higher percentages of helium (5-10%), but usually with a nitrogen content 10 or more times that of helium and high levels of carbon dioxide. Due to the high nitrogen and CO2 content, these fields usually do not contain an economically extractable portion of methane and are thus drilled exclusively for the helium content. US helium production primarily comes from natural gas fields in Texas, Oklahoma, and Kansas.

Shortage

Even though the US produces more than any other nation, we are in the midst of an escalating helium supply crisis. Over the past 25 years, production of helium in the United States has collapsed. In 1999, the US produced 118M cubic meters; in 2023, 59M cubic meters.

Due to this gas’s importance, the National Helium Reserve was established in 1925, but by 1996 was $1.4B in debt. This prompted Congress to pass the Helium Privatization Act of 1996 and begin selling off the reserve by 2005.

For the past 20 years, the helium reserve has been steadily declining. At the same time, government sales flooded the market with cheap helium, resulting in many private companies shutting down operations.

In 2013, the Helium Stewardship Act of 2013 was passed, ordering the remainder to be sold off by 2021, but at a higher price. The final sale of helium from the reserve was completed just last month. German industrial gases company Messer Group bought 425 miles of pipelines in Texas, Kansas, and Oklahoma and over 1 billion cubic feet of helium.

With the strategic reserve depleted, the next few years could see the US flip from a net exporter to an importer for the first time in decades, reliant on nations like Qatar, Algeria, and Russia for this critical resource.

While helium was included in the draft list of critical materials released by the USGS in 2018, it was not included in the 2021 edition. The 2020 Energy Act narrowed the criteria for materials included in the list to focus on quantitative production statistics as the primary means of assessing supply chain risk. Because the US was producing an abundance of helium, it was excluded. However, this does not account for America’s rapidly declining share of global production, with countries like Russia and Qatar rapidly increasing their share. In 2022, Senators John Barrasso and Mike Lee wrote a letter to Secretary of the Interior Deb Haaland, urging her to reject the USGS’s proposed removal of helium (and uranium) from the list, but to no avail.

Inclusion as a critical material would place a renewed emphasis on securing helium supply, potentially reversing asinine maneuvers like selling the national stockpile.

It is now up to exploration companies to find new sources of this strategic gas.

A new discovery

More than a decade ago, a small exploration company called Duluth Metals was exploring for nickel near Duluth, MN. In 2011, in a drill hole looking for nickel, the company hit a pocket of gas at 542 m beneath the surface. Gas flowed with no reduction in pressure for 4 days. After sending a sample to the University of Toronto, results came back revealing the gas contained 10.5% helium.

Years went by, and eventually, the site, now called Topaz, ended up with Pulsar Helium.

To see the extent of the gas discovery, Pulsar Helium used a type of geophysical surveying called Ambient Noise Tomography (ANT). ANT uses passive sensors to detect how the velocity of sound waves changes as they pass through different layers of rock. Gas fields have a lower velocity primarily due to the lower density of gas than surrounding rock and the greater pore space. The cross-section below shows the gas field (green) and discovery hole.

This 950 m depth slice shows the extent of the field in the x and y directions. The velocity anomaly (green) is several miles across, and open to the north and west.

In February, the company drilled an appraisal well 50 feet from the discovery well to confirm the findings. The results came back last week even better than expected. Some parts of the field contained up to 12.4% helium, with the well flowing at 3.7% to 5.1% helium (diluted from air pumped in) for more than 5 hours.

There is much more work to be done determining the full extent of this gas field, but the helium content is some of the highest ever discovered. If the 12% helium found is repeated in other drill holes, and sufficient helium is found along the estimated 610 m vertical thickness, this field could begin producing helium in the next few years.

It could even be the key to an impending helium shortage.

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• Vale operating licenses suspended in Brazil, then decision reversed. Last Wednesday, the Pará State Environmental and Sustainability office suspended the operating license of Vale’s Sossego copper mine, followed by a similar notice for the Onça Puma nickel mine a day later. The environmental secretary canceled the licenses due to issues with the annual environmental report relating to local communities. A few days later, on Monday of this week, the environmental secretary reversed the decision, granting a temporary injunction giving back the operational licenses for the two mines. Sossego, Vale’s second-largest copper mine in production since 2004, produced 66,800 tonnes of copper in 2023 and has been, for the most part, incident-free. Onça Puma, on the other hand, had its operational license suspended in 2021 for failing to comply with its environmental permit (the issue was resolved soon after). Onça Puma has been undergoing maintenance since Q4 last year as its furnace is being rebuilt and is expected to open up again late in Q1, while Sossego is also expected to undergo maintenance soon.

  

• Zijin to expand Julong mine. Chinese mining giant Zijin Mining has received approval from the Tibet Autonomous Region Development and Reform Commission for the Phase II expansion of its Julong copper mine in Tibet, increasing the amount of ore mined and processed daily from 200K to 350K tonnes. This equates to copper production of 300-350K tpa (and 13K tonnes of molybdenum), up from 154K tonnes in 2023. When construction is completed in late 2025, Julong will be the largest copper mine in China and one of the ten largest in the world. The expansion is expected to cost $2.42B and extend the mine life to 36 years. The company is considering a Phase III expansion to more than double the mine’s output again, placing it as the second-largest copper mine in the world after Escondida in Chile.

  

• First Quantum refinancing. First Quantum Minerals, following the closure of its Cobre Panama mine (by far their largest and most profitable asset), has been short on cash, with many speculating they will need to sell part of their Zambian mines. Early last week, the company announced four measures to increase liquidity and shore up its balance sheet:

  • $500M copper prepayment agreement with Jiangxi Copper

  • Extended maturity of its $2.2B corporate bank loan to April 2027

  • $1B equity bought deal offering led by underwriters RBC Capital Markets, BMO Capital Markets and Goldman Sachs

  • $1.6B senior notes offering to pay 9.375% due in 2029

  Though a substantial influx of capital, with Cobre Panama closed and Ravensthorpe closing soon, the company will have only three producing mines (Kansanshi, Sentinel, and Guelb Moghrein) and a need to invest in growth projects in Africa.

Lithium

• Zinnwald expands resource estimate by 445%. Zinnwald Lithium is developing the Zinnwald lithium project in Saxony, eastern Germany. The company released a new mineral resource estimate last week, its first since 2018, detailing a measured and indicated resource of 193.5 Mt grading 0.478% Li2O (contained lithium of 429k tonnes) based on 26,911 meters of diamond core drilling across 84 holes. This places Zinnwald as the second-largest hard rock lithium project in the EU, after Cinovec, a Czech project owned by European Metals and a state utility. Shares of Zinnwald rose more than 40% on the news but have since fallen.

• Sayona deliver Moblan feasibility study, Piedmont sells stake. Sayona Mining, an Australian lithium exploration and mining company, released the feasibility study for the Moblan lithium project in Quebec, detailing a post-tax NPV of C$2.2B with an IRR of 34.4%. The initial mine plan would produce 300K tpa of spodumene concentrate over a 21-year mine life, with the ore at an average grade of 1.36% Li2O. The mine and mill would take 39 months to build, with a total CAPEX of C$962M. The study estimates an all-in-sustaining cost of US$561/mt of spodumene concentrate (current price at $910/mt), substantially lower than Sayona’s current operation at North American Lithium (NAL). However, Sayona has been plagued by cost overruns at NAL, so this should be taken with a grain of salt. It is unclear how and if Sayona plans on financing Moblan, given the current low price of lithium and Sayona’s comparably small market cap of A$411M relative to potential CAPEX. Also last week, US-based Piedmont Lithium sold its remaining stake in Sayona for nearly US$40M, most of which was through an off-market block trade to an unknown buyer. In 2021, Piedmont acquired a 19.9% stake in Sayona Mining, a 25% stake in subsidiary Sayona Quebec, and rights to 50% of the offtake of NAL in exchange for a US$12M investment and commitments to fund C$23.5M of the NAL restart.

  Uranium

• Energy Fuels has a profitable quarter, ramping production. Energy Fuels reported their 2023 results on Monday, detailing an expanding company in uranium, vanadium, and rare earths. The company sold 560K lb of uranium concentrate (U3O8) for $33.28M in 2023 at an average price of $59.42. This translates to a gross margin of 54%, among the highest in the industry. Energy Fuels also holds 685K lb of finished U3O8 and 436K lb of raw material/work-in-progress U3O8 (uranium which has yet to be processed) stockpiled. The company also commenced production at three facilities in 2023 (Pinyon Plain, La Sal, and Pandora); when production is fully ramped in late 2024, the company will produce 1.1-1.4M lb of U3O8 per year. During 2024, the company is also restarting the Whirlwind and Nichols Ranch uranium projects, which, when fully ramped at the end of 2024, will put the company at a run rate of more than 2M lb of U3O8 per year sometime in 2025. With the price of uranium currently at $102/lb, the ramped production and sales from the stockpile will result in much higher margins than those achieved in 2023. The company also realized the sale of the Alta Mesa in-situ recovery project to enCore Energy, first announced in 2022, receiving $120M to fund construction across its uranium and rare earths projects.

  

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• Lilac raises $145M, moving forward with Utah project. California-based direct lithium extraction (DLE) company Lilac Solutions announced last week that they have raised a Series C. The company is developing several pilots to test (then expand) its DLE system, including at the Great Salt Lake in Utah and the Kachi project in Argentina, a partnership with Lake Resources. Lilac’s DLE tech is able to extract 40 of the 60 ppm of lithium in the Great Salt Lake, and the company is planning a pilot test later this year, followed by a phase one production of 3000 tonnes per year of lithium carbonate, eventually scaling to 20,000 tonnes per year. Another DLE company, Compass Minerals, abandoned a project at the Great Salt Lake last November following the passing of Utah HB 513, which would drastically reduce water use from the lake and require companies to pay a severance tax to a lake fund. HB 453 was just passed by the Utah House last week and will limit evaporation volumes of water from the lake by resource companies. These limits could make extracting lithium in Utah difficult and uneconomic, though Lilac is pressing forward in the hopes that the superiority and environmental friendliness of their technology overcomes regulatory barriers.

Copper

• First Quantum adds options to explore in Zambia. First Quantum Minerals, reeling from the closure of its flagship Cobre Panama mine last year, has exercised its options in a deal with African Pioneer. The agreement will have First Quantum spend $500,000 on 4 projects in Zambia, as well as deliver a technical report on each project to earn in 51% of subsidiary African Pioneer Zambia. First Quantum currently operates the Sentinel and Kansanshi mines in Zambia and is developing the Fishtie mine, with first production expected in 2026. Low on cash from the Panamanian mine shutdown and loan repayments, the market has speculated that FQM could sell the entirety or a stake in one of its Zambian assets, perhaps to Jiangxi Copper or Barrick. In a media interview last week, Barrick CEO Mark Bristow said that they are not interested in buying part of an asset and are taking their time to evaluate all options. With the main growth driver for FQM out of the picture, the company is ramping up exploration and development projects in a region where they currently have operations.

• Gécamines offers to buy some ERG assets. Gécamines is the state-owned mining company in the DRC, and recently they have been focused on taking a more active role in mining operations and ownership in the country. Eurasian Resources Group, a Luxembourg-based Kazakh mining group, is a major producer of copper (among other metals) with operations across the globe. Last week Gécamines CEO Robert Lukama told Reuters that the company has a proposal and the funding to back it to purchase three of ERG’s copper and cobalt assets. The state-run company is particularly interested in unlocking value from assets currently not producing, so we may see ERG and Gécamines partner on the development of assets in the future. A few months ago Gécamines announced a push for offtake from projects they are involved in proportional to their ownership to unlock further value from the marketing and sale of their resources.

• $2B Antamina expansion approved. The seventh-largest copper mine in the world is about to get even bigger, as Peru’s environmental regulatory agency approved the modified environmental impact study for the mine. The expansion will increase the mine area by 25% and deepen the pit by 150 meters. Most importantly, this will extend the mine life from 2028 to 2036. Antamina produces ~450,000 tonnes per year of copper at a grade of ~1% and is owned by Teck (22.5%), Glencore (33.75%), BHP (33.75%), and Mitsubishi Corporation (10%)

  

Nickel

• BHP's nickel business is struggling. Last week BHP realized a $2.5B impairment for Nickel West, its massive nickel complex consisting of the Mt Keith, Cliff, and Leinster mines, concentrators at Mt Keith, Leinster, and Kambalda, a smelter in Kalgoorlie, and a refinery at Kwinana. They also stated that the low prices could slow the development of the West Musgrave project. In response to BHP and others’ writedowns, the Western Australian government announced a 50% royalty rebate for 18 months (at prices below $20,000/mt, currently $16,804/mt), repayable over 24 months. However, nickel royalties in Western Australia are just 2.5%, so a rebate of 1.25% will do almost nothing to move the needle on these struggling projects. Nickel was also finally placed on the Australian list of critical minerals, allowing nickel projects eligibility for low-interest loans and grants from the $2.6 billion Critical Minerals Facility.

• And so is Glencore’s. Glencore is looking to sell its 49% stake in the Koniambo nickel mine and processing plant in New Caledonia. Koniambo is a joint venture with Société Minière du Sud Pacifique that began production in 2014. The project had been losing money well before the recent plunge in nickel prices, and despite commitments of $216M per year by the French government to support the operation, profitability does not look likely any time soon, given the current price environment. Trafigura and Eramet also own nickel processing facilities on the island, so this may not be the last withdrawal of majors from New Caledonian nickel.

  Sticking with Glencore, Horizonte Minerals, backed by Glencore (17.74% shareholder) saw the budget jump 87% from $539M to $1B for its planned restart of the Araguaia nickel mine. Nearly half a billion dollars has already been spent on the project, and CEO Karin Nasr said the project’s construction is “still subject to the successful completion of a full financing solution, which the company will seek to develop in the coming weeks, but with no guarantee of success.”

Rare earths

• American Rare Earths expands resource by 64%. ASX-listed American Rare Earths is exploring the Halleck Creek deposit in Wyoming, and they recently updated their measured and indicated resource to 1.417B tonnes of total rare earth oxides (TREO) at 3,295 ppm (0.3295%) with a 1000 ppm cutoff. With ~60 holes drilled and the latest campaign being primarily infill drilling, only about 25% of the property has been drilled today, so a potentially much larger resource looms in the near future. Though lower grade than existing mines like Mountain Pass and Mount Weld, or even other exploration projects like Defense Metals’s Wicheeda property, the company is confident they have a flowsheet to profitably process this massive critical resource in the United States.

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• Chinese to invest $7B in DRC. In 2008, the governments of China and the Democratic Republic of the Congo signed a landmark “minerals-for-infrastructure” deal in which Chinese companies got 68% of a joint venture company called Sicomines, mining copper and cobalt in the southern DRC. In exchange, the Chinese companies would need to spend $3B on infrastructure around the country. The Chinese consortium includes major companies such as China Railway Group Ltd, Power Construction Corp of China (PowerChina), and Zhejiang Huayou Cobalt Co. In the last 15 years, the Chinese consortium has spent only $822M of the promised $3B infrastructure investment, and many in the DRC were unhappy with the arrangement, with the state auditor Inspection Generale des Finances last year recommending the consortium’s infrastructure be increased to $20B to better reflect the value of the assets they received. There was also talk of increasing the Gécamines’ (DRC government’s) stake in Sicomines. Last week, a resolution to the dispute was announced, with the ownership in Sicomines remaining the same and the infrastructure commitments increasing to $7B. The DRC government will also earn a 1.2% royalty from the Sicomines project. There is still concern over the new agreement, as the negotiation process was entirely behind closed doors. No outside information about the Sicomines project (Dikuluwe and Mashamba deposits) is available, so it is difficult to independently assess the mine’s worth to determine if this is a fair deal. Just from aerial observations, the mine is several times the footprint of nearby operations like Mutanda (100% owned by Glencore) and Tenke-Fungurume (80% owned by CMOC), each of which produce billions of dollars per year of copper and cobalt. Additionally, some speculate that the Chinese infrastructure investment could come in the form of loans bearing interest, which could ultimately hurt the DRC (as similar loans have elsewhere in Africa).

  

Lithium

• Sigma Lithium increases resource 27%. Sigma Lithium operates the Grota do Cirilo mine in Brazil, which commenced production last April. The company continues to expand the resource estimate for the project, which, after last week’s announcement, now stands at 109 Mt grading 1.4% Li2O. 94.3 Mt of this is in the measured and indicated category (very high confidence). Sigma plans on drilling 57 spodumene pegmatite targets outside the core Grota do Cirilo area, potentially increasing the resource to 150 Mt later this year. Sigma posted an adjusted EBITDA margin of 56% (net profit of 37%) in Q3 last year (its first full quarter of operation), bringing in $54.6M of adjusted EBITDA. However, lithium prices have fallen 50% in the last 6 months, so the profitability of Grota do Cirilo is now unclear. Accordingly, Sigma’s share price is down more than 60% from its high last May. Q4 results should be released sometime in the next couple of weeks. At the same time, the company has lost several top executives in the last six months, including the Chief Controls Officer (who resigned 2 weeks ago), Chief Operating Officer (who resigned in September), and co-CEO Calvyn Gardner, the soon-to-be-divorced husband of Sigma’s current CEO who was fired last year for trading during a blackout period.

  

• MinRes to sell Azure stake, Mt Marion production jumps 30%. MinRes reported quarterly earnings last week, which included news that Mt Marion spodumene concentrate production is up 30% from last quarter. MinRes also received a $383M payment from Albemarle due to a restructuring of the MARBL joint venture, where Albemarle is taking over MinRes’s stake in the Kemerton lithium hydroxide processing facility. Additionally, MinRes CFO Mark Wilson confirmed that the company is planning to sell its stake in Azure Minerals. MinRes was left as a third wheel when SQM and Hancock offered to acquire the company in December. Wilson’s comments indicate that MinRes now believes it is better off selling its stake to the combined entity than staying on as a minority partner without any control.

