Renewable energy and battery metals - Sykes & Trench - Nov 2017 - Centre for Exploration Targeting

AIG Battery & Strategic Metals Conference
Perth, Australia: 10th November 2017
THE IMPACT OF THE
RENEWABLE ENERGY
TRANSITION ON
BATTERY AND
STRATEGIC METAL
MARKETS
John Sykes1234 & Allan Trench125
1. Centre for Exploration Targeting, The University of Western Australia (UWA); 2. Business School, UWA;
3. MinEx Consulting, Australia; 4. Greenfields Research, United Kingdom (UK); 5. CRU Group, UK
Image: Shutterstock

WHAT IS THE ENERGY TRANSITION?
The impact of the renewable energy transition on battery & strategic metal markets
13 Nov 2017The impact of the renewable energy transition on battery & strategic metal marketsSlide 2 of 35
Image: Shutterstock

THE WORLD IS ENTERING THE ‘ENERGY TRANSITION’
BATTERIES
• Power storage / averaging
• Portable energy
• Rechargeable (reduced waste
& energy efficient)
RENEWABLES
• Theoretically infinite
• Non-carbon emission
generating (at source)
• Distributed sources
Increased
energy
demand
Increased
environment
focus
Increased
transport
Images: Shutterstock

CREATING NEW OPPORTUNITIES FOR ENERGY METALS
RENEWABLES METALS
Uranium
Rare earths (neodymium,
praseodymium &
dysprosium) – in the
generator magnet
Silicon & germanium;
Gallium-arsenide;
Copper-indium-gallium-selenide (CIGS);
Cadmium-telluride
Images: Shutterstock; Wikipedia;solarchoice
Lead-acid Alkaline (zinc-
manganese)
Lithium-ion
(graphite & cobalt)
Nickel-cadmium
/ zinc
Nickel metal (lanthanum-
rare earth) hydride
Vanadium redox
BATTERY METALS

STRAINING SUPPLY CHAINS: CREATING ‘CRITICAL METALS’
antimony, arsenic, barium, beryllium, bismuth,
boron, cadmium, chromium, cobalt,
gallium, germanium, graphite,
indium, lithium, magnesium,
manganese, mercury, molybdenum, niobium,
PGMs, rare earths, rhenium,
selenium, silicon, silver, strontium, tantalum,
tellurium, thorium, tungsten, vanadium
Components of ‘criticality’
ECONOMIC
PARADIGM
Important uses
STRATEGIC PARADIGM
Potentially geopolitically
restricted production, e.g.
USDOE critical metals reports
SUSTAINABILITY PARADIGM
Potentially environmentally /
socially restricted production,
e.g. EU critical metals reports
‘China produces 95%
of the rare earth
metals…’
“Dust emissions from the
mining of… graphite had
become a major issue, air
pollution from dust had
become… known as
graphite rain.”
- Olson, 2017
Sources: Sykes et al., 2016a,b

WE CANNOT ‘REDUCE, REUSE AND RECYCLE’ TO GROWTH
1 10 100 1000 10000 100000 1000000100000001000000001E+09
Gallium
Indium
Lithium
Cobalt
Silicon
Vanadium
Nickel
Rare Earths
Germanium
Copper
Manganese
Zinc
Graphite
Selenium
Cadmium
Lead
Tellurium
Arsenic
Theoretical Total Available for Recycling (tonnes)
0 20 40 60 80 100
Gallium
Indium
Lithium
Cobalt
Silicon
Vanadium
Nickel
Rare Earths
Germanium
Copper
Manganese
Zinc
Graphite
Selenium
Cadmium
Lead
Tellurium
Depletion Index for Material Available for Recycling (years)
Data: USGS

WE CANNOT ‘REDUCE, REUSE AND RECYCLE’ TO GROWTH
We mine ‘commodities’ but recycle ‘products’ thus not all commodities are
amenable to high levels of recycling
45%
55%
Lead Production (2012)
Primary Secondary
Landfill ‘mining’ maybe as socially and environmentally
problematic as conventional mining
Image: Guardian (Javad Tizmaghz)
Source: ILA
37%
33%
10%
5%
5% 1%
9%
Lithium Consumption (2015)
Batteries Ceramics & Glass
Lubrication Purification
Flux Aluminium
Other (inc. pharma)
Source: USGS

THE MINING SECTOR AND INVESTORS HAVE PILED IN!
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Lithium Rare Earths Graphite Lithium (again)
Talison Lithium to
raise $194m in IPO
Business News WA,
24 Nov 2009
RARE EARTHS BECOME
HOT COMMODITIES – US
IPO UP FIVEFOLD IN 10
MONTHS
TheBull.com.au, 06 Jun 2011
Why these graphite
miners have soared
more than 87%
The Motley Fool,
24 Jun 2014
Lithium-ion
battery demand
sends shares in
miners soaring,
but analysts
predict bubble
will burst
ABC, 14 Jun 2016
They’ve got the power:
Battery stocks charging
up, analysts say
The Sydney Morning Herald, 2 Jul 2014
Uranium
Investors put
stock in
uranium
ABC, 24 May 2006

