The Energy Transition: Miners Perspective - Sykes et al - Nov 2016

1. THE ENERGY
TRANSITION:
Some thoughts for
explorers, miners
and moneyers
John P. Sykes12, Allan Trench345,
and Joshua Wright6
1. Centre for Exploration Targeting, UWA: john.sykes@research.uwa.edu.au
2. Greenfields Research Ltd, United Kingdom
3. Centre for Exploration Targeting, UWA: allan.trench@uwa.edu.au
4. Business School, UWA
5. CRU Group, United Kingdom.
6. Rowton Ltd, United Kingdom: josh.wright@rowton-ltd.com
Mines and Money Conference, London: UK
29th November 2016

2. Mines & Money Conference, London, UK
The energy transition: some thoughts for explorers, miners and moneyers
The energy transition: Some thoughts for explorers, miners and moneyersSlide 2 of 31 29 Nov 2016

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The world is entering the ‘energy transition’
BATTERIES
Power storage/averaging
Portable energy
Rechargeable (reduced
waste & energy efficient)
Image: TonyV3112 / Shutterstock.com
Image: Claudio Divizia / Shutterstock.com
RENEWABLES
Theoretically infinite
Non-carbon emission
generating (at source)
Distributed sources
Increased
energy
demand
Increased
environmental
focus
Increased
transportation
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Creating new opportunities for energy metals
Lead-acid Alkaline (zinc-
manganese)
Lithium-ion
Nickel-
cadmium/zinc
Nickel metal (lanthanum-
rare earth) hydride
Vanadium redox
BATTERY METALSRENEWABLES METALS
Uranium
Rare earths
(neodymium,
praseodymium &
dysprosium) – in the
generator magnet
Silicon & germanium;
Gallium-arsenide;
Copper-indium-gallium-selenide (CIGS)
Cadmium-telluride,
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Straining supply chains; thus creating ‘critical metals’
antimony, arsenic, barium, beryllium,
bismuth, boron, cadmium, chromium,
cobalt, gallium,
germanium, indium,
lithium, magnesium, manganese,
mercury, molybdenum, niobium,
PGMs, rare earths,
rhenium, selenium, silicon, silver,
strontium, tantalum, tellurium,
thorium, tungsten, vanadium
Components of ‘criticality’
Important
uses –
‘economic
paradigm’
Potentially geopolitically
restricted production –
‘strategic resources’
paradigm e.g. USDOE
critical metals reports
Potentially environmentally /
socially restricted production
– ‘sustainable resources’
paradigm e.g. EU critical
metals reports
‘China produces
95% of the rare
earth metals…’
‘The problem
with nuclear
power is not
uranium supply
but waste
disposal…’
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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 $194m in IPO
Business News WA,
24 Nov 2009
RARE EARTHS BECOME
HOT COMMODITIES – US
IPO UP FIVEFOLD IN 10
MONTHS
TheBull.com.au, 06 Jun 2011
Why these graphite
miners have soared
more than 87%
The Motley Fool,
24 Jun 2014
Lithium-ion
battery demand
sends shares in
miners soaring,
but analysts
predict bubble
will burst
ABC, 14 Jun 2016
They’ve got the power:
Battery stocks charging
up, analysts say
The Sydney Morning Herald, 2 Jul 2014
Uranium
Investors put
stock in
uranium
ABC, 24 May 2006
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But energy metals market growth mixed so far
0
200
400
600
800
Growth of metal market groups
2005-14 (US$ billions)
Minor Critical Metals Minor Battery Metals
Minor Renewables Metals Precious Metals
Base Metals
Battery Metal
2005-14 Price
Change
Lithium 155%
Rare earths 59%
Manganese 52%
Lead 43%
Zinc 32%
Nickel -5%
Cobalt -25%
Cadmium -51%
Vanadium -72%
Source: USGS (2014)
Renewables
Metal
2005-14 Price
Change
Germanium 138%
Copper 100%
Arsenic 51%
Silicon 46%
Tellurium 2%
Uranium -1%
Indium -38%
Gallium -44%
Selenium -57%
For category definitions see appendices
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The energy transition: some thoughts for explorers, miners and moneyers
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Major market shifts have occurred before
0
50
100
150
200
250
300
1900
1909
1918
1927
1936
1945
1954
1963
1972
1981
1990
1999
2008
Growth in market size indices
of 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
Growth in market size indices
of copper and uranium 1950-
2013 (1950 = 1)
Cu Index U Index
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
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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
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The energy transition: some thoughts for explorers, miners and moneyers
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Some energy metal markets are less constrained
For more information: Sykes et al., 2016a
Metals Constraints removed
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
Metals Constraints removed
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
Nickel Dis. Sup. U
Fullyunconstrained
Fullyunconstrained
Most
constrained
Least
constrained
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Some metals markets have more potential
Finalmarketsizepotential
Lack of discovery, supply & demand constraints on the market
High potential
Few constraints
Low potential
Few constraints
High potential
Many constraints
Low potential
Many constraints
Co
Li
La
V
Cd
Mn
NiZn
Pb
For more information: Sykes et al., 2016a
Nd
Si
Se
As
Te
Cu
Ga
Ge
In
Pr
DyU
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But the change is unpredictable!
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
ShareofGlobalCuMine
production
United Kingdom Chile USA Other “…in 1898.. Bingham Canyon… was
something of a joke… only barren
quartz rock flecked with a trace of
copper. Nobody could make money
out of so little. …the world’s most
famous mining man [Chief Engineer
for the Guggenheims] turned up his
nose. It was ridiculed by the most
respected mining journal of the day.
…The shovels started… in June 1906.”
Decline of UK
mining, rise of
Americas
Resurrection