• Controlled Thermal Resources seeks $1B for Salton Sea project. Last week, Bloomberg reported that Australian startup Controlled Thermal Resources (CTR) is raising $1B of debt and equity to support the development of its direct lithium recovery and geothermal power plant at the Salton Sea in California. Stellantis invested more than $100M in the company last August and has a supply agreement for 65,000 mt of lithium hydroxide over 10 years. General Motors also invested in the company in 2021. CTR anticipates the production of 50 MW of power in late 2024 and the delivery of 25,000 mt of LiOH monohydrate in 2025 (pushed back from an initial target of 2024).

• Ghanaian government acquires 3% of Atlantic Lithium. The Minerals Income Investment Fund of Ghana (MIIF) recently completed a subscription to purchase nearly 20M shares of Atlantic Lithium, representing $5M or 3% of the company. This is the first part of a larger investment by MIIF in the company, with MIIF set to invest an additional $27.9M for another 6% of Atlantic’s Ghana portfolio in the next few months. Atlantic Lithium’s share of the capex to develop the Ewoyaa lithium mine is $185M; investments by the Ghanaian government reduce their portion of the capex burden. Piedmont Lithium, a 50% offtake partner with Atlantic, is responsible for another $70M of capex. Though Piedmont once controlled nearly a quarter of the company, a few weeks ago, Piedmont sold ~40% of their remaining stake to Assore, the South African mining company that now owns 28.4% of Atlantic. Assore bid last November to acquire all of Atlantic at a ~60% premium to their share price (similar price today), but the offer was rejected. Atlantic is targeting its first production at Ewoyaa mid-next year.

Nickel

• NiCAN releases positive drill results, shares soar. NiCAN is exploring the Wine property in Manitoba, an area adjacent to several historically producing nickel and copper mines (Lynn Lake, Thompson, Namew Lake). Last week, NiCAN released drill results from the Wine property, with highlights including 31.5 m of 1.93% Ni and 1.9% Cu, just 36.5 m below the surface (with smaller yet notable proportions of Co and PGMs). Over the same set of holes, there was mineralization even nearer to the surface as well, with 9.6 m of 1.56% Ni and 2.2% Cu starting at 4.2 m below the surface. This tiny company, now with a C$11M market cap, was one of the biggest movers on the TSXV last week, up 270% on Wednesday.

• IGO puts Cosmos mine on C&M. Australian miner IGO operates the Nova (nickel-copper-cobalt), the Forrestania (nickel), and the Cosmos (nickel) mines, as well as owns a stake in a lithium joint venture with Tianqi. In mid-2023, the company commenced a review of the Cosmos project, and the results of that review indicated that the mine life is shorter, ramp-up more delayed, and capital/operating costs higher than expected, while nickel prices have collapsed at the same time. As a result, the company is transitioning the mine to care and maintenance by 31 May 2024. IGO acquired Cosmos and Forrestania just 19 months ago for A$1.3B and is significantly writing down the value of Forrestania as well. In their quarterly report, also out last week, it was shown that the company’s cash position is down 38% QoQ to A$276M. Just in the last quarter, IGO spent A$107M on construction at Cosmos, which calls into question the review process and planning of the company. Finally, lithium production at Greenbushes (which IGO owns 25% of through its JV with Tianqi) is down 14%, while the cash cost is up 36%. Not a great quarter for IGO.

Uranium

• McClean Lake to resume production. Denison Mines (22.5%) and joint venture partner Orano (77.5%) recently announced the restart of the McClean Lake mine, located in the Athabasca Basin, as a reaction to increased uranium prices. Mining is expected to commence next year, with production in 2025 hitting 800,000 lb. McClean Lake uses a patented mining technique known as Surface Access Borehole Resource Extraction (SABRE), in which a high-pressure water jet is inserted at the bottom of a borehole to excavate a portion of the ore. The cuttings are then airlifted to the surface, resulting in a high-grade (4-11%) ore extracted at a lower cost than many competitor operations. Mining was last suspended at McClean Lake in 2008, and SABRE tests were conducted in 2021 to investigate the feasibility of the new mining method developed since the mine shut down.

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• Epiroc signs $32.6M deal with Codelco. The deal is Epiroc’s largest yet for digital solutions, which include asset management, scheduling software, and visualization of personnel and equipment throughout mine sites. The software enhances safety at mine sites due to the ability to know where all employees are working and avoid collisions of equipment underground. It also improves the efficiency of operations with products such as on-site core logging, machine performance data collection, and continuous monitoring of production. This contract is for 5 years of services, with the first phase of $6.5M booked in Q4 2023.

Copper

• Codelco to invest $720M in Chuquicamata. Located in northern Chile, Chuquicamata is one of the largest copper mines in the world, producing 268,348 mt of copper in 2022. Last Thursday, Codelco filed for a permit to adjust plans for the underground extension of Chuquicamata (which is currently just open-pit) at a cost increase of $720M. The expanded plans include two additional ventilation/electrical shafts, several more levels to the mine, and an access tunnel. The new underground mine would produce 140K mt of copper per year, a sorely-needed increase as Codelco’s production has fallen to a 25-year low.

  

• Ivanhoe to restart Kipushi mine by mid-year. Ivanhoe has been constructing the Kipushi mine, located in the DRC near the Zambia border, for several years. Last week, the company executed an agreement made in February 2022 with Gécamines, the DRC state mining company. Under the agreement, an additional 6% control of Kipushi Corporation, the company in control of and operating the Kipushi mine, will be transferred to Gécamines, bringing their ownership to 38%. On January 25th, 2027, an additional 5% will transfer to Gécamines, leaving them with 43% control and Ivanhoe Mines with 57%. Finally, when 12 million tonnes (or at least today’s proven and probable reserves) have been mined and processed, Gécamines will get an additional 37%, leaving it at an 80-20 split. Kipushi is primarily a zinc mine today, though it was the richest copper mine in the world in the 1920s, with an average grade of 18%. Today, Kipushi has a measured and indicated resource of 11.78M tonnes grading 35.34% zinc, 0.80% copper, 23 g/mt silver, and 64 g/mt germanium. Construction at Kipushi is rapidly advancing, with the concentrator 79% finished and the ball mill and flotation cells being installed.

  

• Taseko inks $50M royalty deal to fund Florence Copper project. Florence Copper is an in situ recovery project for copper in southern Arizona that is expected to come online in 2025. In the in situ recovery project, a low-pH solution is injected underground through wells into the orebody, which is naturally fractured and porous, allowing the solution to selectively dissolve copper and be pumped back to the surface, where it can then be recovered. Florence Copper will use 65% less energy and 78% less water than conventional open-pit mines in the region and will not require blasting, hauling, and crushing ore. Last week, Taseko signed an agreement with Taurus Mining Royalty Fund for $50M in exchange for a 1.95% royalty on revenue generated at Florence Copper. Along with recent financing from Mitsui, this allows Taseko to continue to advance construction at Florence Copper, with drilling of the wellfield commencing in February.

Lithium

• Liontown cuts outlook on Kathleen Valley, Albemarle slows spending. On September 5th, 2023, Albemarle offered to buy Liontown Resources for A$3 per share, valuing the company at A$6.6B. Now, just four months later, Liontown is trading below a dollar. Liontown is developing Kathleen Valley, a hard rock lithium mine in Western Australia, with production expected to commence in the middle of this year. Last week, Albemarle sold its remaining stake in Liontown at a price of A$1.26 to A$1.32 and is decreasing capital expenditures in 2024 to just $1.6-1.8B, down from $2.1B in 2023 due to a worsening lithium price outlook.

  Yesterday, Liontown released news that a A$760M loan has been pulled due to low spodumene (lithium) prices. This loan would have gone to mine construction and paying off another A$300M debt facility. To maintain construction with less funding, Liontown has deferred construction of a 4M tpa underground operation and has adjusted its mine plan. The company says they have enough cash to build the now smaller mine but does not seem to have a cash buffer and working capital to burn through during ramp-up before the company produces revenue. The big question here is how much more capital they need and who it will come from. One answer may be Australian billionaire Gina Rinehart, who owns 19.9% of Liontown and was responsible for blocking Albemarle’s takeover offer last fall. With hundreds of millions of dollars still at stake in Liontown and clear ambitions in Australian lithium (see Azure Minerals), she may be interested in acquiring more of the company at this steep discount or an even steeper discount in a few months if Liontown’s financial situation continues to deteriorate.

Nickel

• Wyloo, First Quantum shut down WA mines. Wyloo Metals, a private company owned by Andrew Forrest, acquired Mincor Resources in July of last year for $760M, receiving several nickel mines in the Kambalda region of Western Australia adjacent to Wyloo’s Kambalda nickel concentrator. Now, amid collapsing nickel prices, Wyloo is putting their Western Australia nickel mines (Cassini, Long, and Durkin) into care and maintenance beginning on May 31 and has told BHP that they will not be able to fulfill their nickel offtake obligations. CEO Luca Giacovazzi told the Australian Financial Review in an interview last week that Wyloo wants to see bifurcated pricing between “dirty” nickel from Indonesia and Russia and ESG-friendly nickel from places like Western Australia. With higher standards for safety and pollution, Australian producers have higher costs than many producers overseas but are selling a product with a lower environmental impact. If downstream manufacturing and consumer-facing companies care about the environment, they will create a price incentive for mining companies to produce green nickel. Though with many layers to the supply chain and consumers insulated from the mining industry, this is a difficult prospect. Also last week in WA nickel, First Quantum Minerals announced that they would halt production for two years at the Ravensthorpe mine, in another blow to Western production of this vital commodity.

Uranium

• UEC to restart production in Wyoming. Uranium Energy Corp announced that their Board has approved restarting production at the Christensen Ranch in situ recovery (ISR) operation in Wyoming. The uranium produced at Christensen Ranch will be processed at the Irigaray Central Processing Plant, which has the capacity to process up to 2.5M lbs of U3O8 per year (~6.5% of US consumption in 2022) from four of UEC’s ISR operations nearby in Wyoming. First production is expected in August of this year. UEC is unique among near-term uranium producers due to its unhedged strategy, meaning 100% of the uranium produced at Christensen Ranch will be sold at the spot price. If the price remains anywhere near recent highs of $106, this operation will be highly profitable for UEC. UEC has seven fully permitted sites across Texas and Wyoming, with production expected to commence at many of them in the next year.

  

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• ERG Arabia introduces autonomous soil sampling robot. ERG Arabia is a subsidiary of Eurasian Resources Group, established last January with a $50M investment focused on creating a mining technology hub based in the Kingdom of Saudi Arabia (KSA). Last week ERG Arabia introduced NOMAD, an autonomous rover used to collect up to 120 soil samples per day with minimal human guidance. The autonomous system also includes a mobile base station with the ability to recharge several of the sampling robots. The system has all-wheel drive, allowing for easy transit across the Kingdom’s rugged desert terrain, a drill to collect samples up to 80 cm deep, and a host of sensors for on-board sample analysis, including x-ray fluorescence (XRF) and hyperspectral. The project has been several years in the making and was developed in collaboration with Chilean robotics company Godelius. Field testing of the units in KSA began in December, and ERG estimates the autonomous sampling is a 4X speedup compared to manual collection.

  

  

• Epiroc inks partnership with Vale, tests electric drill rigs. This past week Epiroc signed a non-binding MoU with Vale Base Metals subsidiary Vale Canada “to develop, test and utilize groundbreaking mining techniques and equipment to strengthen safety processes and drive innovative mining solutions while enhancing productivity.” While this is just a press release laden with buzzwords, this partnership will likely see Epiroc’s breakthrough drilling and underground mining equipment tested and deployed early at Vale Base Metals sites across Canada in the near future. Epiroc is focused on electrifying its fleet of mining equipment, and Vale Base Metals has many operations in Canada, a country where decarbonization is a political priority, thus a rush for Vale to deploy new technology. Also announced recently, Epiroc is field-testing their battery-electric SmartROC D65 BE drill at Capital Limited’s operations across Africa in 2024. Epiroc is aiming to be one of the first companies to introduce a battery-electric drill rig to the market, and field testing indicates they are close to doing so. As with any electric vehicle, charging in remote exploration locations is an issue, so these will likely be limited to existing mine sites with reliable renewable power if there is to be any environmental benefit.

Copper

• Manara to start trading arm, potentially acquire stake in Reko Diq. Manara Minerals is a joint venture established last year between Ma’aden (the Saudi state mining company) and the Public Investment Fund (PIF) to invest in mining assets across the globe. Manara made a splash last year when it acquired 10% of Vale Base Metals for $2.6B just months after the firm was founded. Manara (and Ma’aden) CEO Bob Wilt was interviewed at the Future Minerals Forum on Thursday that he envisions Manara having a trading arm given the need to manage the fund’s offtakes from its investments. This offtake would likely be sold to Saudi and foreign companies with downstream operations in the Kingdom, given KSA’s ambitions to become a mineral processing hub. In the same interview, Wilt noted that Manara is in discussions over a purchase of part of Reko Diq, one of the largest undeveloped copper-gold projects in the world owned by Barrick and the Pakistani government that is expected to commence production in 2028.

• Zijin to invest $130M for 15% of Solaris. Zijin Mining is one of the largest Chinese mining companies (~$43B market cap) with operations across the globe, primarily focused on copper and gold. Solaris Resources is advancing a portfolio of projects across South America, most notably the Warintza Cu-Au-Mo project in Ecuador. Warintza was discovered by famed geologist David Lowell in 2000, though works broke down due to issues with the neighboring community. These issues were resolved by Solaris a few years ago, and the company delivered a resource estimate in 2022 with an indicated resource of 579 Mt of copper at a 0.47% grade (0.59% CuEq). The company plans to deliver a new resource estimate later this year, likely followed by a pre-feasibility study in 2025. Solaris is part of the Augusta Group, a mining-focused management group that has a track record of successful acquisitions of its exploration and development companies. Most recently, in 2018, Augusta Group member Arizona Mining was acquired by South32 for $1.8B.

  

• QC Copper updates resource to nearly 2B lbs. QC Copper released an updated mineral resource estimate (MRE) for the Opemiska project in Quebec. The MRE outlines a measured and indicated resource of 1.75B lbs of copper, 845K oz of gold, and 5.5M oz of silver, approximately 85% of which are within the bounds of a proposed open pit mine. At a grade of 0.77% copper (0.93% CuEq), the Opemiska pit would be the highest grade open-pit copper mine in Canada, though with a substantially smaller total resource than larger projects like Teck’s Highland Valley Copper project with a measured and indicated of 2.5B lbs of copper. Opemiska is built around two former copper-gold mines, Springer and Perry, closed by Falconbridge in 1991. The mineral resource estimate includes data from a 2021 20,000 meter drilling campaign as well as re-evaluations of old Falconbridge drilling and geological data, in total evaluating more than a million meters of drilling and approximately 350,000 assays. QC Copper plans on releasing a preliminary economic assessment (PEA) later this year.

  

• Supreme Court dismisses Pebble appeal. Pebble is one of the largest undeveloped mines in the United States, which, if built, would churn out 6.4B lbs of copper, 7.4M oz of gold, 300M lb of molybdenum, 37M oz of silver, 200K kg of rhenium over a 20-year mine life. Located in Alaska and owned by Northern Dynasty Minerals, the company has struggled to receive environmental permits with the backdrop of fierce community and political opposition. This culminated in the January 2023 EPA decision to block Northern Dynasty from storing mine waste in the Bristol Bay watershed using authority granted by the Clean Water Act. Alaskan lawmakers, including Attorney General Treg Taylor, filed an appeal to the Supreme Court to get them to reverse the EPA’s decision last July. Last week the Supreme Court dismissed this request for an appeal, seemingly ending a last-ditch effort to keep the Pebble project alive. Northern Dynasty claims they will try other legal options, but in the eyes of shareholders, this was a major blow for the company, with the stock dropping nearly 40% on the news.

• Ivanhoe Mines reaches 2023 guidance, expects higher for 2024. Under the backdrop of the Future Minerals Forum in Saudi Arabia, Robert Friedland and Ivanhoe Mines have announced that Kamoa-Kakula met 2023 production guidance, producing 393,551 tonnes of copper (contained in concentrate), within the target range of 390K to 430K tonnes. This represents an increase of 18% compared with last year, with the concentrators processing 8.5M tonnes of ore at an average grade of 5.2%. Ivanhoe is planning on commissioning a third concentrator in Q3 of this year, pushing up the 2024 production guidance to 440-490K tonnes (a 12 to 20% increase). This news bumps Kamoa-Kakula up the rankings to the seventh largest copper mine1 in the world by production. If next year’s guidance is met, the mine will climb even higher to the number three or four spot, behind only Escondida, Collahuasi, and El Teniente.

• Ivanhoe Electric finds copper with Ma’aden, drills 25,000 meters. Friedland’s other major venture, Ivanhoe Electric, a technology and exploration company with projects in the United States and Saudi Arabia, announced an update to their joint venture with Ma’aden at the Future Minerals Forum. Using Ivanhoe’s Typhoon chargeability surveying system, the partnership has found three chargeability anomalies. Chargeability is a geophysical surveying technique and property of subsurface materials describing its ability to become polarized when a current is applied (related to conductivity, and useful for finding metals like copper). The southern anomaly lines up with Ma’aden drill results from the area in 2018, indicating 31.5 meters at 2.98% copper, while the western anomaly is an entirely new discovery. These initial surveys focused on the Al Amar belt, a subsection of the 48,500 square kilometers available to the JV that is highly prospective for volcanic massive sulfide deposits. Ivanhoe’s technology is supposedly better than others at finding chargeability anomalies at great depth, but the exact scope of these discoveries will only truly be known when the company can get drill rigs in the field to test it. Ivanhoe Electric also announced that it has drilled 25,000 meters across 37 holes at its Santa Cruz project in Arizona during the past four months, including a 66-meter section at 2.85% copper. The program included both infill and step-out drilling as the company works to expand the resource model to deliver a pre-feasibility study by the end of Q2 2025.