…BUT IT HAS NOT BEEN AS SUCCESSFUL AS HOPED!
Molycorp files for
bankruptcy as rare
earth prices drop
- Bloomberg, 25 June 2015
Graphite junior
Triton Minerals in
shock collapse
- The Australian, 4 March 2016
Valence
Industries
enters
voluntary
administration
- Australian Mining, 20
July 2016
Year-end turn in rare
earth prices seen as
Lynas losses near $1b
- The Sydney Morning Herald, 10
March 2016
Integrated
business
still a Galaxy
away
- The Australian
Mining Review, 27
March 2013
RB Energy
shutters Quebec
lithium mine as
financing fails
Financial Post,
8 Oct 2014
Great Western
Minerals is
Bankrupt
- Newswire, 3 Dec 2015
* Galaxy Resources’ Mt Cattlin mine
re-opened in 2017 (Source: ABC)
* Triton
Minerals re-
listed later in
2016 (Source:
Proactive
Investors)

ENERGY METALS MARKET GROWTH HAS BEEN VARIED
0
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Growth of metal market groups
2005-14 (US$ billions)
Base Metals Precious Metals
Minor Renewables Metals Minor Battery Metals
Minor Critical Metals
Battery Metal 2006-15 Price Change
Rare earths 257%
Lithium 155%
Graphite 126%
Manganese 51%
Zinc 32%
Lead 18%
Cobalt -5%
Nickel -51%
Cadmium -51%
Vanadium -47%
Source: USGS (2015)
For category definitions see appendices
Renewables Metal 2005-14 Price Change
Silicon 114%
Arsenic 83%
Germanium 32%
Selenium -10%
Tellurium -13%
Copper -19%
Uranium -23%
Gallium -28%
Indium -36%

DO WE HAVE EVIDENCE OF THE
TRANSFORMATION OF METAL MARKETS?

EVIDENCE OF PAST TRANSFORMATIVE MARKET GROWTH
0
100
200
300
400
500
600
700
800
900
1900
1909
1918
1927
1936
1945
1954
1963
1972
1981
1990
1999
2008
Growth in market size indices of
copper and aluminium 1900-2014
(1900 = 1)
Cu Index Al Index
0
50
100
150
200
250
300
1900
1909
1918
1927
1936
1945
1954
1963
1972
1981
1990
1999
2008
copper and nickel 1900-2013
(1900 = 1)
Cu Index Ni Index
0
5
10
15
20
25
30
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
copper and uranium 1950-2013
(1950 = 1)
Cu Index U Index
Data: USGS

INSTIGATED BY DISCOVERY, SUPPLY AND DEMAND
Nickel
Discoveries in Sudbury &
New Caledonia
Bulk open pit
mining
Flotation & smelting
advances
Demand for
armour
Ability to handle
radiation
Uranium
Demand for
nuclear
weapons
Demand for
nuclear power
Bulk mining for very low
grade radium
Radium-uranium
discoveries in the
Congo
Aluminium
Bauxite discoveries
in North America
Bayer and Hall-Heroult
processes
Aviation demand
Bulk open pit mining
Source: Sykes et al., 2016b

WHICH ENERGY METALS HAVE POTENTIAL
FOR TRANSFORMATIVE GROWTH?

SOME ENERGY METAL MARKETS ARE LESS CONSTRAINED
Metals Constraints removed
Graphite Discovery Sup. Use
Copper Dis. Supply Use
Germanium Dis. Sup. Use
Indium Dis. Sup. Use
Tellurium Dis. Sup. Use
Arsenic Discovery S Use
Gallium Dis. Sup. Use
Selenium Dis. Sup. Use
Silicon Dis. Sup. Use
Cobalt Dis. S Use
Lithium D Sup. Use
Metals Constraints removed
Nickel Dis. Sup. U
Vanadium Dis. Sup. U
Lanthanum D S Use
Lead Discovery S
Cadmium Dis. Sup.
Manganese Dis. S U
Zinc Dis. S U
Neodymium D S Use
Praseodymium D S Use
Dysprosium D Use
Uranium D S
Fullyunconstrained
Fullyunconstrained
Most
constrained
Least
constrained
Source: Sykes et al., 2016a

