WEBVTT 1 00:00:04.719 --> 00:00:08.279 With Laurent Segal and from London and Gerard read from Berlin. 2 00:00:08.800 --> 00:00:11.439 This is redefining energy today. 3 00:00:11.560 --> 00:00:14.679 On Really Think Energy tod We're going to talk about 4 00:00:14.880 --> 00:00:21.879 the eertrometals like lethium, copper, silver that are going bananas. 5 00:00:22.239 --> 00:00:25.280 Yeah. Absolutely, Ron, It's incredible. What's going on? And I 6 00:00:25.320 --> 00:00:27.120 suppose I have to ask the question, I don't know 7 00:00:27.120 --> 00:00:30.719 if this is just volatility because of geopolitics or really 8 00:00:30.839 --> 00:00:33.640 does a big change in demand. I have no idea, 9 00:00:33.759 --> 00:00:35.600 So I'm looking forward to this conversation. 10 00:00:35.960 --> 00:00:37.399 But first the world from my partner. 11 00:00:38.039 --> 00:00:41.359 A Bloco Energy is Europe's premier leaser of ten foot 12 00:00:41.479 --> 00:00:46.439 container mobile batteries built in Europe with COTL best LFP cells. 13 00:00:47.000 --> 00:00:52.320 A Bloco Energy serves fourteen European countries, including France, Germany 14 00:00:52.399 --> 00:00:55.840 and the UK. Bloco's batteries can be leased for any 15 00:00:55.920 --> 00:00:59.000 duration between six weeks and six years, and they are 16 00:00:59.079 --> 00:01:03.719 monitored by the award winning platform School A block of Energy, 17 00:01:03.960 --> 00:01:06.799 Make your life easier, make your business more flexible. 18 00:01:07.040 --> 00:01:09.920 Back to the show, so we bring a real expert 19 00:01:10.239 --> 00:01:12.799 that we've been following for quite some time, a new 20 00:01:12.840 --> 00:01:15.480 friend of the show, and it's Matt Firmleay. 21 00:01:16.079 --> 00:01:18.239 Yeah, looking forward to having this conversation with a bad 22 00:01:18.280 --> 00:01:19.159 time with them. 23 00:01:19.200 --> 00:01:22.799 On a bit of background on Matt. He is managing 24 00:01:22.840 --> 00:01:27.760 director at Battery Metaios Review and he's also partner in 25 00:01:28.040 --> 00:01:31.959 the equity firm called air K Equity and he's been 26 00:01:32.000 --> 00:01:35.319 following all those metals for the past twenty five years 27 00:01:35.920 --> 00:01:39.159 and he has some extraordinary revelation to make. 28 00:01:39.519 --> 00:01:42.400 Well, let's bring him on the show then, Matt, this 29 00:01:42.519 --> 00:01:44.200 is great to have you on the show. Looking forward 30 00:01:44.200 --> 00:01:44.920 to this conversation. 31 00:01:45.519 --> 00:01:47.599 Thanks for advising me. I've been looking forward to this 32 00:01:47.640 --> 00:01:48.239 for a long time. 33 00:01:48.799 --> 00:01:50.920 Maybe just kick off and it's just give us a 34 00:01:50.959 --> 00:01:53.840 sense of what's going on. And I got to call 35 00:01:53.920 --> 00:01:57.920 it electricity. Commodity is for anything to do with electricity, 36 00:01:57.959 --> 00:02:00.519 whether it sill of our copper, the. 37 00:02:00.519 --> 00:02:03.239 Electric metals we used to call electrica metals. 38 00:02:03.319 --> 00:02:06.239 Just a crazy world of volatility and a space tell 39 00:02:06.280 --> 00:02:06.920 us what's going on. 40 00:02:07.239 --> 00:02:11.159 It's a really interesting space. Dumb materials are going crazy 41 00:02:11.240 --> 00:02:15.400 to the moon, lithium, silver, copper to some extent, some 42 00:02:15.520 --> 00:02:19.639 materials haven't budged, things like graphite and materials not doing 43 00:02:19.680 --> 00:02:21.840 anything at the moment. So it really is a very 44 00:02:21.919 --> 00:02:27.039 very differentiated market. But obviously it's the copper's, silver's, lithiums 45 00:02:27.039 --> 00:02:29.240 of the world that are attracting the most column inches 46 00:02:29.280 --> 00:02:32.199 at the moment. And it's nice to see because we've 47 00:02:32.240 --> 00:02:35.039 obviously come off a period of two to three years 48 00:02:35.039 --> 00:02:37.879 when prices, particularly in lithium are very, very weak and 49 00:02:37.919 --> 00:02:40.560 for other battery materials, so it's nice to be in 50 00:02:40.719 --> 00:02:44.240 vogue again. In terms of what's happening, we have a 51 00:02:44.280 --> 00:02:49.240 secular demand event, and there are periods when