• American Eagle intersects 302 m at 1.09% CuEq. American Eagle is developing the NAK Cu-Au-Mo project in British Columbia and is partnered with Teck, who owns 19.9% of the company. In their last drill-hole of 2023 (NAK 23-17), American Eagle drilled their best results to date, including 302 m at 1.09% CuEq (0.4% Cu, 0.53 g/t Au, 1.2 g/t Ag, 431.4 ppm Mo) within 606 m of 0.74% Copper Eq beginning 98 m downhole. This hole was located 250 m west of any hole previously drilled, a significant step-out and opening up a new area of the deposit for further exploration. In 2024, the company’s focus is on another major drilling campaign (fully funded due to Teck’s investment) exploring targets around NAK 23-17 as well as untested targets to the northwest and northeast that are prospective based on their geophysical data.

Lithium

• Roadblock at SQM lithium operation, production halted. Last week, around 500 protesters blocked a road to the Atacama salt flats in northern Chile, a hub for lithium production with operations owned by SQM and Albemarle. While Albemarle was relatively unaffected, SQM was the target of the indignation of the local indigenous communities, who are upset they were not consulted prior to the sweeping agreement struck recently between SQM and Chilean state-owned company Codelco. The roadblock lasted several days and forced SQM to suspend operations for a short while until it was agreed that Chilean President Gabriel Boric would visit the area, though the timing of this visit is as yet unclear. SQM is resuming operations on Monday, January 15th.

• Azimut and SOQUEM drill 72.7m at 2.48% Li2O at Galinée. Galinée is a 50-50 joint venture between Azimut Exploration and SOQUEM located in the James Bay region of Quebec, an area highly prospective for lithium. The recent discovery is located at the northern part of the Galinée property, directly adjacent to the Adina property owned by Winsome Resources, which delivered a resource estimate in December 2023 of 59M tonnes of Li2O at 1.12%. The Azimut-SOQUEM JV also owns the Pikwa property along the Corvette trend, between major lithium discoveries made last year by Patriot Battery Metals. James Bay is the region to watch for lithium exploration in Canada, as discoveries like this one continue to prove out.

• EMP Metals releases PEA for Viewfield lithium brine project. The Viewfield brine project is located in Saskatchewan and plans to encompass production from wellbores, direct lithium extraction from the brine, and conversion to a battery-grade chemical. The PEA highlights a plan to extract 12,175 tonnes of lithium carbonate equivalent over a 23-year project life, resulting in an NPV of $1.49B and an IRR of 55%. Production will occur from seven target zones at an average concentration of 128 mg/L of Li. EMP Metals has partnered with Koch Technology Solutions as its partner for direct lithium extraction (DLE). Koch is partnering with several other companies to deploy its Li-Pro DLE technology, including Standard Lithium and Grounded Lithium. EMP Metals expects first production in Q1 2027.

• MinRes buys 10% of Kali Metals, spodumene discovered. Kali Metals is an Australian lithium explorer who debuted on the ASX last Monday. MinRes promptly acquired 9.97% of the company at an average price of A$0.43. The stock rocketed up to a peak of A$0.89 last week after announcing the discovery of spodumene in rock chip samples in several of the company’s properties in the Higginsville Lithium District in Western Australia. This area is home to Mount Marion, a major lithium mine jointly owned by Ganfeng and MinRes. Following the 250% increase just days after the public listing, Kali’s stock has crashed down to earth and is now at A$0.52 at the time of writing.

• Promising ramp-up at Caucharí-Olaroz. Lithium Argentina released production results for Caucharí-Olaroz last week, revealing that the brine project exceeded production guidance of 5000 tonnes for 2023, producing approximately 6000 tonnes of lithium carbonate. Caucharí-Olaroz is in the midst of a ramp-up, with the lithium carbonate plant operating at just 50% capacity. Lithium Argentina is focused on achieving nameplate capacity in 2024. Caucharí-Olaroz is a joint venture with Ganfeng and Argentinian energy company JEMSE, and it is the largest greenfield brine project to come online in the last 20 years.

Nickel

• Vale Base Metals wants to merge Sudbury nickel operations with Glencore. Vale Base Metals operates one of the largest integrated mining complexes in the world in Sudbury, Ontario, containing five mines, a mill, a smelter, nearly 4000 employees, and producing nickel, copper, cobalt, platinum group metals, gold, and silver. Glencore also has significant operations in the region, with their Integrated Nickel Operations including the Nickel Rim South mine (whose mine life ends this year) and the Onaping Depth project, an extension to the Craig mine that will extend the copper-nickel operations down to nearly 1.5 kilometers. During an interview with Reuters, Vale Base Metals Chairman Mark Cutifani discussed that finding a deal to merge their Sudbury operations with Glencore would be a priority in 2024. Expanding the already massive mining complex would create further operational efficiencies and cut costs for the company.

• Samsung SDI to invest $18.5M for 8.7% of Canada Nickel. In addition to the equity stake, Samsung SDI, the battery manufacturer partly owned by Samsung Electronics, also has the right to purchase a 10% interest in the Crawford nickel project for $100.5M once a decision to proceed with the construction of the mine is final. Exercising this option will grant Samsung SDI access to 10% of the offtake from Crawford for the life of the mine, as well as an additional 20% offtake for 15 years. Located near Timmins, Ontario, Crawford is one of the largest nickel projects in the world, with proven and probable reserves of 3.8 million tonnes of contained nickel outlined in last November’s feasibility study. Just a week prior to the Samsung SDI deal, Agnico Eagle purchased a 12% stake (15.6% if warrants exercise) in Canada Nickel for $C34.7M.

Rare Earths

• Defense Metals to ship mixed rare earth carbonate sample to Ucore. Defense Metals, a member of Discovery Group, is developing the Wicheeda rare earths project in British Columbia with a measured and indicated resource of 34.2M tonnes of rare earth oxide at 2.02% grade. If built, Wicheeda could produce 20,000 tonnes per annum of rare earth oxide, putting it at a similar scale to Lynas’s Mt Weld mine in Australia, one of only a handful of rare earth mines in the western world. The release of a pre-feasibility study is targeted for the first half of this year. As part of the feasibility studies, Defense Metals is investigating downstream processing of its rare earth material, including last week’s announcement of its MoU with Ucore. Ucore has developed RapidSX, a modular rare earth separation technology being piloted at the company’s demonstration facility in Kingston, ON. Defense Metals is sending Ucore a mixed rare earth carbonate sample produced by prior flotation pilot plant test work on a 26-tonne bulk sample extracted from Wicheeda last year. A Defense-Ucore alliance could result in the production of separated rare earths fully independent of China, a feat MP Materials only recently accomplished.

Graphite

• Graphite One summer drill results indicate high-grade mineralization. Graphite One is developing the Graphite Creek project in Alaska with the aim to mine, process, and manufacture coated spherical graphite required for lithium-ion battery anodes. The company released a preliminary feasibility study in October 2022 detailing a $1.9B pre-tax NPV for the project and a 26-year mine life. As part of work towards a feasibility study (to be released Q4 this year), Graphite One’s summer 2023 drill program results were released, including a highlight of 9.40 m of 13.87% graphite just 10.36 m below the surface. All 52 holes encountered mineralization, further confirming the scale of what the USGS named last year “the largest known flake graphite resource in the USA.”

Uranium

• Kazatomprom expects production shortfall, price breaks $100. Kazatomprom, Kazakhstan’s state uranium company, is the largest producer of uranium in the world, responsible for more than a third of uranium mined in 2022. The company announced on Friday that they are likely to miss their production targets for the next two years due to shortages in sulfuric acid (used to leach uranium from ore) and construction delays at new deposits. With 2022 uranium production at only 74% of global demand, and with countries all over the world rapidly expanding their nuclear power usage, any additional shortage can contribute to rapid upward price movement. Though established players like Cameco and Energy Fuels are scrambling to restart mines, and new ones like NexGen are bringing new deposits into production, anything in the mining industry takes time, so the uranium price is going to remain high and volatile while these shortages persist.

• DoE to invest $500M for high-assay low-enriched uranium (HALEU). HALEU is uranium enriched to 20%, historically used for medical devices but is now emerging as the fuel of choice for many advanced small modular reactors (SMRs) coming to the market over the next decade. Conventional nuclear reactors use uranium enriched to just 5%. $500M was allocated in the Inflation Reduction Act to source HALEU domestically, as the United States currently produces none. In fact, TENEX, a part of Russian state-owned Rosatom, is the sole producer of HALEU at a commercial scale. One company, Centrus Energy, is currently producing HALEU at demonstration-scale and could increase production if needed. Because enriched uranium is heavily regulated, and every producer in the US is required to get a license (through a rigorous process), the federal government needs to invest enough money to demonstrate to companies that there is a market and political support for their HALEU production.

• Jiangxi in talks with First Quantum over stakes in Zambian mines. First Quantum Minerals (FQM), the Canadian gold and copper producer who has been in the news of late over their Cobre Panama project, is reportedly in discussions with Chinese copper producer Jiangxi over the sale of its (FQM’s) Zambian copper assets. First Quantum operates two mines in northern Zambia, Kansanshi and Sentinel, producing 159,000 and 241,000 tonnes of copper (respectively) in 2022, as well as 101,000 oz of gold at Kansanshi. As First Quantum has substantial debt payments due in the next few years, as well as a tumultuous situation to deal with in Panama, the company is in need of cash. Though the nature of the potential deal with Jiangxi is unclear, it could result in the partial sale of both Zambian assets or the full divestiture of one of the mines. Bloomberg also reported that First Quantum has talked to Barrick in the last few months over a potential acquisition of the company. Mark Bristow, CEO of Barrick, has for years talked about Barrick’s desire to increase its copper production, as copper producers receive greater investor interest due to the metal’s criticality and significance to the energy transition, i.e., Barrick would trade at a higher multiple with more copper production. A First Quantum acquisition would provide that boost. Barrick also operates the Lumwana copper mine in Zambia, located between First Quantum’s Kansanshi and Sentinel mines, so synergies in the country would be an attractive part of the acquisition. Additionally, Barrick has experience developing mines and negotiating with governments in unstable jurisdictions, for example, the Porgera gold mine in Papua New Guinea and the North Mara gold mine in Tanzania. Regardless of the outcome, without revenues from Cobre Panama, First Quantum is going to need to find a way to generate cash.

  

  

• Teck forms joint ventures in South America. Following the acquisition of 77% of its coal subsidiary Elk Valley Resources by Glencore last year, Teck announced last week the sale of its remaining stake in the coal business, with Nippon Steel acquiring 20% and POSCO increasing its ownership to 3%. Now fully divested from coal, Canada’s Teck Resources has renewed its focus on copper, as demonstrated by two joint ventures this past week with exploration companies in South America. AbraSilver Resources is exploring the La Coipita copper-gold project in Argentina. Teck’s agreement with AbraSilver grants Teck the option to acquire an 80% interest in La Coipita by funding $20M of exploration activities over 5 years, a total of $3M of cash payments and an equity placement, and $6.3M in cash payments to project vendors. Condor Resources is exploring the Cobreorco copper-gold project in Peru. Condor’s agreement with Teck gives them the right to earn a 55% interest in the Cobreorco project by funding $4M in exploration expenditures and making $500K of cash payments. Teck can earn another 20% (75% total) by committing an additional $6M in exploration expenses and $600,000 of cash payments. Teck has a history of mining in South America, with major stakes in the Antamina mine in Peru, as well as the Quebrada Blanca and Carmen de Andacollo mines in Chile.

• Ivanhoe’s first shipments through Lobito Corridor complete transit. The Lobito Atlantic Rail Corridor is a major new transportation route connecting the city of Kolwezi, located near many significant copper and cobalt mines in the Democratic Republic of the Congo, to the Atlantic port of Lobito in Angola. The rail project was developed with the backing of the US and EU (in part to counter China’s Belt and Road Initiative), as well as support from major mining and commodities companies like Ivanhoe and Trafigura. Ivanhoe Mines’s first shipment of copper concentrate (1100 tonnes) arrived at Lobito 8 days after it was set off from Kolwezi, just 5 miles from the Kamoa-Kakula Copper Complex. The route to export copper from Kamoa-Kakula was previously a 20 to 25-day trip by truck to various ports around Sub-Saharan Africa. Ivanhoe plans to build a rail spur directly to the Kamoa-Kakula mine, eliminating the need to ship copper concentrate by truck any distance. Additionally, the Lobito Corridor rail line runs directly through the Ivanhoe-owned Western Forelands exploration project, a promising area of discovery for an additional copper mine.

Cobalt

• CMOC is now the world’s largest cobalt producer. CMOC (China Molybdenum Company) released 2023 production data last week, reporting cobalt production of 55,526 tonnes, a massive increase of 174% compared to last year. Most of this increase is attributable to the Kisanfu mine, which was commissioned in Q2 of 2023. Kisanfu is majority-owned by CMOC (71.25%), with battery maker CATL (23.75%) and the DRC government (5%) comprising the remainder. CMOC invested $1.8B in phase one construction at the mine following its purchase in 2020. The rest of the increased cobalt output is attributable to CMOC’s other DRC asset, Tenke-Fungurume. The massive increase in cobalt supply by CMOC, as well as supply associated with nickel mining in Indonesia, has caused the cobalt price to fall substantially over the last year. With Glencore guidance suggesting an output of 38,000 tonnes of cobalt in 2023, CMOC produced the most of the battery metal last year.

  

Rare Earths

• Energy Fuels has the option to develop the Donald rare earth project with Astron. Energy Fuels recently signed a nonbinding MoU with Astron over the joint development of the Donald rare earths and minerals sands project in Victoria, Australia. Mineral sands are a type of mineral deposit often found near the surface, containing heavy minerals of economic value such as zircon, ilmenite, rutile, leucoxene, and monazite. These minerals have historically been important sources of zirconium and titanium, but now the focus of these projects is the rare earth elements contained in the monazite. Though it is relatively simple to extract valuable minerals due to the ability to separate the heavy mineral sands (containing the desired minerals) from the rest by density, these mineral sands often contain trace amounts of thorium and uranium, so the concentrates produced require processing to remove the radioactivity. The agreement gives Energy Fuels the right to invest A$180M in the project and issue $17.5M of shares to Astron in exchange for 49% of the venture and 100% of the rare earth concentrate offtake. Energy Fuels will process this concentrate at its White Mesa Mill in Utah, which is the only facility of its kind in the US able to remove radioactivity from these rare earths and convert them to rare earth oxides (MP Material’s facility does not need to remove radiation). The company has other sources of rare earth concentrate from minerals sands, including an offtake agreement with Chemours (from their production in southeast Georgia) and Energy Fuels’s wholly-owned Bahia Project in Brazil.

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Copper

• Antofagasta approves second concentrator at Centinela mine. Centinela produced 247,500 tonnes of copper in 2022, and the expansion will add an additional 144,000 tpa (as well as 130,000 oz/yr gold and 35000 tpa of molybdenum). The mine has a 36-year mine life with ore reserves of approximately two billion tonnes. The new concentrator is expected to cost $4.4B, including the concentrator plant, a new tailings facility, new autonomous mining equipment, an expansion to the Esperanza Sur pit, and additional infrastructure. Construction is expected to take 3 years, with commissioning expected in 2027. The expansion will move Centinela into the top 15 copper mines globally as Antofagasta progresses to hit its production target of 900,000 tpa of copper production (from 646,200 tonnes in 2022).

  

• Antofagasta acquires 19% stake in Buenaventura. Buenaventura is the largest publicly traded precious and base metals miner in Peru, operating 7 mines and 6 exploration projects across the country and holding a nearly 20% interest in Cerro Verde, the 6th largest copper mine in the world operated by Freeport-McMoRan. The company produced nearly 116,000 tonnes of copper in 2022 (including its stake in Cerro Verde), with just over 29,000 tonnes from Buenaventura operations, as well as 206,000 oz of gold. Antofagasta operates four mines in Chile, and their only investment outside of Chile is the Twin Metals copper-nickel-cobalt-PGEs project in Minnesota. The new ownership stake in Buenaventura reflects Antofagasta’s ambition to invest in exploration across the Americas.

• Argentine mining export taxes are unchanged; Milei looks to cut red tape. Newly-elected Argentine President Javier Milei announced a sweeping omnibus bill last week cutting regulations, bureaucracy, and tariffs across Argentina’s economy. Absent from these cuts, though, were changes to export duties on the mining and hydrocarbons sectors — the only sectors to remain unchanged. Argentina’s mineral export tariffs vary by commodity from 0 to 8% (4.5% for lithium). Many analysts are still bullish on Argentina’s mining industry due to a stated commitment by the mining ministry to quintuple lithium production to 250,000 tpa as well as streamline the permitting process for exploration and production.

• NewRange wins minor legal permitting battle, long way to go. NewRange Copper Nickel is a 50-50 joint venture between Glencore subsidiary PolyMet and Teck developing the NorthMet and Mesaba deposits in the Duluth Complex of northern Minnesota. The Minnesota Court of Appeals recently affirmed the granting of an air emissions permit for the NorthMet project after the permit was challenged by a coalition including the Minnesota Center for Environmental Advocacy, Friends of the Boundary Waters Wilderness, and the Sierra Club. The permit was initially applied for in 2016, granted in 2018, and has been in a legal quagmire since. The coalition’s contention was that Glencore and Teck failed to properly disclose potential expansion plans for the mine when applying for the initial permit, while NewRange contends that they will apply for necessary permits when expansion plans are finalized. Though the air emissions permit now seems to be granted, NewRange faces myriad other permitting challenges. In 2018, the company was also granted a water quality permit, a federal wetlands permit, and an overall “permit to mine.” All three of these have since been revoked and are being disputed. NewRange (formerly PolyMet) is a classic example of permits being granted in the United States and then publicly challenged, with disputes lasting (now) half a decade or more. The lack of regulatory clarity and the financial burden this puts on the companies are part of why the United States is not considered a competitive mining jurisdiction.

