This Week in Critical Minerals - #7
PDAC recap, Atlantic Lithium, First Quantum in Panama, and Tesla Investor Day
Welcome to the seventh issue of This Week in Critical Minerals, where I cover the mining and resource processing projects and technologies being built around the world.
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
For full disclosure, I am currently an Intern at MP Mine Operations LLC (MP Materials). This newsletter is in no way associated with my employer and reflects my views alone.
Some thoughts on illegal gold mining...
https://open.substack.com/pub/profvictoria/p/gold-mining-and-the-yonamami?r=bpwpi&utm_medium=ios&utm_campaign=post