supply catches 52 00:02:49.360 --> 00:02:52.080 up with that secular demand event, and their are periods 53 00:02:52.120 --> 00:02:54.639 when we move into oversupply, and then obviously we have 54 00:02:54.639 --> 00:02:57.960 a price correction, and that's where we were coming from 55 00:02:58.120 --> 00:03:00.240 off the back of in lithium over the last couple 56 00:03:00.240 --> 00:03:03.479 of years. And then there are periods when supply growth 57 00:03:03.599 --> 00:03:08.439 drops away and perhaps demand accelerates and we then move 58 00:03:08.479 --> 00:03:13.439 into a positive commodity price environment. The situation in lithium 59 00:03:13.520 --> 00:03:17.080 has been exacerbated by the fact that we are seeing 60 00:03:17.360 --> 00:03:22.319 a change in leadership in the battery markets from EVS 61 00:03:22.520 --> 00:03:27.439 to ESS and my numbers I see ESS dominating EVS 62 00:03:27.479 --> 00:03:30.240 as a user of batteries by the early part of 63 00:03:30.280 --> 00:03:33.919 the twenty thirties and being really significant long term event 64 00:03:33.960 --> 00:03:34.840 for battery demand. 65 00:03:35.280 --> 00:03:38.080 Yes, Matt. Currently the EV market in term of Relgium 66 00:03:38.080 --> 00:03:41.439 consumption is six times bigger than the best. But in 67 00:03:41.479 --> 00:03:44.719 two twenty five the EV market has grown by fifteen percent, 68 00:03:45.479 --> 00:03:49.800 whereas the best has grown by fifty. Yeah. Clearly, at 69 00:03:49.800 --> 00:03:55.199 some point if base continue, those two charts may converte. Now, 70 00:03:55.479 --> 00:03:59.439 if you analyze in general any community market, you have 71 00:03:59.560 --> 00:04:03.199 two school of thoughts. The one which is from Jeff 72 00:04:03.240 --> 00:04:07.680 Curry talk about supercycles, and I hear him a lot 73 00:04:08.280 --> 00:04:11.479 well on the foothiels of the Imalaya, But the thing 74 00:04:11.520 --> 00:04:13.520 he has said that for a very long time and 75 00:04:13.960 --> 00:04:15.759 most of the time got the timing wrong. And on 76 00:04:15.840 --> 00:04:18.480 the other you get the school of Ed Moss, who 77 00:04:18.480 --> 00:04:21.040 says the market are very elastic and within two three 78 00:04:21.079 --> 00:04:24.279 years they tend to rebalance themselves. So in what camp 79 00:04:24.399 --> 00:04:25.199 you see yourself? 80 00:04:26.079 --> 00:04:30.360 I do believe in supercycles, but similarly I do think 81 00:04:30.399 --> 00:04:33.040 that Ed is correct as well. If I look back 82 00:04:33.120 --> 00:04:36.079 to the sort of China led supercycle in the early noughties, 83 00:04:36.399 --> 00:04:39.079 by two thousand and two, two thousand and three, that 84 00:04:39.079 --> 00:04:42.160 that supercycle was kicking off at the time, we said 85 00:04:42.160 --> 00:04:45.639 that the Chinese fixed acid investment event would last ten 86 00:04:45.680 --> 00:04:49.000 to twelve years, but the supercycle didn't last that long. 87 00:04:49.319 --> 00:04:52.879 We did start to see substitution in key commodities. We 88 00:04:52.959 --> 00:04:56.839 did start to see supply catch up. So I do 89 00:04:56.920 --> 00:05:00.360 believe that we'll see a supercycle, but I also leave 90 00:05:00.639 --> 00:05:03.279 it's not going to last for ten years or something. 91 00:05:03.319 --> 00:05:07.920 It'll last for two, three four years before supply catches up. 92 00:05:08.199 --> 00:05:11.120 There's enough substitution out of the areas for prices to 93 00:05:11.120 --> 00:05:11.879 catch up as well. 94 00:05:12.480 --> 00:05:15.959 Let's probably before we go deeper into lydium, let's talk 95 00:05:15.959 --> 00:05:19.959 a bit about copper, because God, I love and respect 96 00:05:20.040 --> 00:05:24.480 Aba Friedland the greatest miner since Cecil Rose in my opinion, 97 00:05:25.000 --> 00:05:28.800 or it's been pumping copper like never. We went from 98 00:05:29.120 --> 00:05:32.920 ten thousand dollars a ton to thirteen fourteen, which is 99 00:05:32.959 --> 00:05:35.879 a lot. And of course there's you know the Grasberg 100 00:05:36.000 --> 00:05:40.120 mine Indonesia that's underwater, win Panama, which has been stopped. 