• IRH to invest $1.1B in Mopani Copper Mines. International Resource Holdings (IRH) is a natural resources-focused subsidiary of International Holding Company (IHC), an Abu Dhabi-based conglomerate with a nearly US$240B market cap. IHC has been chaired by Sheikh Tahnoon bin Zayed al-Nahyan, brother of UAE president Sheikh Mohammed bin Zayed al-Nahyan, since 2020, and he controls Royal Group, which owns 62% of IHC. Mopani has been producing copper in northern Zambia (near the DRC border) since the 1930s, and the company assets include several underground mines, concentrators, a smelter and a refinery. Mopani was sold by Glencore (and minority owner First Quantum) to Zambia Consolidated Copper Mines Investments Holdings (ZCCM-IH), an entity controlled by the Zambian government, in 2021 for $1.5B funded by debt. The deal announced recently has IRH buying 51% of Mopani from ZCCM-IH for $1.1B, which will be used to pay down the debt owed to Glencore, with $300M of it used to fund mine expansion. Mopani produced 72,694 tonnes of copper in 2022 and, with expansion plans, aims to produce 200,000 tpa by 2026.

  

Lithium

• SQM and Hancock offer to buy Azure for A$1.7B. Chilean chemicals giant SQM and Australian miner Gina Rinehart’s Hancock Prospecting offered a joint bid of A$3.70 per share for Azure Minerals, an Australian lithium exploration company. SQM and Hancock already own a combined 37.8% of Azure shares (~19% each) and have received the approval of major shareholders Creasy Group (12.8%) and Delphi Group (10.2%) for the proposed scheme of arrangement. Separate from SQM and Hancock, Australian mining billionaire Chris Ellison’s Mineral Resources has been accumulating shares in Azure over the past few months up to a current level of 13.6%, presumably with the intention of taking part in Azure’s projects (potentially offering a bid). The proposed scheme throws a wrench in these plans, as SQM and Hancock offer to buy out MinRes and other shareholders. Since SQM and Hancock cannot vote in the scheme, MinRes’s stake represents ~22% of the votes, and 75% is required for the scheme to pass (with absent voters, this may equal a blocking stake). In the event MinRes declines the offer, SQM and Hancock have also offered an off-market takeover bid at A$3.65 per share. MinRes has not yet indicated if they are willing to accept the scheme, and the dramatic Australian lithium M&A saga will continue through the new year.

• Allkem shareholders approve $10.6B merger with Livent. In May 2023, lithium producers Allkem (Australian) and Livent (American) proposed a merger of equals, valuing the combined entity at $10.6B. The final stage of this process has now concluded, with 72% of Allkem shareholders (90% of votes cast) voting to approve the scheme. The combined entity, now known as Arcadium Lithium, will be the third-largest lithium producer in the world (after SQM and Albemarle). The deal is expected to close on January 4, and the companies will begin operations as a combined entity.

• Codelco and SQM reach an agreement on a government-controlled partnership. Codelco is the Chilean state-controlled mining company that primarily mines copper, but earlier this year, indicated an appetite for involvement in the country’s lithium sector. The agreement outlines SQM’s operations on the Salar de Atacama from 2025 to 2060. The agreement will create a new company (NewCo) starting in 2025, with Codelco owning 50% plus one share and SQM owning 50% minus one share. SQM will contribute all their lithium production and refining assets in Salar de Atacama, their knowledge, employees, and distribution network. Codelco will contribute their mining lease on the salar (brine pond) from 2031 to 2060 (SQM’s lease expires in 2030) and a significant increase in the company’s production quota beginning in 2025. SQM will maintain operational control of NewCo and the majority of the profits through 2030, when Codelco gets to nominate additional directors to the board and an equal split of economic benefits commence. Including the lease agreements and taxes, nearly 70% of the operational profits of the lithium operations accrue to the Chilean state.

  

  

Cobalt

• US Strategic Metals announces $230M financing from Appian. US Strategic Metals is developing a mineral processing and recycling plant in Fredericktown, Missouri to produce battery-grade nickel and cobalt, as well as precursor cathode active material, a key component of batteries not currently produced at scale in the US. The company, formerly known as Missouri Cobalt, is also developing a cobalt-nickel mine. The capital will fund the development of a mine at this former superfund site. USSM has raised nearly $500M in funding to date, and they signed a marketing agreement with Glencore last year. The completed phase-one plant will be able to handle 240 tons of feedstock per day, which could include “recycled lithium-ion batteries, battery production scrap, mixed metal concentrate, and traditional ore,” making it the only fully-permitted facility of its kind in the US.

Nickel

• Agnico Eagle invests C$23.1M in Canada Nickel. Agnico Eagle is a major Canadian gold and silver producer with operating mines in Canada, Australia, Finland, and Mexico. Following fellow gold majors Barrick and Newmont getting involved in copper mining, Agnico Eagle is joining the critical minerals space by investing in Canada Nickel. Canada Nickel is exploring at the Crawford project, which contains multiple properties in the Timmins Nickel District in Ontario. For each of the 19,600,000 shares Agnico Eagle purchased for C$1.18, they also receive a 0.35 of a warrant with a strike price of C$1.77. If all warrants are exercised, Agnico Eagle’s ownership stake will rise to 15.6%, with the right to maintain pro rata in future equity raisings.

  

Rare Earths

• Serra Verde receives environmental approval for Brazil mine. Serra Verde is developing the Pela Ema rare earths deposit in central Brazil. Last week, the company received the environmental operating license from the Goiás state government, the final approval necessary to commence production at Phase I of the project. Pela Ema phase one will produce approximately 5000 tpa of rare earth oxides (~1.6% global production) over a 25-year mine life, with a potential Phase II expansion being investigated by the company. Production should start early next year. The company has offtake agreements secured for most of its planned production. Ex-China rare earth processing capacity is still nascent, so these agreements will likely result in the Brazilian REEs being shipped to China. The deposit is ionic clay, so it is located near the surface and can be mined without hazardous chemicals, resulting in less environmental impact than larger conventional projects.

  

• China to ban export of rare earths technology. The People’s Republic of China’s Ministry of Commerce released the Catalog of China's Export Prohibited and Restricted Technologies, a list of export restrictions of technology deemed critical to the national security of the PRC. This list is continuously updated, most recently in 2020, and a draft of what was released last week was initially announced on 30 December 2022 (so the list really should not come as a surprise). The updated list follows tightened export controls of gallium, germanium, graphite, semiconductor technology, and many other high-tech items over the last year and includes the following rare earths-related items:

  • Prohibited

    1. Rare earth extraction and separation technology

    2. Production technology of rare earth metals and alloy materials

    3. Preparation technology of samarium cobalt, neodymium iron boron, and cerium magnets

    4. Preparation technology of rare earth calcium oxyborate

  • Restricted

    1. Ionic rare earth mine leaching process

    2. Mining of rare earths, mineral processing, and smelting technology

    3. Synthesis process and formula of rare earth extractants

    4. Rare earth modification and addition technology of metal materials

  Prohibited technologies may not be exported, while restricted items need to be licensed. It seems that China wants to keep magnet manufacturing technology close to home while allowing their state-affiliated companies to extract rare earths outside China, predominantly in Southeast Asia (Myanmar, Vietnam, Thailand). A translated version of the document can be found here.

Uranium

• Energy Fuels to restart five mines in response to surging prices. Energy Fuels is a leading US uranium producer also developing rare earths refining capabilities. The company has commenced production at the Pinyon Plain, La Sal and Pandora mines, ramping up production by the end of 2024, to be producing at a run rate of 1.1 to 1.4 million pounds per year. This uranium will be stored, to be processed at the company’s White Mesa Mill in Utah in 2025 and later. The Whirlwind and Nichols Ranch mines are being prepared to commence production later this year, as the company expects to ramp total production to 2 million pounds by the end of 2025, assuming strong market conditions and government support continue.

• Bannerman receives final permits for Etango project. Bannerman Energy, an Australian uranium development company, received the permit to mine at their Etango project in Namibia in mid-December 2023 and is now commencing construction. Etango’s definitive feasibility study, completed in December 2022, indicates 3.5M lbs/year uranium concentrate (U3O8) production at a cash OPEX of US$35/lb (excluding royalties). Etango will be an open pit mine using heap leaching to extract the uranium, and production should begin in 2026. Namibia is the third-largest producer of uranium in the world, with two existing mines, Rossing and Husab, controlled by Chinese investors. Australian Paladin Energy aims to restart its Langer Heinrich mine early this year.

  

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Technology

• Lifezone Metals announces recycling joint venture with Glencore. Lifezone Metals acquired the hydromet technology in July and is commercializing it to recover platinum, palladium, and rhodium (collectively known as platinum group metals, PGMs) from used catalytic converters. Phase 1 testing is underway at a lab in Perth, and is expected to conclude in the first half of 2024, with a feasibility study to follow outlining recoveries and project economics. Glencore will be providing the capital (US$15-20M) for the phase 2 commercial-scale recycling facility located in the United States and will be the sole offtaker and marketer of the refined PGMs. Lifezone is also advancing the Kabanga nickel project in Tanzania, which will use similar hydrometallurgical technology; a definitive feasibility study is underway.

• Veracio and Granite partner to transform drillhole data. Veracio is a wholly-owned subsidiary of Boart Longyear, spun out of the company’s main business (drill rig manufacturing and services) in October. The newly independent entity is a technology company specializing in core scanning (XRF and high-res photos), logging features of core samples, analytics, and drill rig monitoring. Granite subsidiary International Directional Services (IDS) specializes in data collection from drill holes. The latest partnership will allow IDS to leverage Veracio’s drill rig monitoring technology to improve the efficiency and accuracy of drill rigs, as well as apply Veracio’s AI analysis tools. This combination of hardware and software expertise will undoubtedly improve efficiency in the exploration drilling process.

• Glencore deploys autonomous haul trucks at Lomas Bayas mine in Chile. This deployment is through the Lomas Lab, a technology creation initiative that seeks to test the automation of production processes at Glencore’s Lomas Bayas mine in northern Chile before scaling the technology to the company’s other operations worldwide. The pilot utilizes four Komatsu 930E-5 extraction trucks running the Komatsu FrontRunner autonomous system operating in a separate area from the rest of the mine. Glencore expects a decrease in fuel consumption of 4%, reduced safety incidents, and longer hours of operation through greater utilization of the autonomous fleet. Autonomous blasthole drills used in mining were deployed at the site starting mid-last year using technology provided by FLANDERS on two Caterpillar drill rigs.

• Epiroc acquires drill parts and excavator attachments businesses. Epiroc is one of the largest manufacturers of mining equipment in the world, producing drill rigs, excavation equipment, loaders, trucks, and much more. They made two acquisitions this week, the first (and smaller) being Weco Proprietary Limited, a leading manufacturer of precision-engineered rock drilling parts primarily serving underground mines in South Africa. They also acquired STANLEY Infrastructure, a manufacturer of excavator attachments and handheld hydraulic tools, from Stanley Black & Decker for US$760M.

Copper

• Copper price sees biggest day since January. The 3-month copper price on the LME jumped 2.8% on Thursday amidst expectations that the Fed would cut interest rates next year. Copper has seen a steady climb over the last few months from around US$3.60/lb to Friday’s closing price of $3.88 (copper continuous contract on NYMEX). Supply constraints are adding upward pressure to the price, with the Panamanian government shutting down First Quantum’s Cobre Panama mine recently, as well as Anglo American lowering copper production guidance for next year by 200,000 tonnes. Anglo American shares plunged nearly 20% following this news last week.

  

• Ivanhoe Mines raises C$500M, to quadruple exploration budget in 2024. The company announced a mega private placement to fund exploration, working capital, and general corporate purposes. They are also increasing their exploration budget fourfold to $90M. Most of this will be deployed at the Western Foreland exploration site adjacent to the producing Kamoa-Kakula copper complex, particularly around the Kitoko find announced last month, which contained two mineralized zones grading as high as 11.64% over 5.19 meters in one hole. Ivanhoe geologists predict that the mineralization at Western Forelands extends over a greater area than at other projects in the DRC.

  

• Workers at Antofagasta mine approve contract, avert strike. The union at Antofagasta’s Centinela mine in northern Chile voted to approve a new labor contract, following a threat by the union leader earlier in the week that they would go on strike. The union rejected a previous offer from Antofagasta last month over working conditions and production-related bonuses. The mine produced 247,600 tonnes of copper last year, approximately 1% of global supply.

Lithium

• MinRes ups stake in Delta Lithium to 24.27%. The company recently raised A$70M to fund drilling at the Mt Ida and Yinnetharra lithium projects, including participation from MinRes. MinRes has been accumulating shares since it revealed itself in August as the mystery buyer of 14% of the shares on the open market. This was followed by the appointment of MinRes Managing Director Chris Ellison as Non-Executive Chairman of the Delta board. This is part of a wave of consolidation in Western Australian lithium, with producing companies acquiring stakes in exploration and development projects. In the last few months, MinRes has also accumulated 13.56% of Azure Minerals and 19.85% of Wildcat Resources.

• Livent acquires minority stake in EnergySource Minerals. EnergySource subsidiary ILiAD Technologies is developing a direct lithium extraction process that extracts lithium from brines. Their technology uses 9X less water than conventional salars (brine ponds) and 3X less water than hard rock mining. The California-based company is working on deploying its technology at the ATLiS project in the Salton Sea in California. The new deal with Livent will see ILiAD’s technology platform deployed at Livent’s Argentinian brine asset, Salar del Muerto, significantly reducing Livent’s energy and water consumption.

• Volt Lithium releases PEA for Rainbow Lake oil field brines project. The project is located in Alberta, and the preliminary economic assessment details the ramp-up of lithium hydroxide monohydrate production from 1000 tpa to 23,000 tpa in three phases over a 19-year project life. The company finished a pilot of its proprietary direct lithium extraction (DLE) technology earlier this year, extracting 90% of the lithium in brines at a concentration of 34 mg/L, and 97% Li recoveries from 120 mg/L. Volt has a strategic partnership with Cabot Energy, an Alberta oil and gas company, in which Volt can utilize existing equipment and wells with lithium-infused brine. The company anticipates production to begin in the second half of next year.

Rare Earths

• Aclara delivers maiden mineral resource estimate at Carina project in Brazil. The company announced a 168 Mt inferred resource grading 1510 ppm total rare earth oxides. Carina is an ionic clay rare earth deposit, formed where rare earth mineral particles weather from the parent rock and adsorb onto clay particles, as opposed to hard rock deposits formed by solidification of rare earth-rich magma into carbonatite rock. Ionic clay rare earth mining is increasingly common in China, now comprising ~10% of Chinese rare earth mines, but is virtually absent outside of China and Myanmar. While lower grade, ionic clay deposits tend to be located near the surface, so mining it is cheaper and less disruptive to the environment. Ionic clay deposits contain a greater proportion than carbonatite deposits of dysprosium and terbium, two critical rare earth metals used to improve the magnetic properties of NdFeB magnets (the kind used in electric vehicle motors). Aclara is moving quickly, with plans to test a pilot plant to produce 20 kg of mixed rare earth carbonate and the release of a preliminary economic assessment in Q1 of next year, followed by further exploration drilling on-site in Q2.

Uranium

• US House passes bill banning Russian uranium imports. The bill passed on Monday does include exemptions for purchases made in the national interest or if an alternative source cannot be found to power a nuclear reactor. The vote still needs to pass through the Senate, and it is unclear if that will occur by the end of the year. If enacted, uranium prices (particularly low-enriched uranium used in power plants) will likely spike. Though many North American uranium projects are under development, these will take years to come online and fill the domestic supply gap. Russia supplied 12% of the uranium used in the US in 2022, with US companies paying the state-owned company Rosatom nearly US$1B last year. With sanctions across most Russian exports, certain metals—notably uranium and titanium—have been an exception. The UK also expanded its sanctions against Russia during the week to include several dozen metals, including copper, nickel, and aluminum (but not uranium).

• Fission Uranium releases 2024 development program for the PLS project in Saskatchewan. The PLS project is in the Athabasca Basin, known as one of the highest-grade uranium regions in the world, home to major mines like Cameco’s Cigar Lake and McArthur River. The feasibility study released in January estimated a production cost of C$13.02/lb U3O8 (US$9.70) against the current market price of around US$85. Construction is estimated to take 3 years with an initial capital cost of C$1.15B for a shallow underground operation, and a mine life of 10 years with several areas of future expansion. The announcement shows Fission Uranium’s plan to submit the draft Environmental Impact Statement in Q1, advance licensing with the Canadian Nuclear Safety Commission in Q2, and finalize engineering plans for the mine, mill, and related infrastructure next year. The company plans to commence site prep and construction in 2026 and commission the mine in 2029.

• NexGen to raise C$500M to develop the Rook I project. The Rook I project will be an underground mine located in the southwest part of the Athabasca Basin. Permitting is in the final stages, with the company awaiting provincial construction approval and a hearing with the Canadian Nuclear Safety Commission. With provincial environmental approval this past November, Rook I is the most advanced greenfield uranium project in Saskatchewan in the last 20 years. The project’s feasibility study estimates C$1.3B of capex to construct the initial mine, with opex of C$7.58/lb U3O8, one of the lowest production costs in the uranium industry. The at-the-market equity offering will fund 2024 goals, including the completion of earthworks, front-end engineering and design for the mine and mill, and a start to construction in the next few years.

  

• Boss Energy buys 30% of Alta Mesa from enCore Energy for US$60M. enCore acquired Alta Mesa from Energy Fuels in February, and the in situ recovery project located in Texas is now fully licensed and expected to commence production in 2024. In situ recovery is a method of uranium extraction used primarily in Kazakhstan, where fluids are injected underground to dissolve the uranium, and then the fluid is pumped up and processed. The company officially became a uranium producer less than a month ago with the recommissioning of the Rosita in situ recovery processing plant in Texas. enCore will be a major player in domestic US uranium production in the coming years, with expected 2026 production of 3.6M lbs/U3O8 and projects in Texas, South Dakota, Wyoming, and New Mexico. Boss Energy is an Australian company developing the Honeymoon uranium ISR project in South Australia, where production is expected to commence in H1 next year. They recently announced the completion of an A$205M placement which will fund the restarts of Alta Mesa and Honeymoon and other exploration activities.

