Investing in the future

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The West faces a huge strategic challenge to its plans for renewable energy, battery storage and electric vehicles because China has won a 15-year war to dominate supply of rare earths and other essential metals.

Brian Menell, chairman and CEO of TechMet, a private technology metals company, is helping to address this strategic imbalance by producing, processing and recycling these metals.

He says: “What is often not adequately appreciated is that the global power, energy and mobility revolution is dependent on a relatively small number of strategic technology metals that go into batteries, electric vehicles and renewable energy systems and that are in structural short supply and are almost entirely controlled or substantially influenced by the Chinese state or by Chinese interests.

Menell was speaking at the recent WM Nexus 2019 Impact Investing event in London.

He said: “This is a 15-year-old war that nobody knew they were fighting until they lost it with the Chinese.”

He says that China now controls 95% plus of all global rare earth metals, 80% of cobalt products and probably 65% of cobalt primary resource. For lithium, it is around 60% of primary resource, over 80% of processing capacity and intermediate products, then around 75% tungsten and 85% of natural graphite.

Geopolitics playing important role

“This geopolitical context in which we are investing and the national security implications of it in the US and Japan and Europe are important to us. It gives us access to political supporters and sources of funding in US and Japan, which will add a lot of value to us and allow us to grow in a manner that adds value to our shareholders.

“We want to see Western interests balanced with Chinese interests, where the ability of China to use their dominant position is remedied over time. That is why we’re working with state institutions in Washington and Tokyo.”

TechMet is funded primarily by family offices and is currently undertaking its second funding round. The projects include tin and tungsten mines in Rwanda, a rare earth project in Burundi with plans to build processing capacity in the US partnering with a Japanese processing company. It has a lithium-ion battery recycling technology company in Canada and the US which is establishing large-scale commercial capacity in the US, and next year in Europe, to recycle ‘all the formats and all the chemistries’ of lithium batteries. It has a nickel/cobalt project in Brazil and a vanadium speciality chemical processing plant in Arkansas in the US.

The projects are placed in more stable geographies so not, for example, the Democratic Republic of Congo or Zimbabwe at least partly to address concerns from funders.

There is also a very strong sustainable element to the strategy.

“We want to contribute to the building blocks that are creating this new technology for a sustainable future,” he says.

“We are dealing with products that go through the value chain, from mines to consumer goods, which are increasingly scrutinised for the ethics of origin and all along the value chain. For us to be ahead of the game with governance, sustainability and ethics is important.”

This also applies to the mining side where Menell says the firm takes a multi-faceted approach to responsible mining.

“It doesn’t have to be a dirty, environmentally offensive, and socially negative industry. It has been in certain instances, historically, but a lot of the mining industry is now well governed and well regulated. We seek to be at the forefront of governance, regulation and environmental and social responsibility across all our projects”.

Recycling Lithium ion batteries

That applies to the recycling technologies too.

“The recycling we do is very energy efficient. It deals with lithium ion batteries that are often scrapped at the end of life. This a massive environmental problem. Our pioneering process is recovering 95% plus of the ingredients.”

All of this has a clear investment case.

He describes a macro tailwind that will result in these commodities outperforming other commodities, by significant multiples over the next two, five and 10 years.

Indeed, this should see these metals overcome trade concerns and economic downturns.

“With our metals, there is such a severe supply dislocation that it should ride out any cyclicality and volatility. It is a significant hedge against global recession and trade wars.”

He underlines this with a point about demand.

There are presently around 6 million electric vehicles in the global fleet. This number is expected to increase dramatically in the next ten years.

He says: “Even if in ten years there are only 100 million electric vehicles, at the lower end of predictions, it will require three times the total world supply of cobalt, five times the total world supply of lithium and 12 times supply of nickel.  This is the biggest impact on demand for any group of natural resources since the Industrial Revolution. It will require multiples of the present prices of those commodities and metals in order to stimulate the supply that the demand will require. It’s not a theory. It’s happening today.”

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