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Europe, Problems with minerals

Mark Mills, speaking at a recent conference held by Norwegian funds management group, SKAGEN Funds, said that expecting the global EV transition from ICE vehicles to take place in the same time frame as occurred in Norway was impossible because the global demand for electric infrastructure and EV-specific minerals could never be met.

He said the mining industry throughout time has never managed to increase production at more than 10 per cent a year yet the demands required under projections envisioned by the EV industry would require mineral production increases in some cases as high as 7000 per cent a year.

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Mr Mills is a senior fellow at the Manhattan Institute and a faculty fellow at Northwestern University’s McCormick School of Engineering and Applied Science. He is also a strategic partner with Montrose Lane (an energy-tech venture fund) and has an early background in mining.

Mr Mills said that if the mining industry were to achieve the aspirations of the EV supporters it would be “the largest single increase in demand or supply of metals in all of human history. It has never happened.”

He said that a study by the Electric Power Research Institute, a nonprofit research group in the United States for the electric industry “reached the conclusion that it doesn’t look like it is structurally possible to make the transition in the way that is imagined.”

He said that an EV requires 400 per cent more metals and minerals to build compared to a conventional car and that people “are suffering some modest delusion about what the possibilities are in the mining sector”.

He asked: “Is it possible? Can the world increase the production of these kinds of metals, not by 10 or 20 per cent, not by 50 per cent, not by 200 per cent, but from 700 to 7000 per cent; and in timeframes that are meaningful, which is in the next decade or two?”.

Mr Mills said under the current levels of mining investment required to build the cars, batteries and electrical infrastructure to make that happen the energy transition envisaged, “the reality is that it will fall well short.”

“The world’s miners are not investing 90 per cent of what’s required, nor 50 per cent of what’s required. They’re not even investing 10 per cent of what’s required in global mining expansion to meet the aspirations to build quantities of machines (EVs, batteries, windmills, etc) to have the rest of the world follow Norway.”

He also warned that on average globally, it takes about 16 years to open a new mine.

“In very simple terms, that means that if tomorrow we started investing the necessary amount of capital in exploration efforts, it will be 16 years before the first mines that we need will be open.

“This is a long way after the aspirations have kicked in to build the quantities of batteries, windmills and solar arrays that the world imagines outside of Norway.”

He told the conference that another challenge was that globally the grades of ore (the amount of ore recovered per tonne of mined material) are declining.

“Over all of history, the grade of ore that we mined has been declining – especially for the higher value of metals like copper, nickel, molybdenum, and magnesium.”

He said that the world will be short of copper, fundamental to the EV transition, “in the next year or two.”

“Copper ore grades are typically 1 per cent which means you have to dig up a tonne of ore to get 10kg and that doesn’t count the tonnes of rock overburden that are in the way of the ore. So you dig up tonnes of material to get to kilograms of metal.

“It means that the world is chasing larger quantities of metals from declining ore grades which means that the larger quantities of metals that are produced, the larger quantities of energy will be consumed to produce those metals to deliver to markets.”

He said that the increase in energy consumption as ore declines is nonlinear and the energy consumed rises exponentially.

“This is a non-trivial problem. It means that the future of electric cars, the future solar module, the future wind turbines, carbon dioxide emissions and metal requirements are rising non-linear just to fabricate them.

“So never mind whether (the minerals) are available, the cost just to fabricate them (the energy transition) will require the world to consume fuels and emit carbon dioxide at levels that are frankly unprecedented in mining history. We will solve those problems in due course. But in the mining industry, those problems get solved over decades, not in years.”

Mr Mills warned that as the world chases more and more minerals for the EV transition that the world’s miners are not able to supply, there would be large inflationary pressures in EV minerals.

“So when you look at the aluminum, steel and nickel and cobalt and look at the cost of purchase to make a single EV, that cost per EV was around $4000 before metal price inflation really started to kick in and it doubled to about $8000.

“If the world chases more product than the world can supply, that’s the textbook definition of inflation.

“The question you would ask is how much inflation would we get … on metals as the world chases the energy transition? The underlying fact is prices don’t go down. They just don’t go down.

“If you have 16 years to add supply, on average, a decade at best, and you increase demand immediately, which we are now doing with policies everywhere in the world, you should expect prices to not only go up, but to perhaps go up a lot.”

Mr Mills produced data that suggested that the global energy transition plans would put pressure on metals “that will cause all metals to reach historic price levels for an unprecedented length of time.”

“If you cause metal prices go up 200 to 300 or 400 per cent, or in lithium’s case 1000 per cent, you will have a top-line effect on global inflation.

“This will impact wind, solar and battery and EV prices because they’re made from these metals. The whole demand pressure is coming from those metals. Almost the entire increase that’s been going on at the cost of building wind turbines, solar modules and batteries is the cause of the increasing costs of the mineral inputs.”

Mr Mills said that roughly 70 to 80 per cent of the costs of fabricating an EV battery today is in the purchase price of the materials and 80 per cent of the cost of a solar module is in the purchase price of the materials.

He said that “the much vaunted claim” that the cost of minerals will fall as production volumes increase is incorrect and that the industry should in fact see increases of 200 to 300 per cent.

“These are the rising real prices that governments can hide with subsidies for a while, but the real costs are going up.

“So on what possible basis are forecasters saying that metal prices are going to go down after they’ve been rising in the face of these kinds of demand pressures?

“I don’t think they’re going to go down but this is a bet that people are making,” Mr Mills said, Go Auto Premium News writes.

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