The era of electric vehicles (EVs) and other battery-powered technology has also ushered in the age of "new energy minerals". The International Energy Agency's 2018 World Energy Outlook, in its core scenario, suggests that one-in-five cars sold in the world will be electric by 2040 (but in China it could be and one-in–three cars). This shift to EVs presents an exciting opportunity for mineral resource exploration companies as we observe a recent spike in demand across the mineral industry (see The Electric Vehicle and Battery Revolution: Are Our Miners Ready?).
While Australia is a top global producer and exporter of minerals such as copper, nickel and zinc; this article explores the further opportunity of vanadium, lithium and cobalt as the key base materials in the "new energy minerals" space. In the context of the conversation around the "future of mining" in Australia, these minerals present an especially pertinent (and lucrative) alternative in powering the emerging technologies of the future. However, explorers need to be aware of commercial and regulatory issues affecting the potential exploitation of these mineral resources.
Copper, nickel and zinc
Australia is the third largest exporter of copper and zinc and is the fifth largest exporter of nickel. There are zinc and copper projects across all Australian jurisdictions, while nickel projects predominantly exist in Western Australia (WA). The production of equipment and infrastructure requires copper, nickel and zinc either as the main component of these products as well as being used in the steel making process (nickel and zinc). However, while China remains the main importer of these materials – the trends are due to change as China and other nations explore the development of battery-powered renewable technologies.
Vanadium, lithium and cobalt
Lithium has been the relatively recent focus of both the private and government sectors, especially in WA. Lithium is an essential ingredient in Tesla battery packs and has seen companies being able to capitalise on this demand including Altura Mining, Pilbara Minerals (who shipped their first lithium concentrate from Port Headland bound for North Asia in October 2018) and Queensland's Novonix.
The rise of importance of lithium to the Australian resources sector is demonstrated by the fact that Lithium now has its own chapter (alongside coal, gas, copper etc.) in each edition of the Resources and Energy Quarterly published by the Federal Industry Department.
Similarly, EVs are the basis for the growing cobalt demand – as Cobalt is an essential ingredient to extending the life of the car battery. The demand for cobalt for battery purposes is now responsible for 50 percent of the industry demand.
As a recent example of the growing cobalt development, in Queensland Aeon Metals has launched the Walford Creek Cobalt & Copper Project as it is confident that this site contains one of the highest grade and largest tonnages of cobalt metal content among the cobalt sulphide deposits in Australia. Cobalt took somewhat of a hit when Tesla boss Elon Musk declared that he was aiming to eliminate use of cobalt from his batteries – cobalt is trading on the LME for around US$55,000/tonne. Others argue that reducing the use of cobalt reduces battery performance.
The newest mineral on the scene, vanadium, is an alternative to lithium and cobalt batteries. Like lithium, vanadium compounds form a "vanadium rechargeable redox battery". Junior explorers, including Hardey Resources, are looking to export vanadium produced from reserves in Queensland and WA.
The battery and automative industries are now confronting supply chain challenges due to the spike in the demand for these "new energy minerals" across the globe. As a result, to ensure a reliable supply of these materials there is greater equity and offshore investments into Australian projects as a way to ensure offtake.
Australia is also experiencing significant overseas investment interest in these minerals by virtue of Australia's strong regulatory requirements, which requires the extraction of these minerals in both an ethical and environmentally sustainable manner, aligning with the environmentally friendly stance of the renewable and electric car industries.
However, this strong regulatory framework can result in complex environmental approval processes that need to be navigated. In particular, the Queensland and New South Wales Governments continue to introduce regulatory changes to ensure that the long-term impact of mining activities are minimised and remediated to the greatest extent possible. This often means additional hurdles need to be satisfied in order to obtain all approvals required to commence production of a mineral project.The investment attractiveness of a mineral project can be achieved if the proponent is able to secure their "social licence to operate" through a cooperative relationship with a broad range of stakeholders including government agencies, community groups, native title parties and landholders.
New Energy Minerals are in high demand
Despite these challenges, nations are seeking to meet their clean energy targets (and therefore require a reliable source of energy to power the battery life of this technology). Australia has a unique position with rich deposits of all of the above minerals to step up and meet the demand.
As noted in the recently published Federal Government's Resources 2030 Taskforce Report "Australia urgently needs to find major new, high-quality, tier one resource bodies which can replenish its project pipeline and capitalise on growing global demand". Simultaneously, the Junior Minerals Exploration Incentive (JMEI) introduced by the Federal Government in early 2018 aims to unlock this economic potential.This allows eligible companies to give up a portion of their losses from greenfields mineral exploration expenditure to investors in the form of a refundable tax offset attaching to newly issued shares.
For those who are already part of, or wish to join, the fast growing "new energy minerals" space in Australia, McCullough Robertson can assist in structuring your transactions to maximise your return as well as navigating through the complex approval regimes in each jurisdiction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.