SOME ENERGY METALS MARKETS HAVE MORE POTENTIAL
Finalmarketsizepotential
Lack of discovery, supply & demand constraints on the market
High potential and few constraints
Low potential but few constraints
High potential but many constraints
Low potential and many constraints
Nd
Si
Se
As
Te
Cu
Ga
Ge
In
Pr
Dy
U
Co
LiLa
V
Cd
Mn
NiZnPb
C

BUT ENVIRONMENTAL & SOCIAL FACTORS ADD COMPLEXITY
Energy transition
requires electric
vehicles
Increased
mining of rare
earths in China
Questionable
environmental and
social impacts
Switch back to ferric
magnets required?
Electric vehicles
require better
motor magnets
Rare earth
magnets are
technically better
Image: Reuters
Based on: Widmer et al., 2015
Rare earth magnets case study

SOME ENERGY METALS ARE ENVIRO-SOCIALLY
CONSTRAINED
Abilitytoresolveconstraint
Type of market constraints
Resolvable societal constraints
e.g. conflict
Unresolvable societal constraints
e.g. toxicity
Resolvable technical constraints
e.g. processing challenges
Unresolvable technical constraints
e.g. geological scarcity
Pr
USe
Dy
Ga Si
Nd
As
Cu
Te In
Ge
Co
Li LaV
Cd
Mn
Ni
Zn
Pb
C

HOW WILL THE MINING SECTOR BE
IMPACTED BY THE ENERGY TRANSITION?

MINING IS IMPACTED BY THE ENERGY TRANSITION TOO
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Surface Mine UG Mine Mill
Other
Steel
Equipment,
Tyres & Parts
Explosives &
Reagents
Fuel &
Electricity
Labour
Data: CostMine, July 2016
Solar power at Sandfire Resources
Degrussa mine, WA
All electric underground mine planned
by Goldcorp at Borden, Canada
Wind power for copper mines in Chile
owned by Barrick
‘Flexicycle’ using biodiesel power at
Pueblo Viejo, Dominican Republic (Barrick)

…WITH MULTIPLE FACTORS CAUSING THE TRANSITION
Movement towards all
electric underground
mines
Focus on
greenhouse gas
reduction
Health concerns
surrounding diesel
emissions in
confined spaces
Improved
battery
technology
Volkswagen
NOX & SOX
emission scandal
Movement
towards
underground
mines
Focus on social &
environmental
footprint of
surface mining
Fewer surface
mineral deposits
awaiting
discovery
MOVEMENT TOWARDS ALL
RENEWABLE ELECTRIC
UNDERGROUND MINING?
Improved
automation and
remote technology
Safer
underground
mines

WHAT DOES THE FUTURE LOOK LIKE FOR
MINING & RENEWABLES COMPANIES?

NAVIGATING THE ENERGY TRANSITION IS COMPLEX
Wonderland
1984
Left behind
High tech
Discworld
NOW
(An unknown
number of
economic cycles
to come)
Low tech
(Beyond which is
the unknown)
‘Economic paradigm’
‘Sustainability
paradigm’
‘Strategic paradigm’
‘Transition’
Images: Amazon

FIRST SURVIVE OUR ‘OLD WORLD’ OR ‘DISCWORLD’
OLD
ECONOMY
STRATEGIC
RESOURCES INEQUITYPROTECTIONI
SM
STRATEGIC
RESOURCES
ISIS
BIG
MINING
ECONOMIC
PARADIGM
COAL
POWER
POLLUTION
WASTE
PETROL
CARS
…with an unknown number of economic cycles to come, so you have to be good at ‘business as usual’
BOOM &
BUST
BIG OIL

KNOW WHEN TO STEP THROUGH THE ‘TRANSITION’
…but into which future?
Image: Shutterstock

…ALL WE KNOW IS THAT IT CAN BE VOLUNTARY OR FORCED
WONDERLAND NINETEEN EIGHTY-FOUR
(common in Eastern culture) (common in Western culture)
Images: Maya Eilam

THEN THRIVE IN THE FUTURE: WONDERLAND?
GREEN
ECONOMY
STRATEGIC
RESOURCES
SILICON
VALLEY
PROTECTIONISM
STRATEGIC
RESOURCES
ISIS
DISRUPTION
SUSTAINABILITY
PARADIGM VOLATILITY
CETA DEAL
INNOVATION
PARIS
AGREEMENT
Disruptive innovation within a global regulatory framework allows leads to voluntarily energy transition
GLOBALISATION TESLA

THEN THRIVE IN THE FUTURE: NINETEEN EIGHTY-FOUR?
NEW
WORLD
STRATEGIC
RESOURCES
BREXITPROTECTIONISM
STRATEGIC
RESOURCES
ISIS
OLD
WORLD
MILITARY-
INDUSTRIAL
COMPLEX
TRUMP
STRATEGIC
PARADIGM
WARPROTECTIONISM
PUTIN
ISIS
Geopolitics and conflict forces a government-led energy transition in the fossil-fuel poor parts of the world

WHAT DOES ALL THIS MEAN FOR MINING
COMPANIES AND THEIR INVESTORS?