  

Palladium

• Price rallies nearly 20% on sanction fears. Last week, the UK deployed sanctions across several dozen Russian metals, but not palladium. However, on fears of potential disruptions to palladium supply (of which Russia supplied 42% in 2022), the price has rallied 16% since Thursday’s announcement and 26% in the last week to US$1185/oz (at the time of writing). The metal is still down 34% this year and nearly 60% since the price approached US$3000 just after Russia’s invasion of Ukraine in February 2022. Primary uses are in catalytic converters in automobiles and as industrial catalysts, though demand for the metal is expected to grow slower than in the past with the switch to electric vehicles that don’t require it. With the surge of palladium prices in 2021 and 2022, some automakers switched to the cheaper platinum in their catalytic converters (now US$947.70/oz).

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Albemarle earnings, DLE play, and investment in Patriot

Albemarle reported its Q2 earnings last week, with sales growth of 60% to $2.4B and net income growth of 60% to $650MM. Albemarle is the world’s top producer of lithium chemicals, operating mines and brine ponds in the US, Australia, and Chile. The company attributes the drastic increase in sales to the bounceback in lithium prices over the last six months, resulting in 2023 prices being significantly higher than in 2022. Though they reported stellar earnings, the company’s stock has been down since last week, following news that they had reached a $218.5MM settlement to resolve possible violations of the US Foreign Corrupt Practices Act. The settlement would resolve the company’s voluntary disclosure in 2018 following an internal investigation that revealed improper payments made by representatives of its refining solutions business. Albemarle also disclosed the actions to Dutch authorities, but the Dutch took no action against the company.

In the past week, Albemarle also announced two primary potential sources of growth for the company, including an $83MM investment for 5% of Patriot Battery Metals, a Canadian developer with the Corvette lithium project in James Bay, Quebec. While a significant source of supply, Albemarle also entered a non-binding agreement with Patriot to study the feasibility of a downstream lithium hydroxide plant integrated with the Corvette project. Additionally, Albemarle is building a facility at its Magnolia site in Arkansas to experiment with direct lithium extraction (DLE) technology. The company currently processes brines at Magnolia to produce specialty bromine chemicals. If successful, Albemarle would bolt this process onto the bromine operations to make lithium from the brine as well. While DLE technology is being developed worldwide with backing from almost every automaker and lithium major as a more energy-efficient way of processing lithium, no one has deployed the technology beyond the pilot scale. Regardless of its DLE success, these represent a significant expansion in Albemarle’s North American presence.

Ghana approves mining framework, Atlantic Lithium optimistic

Ghana’s Lands and Natural Resources Minister Samuel Jinapor announced last week that the cabinet had approved a green minerals policy framework to manage lithium production in the country. The policy will clarify the previous announcement that companies cannot export lithium as raw ore. Though not law yet, the regulatory framework is expected to pass through parliament later this year. While Ghana does not currently produce lithium, its reserves are among the largest in Africa, and Australian exploration company Atlantic Lithium is the closest to production in the country. Atlantic is in talks with Ghana’s Minerals Commission and is confident they will get a mining lease later this year with the new legal framework in place. The company expects to commission the Ewoyaa lithium project in Ghana in 2025, producing a spodumene concentrate from the ore it mines (in compliance with the export regulations). Atlantic has a strong backer in US-based Piedmont Lithium, which owns nearly 10% of the company and has rights to 50% of the offtake at the project. Piedmont recently received its first shipment of spodumene concentrate from North American Lithium, a project in Quebec that Piedmont backed alongside Sayona Mining. This offtake will supply batteries manufactured by LG Chem. Mining investment is challenging in regions like Africa that often lack legal clarity. Still, the legislation passing through the Ghanaian government is a step in the right direction on this front.

Saudi Arabia buys 10% of Vale base metals unit

A joint venture between Saudi Arabia’s Public Investment Fund and state mining company Ma’aden purchased a 10% stake in Vale’s base metals business, valuing the business unit at $26B. The Saudi coalition beat out Japanese trading house Mitsui & Co and the Qatar Investment Authority in the final round of bidding. While known for oil, Saudi Arabia is increasingly involved in the mining industry, announcing a joint exploration venture between Ma’aden and Robert Friedland’s Ivanhoe Electric in January. Additionally, Barrick Gold, which already operates the Jabal Sayid copper mine as a 50-50 JV with Ma’aden, has strengthened partnerships to explore more regions of the Kingdom. As investor focus shifts away from oil and towards minerals needed for the energy transition, Saudi Arabia is engaging in a parallel strategy of investing in critical minerals abroad while developing mining and processing capabilities domestically. For Vale, the investment provides cash to deploy at existing and exploration-stage copper and nickel projects as the company works to grow its base metals division to match its iron ore production (second largest in the world). Vale’s stock trades below many peers with large base metals production due to the significance of Vale’s iron ore assets in Brazil and the shadow of the tragic Brumadinho dam collapse in 2019. A spin-off IPO of the base metals unit could potentially unlock billions of dollars of latent value.

US DoE adds copper to critical minerals list

The US Department of Energy released the 2023 Critical Materials Assessment, a report summarizing materials significant to the US economy, focusing on minerals required for clean energy technologies facing supply chain gaps. The assessment includes a list of “critical minerals,” which the Energy Act of 2020 defines as a “non-fuel mineral or mineral material essential to the economic or national security of the US and which has a supply chain vulnerable to disruption.” This designation as a critical mineral informs tax incentives under the Inflation Reduction Act and higher visibility in DC and beyond. The finalized list1 for 2023 includes copper, uranium, electrical steel, and silicon carbide for the first time, of which copper is the most significant addition. The graphic below shows the latest designations of minerals deemed critical, mapped based on supply risk and importance to energy production.

Of all the minerals required for the energy transition, copper has the most underinvestment to reach production levels needed for climate goals, with some estimates of more than $100B still required to be invested in copper mining and processing over the next decade, as the graphic below shows. Though copper is already mined in the US, critical mineral designation indicates that the DoE recognizes the sheer amount of capital that must flow into the commodity, so the DoE will do more to back these projects (as they have with lithium projects via the Loan Programs Office). The copper industry has been advocating for inclusion in the critical minerals list for years, and this past February, Senator Kyrsten Sinema wrote a letter alongside five Senate colleagues (from both parties) to US Interior Secretary Deb Haaland urging her to designate copper as a critical mineral.

Niger coup threatens EU uranium supply

Following a coup in Niger on the 26th of July, reports have come out that the country will halt exports of uranium to France. France, which derives nearly 70% of its electricity from nuclear power, buys around 16% of its uranium from Niger. The European Union is even more reliant on the country at 25% of EU uranium imports, making Niger its top supplier of uranium. France and the EU have several years of nuclear fuel reserves, with the European Commission saying they have “sufficient inventories of uranium to mitigate any short-term supply risks.” If the export ban does materialize, Europe will need to find new sources from which to import uranium. However, the World Nuclear Association estimates that global uranium production is not currently sufficient to meet demand by the international nuclear fission fleet, so finding an alternate source could be a problem and lead to higher uranium prices (illustrated in the graph below). However, the cost of uranium only accounts for around 6% of the cost2 of nuclear energy, so electricity prices are not likely to be affected. State-owned mining company Somair is responsible for uranium mining in Niger, while Somair is controlled (by a 63.4% stake) by French state-owned nuclear fuel producer Orano. Orano claims they will continue operating in Niger, but the political situation makes that claim look uncertain.

Russia’s involvement further complicates the mineral situation in the Sahel, with US Secretary of State Anthony Blinken stating that the private military contractor Wagner Group is taking advantage of the instability in Niger. Wagner currently operates in neighboring Mali, and the Russian cyber machine has spread anti-French and anti-American propaganda in surrounding countries. Though not appearing to be responsible for the coup, Russia has plenty to gain, notably more significant influence on Niger’s uranium endowment. Russia, Kazakhstan, and Uzbekistan account for 55% of uranium mining, while Russia alone contains 45% of uranium conversion and enrichment, the processes required to create fuel for nuclear power plants. The United States still imports approximately a third of the enriched uranium used by its utilities from Russian state-owned companies, paying them nearly $1B last year. While sanctions have severed ties between Russia and the West over the past two years, the US and Europe still rely on Russia for uranium (and several other metals, notably titanium used in the defense industry). A Niger-originated uranium supply shock could be a golden opportunity for the US and EU to take action to re-develop a domestic uranium mining, conversion, and enrichment supply chain to achieve energy independence using the cheapest and most-reliable carbon-free fuel. Otherwise, this supply could end up falling into Putin’s hands.

That’s all for this week. Thank you for reading, and if you have not yet, please consider subscribing.

- Teddy

Barrick Gold looking to get into copper

News came out last week that Barrick Gold recently approached First Quantum Minerals with an informal takeover offer at the market value of $17B, which First Quantum rejected. Barrick is the second-largest gold producer in the world, but its gold production is at the lowest level since 2000. CEO Mark Bristow has been public about wanting to get the company involved in copper mining in recent years, saying that copper is critical for mining companies to stay relevant today. Already acting on this, Barrick is investing nearly $7B in the Reko Diq copper-gold project in Pakistan which is slated to achieve first production in 2028. First Quantum on the other hand is primarily a copper company with significant assets in Panama and Zambia. The company recently resolved a dispute with the Panamanian government over royalty payments from its massive Cobre Panama mine. Shares of First Quantum jumped nearly 10% on the announcement, while Barrick dropped 2%. The world’s largest mining companies are all looking to increase exposure to copper, with BHP taking over OZ Minerals at the end of last year, Rio Tinto buying out the remainder of Turquoise Hill, and Glencore’s current bid for Teck Resources. With increased institutional and retail interest in energy transition metals like copper, copper companies have outperformed the overall mining industry in the public markets. Barrick is looking to get a piece of this action.

Codelco CEO steps down

The CEO of Chilean state-owned copper giant Codelco, André Sougarret, is stepping down from the job just one year after his appointment. Sougarret previously managed El Teniente, the world’s largest underground copper mine, and became well-known in 2010 as the leader of the rescue of the 33 miners trapped in the San José mine following a collapse. He later left the company for Antofagasta, followed by stints at Chilean state-owned ENAMI and Minera Fresnillo. Codelco is facing a number of problems, including production falling 11% in the past year to a 25-year low, despite investing billions of dollars to expand their aging mines. Additionally, the government has tapped Codelco to negotiate stakes in Albemarle and SQM’s lithium assets in Chile, as the government seeks to capture more value from the emerging lithium industry. While demand and production of lithium are growing substantially, extracting lithium from salars (brine ponds) is a vastly different process from copper mining, so Codelco does not have much expertise in this new venture. These two reasons are speculated to have contributed to Sougarret’s departure.

Mineral Resources lowers guidance on WA lithium assets

Iron ore and lithium miner Mineral Resources (MinRes) put out an announcement on Friday afternoon with some updates on their lithium operations. MinRes currently operates the Wodgina mine in the Pilbara in Western Australia as a 60-40 (MinRes minority) joint venture with Albemarle. The announcement reported that Wodgina production would be at the low end of guidance at around 150k dry metric tonnes (dmt) of SC6 (spodumene concentrate) equivalent. Additionally, they revised cost of production estimates at Wodgina upwards from A$850-900 to A$925-975 per tonne of SC6. MinRes also operates the Mt. Marion mine near Kalgoorlie in Western Australia as a 50-50 JV with Chinese lithium mining and processing company Ganfeng. MinRes had an agreement to sell its 50% of the spodumene (lithium-bearing mineral) concentrate produced at Mt. Marion to Ganfeng at a price based on the market price for lithium chemicals (LiOH, LiCO3) which was terminated on June 1. MinRes will now sell its offtake at the market price for spodumene concentrate. MinRes Managing Director Chris Ellison remarked in the update that “The early termination of the Mt Marion toll treatment agreement with Ganfeng is a sensible outcome given prevailing market prices, with our world-class lithium assets well-placed to capitalise on growing demand.” He seems to be alluding to the fact that prices for lithium chemicals have fallen much more than spodumene from their peak (though both have since bounced back slightly from their low a couple of months ago), so basing the price on spodumene will now result in a better price for MinRes. Finally, MinRes revised production guidance for Mt. Marion down from 160-180k dmt to 145-150k dmt of SC6. While the revised guidance and new pricing structure will have a material impact on the business, MinRes’s underlying EBITDA in the half year ending 31 December 2022 was A$939M with nearly 40% margins.

Namibia bans export of unprocessed critical minerals

On Monday, May 29, Namibian Mines and Energy Minister Tom Alweendo made comments implying that the government may take stakes in mining projects in the country. The following week, the news was clarified that this would only apply to future projects in the country, not existing operations. Last week, Minister Alweendo announced that the state would ban the export of unprocessed critical minerals, notably lithium. Namibia is a major exporter of diamonds and uranium, and more recently major discoveries of lithium have been found in the country. This announcement preempts the development of most of the lithium resources in the country. There are more than half a dozen junior mining companies with lithium exploration projects, and one currently producing mine owned by Andrada Mining, who produces a concentrate on-site so would most likely be exempt from the recent ban. Chinese companies are also involved in the country, notably, Xinfeng Investments, whose license to mine lithium was canceled a few months ago following local opposition to their planned mine and processing plant and controversy around their acquisition of the license in the first place (i.e. corruption). Namibia is not the only country to enact laws like this, with Zimbabwe and Indonesia being some of the notable examples. While Indonesia saw a tenfold increase in nickel production following its ban, Zimbabwe’s local miners have been forced to stockpile their ore while giant Chinese corporations with the capex to support local processing plants are able to export their product. These sorts of bans are gaining steam around the developing world, but so far have seen mixed results.

Paul Singer to battle LME over nickel trading halt

On March 8, 2022, nickel prices skyrocketed and the London Metal Exchange halted trading, going so far as to roll back trades from earlier in the day. The LME’s actions have been widely condemned and is facing a probe by the UK’s Financial Conduct Authority. Traders from all over the world were caught up in the mess, notably Paul Singer’s hedge fund Elliott Investment Management. While the hedge fund has not disclosed details of its nickel position, a portfolio manager at the firm and legal filings indicated that it had built up a substantial position in nickel call options. As nickel prices more than doubled on the morning of March 8, Elliott was selling its position, but those trades were later reversed, and the firm ended up with far less of a gain than it would have if the market had operated without interference. Lawyers on behalf of Elliott are heading to the High Court in London to argue their case against the LME in a three-day hearing that starts Tuesday. Elliott is pursuing a judicial review of the LME, a “court proceeding in which a judge reviews the lawfulness of a decision or action made by a public body.” The last time a judicial review was won against the LME was in 2014 over a change in warehousing rules, but that was later overturned. Singer gained notoriety for his investments in sovereign distressed debt, notably in Argentina, which defaulted on its debt in 2002. Singer fought for repayment in the courts for more than a decade, going so far as to attempt to seize an Argentine naval vessel in Ghana in 2012 and rights to two SpaceX satellite-launch contracts in 2014, before finally reaching a settlement in 2016. If history is any indication, the fight with the LME could be protracted and remain unresolved for quite some time.

Teck engaging multiple parties on coal assets

On April 3rd, mining giant Glencore proposed a merger between itself and Teck Resources, the leading Canadian diversified mining company. The plan would retain Teck’s base metals assets (notably its copper mines in Canada, Chile, and Argentina) while spinning off the merged company’s coal assets into a separate entity. The proposal has been rejected by Teck, but Glencore is expected to present a revised offer in the next few weeks. Prior to Glencore’s proposal, Teck announced plans to split into two companies, Teck Metals retaining the base metals assets and Elk Valley Resources with the coal assets, but the shareholder vote on that decision was canceled due to the Glencore announcement. Teck recently put out an announcement confirming that they are engaging with multiple parties to pursue the sale of their coal assets. Though no one was named in the release, famed Canadian mining entrepreneur Pierre Lassonde announced in May that he is leading a consortium to bid for the British Columbia coal assets, and Japan’s top steelmaker Nippon Steel is reportedly in talks with Teck as well. Additionally, Glencore has bid an undisclosed amount for the coal assets, which it would merge with its own and spin out to form the largest independent coal company in the world. With the Keevil family controlling Teck opposing the original deal, as well as disapproval of the Canadian government on the sale of its largest mining company, it appears that the Teck-Glencore merger is not going to happen, but the verdict is still out on whether a deal involving the coal assets can be completed.

Battery factory announcements

The past few weeks have seen a slew of new battery investment announcements. Here are the highlights:

• A British-led consortium has pledged to invest up to $9B, according to an announcement made by Indonesian Investment Minister Bahlil Lahadalia. The consortium reportedly includes mining giant Glencore, the largest Indonesian nickel producer Aneka Tambang, materials technology company Umicore, and Chinese energy company Envision. The investment is slated to go toward an industrial park in the Bantaeng region on Sulawesi island.

• Toyota has upped its planned investment in its North Carolina battery plant by $2.1B to $5.9, as the company aims to start production in 2025 and sell 1.5M EVs per year by 2026. These EVs would be manufactured at its currently under-construction vehicle factory in Kentucky, using the North Carolina batteries.

• India’s largest EV manufacturer Tata Group signed an MOU to build a $1.6B battery plant in Gujarat.

• GM and South Korean POSCO Group upped investment in their Quebec cathode active materials plant by $1B.

• Panasonic announced that they’re developing plans for a third EV battery plant in the United States.

• Hyundai and LG Energy Solution are building a $4.3B battery plant in Georgia, close to Hyundai’s EV manufacturing facility. This is a 50-50 joint venture with annual capacity of 30 GWh, enough to power 300,000 EVs. Construction will begin in H2 2023 with production expected to begin in Q4 2025.

• Ascend Elements has signed a billion-dollar deal with a yet-to-be-disclosed automaker to produce cathode active materials for use in EV batteries at a plant in Kentucky. The company was founded in 2015 and last year received $480M in grants from the DoE.

That’s all for this week. I’ll be writing on a more consistent cadence going forward, with weekly critical minerals news and a few deep dives in the coming weeks.

