I recently sat down with Brian Menell, CEO and Chairman of TechMet, to talk EV battery mineral mining, investment in this fast-changing market, and the Inflation Reduction Act of 2022. As someone whose company is investing in mines and lithium mining startups, Brian had more to share and more perspective on these matters than anyone else I’ve talked with.
You can listen to the full discussion below via the SoundCloud player or down on the bottom of the article via the Spotify player if you prefer that.
We talked a bit about China’s leadership, foresight, and dominance of the lithium processing and associated battery cell component market. We also talked about market supply in the coming decade and whether the market can respond adequately to fast-growing demand. “I’m less worries about 2030 onwards,” Brian said. “You know, you’re right, the market generally takes cares of itself. So high prices result in stimulating more supply and it’ll eventually balance out. But we have one fundamental problem here — is that a new mine and metal processing capacity takes on average 7 to 12 years to build, and the average battery gigafactory or electric vehicle manufacturing facility takes 2 or 3 years to build.
“So, we have got the industry growing very rapidly and fully and inescapably committed to this transformation, and we’ve got our industry — the metals and mining industry — that is waiting for sustainably high prices to justify the investment in new capacity to meat the demand. And we’re gonna have a 2, 3, 5, 8 year time gap, which will result in us having higher metal prices for longer and results in very severe constraints with respect to how that growth in capacity is going to be fed with inputs. And there’s going to be some big losers, because the companies that prepare less well to engage in that supply chain, invest in mining and minerals to have preferential access to products are going to lose because you spend — you know, if you’re VW and you spend $60 billion electrifying your fleet over the next 5 years and you wake up in 5 years time and you can only utilize half of the capacity you built because you just cannot secure the units of nickel and cobalt and lithium to feed your battery factories, you know, your existence is going to be in question.
“So, you know, now’s the time when countries and companies will need to decide whether they’re going to be one of the winners or the losers, and the winners need to take equity risk in mining metal — which is tough for car companies. Because it is a different industry — different set of risk factors, different set of value drivers — and you know, they’re not that high up the learning curve. Historically, the GMs of this world have been able to rely on the fact that they’re big companies that everyone wants to sell stuff to, and they’ve been able to squeeze prices in order to maintain their margins, and everybody would run around and do what they had to do to be a supplier. And that’s no longer the case. We’re now in a sales market for all of these key inputs into an EV ecosystem which is very different to the ecosystem leading to petrol and diesel vehicles.”
As far as what automakers can and are doing, “There’s been enormous progress in as far as we were speaking to automakers a year ago. They were saying that ‘we know we need these materials in much greater volume than the world was producing them in the past, and we want offtake rights to your production, and we want some sort of price smoothing and price advantage relative to market because we know prices are gonna go up and be volatile, and in return we’ll lend you our name. You know, so we’ll give you certainty of demand and we’ll allow you to use our name so that you can validate your projects and be more financeable.’ And we were saying ‘No!’ And everyone else was saying no. So they have all come around to the realization that they’re gonna have to invest and take equity risk in the development of mining and metal processing projects in order to secure preferential access to product to feed their EV program. So that’s massive progress. And they’re all doing it.
“All of the automakers have now got teams looking at this. And all of them are doing offtake agreements, in many instances linked to some sort of pre-financing or equity-type participation in project development. But it’s in many instances a bit too little, a bit too late, and they need to do a lot more of it if they’re going to adequately feed their EV transformation. And of the recent participations that have been announced by the automakers, I’d say half are real and the other half are speculative and involve participating in projects that may or may not happen. And I’m not sure there’s enough understanding of our industry to judge what may or may not happen.”
For much more on these topics, TechMet’s investments, and Brian’s top request for the industry, listen to the full podcast. We also talked about how European governments and the Biden administration have approached these challenges and what they are doing to try to help out. We talked about the different types of EV battery metals, recycling, and other factors that are critical to EV sales growth. Interestingly, just due to the scale of the need and the lack of adequate investment in this space, Brian is even asking for more players, more competitors, more investors to get into the market or invest more in it.
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