Don’t forget catalytic converters as a driver of metals demand”
Jack Lifton, Founding Principal, Technology Metals Research.
Catch Jack at Mines and Money New York on Day 1 participating in Cobalt Panel Discussion: With a shortage of pure cobalt plays, should you and if so what’s the best way to play the cobalt investment thesis?
Mines and Money: You are credited with inventing the term technology metals. How did that come about?
JF: I was giving a talk in Barcelona in 2007, I was looking for a collective noun to describe them all (Cobalt, Uranium, Lanthanum, Neodymium, Cadmium, Lithium, Yttrium, Bismuth, Praseodymium, Dysprosium, Selenium, Samarium, Zirconium, Gadolinium, etc etc). I realised that if I name-checked every individual name I’d be spending the entire presentation reading the list out! So, I came up with the catch all term of technology metals. Over time this has caught on and has become an industry term.
Mines and Money: Electric vehicles have been a key driver of this commodity cycle. How are traditional car manufacturers responding?
JF: As I live near Detroit I get to speak to many of the key US car manufacturers. I can therefore say that reports of the demise of the internal combustion engine and the rise of the Electric Vehicle have been exaggerated.
What people forget about the automotive industry is that it is very capital-intensive industry. All the major automotive manufacturers have announced future capital injections into the industry. They are planning to spend US$100bn on electrification. The big questions are how will they spend that US100bn, what is their purchasing strategy for battery metals, and most importantly of all will they make money?
Car companies will not suddenly produce more electric vehicles unless they are convinced that they can make money by doing so. They only have so much capital – if they don’t sell then they are out of business.
Mines and Money: Is there enough supply?
JF: For battery metals automotive manufacturers can get all the lithium they want. However, for cobalt there is a lack of supply to meet the demand that some analysts talk about.
Car companies have noticed that the cobalt price is volatile and have factored this into their pricing models.
The only thing for certain is that lithium demand will continue but as for figuring out how the rest of metals demand will play out, that’s still up in the air.
Mines and Money: Are they any cobalt mining companies out there that you like?
JF: None I’m afraid. At BMO last year in Miami there were no cobalt juniors. Also, these cobalt juniors might produce 1000 tonnes a year. That’s not enough to make a dent into the market.
Mines and Money: What about last year’s best performing commodity, vanadium?
JF: The only vanadium company that I can confidently recommend is Largo Resources. Using vanadium in energy storage batteries is a vast improvement on existing solutions. I know there are other up and coming vanadium juniors out there, but I haven’t studied them in great detail.
Mines and Money: You are speaking at Mines and Money New York on 1 to 2 May on battery metals. What do they say to you when you talk to them?
JF: When I talk to people in NYC they are very conservative. No-one is buying into there is infinite demand for lithium and cobalt.
However, for the first time in my life I am seeing discussions in the likes of Volkswagen and Renault about actually investing into battery metals miners, rather than just buying it from the supplier.
I know this also happened a few years ago with rare earth miners which came to nothing, but this time I think its different. They are genuinely interested in talking to battery metals miners with solid management and who have done proper due diligence.
Mines and Money: The most common prediction bandied around is 30% of vehicles will be Electric Vehicles by 2030. What’s your view?
JF: Currently there are approximately 100 million cars produced every year. The industry is a very mature market. Therefore, future growth is unlikely to come from markets like the US and Europe. India and Africa are potential growth markets; China I am unsure.
One thing that is clear is that we are not talking about 150 to 200 million cars. We are also probably talking about less car manufacturers – there will be consolidation and companies will go out of business.
So, let’s assume 100 million cars. 30% equals 30 million vehicles. The next question is are we talking about battery powered vehicles or hybrid vehicles. Hybrid vehicles are by far the most efficient type of electric vehicle.
For 30 million lithium-ion batteries I don’t see a problem with mining all the lithium. I do see a problem with mining all the cobalt.
Mines and Money: Which commodities are you avoiding right now?
JF: Silver. There is a terrible series of advertisements on US TV which talk about the price of silver going to US$200 per oz, and how it is a critical energy metal. Utter rubbish!
Mines and Money: What do you think the mining industry needs to do to improve its reputation?
JF: Stop over-promoting.
Mines and Money: What commodity or investment call are you most proud in your career?
JF: I’ve been talking about PGMs for the last 25 years. I’m not interested in jewellery but there uses as an industrial metal. They are very underappreciated. Catalytic convertors need platinum, palladium and rhodium and there is a very limited amount produced, hence the extensive recycling which happens. Fuel cells also need palladium and platinum and like I said earlier, catalytic convertors aren’t about to disappear. At the bare minimum we’ll need 70 million catalytic convertors per year by 2030.