Until next time,

Teddy

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Glencore submits $23B bid to acquire Teck Resources

On the 26th of March mining and trading giant Glencore submitted a bid to Teck Resources’ Board of Directors to acquire the company for $23B, a 22% premium to Teck’s valuation at market close on March 31st. Teck’s board has so far rejected the bid. Teck Resources produces copper and zinc from operations across the Americas and steelmaking coal in Canada. Norman Keevil, whose father founded Teck 60 years ago, retains control of the company through special class A which have 100 times the voting power of public class B shares. He is committed to keeping the company independent and out of foreign hands. In January a plan was announced that would dismantle the dual-class share structure over the next six years as well as spin off Teck’s coal assets into a separate company called Elk Valley Resources which would pay a royalty to Teck, while leaving the base metals assets under the original entity. Teck’s shareholders are set to vote to approve this motion on April 26th, with the motion requiring a two-thirds majority of class A and class B shareholders to pass. It is possible that the shareholders vote against this separation because they believe the Glencore acquisition could unlock more value, and Glencore stated that their offer would be dead if the separation were to move forward. A Glencore-Teck merger would combine the metals units of both companies and spin off the combined coal assets into a separate entity. This coal company would not owe a royalty to the base metals company, unlike the Teck proposal. The metals company would be the third largest copper producer in the world, just behind Freeport and Codelco, and Glencore predicts the merger would unlock $4.25-5.25B of post-tax synergy. Because the Keevil family is committed to keeping the company in Canada, Glencore’s proposal included basing the metals company in Canada. No other mining giants have come out with bids for Teck yet, though there is some speculation other companies may get involved if Teck’s proposal is voted down later this month. A Glencore acquisition of Teck would be the largest in mining since 2007, when Rio Tinto acquired Alcan for $38B, or Glencore’s 2013 merger which valued Xstrata at $39B.

Chinese lithium refiners shut down on low prices

Two producers in the lithium processing hub of Yichun, nicknamed “Asia’s lithium capital,” are cutting production due to the massive decline of lithium carbonate price over the last few months. Chinese battery-grade lithium carbonate prices are down from approximately 345,000 RMB/tonne to 210,000 RMB/tonne over the last month, a decline of 39%. Yichun has the capacity to produce 180,000 tonnes of lithium carbonate per year out of China’s total capacity of 450,000. With lithium carbonate prices still more than five times the pre-COVID levels, as well as a more than 6% decline in Chinese electric vehicle sales in January 2022, some analysts believe the price has further to fall before it is stabilized. It is possible producers across China continue to cut production which may mitigate the over-supply build-out and slight drop in demand. Over the last year the price of spodumene concentrate has fallen 23% and lepidolite 22%, both feedstocks for the production of lithium carbonate (the cheaper lepidolite is more commonly used in the Yichun plants). The quicker decline of lithium carbonate prices compared to the concentrated minerals demonstrate that the processing step has more capacity built out than the actual mining (both in China and especially the US). The US seems to be placing more emphasis on the processing part of the supply chain which is easier to permit and construct than mines, but may lead to a similar issue where refining is in over-supply but mining remains a bottleneck.

Ford to build Indonesian battery materials plant alongside Huayou Cobalt

Ford announced plans to invest in a $4.5B nickel processing plant in Indonesia alongside Huayou Cobalt and Vale. Ford recently announced a battery factory in Michigan partnering with Chinese battery giant CATL, but is coming under criticism from many lawmakers over it’s use of funds from the Inflation Reduction Act (IRA) designed to subsidize electric vehicles built without components or raw materials sourced from “foreign entities of concern” (i.e. China). When the venture was initially announced last July, it seemed like Huayou would control 53% of the venture, with Vale at 30% and Ford at 17%. Additionally, Indonesia is not currently a free trade country so battery materials produced there would not qualify for federal subsidies, but that could change with the recent announcement of a proposed US-Indonesia free trade agreement. This would strengthen ties between US automakers and Indonesian nickel producers, providing a reliable supply of the battery metal with low/no tariffs and potentially IRA benefits, but the Chinese involvement still has an unknown impact of the geopolitical and financial implications of Ford’s supply chain.

Tesla estimates $10T investment needed for energy transition

Tesla released their Master Plan Part 3, detailing the investment needed to transition away from fossil fuels. The company also highlighted the comparably higher cost of sticking with fossil fuels: $14T. The report noted that electric vehicles are four times as energy efficient as internal combustion engine vehicles, due to higher powertrain efficiency, regenerative braking capability, and optimized platform design. Though Tesla is an EV and battery storage company, they also stressed the importance of efficient electric heat pumps, electrified planes/boats, and clean steel production. Most relevant here, however, is their view of the raw materials required for this transition. Research firm Benchmark Mineral Intelligence indicated that Tesla is vastly underestimating the investment needed on the refining side, by up to $1.6T, while the analysis of battery gigafactory spending was in line. Tesla estimates 7 Mt of lithium hydroxide will need to be produced per year, a more than ten times increase in production compared to today. Estimates for many materials included assumptions that they would be phased out of products, including neodymium/praseodymium rare earth magnets in EV motors. No real plan was given for greater resource extraction, indicating Tesla’s continued desire to stay away from mining. Increased recycling was stressed as a major source of materials, particularly from the 2050s onward.

Tesla’s Master Plan Part One consisted of

1. Create a low volume car, which would necessarily be expensive

2. Use that money to develop a medium volume car at a lower price

3. Use that money to create an affordable, high volume car
   And...

4. Provide solar power. No kidding, this has literally been on our website for 10 years.

while Part Two involved

1. Create stunning solar roofs with seamlessly integrated battery storage

2. Expand the electric vehicle product line to address all major segments

3. Develop a self-driving capability that is 10X safer than manual via massive fleet learning

4. Enable your car to make money for you when you aren't using it

Tesla thus far has executed on Part One and is well on their way to completing Part Two (at least the first point), but Part Three is focused more on broad trends applicable for the whole industry. It is far less specific than the previous plans. Tesla is getting deeper into the battery game and is opening a lithium refinery in Texas, and this plan marks a renewed emphasis for the company on the importance of their supply chain.

Key Takeaways

• Glencore wants to acquire Teck as mega-mining-M&A continues this year.

• Chinese lithium refiners are decreasing production following massive price declines.

• Ford is partnering with Huayou Cobalt to secure nickel supplies in Indonesia.

• Tesla’s Master Plan Part 3 laid out massive mining needs of energy transition.

Lithium

Zimbabwe export ban leading to stockpiles

Last December Zimbabwe’s Mining Minister announced “No lithium bearing ores, or unbeneficiated lithium whatsoever, shall be exported from Zimbabwe to another country,” with the exception of companies currently building processing plants in the country. This export ban is an effort to derive more value from domestic mineral processing, following the model of other developing countries like Indonesia which ramped up nickel processing tenfold in five years after forcing producers to process domestically. Zimbabwe’s export ban is now leading to stockpiling of ore within the country as processing capacity is built, leading to drastically decreased revenues for miners in the country. Now the industry is calling for the ban to be reviewed, as it unfairly benefits larger international companies able to acquire loans to build expensive processing plants, to the detriment of smaller miners who comprise most of Zimbabwe’s lithium mining industry. Larger Chinese players like Zhejiang Huayou Cobalt Ltd have been less affected. Zhejiang operates the Arcadia mine, one of the largest hard rock lithium projects in the world, near Harare in Zimbabwe and has invested $300MM to build a processing plant at the mine. Chengxin Lithium Group and Sinomine Resource Group are also looking to build a processing plant in the country. While an ore export ban may have worked for Indonesia, and is being experimented with all over the world, so far the decision seems to have come too quickly for a growing lithium industry in Zimbabwe.

Nickel

LME nickel shipment turns out to be stones

The London Metal Exchange discovered stones in bags that should have contained nickel at a warehouse in Rotterdam. The falsified metals weighing 54 tonnes amount to 0.14% of live nickel inventories on the LME, totaling $1.3MM at current prices, and were owned by JP Morgan. The LME operates (through a variety of contractors) a network of metals warehouses around the world. Metals are checked for weight and content when they enter the warehouse, but it is still unclear whether this shipment is the result of error, theft, or fraud. This comes after a separate incident shocked the LME in March of 2022, when nickel trading had to be halted and trades unwound following a 250% price spike in a single day. Additionally, it has been just over a month since commodities trader Trafigura discovered fraudulent nickel shipments worth $577MM. The LME does not believe that other warehouses are affected, but its licensed operators are checking nickel stockpiles across its network. The Financial Conduct Authority, the UK’s financial services regulator, announced earlier this month a probe over the LME’s conduct in last year’s nickel crisis, and the exchange is set to announce a series of reforms later this month. Operating a secure network of metals warehouses is critical to the global commodities supply chain, and these sorts of incidents do not inspire confidence in an already embattled LME.

Copper

Peru exports drop 20%, 39 projects in development

Following a wave of protests over the ousting of former President Pedro Castillo, copper exports fell 20.3% in January 2023 compared with January 2022. Sales were down even more at a 25% decrease, due to the fall in volume and a price drop of 5.9% over the same period. Civil unrest across the country has largely subsided, so this drop is only temporary and normal operations are resuming in affected portions of the country. Additionally, the Peruvian Ministry of Energy and Mines announced last week that 2023 will see 74 projects in development for a total mining investment of $596MM, with 30 of the projects expected to become operational in the next year. Copper projects comprise 39 of the 74 with investment of $284MM, while gold has the next most at 18 projects and $220MM of investment. Though troubled in recent months, Peru’s mining sector is still seeing strong investment and is likely to continue to grow.

Ivanhoe Mines sees record profit

Ivanhoe Mines released earnings last Monday, seeing 2022 profits soar to $434MM from $45MM in 2021. The rapid expansion of the company is due to the production ramp up at the Kamoa-Kakula copper complex in the Democratic Republic of the Congo, which sold 323,733 tonnes of copper in 2022 yielding revenue of $2.15B, operating profit of $1.27B, and EBITDA of $1.39B. Ivanhoe has been able to produce copper for $1.39 per pound over the past year, yielding a 65% margin at today’s price of $3.95. When the Phase 3 expansion at Kamoa-Kakula is complete, that production cost should drop another 10-20%. The Kamoa-Kakula mine is one of the largest copper mines in the world, and is operated as a joint venture with China’s Zijin Mining.

Rio Tinto begins underground mining at Oyu Tolgoi

Rio Tinto has begun mining from an underground operation at the Oyu Tolgoi mine in southern Mongolia. Mining in this part of the Gobi stretches back to the time of Genghis Khan, when outcropping rocks were smelted for copper. Soviets made an initial discovery in the region prior to 1990, but most of the exploration work was done in the late 1990s and early 2000s by Robert Friedland’s Ivanhoe Mines (a separate entity from the existing Ivanhoe Mines). Mining commenced in an open pit in 2013, and in 2012 Ivanhoe Mines rebranded as Turquoise Hill Resources, which as of December 2022 has been bought out completely by Rio Tinto. Over the last decade Turquoise Hill has had some disputes with the Mongolian governments over royalty payments and the fate of the mine’s expansion was unclear. All is resolved now, with the Mongolian government owning 34% of the mine and the $7B underground expansion now operational. Oyu Tolgoi is expected to produce 500,000 tonnes per annum of copper between 2028 and 2036, making it the fourth largest copper mine in the world. The project is the largest in Mongolia’s history, with a total cost of more than $17B (open pit cost $10B), and at one point it was estimated that the mine comprises a third of Mongolia’s GDP. Mining is a long game and megaprojects like this take decades to develop, often with multiple owners over the project’s life.

Geopolitics

EU Critical Raw Materials Act

The European Union proposed the Critical Raw Materials Act last week that would classify copper and nickel as critical minerals in an effort to revitalize supply chains of the metals vital to the energy transition. Though significant, many in industry are calling on the European government to go further and implement programs similar to the American Inflation Reduction Act, in which government loans and grants back up proclamations of the criticality of certain raw materials. Copper and nickel are both already widely used and produced for use in wires and stainless steel (respectively), but increased electric vehicle and battery adoption is leading to drastic increases in demand for the metals, pushing up prices. Additionally, the nickel market was shocked by the Russian invasion of Ukraine last February, which threatened to cut off a primary supplier (Russia) of nickel to the European market. While nickel is designated as a critical mineral in the US, copper is not yet, though many at the highest levels of government (including Senators Kyrsten Sinema and Mitt Romney) are pushing for its designation. The proposal still has to make its way through European Parliament, but is a step in the right direction if the EU wants to increase the resilience of its energy transition supply chains.

Key Takeaways

• Zimbabwe’s effort to bolster domestic lithium processing is hurting smaller miners — similar moves have worked in the past, but they may have moved too quickly.

• The London Metal Exchange’s nickel market had another speedbump, with the discovery of stones in bags supposed to contain nickel.

• While Peru’s copper exports are down 20% year-over-year, there are dozens of projects in the pipeline expected to be commissioned in the coming years.

• Copper mining capacity continues to come online, with the expansion of Ivanhoe’s Kamoa-Kakula and Rio Tinto’s Oyu Tolgoi mines.

• Legislation is making its way through European Parliament to designate copper and nickel as critical minerals — this government support may help, but industry wants more action.

PDAC

Earlier this week I attended PDAC, a major mining conference in Toronto with more than 23,000 attendees. Mining companies, investors, service providers, technology companies, and government officials from all over the world gathered to discuss critical mineral shortages, the increased role of software in mining and exploration, and fundraising in today’s macro environment.

One discussion theme was the need for increased investment in smaller exploration companies focused on critical minerals. While the Inflation Reduction Act is benefitting the industry as a whole, so far most of this US federal government investment is going to processing companies. Increased capital has to flow to smaller companies focused on exploring for mineral deposits if energy transition targets are to be met. In his Sunday speech at PDAC, Ivanhoe Mines founder Robert Friedland criticized the Canadian government for cutting off funding from Chinese investors, saying that junior miners need more of any sort of capital, not less. Friedland also discussed his company Ivanhoe Electric’s I-Pulse technology, which could potentially decrease the amount of energy used in crushing ore by more than 90%. Ivanhoe Electric has also developed a novel exploration technology using energy pulses and computational geoscience to discover critical mineral deposits (mostly copper) and is developing several copper assets in the western US.

Visible at the conference was an acute awareness that project development timelines need to be shortened to meet metals demand. This has percolated to the government, with Canadian Natural Resources Minister Jonathan Wilkinson saying in an interview that he is open to shortening the permitting process by a third and wants to speed up project development by four to five years. These improvements would come from syncing provincial and federal requirements, and the ministry is looking to Australia as an example, where permitting timelines are shorter than in North America (the US is much further behind Canada).

On the technology and services side, artificial intelligence has made it to mineral exploration. Dozens of companies are using AI to infer geological deposits, determine mineral content of core samples, or predict how to expand mines once in production. Two companies I found interesting are Toronto-based Stratum AI and Calgary-based GeologicAI. Stratum AI takes in drilling data (mineral content at locations in a site) and infers how the deposit extends between holes, creating a geological model, as well as indicating where to drill next to expand the reserves or increase confidence in the data. GeologicAI has developed a mobile core scanner that quickly returns mineral content from drilled rock using hyperspectral and XRF (x-ray fluorescence) scanning, with a software layer on top to provide for easy interpretation of results. The intersection of software with the mining industry is a growing trend that will continue, hopefully contributing to quicker discoveries, lower costs, and larger reserves.

Piedmont/Atlantic Lithium hit with short seller report

Activist investment firm Blue Orca Capital released a report Wednesday morning stating that they are short Piedmont Lithium, a North Carolina-based lithium project developer. Piedmont owns stakes in Sayona Mining, developer of the North American Lithium spodumene mine in Quebec, and Atlantic Lithium, developer of the Ewoyaa spodumene mine in Ghana. Piedmont invested in both of these companies to secure offtake of spodumene (a lithium mineral) to be processed in planned lithium carbonate plants in North Carolina and Tennessee and sold to customers including Tesla and LG Chem. Blue Orca released the report because they believe the mining licenses obtained by Atlantic Lithium in Ghana are tainted by corruption, with the company allegedly making secret payments and promises of royalties to family members of a prominent politician. If true, Blue Orca claims this could imperil Atlantic’s licenses and leave Piedmont without spodumene to process and sell. Piedmont and Atlantic have categorically denied these accusations. Since Wednesday morning, Piedmont’s stock is approximately flat, while Atlantic is still down nearly 30%. From what I’ve seen on various sites, the claims appear to be false, consistent with the lack of a material move in Piedmont’s share price.

First Quantum to resume copper production at Cobre Panama

Following weeks of tense negotiation, Canadian mining giant First Quantum has reached a deal with the Panamanian government to resume production at the Cobre Panama mine. As I’ve written about previously, First Quantum was forced to stop production after the Panamanian government ordered the company to halt operations at a port used to export copper ore. The new deal would see the government earning a minimum of $375MM per year for the next 20 years as the mine stays active. This is a dramatic increase from the $61MM the government received in royalty payments from First Quantum in 2021 on $3.2B of sales. Shipping operations will commence immediately, while ore processing will take longer to ramp back up as 1,000 employees were placed on leave in the shutdown. This renegotiation shows that countries are desiring to keep a greater percentage of the value their natural resources generate, specifically those resources with demand (and to an extent prices) rising as strongly as copper. It will be interesting to follow which other countries will strike similar deals with major mining companies over the next few years.

Are rare earth-free magnets feasible?

There has been a lot of discussion online about Tesla’s recent announcement to do away with rare earth magnets in their EV motors, with some saying this spells doom for the rare earths (REEs) industry. I believe this is mostly overblown. While a significant announcement, we have not yet seen any substantial evidence that Tesla has demonstrated the REE-free motors, indicating that this technology is likely at least three or four years from production. A report from strategic metals research firm Adamas Intelligence did a great job breaking down the announcement, stating that Tesla’s alternative motor design likely uses ferrite magnets, a composition primarily of iron oxide and strontium (in contrast with more conventional neodymium-iron-boron magnets). Ferrite magnets have been used in EV drivetrains in the past, notably in an older version of the Chevy Volt, but are significantly (~30%) heavier than motors using rare earth magnets. This increased weight leads to decreased range or a need for a larger battery, increasing costs elsewhere. Historically one reason to switch from rare earth magnets would be the environmental footprint of rare earth mining (often in unregulated Chinese mines), but with the rise of cleaner, better-regulated Western REE miners like MP Materials1 this becomes less of a factor. Finally, electric vehicle motors comprise only approximately 12% of the market for rare earths, of which Tesla (though market leader) is only a fifth. Experimentation with new materials is necessary for industry and civilization to progress, but it's also important not to over-hype announcements which are just that — announcements.