THERE ARE DIFFERENT IMPLICATIONS FOR EACH SCENARIO
Business capabilities
• Spot new technology by working with innovators ‘on the
ground’;
• Understand niche markets before they become the next big
thing;
• Be able to scale globally quickly.
Winners & losers
• In a globalised world only one or two battery technologies,
hybrid car companies, and renewable energy sources will
win, so backing the right idea early is critical.
• However advantage is only ever temporary, as the next big
thing is already on its way – innovate ruthlessly to stay on
top.
Business capabilities
• Work closely with government to ensure you understand their needs and
get the big contracts;
• Global scaling is impossible;
• Understand your local market, and what technologies can work in your
part of the world.
Winner & losers
• In a divided world many ‘just good enough’ energy technologies will exist,
supported by government and their geopolitical need, so picking ‘a
winner’ is less important – government relationships are more important.
• The slow changing nature of government and the focus on defenceof the
state means that within each block this is a stable, slow changing world
with long-lasting competitive advantage.
WONDERLAND NINETEEN EIGHTY-FOUR
Because it is not possible to see what the world will look like after the energy transition mineral explorers, miners, renewable energy companies, hybrid car
companies, battery makers and other companies affected by the energy transition need to be prepared to thrive in both scenarios:

A STRATEGIC APPROACH TO THE ENERGY TRANSITION
• The energy transition will likely have a substantial impact on some currently minor metal markets;
• Some minor metals markets have the potential for transformational growth becoming a major ‘battery metals’ and/or ‘renewables metals’ industrial
sector (together the ‘energy metals’);
• However, of the energy metals some face more severe constraints on geological discovery, technical supply and demand growth, as well environmental
and socio-political constraints;
• The mining industry will therefore have a major impact on which minor metals will become available for mass consumption as energy metals by
renewables and battery companies;
• However, some battery metals such as lithium, vanadium and nickel and renewables metals such as silicon and gallium do seem to have more potential
than the others;
• In turn, as a major energy consumer in remote locations the mining sector will be impacted by and may be a driver of the energy transition;
• In the end, the socio-political context of the energy transition will determine what sort of future we progress into; with different implications for the
‘energy metals’ sector in each;
• For the affected businesses navigating the energy transition will be difficult as it is not obvious when it will arrive, or what it will look like when it
does;
• Mining, exploration, renewables and battery companies seeking to capitalise on growth in the ‘energy metals’ sector need to:
– Target those metal markets with the most potential for substantial market growth;
– Approach these metal markets in a holistic manner, removing discovery, supply, demand, technical, environmental and socio-political constraints;
– Be ready for a three stage approach: survive the present, see the energy transition, and thrive in the future (whatever it is).

THANK YOU
Contact details:
• John Sykes: john.sykes@research.uwa.edu.au
• Allan Trench: allan.trench@uwa.edu.au
We’d like to acknowledge the efforts of the Centre for Exploration
Targeting scenario planning team whose work contributed to this
presentation:
• John Sykes, Allan Trench, T. Campbell McCuaig, Jonathan Bell, Jeremie Giraud,
Constanza Jara Barra, Ahmad Saleem, Dave Stevenson and Jan Tunjic.
We’d also like to acknowledge the following collaborators for their
contributions to this research:
• Sam Davies, Aaron Dixon, Mark Jessell, Heta Lampinen, Cam McCuaig, Paul Miller,
Nico Thebaud & Josh Wright.
Image: Shutterstock

REFERENCES
• Sykes, J. P., Wright, J. P., Trench, A., & Miller, P. 2016a. An
assessment of the potential for transformational market
growth amongst the critical metals. Applied Earth Science,
125:1, pp21-56.
• Sykes, J. P., Wright, J. P. & Trench, A. 2016b. Discovery,
supply and demand: From Metals of Antiquity to critical metals.
Applied Earth Science, 125:1, pp3-20.
Image: Shutterstock

APPENDICES

CATEGORY DEFINITIONS FOR SLIDE 10
• Precious metals: gold, platinum groups metals & silver
• Base metals: aluminium, copper, lead, nickel, tin & zinc
• Renewables metals: arsenic, gallium, germanium, indium, rare earths, selenium, silicon, tellurium & uranium
• Minor battery metals: cadmium, cobalt, lithium, manganese & vanadium
• Other minor critical metals: antimony, barium, beryllium, bismuth, boron, chromium, magnesium, mercury,
molybdenum, niobium, rhenium, strontium, tantalum, thorium, titanium & tungsten

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