of Chilean
industry
Sources: Lynch (2002), Crowson (2012)
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…and complicated by societal changes!
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Cuoregrade(%)
Cornwall (UK) Average UK Average
Michigan (USA) Average USA Average
Western World Average World Average
Change from high grade
underground mining in UK to
low grade open pits in USA
Further low grade copper
mining innovations and
rise of Chile
20th century copper
mining technology,
innovation &
discovery package
Dynamite
Steam
power
The
corporation
Mechanisation
Major public
infrastructure
Flotation
Improved
smelting &
refining
Airborne
geophysics
Porphyry
geological
model
Better work
practices
SXEW
Computation
Low cost
drilling
Globalisation
Free trade
Forward
contracts
Regime
change
Sources: Lynch (2002), Schodde (2010), Crowson (2012)
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Some metals have societal constraints
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
For more information: Sykes et al., 2016a
Co
Li
La
V
Cd
Mn
Ni
Zn
Pb
Pr
USe
Dy
Ga
Si
NdAs
Cu
Te In
Ge
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The energy transition: some thoughts for explorers, miners and moneyers
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Navigating the energy transition is complex
Wonderland
Battlefield
Left behind
High tech
Old
World
NOW
Transition
(An unknown
number of
economic cycles
to come)
Low tech
(Beyond
which is
the
unknown)
‘Economic
paradigm’
‘Sustainability
paradigm’
‘Strategic paradigm’
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First survive our ‘OLD WORLD’
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
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Know when to go through the TRANSITION
…but into which future?
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…all we know is that it can be voluntary or forced
WONDERLAND BATTLEFIELD
(common in Eastern culture) (common in Western culture)
Story line references: http://io9.gizmodo.com/the-universal-shapes-of-stories-according-to-kurt-vonn-1526559996
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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
Geopolitics and conflict forces a government-led energy transition in the fossil-fuel poor
parts of the world
GLOBALISATION TESLA
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Then thrive in the future: BATTLEFIELD?
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
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…but beware things may not be what they first seem…
WONDERLAND? BATTLEFIELD?
Story line references: http://io9.gizmodo.com/the-universal-shapes-of-stories-according-to-kurt-vonn-1526559996
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…and continue to be not what they seem…
WONDERLAND??? BATTLEFIELD???
(this presentation?)
Story line references: http://io9.gizmodo.com/the-universal-shapes-of-stories-according-to-kurt-vonn-1526559996
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The energy transition: some thoughts for explorers, miners and moneyers
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There are different implications for each scenario
WONDERLAND
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.
BATTLEFIELD
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 defence of
the state means that within each block this is a stable, slow changing
world with long-lasting competitive advantage.
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 – however both scenarios
require different capabilities:
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Some final thoughts on the energy transition
• The energy transition will likely have a substantial impact on some currently minor metals 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;
• 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;
• Some battery metals such as lithium, vanadium and nickel and renewables metals such as silicon and gallium
do, however, seem to have more potential than the others;
• 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;
• Companies seeking to capitalise on growth in the ‘energy metals’ sector need to:
– Target those markets with the most potential for substantial market growth;
– Approach these markets in a holistic manner, removing discovery, supply, demand, technical,
environmental and socio-political constraints;
– Be ready for a ‘strategic triple jump’: hop through the present, step through the energy transition, and
jump into the future (whatever it may be).
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THANK YOU
Contact details:
• John Sykes: john.sykes@greenfieldsresearch.com
• Joshua Wright: josh.wright@rowton-ltd.com
• Allan Trench: allan.trench@uwa.edu.au
With thanks to the Centre for Exploration Targeting
scenario planning team:
• John Sykes, Allan Trench, T. Campbell McCuaig,
Jonathan Bell, Jeremie Giraud, Constanza Jara Barra,
Ahmad Saleem, David Stevenson and Jan Tunjic
• And Heta Lampinen for the Kurt Vonnegan universal
storylines link.
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References
• Sykes, J. P., & Trench, A. 2016. Using Scenarios to
Investigate the Long-term Future of Copper Mining and
Guide Exploration Targeting Strategies. AusIMM
International Mine Management Conference, Brisbane,
Australia, 22-24 August, pp265-289.
• Sykes, J. P., Trench, A., & McCuaig, T.C. 2017. The
energy transition: A mining and exploration industry
perspective. World Renewable Energy Congress, Perth,
Australia, 5-9 February, in press.
• 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.
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Appendix
Category definitions for slide 5
• 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
The energy transition: Some thoughts for explorers, miners and moneyersSlide 31 of 31 29 Nov 2016