US Senators unimpressed with CATL venture in US

At the CERAWeek energy conference on Friday Senator Joe Manchin said that he is “totally opposed” to the planned Ford-CATL battery plant being built in Michigan. Ford will be licensing battery technology from Chinese battery leader CATL to be used in their electric vehicles. Manchin was a main backer and co-author of the Inflation Reduction Act, which gives consumers a $7,500 tax credit when purchasing EVs manufactured in the US. Manchin claims that CATL would receive $900 of the $7,500 for each Ford vehicle sold using the company’s battery technology, in accordance with a 12% royalty. Ford insisted that no government funding will make it’s way to the Chinese company, but the exact terms of the deal still seem unclear. On Thursday Senator Marco Rubio introduced legislation blocking tax credits for EV batteries produced with Chinese technology and called on the Biden administration to review the Ford-CATL partnership.

At the same conference, Manchin and Alaska Senator Lisa Murkowski discussed that permitting reform is necessary to achieve the goals of the Inflation Reduction Act. While federal funding is going towards mineral processing facilities, the raw materials are still largely mined in Africa and China, where environmental and safety standards are not as rigorous as the United States or Canada. The United States has vast resources of lithium, copper, and other critical minerals, but the permitting system must be adjusted to allow for their extraction in a timely and cost-sensitive manner — otherwise we are just as reliant on the rest of world as we were before the Inflation Reduction Act.

Key Takeaways

• PDAC has come and gone — critical mineral shortages remain. Good projects will get funded, hopefully with the support of government and technology.

• Don’t buy the hype — whether Piedmont’s short seller report or Tesla’s REE-free magnets, I’ll wait for something substantial to make up my mind.

• Ford’s Chinese partnership is receiving major pushback — looks like the Senators who passed the IRA want US government funding to go to only US companies!

- Teddy

Thank you for joining me. Let’s dig in.

Lithium

Pilbara Minerals and Allkem profits up 10X in H2 2022

Australian lithium producers Pilbara Minerals and Allkem announced record earnings this week as production scales and lithium prices remain high. Pilbara’s revenue grew 647% (compared to H2 2021) to $1.46B and EBITDA soared 1,091% to $1.21B. Pilbara has been expanding production at its Pilgangoora project in Western Australia which now has the capacity to process 580,000 tonnes of spodumene (lithium mineral) concentrate per year. Over the past 6 months, the company was able to produce spodumene concentrate at a cost of $405-$430 per tonne, which it sold for an average of $4,993 per tonne. With current prices ten times production costs, more than $2B of cash, and a mine life of 26 years, Pilbara is well poised to grow into a larger lithium player over the next decade and thrive even if prices drop from record highs.

It’s a similar story over at Allkem, where revenue tripled to $588MM and EBITDA quadrupled to $401MM. Though lower revenue, Allkem is a more diversified lithium producer, with assets in Western Australia, Argentina, and Japan and the capacity to produce lithium carbonate, a more refined chemical (compared to spodumene concentrate) used in lithium batteries. With cash and a low cost of production, Allkem is also well-suited to expand mining and processing operations.

Although lithium is down 30% from its November 2022 all-time high, prices remain well above the pre-2020 “normal.” With a continued production deficit it is likely prices remain elevated while projects currently in development come online to meet the demand. This should be a boon to companies like Pilbara and Allkem who’ve been building capacity over the last decade.

Albemarle restructures joint venture with Mineral Resources

Lithium giants Albemarle and Mineral Resources (MinRes) have restructured a joint venture between the two companies. Albemarle will increase its stake in the Western Australian processing plant Kemerton from 60% to 85%, as well as operate part of the facility. Albemarle will supply MinRes’s 15% of the spodumene feedstock used at the plant at market prices. MinRes will increase its ownership of the Wodgina lithium mine in the Pilbara region of Western Australia from 40% to 50%, and MinRes will operate the mine. Albemarle will build processing capacity to convert both parties’ spodumene from Wodgina to lithium chemicals, with MinRes paying for 50% of up-front capital costs for that processing facility. Additionally, pending Chinese regulatory approval, MinRes will acquire a 50% stake in Albemarle’s Qinzhou and Meishan processing plants in China. Qinzhou is undergoing modifications to process Wodgina spodumene, and Meishan is still under construction. Both are expected to open in 2024. Albemarle CEO Kent Masters said that their “Australian lithium assets are core to Albemarle's strategy to build a globally diversified portfolio of best-in-class assets and resources.” The point about diversification is key. Albemarle and MinRes are both looking to ramp up capacity rapidly, and investing in projects together enables the companies to have more assets in their portfolio and pipeline. The deal also reflects an increasingly interconnected lithium and battery supply chain with customers investing in miners and processors to secure supply (see LG Chem/Piedmont Lithium last week).

Copper

First Quantum halts processing at Panama mine

Canadian miner First Quantum Minerals is halting ore processing operations at its Cobre Panama mine following a months-long dispute with the Panamanian government. After First Quantum missed a deadline to renew their mining contract because they were unhappy with some of the terms last December, the President of Panama announced a plan to halt the operation. Talks seemed to progress, but in early February the company was ordered to suspend operations at the local port, blocking First Quantum’s exports of copper from the mine. Now the company is halting ore processing and beginning to demobilize some of their 8,000 employees and contractors. The company has also suspended purchasing of some $20 million per week of supplies for the mine, a significant loss for local Panamanian suppliers. The mine is responsible for 3.5% of Panama’s GDP and 1.5% of global copper production. The situation in Panama demonstrates the difficulty of operating in jurisdictions with regulatory uncertainty, where tax and royalty payments are not set in stone. A continued closure, combined with production decreases in Peru and Chile, would deal a major blow to global copper output, potentially impacting price.

Teck to spin off coal assets, focus on copper

Last week $20B Canadian giant Teck Resources announced that the company would change its name to Teck Metals and spin out their coal assets into a separate entity named Elk Valley Resources. The split will allow the company to focus on metals (like copper) critical for an energy transition, as well as potentially unlock latent shareholder value. Current Teck shareholders will receive shares in Elk Valley Resources, which operates four mines in British Columbia. Additionally, Teck will be phasing out their dual-class share structure over the next six years by which the Keevil family had control over the company. The focus on copper and winding down of dual-class shares could make Teck a fruitful target for acquisition as larger mining players like Rio Tinto and BHP are looking to expand their exposure to copper. Teck Metals will operate four copper mines in Canada and Chile at a current production of 270,000 tonnes per year, which is expected to double by next year as the company concludes a production ramp at Quebrada Blanca in Chile. Teck Resources’s split follows a similar move by Vale earlier this year to separate its coal and base metals units.

Nickel

Indonesia nickel exports up tenfold in 5 years

In 2014, Indonesia banned the export of raw nickel ore. Since then, companies have set up nickel refineries in the country, leading to a greater value from the resource accruing to the nation. As the largest nickel exporter with five times the production of the second-place Philippines, this policy appears to have been a success so far, with even downstream battery producers like Tesla considering setting up advanced manufacturing facilities in the country. Foreign investment in the country rose 44% last year to $80B, driven largely by the nickel industry. President Joko Widodo wants to use nickel as the prototype for bringing all sorts of processing and manufacturing industries to the country, from fertilizer to copper to fish, following the growth model of countries like Taiwan and South Korea. Historically, people would move to the richest and most populous island of Java for good jobs, but new manufacturing is spread around the country’s islands, creating new growth centers in provinces outside Java.

There are doubts that this level of growth is sustainable, due to nickel investment driven largely by a supply shortage giving the country leverage in production — this may not apply to other industries. Additionally, the EU recently protested Indonesia’s ban on nickel exports to the WTO and won, though President Jokowi will appeal the ruling. Finally, if commodity prices fall, Indonesia may see investment drastically decrease and exports drop — a part of “resource curse” which burdens many developing countries endowed with natural resources. Countries in Africa including Namibia, Zimbabwe, and Nigeria may be following Indonesia’s lead, all enacting bans on unprocessed ores in recent years. If Indonesia is able to meet their goal of doubling their GDP per capita to $10,000 by 2045, this would be a growth story aided by the energy transition hardly seen in the past.

Graphite

Magnis to supply graphite to Tesla

Australian battery manufacturer and graphite developer Magnis Energy signed an offtake agreement to supply Tesla with up to 35,000 tonnes per annum of anode active materials (graphite) for a minimum of three years. The anode materials will be supplied from a yet to be constructed factory in the United States. A site is expected to be chosen in the first half of this year, with production commencing by February 2025. The company will be constructing pilot plants for the graphite production lines over the next year, following research and development on their anode materials conducted at their New York battery facility over the last seven years. The US plant would be one of the first graphite anode manufacturing facilities in the US, producing this resource critical for popular lithium ion battery chemistries.

Rare Earths

MP Materials hits record output, to supply REEs to Japan1

Sole US rare earths producer MP Materials released earnings this week, announcing record rare earths production with revenue increasing 59% to $527.5MM and EBITDA increasing to 77% $388.6MM as the price of rare earths oxides rises. The company also announced a deal with Japanese trading house Sumitomo Corporation to distribute the company's NdPr oxides in Japan. NdPr is a critical material used in the production of powerful rare earths magnets used in electric motors.

Other Mining News

Molybdenum surges 122% in past year

The price of molybdenum, an additive used to make steel alloys, has more than doubled in the past three months due to supply shortages. Molybdenum is often produced as a byproduct of copper mining by companies such as American Freeport-McMoRan and Chilean Antofagasta. The high molybdenum prices have offset flat copper prices and rising copper mining costs for these companies. It remains to be seen how long these elevated prices last, as some stainless steel producers are already cutting output.

US to raise tariffs on Russian metals

The White House announced increased tariffs on imports of Russian aluminum and products made with Russian aluminum. Bloomberg reported the amount at 200%, though this appears to be unconfirmed. The tariff is both a punitive action against Russia and a ploy to strengthen the US’s domestic aluminum industry, with the tariffs seeing massive support from American producer Alcoa. The US also imports a substantial amount of titanium from Russia which has thus far gone unsanctioned.

Chinese coal mine collapses

An open pit coal mine in the Chinese province of Inner Mongolia collapsed Wednesday in a tragic accident which killed six workers. The incident prompted an investigation by China’s ministry of emergency management into landslide risk, poor management practices, and illegal mining. China’s mines have been trying to boost output as the government wants increased supplies and stable prices in order to increase coal electricity production. In a region where safety inspection is not as rigorous as in the US or Australia, that desire can lead to accidents like this.

Key Takeaways

• Lithium and rare earths mining companies are making record profits as prices remain high due to structural deficits of these commodities (Pilbara Minerals, Allkem, MP Materials).

• Mining companies are restructuring agreements and corporate entities to maximize growth potential to supply battery raw materials (Albemarle, MinRes, Teck Resources).

• Developing countries like Indonesia are finding success by limiting export of raw ores and requiring processing domestically. It remains to be seen if this policy and growth can be maintained.

That’s all for this week. Thank you for reading, and if you have not yet, please consider subscribing.

- Teddy

Critical and lucrative. That’s the best way to describe mining. Core to almost every product we have, whether computer chips, batteries, or screens, minerals are in short supply. By 2035, according to Boston Consulting Group research, lithium supply will be 24% less than demand or 1.1 million metric tons. But to build a mine, you first need to know where the material is located and that’s an expensive process.

It all starts with a “hunch” that there’s resources at a location. For a mining company, this could be from past exploration, the type of rock seen at the surface, or discoveries nearby. Once that hunch has been verified to a minimum level of confidence, it’s time to drill some holes. Drill rigs are large pieces of equipment requiring a skilled crew, generally drilling 1–2 holes per day depending on depth. The holes (150 to 2000 ft deep) produce core samples, a piece of rock a few inches wide, which are sent to labs where assays can be completed. When exploring for Lithium in brine specifically, ponds are dug and the concentration of materials measured in the solution. Either way, waiting for lab results takes time. “Right now, Christmas is not coming fast enough, or at all, for many explorers. Geochemistry labs are seriously backed up and explorers are experiencing delays — like three months instead of six weeks!” [Resource Maven]

In the lab, the rock is crushed at defined intervals and tested for mineral content. With this, a geologist knows what rock exists at what depth and combines this with other data to fill in the gaps between holes. The result, weeks to months later, is a predicted map of where the mineral body expands to.

With these results, a company will raise more capital to do more drilling and get a better sense of their resource. At this stage, the goal is a scoping study, generally a 50–100 page document with a general assessment of technical and economic factors that contribute to the proposed mine’s plan. This takes years of work and is only just the beginning of the paperwork mountain required. The company then moves on to a pre-feasibility study (PFS), which includes a first plan for the mine, infrastructure on site, environmental remediation, metallurgical processes, tailings management, and much more. Taking 5–6 years of work, a PFS is a big deal. And we’re still not ready to extract anything yet! Next is the full Feasibility Study. Even more critical in nature, this is the detail-by-detail plan to build a mine, and getting one out is a pretty sure bet the asset will get developed. Developing the PFS and FS, along with acquiring regulator permits, comes at a cost of $10s of millions (plus a few thousand pages of documentation) and years of time.

This whole process, even before building the actual mine, is not only expensive and time-intensive but complex with many actors and a changing set of risks at each stage. The process is best illustrated using a Lassonde curve, seen below.

With permits secured, the process of mineral extraction can finally begin…. Kind of. Years of construction begins at a cost of about half a billion dollars to develop the mine of course must come first. Just getting to approval costs tens to hundreds of millions. Getting to extraction puts you half a billion in the negative. Funding comes in large part through equity raises similar to a startup! Debt equity in the project itself is often used, as well as offtake agreements, where a customer pays to secure a supply (offtake) of the resource being developed. For the industry with half a billion dollars of capex before an ounce of product, a few goals are therefore obvious:

1. Reduce the cost of finding the minerals, both in terms of time and money

2. Ensure the predicted volume of extractable mineral is as accurate as possible

3. Maximize the amount of minerals extracted at a particular point

With the continuing shortage of critical minerals and growing need for chips, batteries, and other technologies, market prices for these resources are rocketing. And where there’s pain and money, there’s always opportunities for innovation. A number of companies with varying points of attack are building solutions for making mineral discovery cheaper, faster, and more accurate. The question is, who wins and what does the technological future of mining look like?

MARKET MAP

Company Breakdown:

Esper Satellites

What do they do? Esper is deploying 18 hyperspectral satellites to offer the most advanced geo-data capture the world-over. The company’s custom satellites are equipped with an array of sensors capable of detecting a wider bandwidth of spectral range with greater resolution. Doing so enables material composition detection beneath the earth’s surface.

Fundraising to date: ~$600K

Fleet Space

What do they do? Fleet Space is deploying an array of low cost nanosatellites for IoT connectivity in remote areas. They combine this with a mesh of edge-processing equipped geophones to detect seismic activity for mining exploration. The geophones, small devices placed in the ground, connect to the nanosatellites to effectively reduce the traditional lab time to a few hours.

Fundraising to date: $37.4M

Plotlogic

What do they do? Plotlogic provides a suite of tools for optimizing mine operations by better understanding material quality in the process using a series of advanced integrated sensors. Ultimately, Plotlogic aims to maximize outcomes and reduce waste from multi-moving assets.

Fundraising to date: $23M

Ideon

What do they do? Uses sensors designed to sense the movement through the earth of a form of subatomic particle emitted during a supernova. Doing so enables them to more accurately build an “x-ray” of the land around a drill hole.

Fundraising to date: $16M

Geologic AI

What do they do? Mobile lab setup for drill sample assays and analysis, designed to significantly reduce costs, both in terms of time and money, for exploration in the field.

Fundraising to date: $3.53M

Atomionics

What do they do? In-situ quantum sensing startup that uses a truck-bed device to assess dynamic gravity measurements at a higher spatial resolution in a shorter period of time.

Fundraising to date: $2.5M

Exodigo

What do they do? Exodigo creates accurate and precise underground maps for design, construction, and subsurface discovery. Using multi-sensor fusion, Exodigo searches every square inch of an area to ensure the construction of a 3D model and run simulations. The use of AI makes this process many multiples faster than geologists can currently manage, even without lab bottlenecks.

Fundraising to Date: $29M

Stratum AI

What do they do? Similar to Exodigo, Stratum AI takes in existing data from a mining site to generate a 3D model of an adjacent area in the site and predict the economic outcomes of mining that area. The critical difference is Stratum AI uses the data from the drill holes, whereas Exodigo uses data from a much wider array of sensors (e.g. drone scans). As such, Stratum AI functions in the geostatistics space and compliments the existing workflows of geologists.

Fundraising to date: $156K

The mining space is so large and complex with such a vast number of different minerals and geographic ecosystems that multiple players can exist at each layer. The question becomes, at each layer (new site / greenfield data sourcing, existing site / brownfield data sourcing, and map creation), which technology comes out on top? Winners in this space will learn to balance a trifecta of factors: cost to deploy, integration with existing workflows, and data value. Applying a ranking to these is challenging, however, cost to deploy is often the lowest due to the sheer magnitude of the financials in this industry

Mining is a historical industry that likes to do things how they’ve always been done. We’ve seen this trend in other industries like construction, where new tech has struggled to break ground even when substantially improving results because it doesn’t integrate with existing workflows. We are likely to see a progressive transition rather than an overnight change, so technologies that are lower cost than existing methods but fit within existing workflows to deliver high value data will win. It’s important to assess these by focus area.

Greenfield Data Sourcing:

When discovering new mining sites, approaches can be bucketed into three cores. Leveraging satellite data; data from low height drones; data from surface sensors.

Fleet Space and Esper Space both intend to launch nanosatellites, which is extremely expensive. With the boom of private space flight and satellite launch costs dropping, launching a custom satellite is increasingly easy, however, we still don’t believe this to be necessary. The proliferation of advanced geological data satellites equipped with a vast array of sensors is increasingly making the necessary data more of a commodity, making the need for a custom and expensive satellite redundant.

