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💬 "Creating Supply Chains For Critical Minerals"

Columbia Energy Exchange

Photo by Savannah Wakefield / Unsplash

Table of Contents

Host: Bill Loveless
Guest: Frank Fannon | Managing Director | Fannon Global Advisors
Category: 💬 Opinion

Podcast’s Essential Bites:

[3:59] “Critical minerals can be broken down in a couple of different areas in terms of industry focus. […] Really the predominant area where critical minerals have come up has been in the defense area. […] But that concept has certainly expanded and the energy transition has really increased the importance of the discussion around critical minerals. And effectively what we were speaking about is we're transitioning not just in terms of energy systems, but the energy types and where things come from. I mean, everything in this world is either mined or grown. And so we're really shifting from the fossil based minerals that are used in energy systems today to different metals that are used in energy systems. And […] that transition means we have to go to different places to source those minerals.”

[5:35] “An electric car, of course […] won't use oil any longer, but it will use six times the amount of minerals than a conventional internal combustion engine vehicle. An offshore wind plant requires nine times more minerals than a gas fired power plant. So we're moving from the fossil dependency to a new intensity of minerals. And some of these minerals include things that go directly into the electric vehicle […], cobalt, lithium, nickel and graphite […] as well as copper is required for the electrification of the world.”

[6:21] “It's important to distinguish where they are versus where they're actually being mined. […] We have a lot of them here in North America and the United States in particular. But increasingly, they're mined elsewhere. […] Depending on the mineral, it’s places in different African countries, like the Democratic Republic of Congo […]. But also China has a lot of these, Russia has a lot of nickel, for example, which is critical to batteries. But there [are] tremendous amounts in North America and in the United States and we're seeing an increasing awareness. And I also think it's important to underscore that this is something that has a degree of continuity across administrations. The Trump administration initiated a critical mineral review, […] a similar review was done under the Biden administration in their 100 day supply chain report. […] We really have to move beyond the identification to the development of these resources.”

[10:57] “In order to get a mine built in the United States, it's more than a decade long experience versus two to three years in places like Australia and Canada. Why is that? We need to seriously rethink that. […] There is this mismatch in terms of capital. But also we have to think about, if we're not going to develop these resources of these critical minerals, who is. And if prices are too high […] [for] the commodities that go into the electric vehicle, we need to make sure that those vehicles are affordable for people. Having a volatile price on critical minerals is no way to make an affordable energy transition.”

[12:12] “In the IAEA report, […] they were looking at a 30 to 40 times increase in demand for minerals through 2040. It really begs the question of where are they going to come from given […]this high price environment where we find ourselves. That means the price escalation will be effectively exponential, unless we create new sources of supply. And, again, the US is blessed with having some of these mineral resources here at home. I'm involved in a project that's a direct lithium extraction out of Arkansas, [where] a new kind of technology is being applied. So I deeply believe in the innovation agenda of the United States entrepreneur and corporate sector, and the support that the US government can provide to accelerate not just the R&D component, but really the commercialization is what we needed. And we need it done at scale to ensure that our OEMs are able to deliver on the commitments they have been making.”

[14:30] “To advance a mine you effectively need three critical components. You need social licence to operate. You need grade, [that means] is this a metal of sufficient quantity and quality that's economic. And third, do you have an appropriate time horizon to develop the project aligned with market expectations? There are very few projects that seem to have these three criteria at present. And this is where I do think there's a role for government to work with the producers, with the companies, and also perhaps to moderate some of the however well intentioned opposition interests may be. Because we have a pretty binary choice here. […] We have to get these minerals, you can't produce an electric vehicle without them.”

[15:46] “The World Bank [and] the International Renewable Energy Agency have identified that a lot of these minerals are coming from places [where] the projects do not align with human rights standards. They are done in ways that are not sustainable, they harm the environment. And […] they don't empower local communities. So we really have to be pretty thoughtful about where they're coming from and where they're not. I've been calling for a degree of standard setting to recognize companies that really do adopt best practice and advance our traditional values and the way they operate at home, but also around the world. The market needs to include those preferences, or else the energy transition, if it's not done [...] inclusive[ly], […] it could have a perverse outcome on other countries around the world.”

[29:25] “[China] dominate[s] something like 60% of the world's global lithium refining capacity, […] some 85-90% of rare earths metals refining, 70% of cobalt refining, 80% of the production. They could flood the supply and then take you out of the money. So that's why […] it's so important for the US government, but even more Western companies prioritize sourcing from the United States and from our friends and allies around the world. Because then that sends […] the necessary market signal to market participants to invest the capital, to develop the technology, and build the projects, because they know that there's going to be an off take and not allow state actors who have a dominant role to control either side of the transaction, either by restricting or flooding the market.”

Rating: ⚡⚡⚡

🎙️ Full Episode: Apple | Spotify
🕰️ 46 min | 🗓️ 10/19/2021
✅ Time saved: 44 min

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