The Energy Transition Will Transform The Mining Industry.

The Energy Transition Will Transform The Mining Industry.

But how might transition metals markets cope?

By 2050 the energy transition could see nickel (Ni) demand triple, copper (Cu) demand more than double, and demand for Lithium chemicals grow 700%. The burden on miners of transition metals will be immense and the industry will be transformed as investors scramble to deliver the necessary metal.

For battery raw materials in particular there will be a reliance on deposits that are as yet undefined. Lithium is a prime example. There is plenty of uncertainty around the costs of extraction at known Lithium projects, let alone the millions of tonnes of Lithium required from unexplored sources, some of which will rely on untested technologies. Add in the likelihood of global carbon prices and you can understand why long-term pricing for Lithium and other energy transition metals is the subject of fierce debate.

So how should we think about the costs of supply and therefore prices – in a much larger, carbon adverse future market?

Let’s stick with Lithium and start by looking at today’s cost curve. The current marginal C1[1] cash cost of Lithium chemical production (on an LCE refined[2] basis) is about US$5,000/t for brine, US$9,000/t for spodumene, and over US$10,000/t for lepidolite – based upon costs to produce, transport and refine the concentrate.

Given prices are currently sitting at about US$60,000/t LCE refined, it is reasonable to ask whether costs are a good indicator of future prices. But Lithium is one of the more abundant elements on earth, and it is also reasonable to expect that Lithium will eventually behave similarly to all other mined metals. That is, the market will be cyclical with prices falling back to cost curve support levels from time to time. It is likely that cost curve support will become more frequent once the automotive and grid storage sector decarbonisation reaches maturity and demand growth slows.

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