The counter argument here is that none of these existing satellites carry the necessary grade of sensor to deliver the correct data to the required accuracy. With the complex nature of the sensor arrays necessary for accurate geological assessments, this is likely. Furthermore, the use of nanosatellites vs. larger versions makes the cost more acceptable. There is still risk, however, that this data becomes less valuable as existing satellite data is combined with other greenfield discovery methods.

The alternative to satellite hyperspectral data collection may be to use drones to survey potential mine sites, providing a lower capex access to similar data. The challenge here is two fold. Firstly, assessing the same scale of land in a reasonable amount of time. And secondly, carrying the same grade of sensors. Drones are only able to carry a fairly minimal payload for a smaller amount of time, limiting larger sensor arrays to larger aircraft and satellites.

Some companies are focusing their efforts on novel, lower cost, surface data analysis techniques. These include Atomonics with their gravity sensing system or Ideon with the in-drill hole sensors. The value of this data is yet to be fully proven, especially for Atonomics. Ideon plays in an interesting position, leveraging existing drilling techniques for a smoother go-to-market but ultimately not improving the speed of discovery or reducing the environmental impacts. That said, with mining an industry committed to its existing methods, we see Ideon carving out a niche by dramatically improving the accuracy of existing drill data.

Brownfield Data Sourcing:

Brownfield Data Sourcing is about maximizing the amount of material extracted. The continued use of traditional methods are prone to lab transportation and capacity issues. The integration of advanced sensors and edge processing (Plotlogic’s approach) as well as the increasingly sophisticated use of 3rd party data for continuous mapping, like LISUS, enables decision making that is not only faster but more granular too. When granular decision making can result in hundreds of millions in value, the cost of installing sensors or paying large sums for new data models is minimal. Furthermore, this makes the pricing power of companies like Plotlogic extremely high.

Map Creation:

Map creation is all about assembling the data sources and extracting the most valuable insights, whether that’s previously untapped resources in an existing mine or minimizing waste. Interestingly, Plotlogic can also play in this space, combining existing data sources with its own data to build better maps and dashboards. Of course, the inverse is also true. Stratum AI and Exodigo could begin to offer on-site sensors like Plotlogic to improve their own data flow. Hardware is hard though and companies like Stratum may think it more strategic to offer API integrations for Plotlogic’s data. On the flip side, modeling skills using solvers are extremely complex mathematical and physical problems that Plotlogic would have to buy in. As such, if vertical integration is the strategy of choice over offering data integration APIs, it will most likely come through M&A within the industry.

Stratum AI’s value is doing advanced Geostatistics, improving the interpolation of drilling cores using AI instead of statistical models. Old school geologists, set in their century old ways, may prefer more data to drive existing methodologies vs. entirely new, AI-driven solutions. Stratum AI therefore must overcome the “new tech” barrier to break in, whereas Plotlogic leverages a tried-and-tested desire of geologists as a sales-based approach.

Conclusion:

We’re on the verge of a complete reinvention of the tech stack that drives mining. Though an age-old industry perceived as resistant to change, the mining hardware landscape has evolved in the industry in recent years — now it is time for new software and sensors to be applied. The high value and huge cost drivers of the industry (remember it takes north of half a billion just to get to extraction!) means there is potential for multiple players at all levels operating in the same mines. Despite this, an increasing amount of market shakeout in the varying technologies is likely. As the industry learns its balance of the three factors (cost to deploy, integration with existing workflows, and value of data) and some data sources become more commoditized, we will see some technologies fall to the wayside.

For greenfield, we foresee the integration of modeling company products leveraging third-party satellite data to drive speed and improve initial discovery outcomes along with more advanced drill hole sensor tech once drilling commences. At the brownfield level, the use of Plotlogic-like products, integrating sensors throughout the operation to maximize outcomes with continuous mapping updates while driving efficiency gains is exciting. All of this data, greenfield and brownfield, will come together into a master model.

The winner of this tech stack, however, will own the mining mapping software, taking in the various data inputs both at the greenfield and brownfield stages and modeling them to maximize extraction volumes. Although this stage is not necessarily more or less technically challenging than sensor development, it enables control of the data flows and the sale price of the model (the tangible, useful output for a mining operations team). This theory becomes stronger when you consider the current arms race for data sources between satellite companies like Fleet and Esper and sensor companies like Ideon. Furthermore, with the proliferation of private satellites, satellite data could become increasingly commoditized. For modeling companies, deploying APIs and acting as the pipework for all this data places their software stack at the center of the ecosystem.

Regardless of traditional ways, the necessity to drive up supply means faster, more accurate, and lower cost exploration combined with the maximization of output is critical. Overall, this will lead to a dominant set of companies deploying a new techstack integrated within existing workflows. The centralized model of mine that takes in all data points to provide the most accurate map of resources to guide decision making is the most high value asset. We therefore expect a race to vertically integrate in this direction with a platform play using data-input APIs.

- Teddy and George

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Lithium

Tesla rumored to buy Sigma Lithium

A Friday Bloomberg report indicated that Tesla is rumored to be looking at acquiring Sigma Lithium. Sigma is currently developing the Grota do Cirilo Project in Brazil. Sigma Lithium aims for phase one to be in production in the first half of this year at a rate of 36,700 tonnes of per annum (tpa) of lithium carbonate equivalent (LCE). By the end of 2024, Sigma aims to completes phase 2 and phase 3 of the mine, bringing lithium carbonate production up to 104,200 tpa. This would make Sigma the fourth largest lithium producer in the world. The company has been exploring an acquisition, though talks are still in the early stages. Agreeing on a price may prove difficult, as shares of the company have tripled in the last 12 months (as well as a 24% after-hours surge on Friday). Supposedly Tesla has been in discussions with several lithium mining companies, but nothing is official as of now. Tesla has announced that they would open a lithium refinery in Texas, and this is a bigger part of that same strategy to vertically integrate. Tesla is starting to lag behind rival EV manufacturers like GM and Ford, who have both made investments in battery metal producers (GM with Lithium Americas for lithium and Ford with Vale for nickel).

LG Chem invests $75MM in Piedmont

LG Chem, Korean chemical and battery manufacturer, made an equity investment of $75MM in US lithium developer Piedmont Lithium. As part of the terms of the deal, LG Chem will get access to 50,000 tonnes of spodumene concentrate for four years, beginning in Q3 2023 from North American Lithium (NAL). NAL is a project in Quebec developed by Sayona Mining (through subsidiary Sayona Quebec) beginning production in the next month. Piedmont owns 25% of North American Lithium, and has the right to purchase 50% of the spodumene concentrate produced by the project, a significant portion of which will now go to LG Chem. Piedmont will use the capital to develop its Tennessee and North Carolina lithium hydroxide production facilities.

Ghana mining fund in talks to invest $30MM in Atlantic Lithium

State-owned Minerals Income Investment Fund (MIIF) is reportedly in talks with lithium developer Atlantic Lithium to invest up to $30MM in the company. Atlantic has also agreed to list on the Ghana Stock Exchange. The MIIF manages royalties from mines (primarily gold) across Ghana, and this would be their first investment in lithium. Atlantic recently updated their mineral resource estimate, bringing the life-of-mine revenue to nearly $5B. Auto manufacturing is on the rise, with Toyota, VW, and Nissan opening manufacturing plants in the country. The government is hopeful more of the EV supply chain will move into the country, with Atlantic Lithium representing a significant step towards that.

Copper

Mitsubishi Materials aims to triple copper output by 2030

Japanese conglomerate Mitsubishi aims to increase production of copper concentrate from 150,000 tpa to 500,000 tpa by 2031. The company plans on increasing throughput at their Naoshima and Onahama smelters/refineries and potentially some mining acquisitions “targeting projects that have considerably progressed in terms of the development stage, and those that are in the early stage,” according to Mitsubishi Materials president Naoki Ono. Mitsubishi already owns stakes in copper mines in Chile such as Los Pelambres and Mantoverde. They are also considering investments in rare earths and lithium ion battery recycling. Mitsubishi continues to increase its exposure to energy transition metals, to the benefit of their materials and automotive businesses.

Nickel

Teck-PolyMet joint venture aims to open 2nd nickel mine in US

Canadian mining firm Teck and American PolyMet have formed the NewRange Copper Nickel joint venture. PolyMet owned several assets in the Duluth region of Minnesota, and was developing the NorthMet ore body. Teck also holds the Mesaba project in the region, but that area has not been explored as much as PolyMet’s assets. These assets are now owned by the joint venture. The region is also home to Talon Metals’s nickel project, which is in early stages of permitting, as well as Twin Metals’s mine, which was blocked by the Department of Interior just a few weeks ago. Unlike Twin Metals, the New Range project’s minerals rights leases are from the state, not the federal government, so the company does not foresee the same issues as Twin Metals. Glencore is a major shareholder of PolyMet with 71% of the company, while China Investment Corp (China’s sovereign wealth fund) is the largest shareholder of Teck, at 10% ownership. The larger combined entity will be better capitalized to increase exploration activity, receive permits and fight lawsuits, and eventually build these critical nickel-copper projects in the United States.

Cobalt

Price collapses to near historic lows

The price of cobalt has fallen more than 50% over the last year, following a demand decrease and increased supply coming onto the market. Consumer electronics batteries is a significant market for cobalt. Demand peaked for these products during the pandemic and has since fallen. Additionally, cobalt is used in lithium ion batteries for EVs, but over the last decade the amount of cobalt used in those batteries has decreased in proportion to other metals like nickel. The Democratic Republic of the Congo is seeing a significant ramp-up of cobalt mining in the country, as Glencore and China Molybdenum continue to increase investment in the country. Further, as nickel production ramps up in Indonesia (for EV batteries), cobalt is produced as a byproduct, increasing the blue metal’s availability. As nickel projects continue to come online, and with expected rise of battery recycling, it is unlikely that cobalt prices will approach anywhere near their early 2022 peak for the foreseeable future.

Batteries

Ford, CATL to build Michigan battery plant

Ford, through a wholly-owned subsidiary, is setting up a $3.5B lithium iron phosphate (LFP) battery plant in southwest Michigan, licensing battery technology and technical expertise from Chinese battery giant CATL. Though Ford would wholly own the facility, there are still questions being asked about the deal’s national security implications. Senator Marco Rubio, top Republican on the Senate Intelligence Committee, has asked the Biden administration to review the deal, arguing that Inflation Reduction Act tax credits would benefit CATL and the Chinese government. Beijing has also expressed concern about LFP battery technology (which the US is behind in) being handed over to an American automaker. The site in Michigan was chosen after Virginia governor Glenn Youngkin’s decision to withdraw the state from the competition to attract the plant just one month ago. Ford has also collaborated (through joint ventures) with South Korean LG Energy Solution and SK to produce batteries. The partnership with CATL enables Ford to produce batteries at a lower cost, but would rely on on the US’s geopolitical adversary.

Key Takeaways

• Automakers and battery manufacturers are putting real capital into mining companies to secure supplies of critical minerals - e.g. Tesla and Sigma Lithium, LG Chem and Piedmont Lithium, and Ford and CATL.

• The Teck-PolyMet joint venture aims to create a better capitalized entity to open the second nickel mine in the US.

• The cobalt price is at a record low and is unlikely to rise as demand stays flat and supply increases.

That’s all for this week. Thank you for reading, and if you have not yet, please consider subscribing.

- Teddy

Thank you for joining me. Let’s dig into it.

Lithium

Lithium discovered in Jammu and Kashmir, India

India’s Ministry of Mines announced a discovery of 5.9 million tonnes of lithium on Thursday in the Jammu and Kashmir region. This means India possesses the 7th largest lithium reserves in the world, following Bolivia, Argentina, the US, Chile, Australia, China (according to USGS). The geology of the deposit is not known, but discoveries of lepidolite and spodumene (hard-rock lithium minerals) have been made in other areas of the country — in contrast with the lithium brines found in major producers like Chile and Argentina. Though a breakthrough development for India’s electric vehicle ambitions, this deposit will likely take a decade or more to develop, meaning the discovery won’t impact manufacturing until the mid-2030s. Benchmark Mineral Intelligence CEO Simon Moores summarizes the takeaways well.

Waste rock study ordered for Thacker Pass

Last week I discussed the Thacker Pass mine proposal in Nevada, and I stated that a judge’s decision on the fate of the project was imminent. That decision is now in, but the outcome is still unclear. The Federal District Court of Nevada judge ruled that all objections to the proposed mine are invalid, but the Bureau of Land Management must determine whether Lithium Americas can dump waste rock on the site. The company is confident this review is an easy fix and plans to begin construction this summer, says CEO Jonathan Evans. Just two weeks ago GM announced a $650MM investment in Lithium Americas, and if developed, Thacker Pass will be the largest lithium mine in the US.

Copper

Ivanhoe Mines in talks to increase activities in Congo

Robert Friedland’s Ivanhoe Mines is seeking a strategic partner to develop copper assets in the Democratic Republic of the Congo (DRC). Ivanhoe operates their flagship Kamoa-Kakula copper mine in the DRC, of which they own 39.6%. Partner Zijin Mining owns 39.6% of the project, with Crystal River Global Limited and the Congolese government comprising the rest of the ownership (0.8% and 20%, respectively). The company has been in touch with BHP and sovereign investors about taking a minority stake in exploration of adjacent land (Western Foreland Project), as countries and companies seek to quickly ramp up copper production. The Kamoa-Kakula mine produced 333,500 tonnes of copper in 2022, quickly ramping up from 105,884 tonnes in 2021, the first year of production at the mine. The project could be one of the largest copper mines in the world very soon, producing 600,000 tonnes per annum (tpa) by the end of 2024.

ERG to double copper/cobalt output in Africa

Eurasian Resources Group, mining conglomerate with assets across Central Asia and Africa, will spend $1.8B to double their cobalt and copper production in Africa. ERG currently produces 200,000 tpa of copper and 25,000 tpa of cobalt, primarily in the DRC. A significant portion of the capital will go towards building small hydro plants as well as solar and batteries to mitigate disruptions from an erratic electric grid. The company, controlled by the Republic of Kazakhstan and a trio of Kazakh oligarchs which faced a serious fraud investigation in 2013, was restructured in 2014 with $2.5B of financing from China as part of the Belt and Road Initiative.

Further investment by ERG and Ivanhoe show that money will continue to flow into the mineral-rich DRC to develop existing copper and cobalt assets. Exploration timelines are too long to meet emerging electric vehicle demand, so expanding existing projects looks like the only serious way to meet demand in the short-term.

Nickel

GM bidding for stake in Vale base metals business

Last year Vale announced that it would split off its copper and nickel (base metals) business from its iron ore business, and then sell a portion (potentially $2B) of the new base metals company to a strategic partner. The company’s stock had been trading at a lower earnings multiple than base metals peers, so separating the businesses could unlock massive shareholder value. GM has advanced in this bidding, along with Saudi Arabia’s Public Investment Fund and Japanese trading house Mitsui & Co. Vale is already a supplier of nickel to Tesla, has signed a supply agreement with GM, and is developing a nickel processing plant in Indonesia with Ford.

GM’s potential investment in the Vale base metals business follows their recent investment in Lithium Americas, and shows that auto manufacturers are investing heavily to secure raw material for mineral-intense electric vehicles.

Trafigura loses $577MM in alleged fraud

Global commodity trader Trafigura is reported to have lost $577MM in a nickel fraud involving companies owned by Indian businessman Prateek Gupta. Trafigura had paid for shipments of nickel but received cargo of much lower value. Last July the Indian intelligence agency Central Bureau of Investigation opened an investigation against Gupta over a separate alleged fraud. Commodities trading can be an opaque business where profit is made navigating the complexities of balancing global supply chains, and sometimes this involves doing business with dubious characters. This leads to missing metals being a prevalent issue, as in last August when Glencore halted shipments to Chinese firm Huludao Ruisheng after half a billion dollars of copper went missing.

Batteries

Redwood Materials secure $2B DOE loan

Battery recycling company Redwood Materials will receive a $2B loan from the Department of Energy to develop anode and cathode materials manufacturing plants in the US. Redwood was founded by Tesla cofounder JB Straubel in 2017 with the vision of “building a circular supply chain to power a sustainable world.” Batteries are comprised of a cathode (containing lithium, nickel, cobalt, and manganese), an anode (containing graphite), a separator/electrolyte, and copper foil to allow electrons to travel through the battery. The company currently produces cathode materials at its facility in Nevada and is beginning production of copper foil there as well. This copper foil, primarily used in the anode, is currently manufactured overseas in Asia, with no US production. The loan will be received in tranches based on construction and production progressing at Redwood’s recycling facilities in Nevada as well as a recently announced campus in Charleston, South Carolina. Panasonic is the first customer for Redwood’s cathode and anode materials for their jointly-owned with Tesla Nevada factory and Kansas facility set to open in 2025.

Gold

Gold giant Newmont bids $16.9B for Newcrest

US-based largest gold miner in the world Newmont has submitted a bid worth $16.9B to buy Australian rival Newcrest. The combined company would be nearly twice as large (by market cap) as next largest gold producer Barrick, and would place four of Australia’s five largest gold mines under one company’s control. Newcrest was initially founded as Newmont’s Australian arm, but was spun out in 1990. Newcrest, whose stock is still a third below its 2019 all time high, is considered cheap by some due to the longevity of their gold assets, so it is possible Newmont increases their bid. The announcement follows the 2018 Randgold acquisition by Barrick and 2022 Yamana Gold acquisition by Agnico and Pan American, representing continued M&A activity in the gold sector.

Key Takeaways

• Lithium discoveries continue to be made around the world, but won’t contribute to supply chains for a decade plus.

• Increased copper output will come from existing projects, largely in Africa.

• Auto manufacturers continue to invest in raw materials, as in GM with Lithium Americas and Vale base metals, or Redwood partnering with Panasonic.

That’s all for this week. Thank you for reading, and if you have not yet, please consider subscribing.

- Teddy

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