101 00:05:40.560 --> 00:05:43.920 But on the other hand, after a while copper and 102 00:05:43.959 --> 00:05:47.040 people are going to switch to aluminium, which is what 103 00:05:47.079 --> 00:05:49.759 two thousand dollars a ton. How do you see the 104 00:05:49.800 --> 00:05:51.360 copper market going forward? 105 00:05:52.120 --> 00:05:54.319 I agree with you on aluminium substitution. I think the 106 00:05:54.319 --> 00:05:56.639 other thing that people don't necessarily think about when they 107 00:05:56.680 --> 00:05:59.879 see those big supply demand charts with the gap going forward, 108 00:06:00.000 --> 00:06:02.759 So they don't necessarily think about recycling because obviously, as 109 00:06:02.800 --> 00:06:06.399 copper prices go higher, it's more economic to recycle more. 110 00:06:07.000 --> 00:06:10.240 And historically in periods when we have seen that big 111 00:06:10.240 --> 00:06:13.199 supply demand gap, a recycling has come along to fill 112 00:06:13.199 --> 00:06:16.560 it in, not totally but to some extent. The big 113 00:06:16.600 --> 00:06:20.199 issue with copper is that we're not discovering enough. We're 114 00:06:20.199 --> 00:06:24.199 not discovering enough big operations. So in the medium to 115 00:06:24.319 --> 00:06:27.360 longer term there is certainly an issue in the market 116 00:06:28.040 --> 00:06:32.040 in the near term. What worries me about copper is 117 00:06:32.360 --> 00:06:36.480 from a macroeconomic standpoint, the world ain't great at the moment. 118 00:06:36.800 --> 00:06:40.160 From a top down standpoint, a consumer demand isn't great. 119 00:06:40.560 --> 00:06:42.720 There's not a lot going on a fixed acid investment, 120 00:06:43.199 --> 00:06:46.680 so the world isn't brilliant at the moment, and inventories 121 00:06:46.720 --> 00:06:48.000 in copper actually increasing. 122 00:06:48.399 --> 00:06:48.519 Now. 123 00:06:48.519 --> 00:06:51.160 I've been looking at the price inventory relationship in copper 124 00:06:51.360 --> 00:06:53.800 since two thousand and two thousand and one. On a 125 00:06:53.839 --> 00:06:57.560 weekly sometime as a monthly basis, you see a very 126 00:06:57.600 --> 00:07:01.600 close price inventory relationship. But generally what happens is that 127 00:07:01.680 --> 00:07:05.279 as inventry's full, prices increase. And that's indeed what we 128 00:07:05.319 --> 00:07:07.480 saw in the supercycle in two thousand and two, two 129 00:07:07.519 --> 00:07:10.839 thousand and three, when the first sign that's something really 130 00:07:10.839 --> 00:07:13.439 important was happening was because inventry is just dropped away. 131 00:07:13.879 --> 00:07:16.279 We're not seeing that in this cycle. In fact, we're 132 00:07:16.279 --> 00:07:19.720 seeing inventories increasing. And if you look at global inventories, 133 00:07:19.800 --> 00:07:22.480 so what's there in the US, in China and on 134 00:07:22.519 --> 00:07:25.800 the LME, they've actually been increasing at the same time 135 00:07:25.800 --> 00:07:28.800 that price has and that's very atypical. I've never seen 136 00:07:28.839 --> 00:07:31.399 that in a cycle before. So there's a lot of 137 00:07:31.439 --> 00:07:34.680 speculative excitement about the medium to longer term in copper. 138 00:07:35.279 --> 00:07:37.720 I'm really worried about the near term and if we 139 00:07:37.800 --> 00:07:41.000 have any sort of economic correction globally, there's a big 140 00:07:41.079 --> 00:07:42.720 risk for copper prices in my view. 141 00:07:44.000 --> 00:07:47.480 Matt, can we talk maybe next about silver and they can? 142 00:07:47.519 --> 00:07:49.600 I understand last year it was like one hundred and 143 00:07:49.639 --> 00:07:52.240 twenty five percent and if I look in terms of 144 00:07:52.279 --> 00:07:54.920 the biggest industrial use so that it's now solar panels, 145 00:07:55.199 --> 00:07:57.040 is that what's driving it or is it just the 146 00:07:57.040 --> 00:07:59.519 fact that it's a pressure's metal like gold or whatever. 147 00:07:59.680 --> 00:08:00.800 And you know, just how do you. 148 00:08:00.800 --> 00:08:03.959 See that silver is right on the edge of my 149 00:08:04.079 --> 00:08:08.000 comfort zone. I'm an industrial metal strategist to always have been. 150 00:08:08.720 --> 00:08:12.279 I can pick growth cycles and understand where demand is 151 00:08:12.319 --> 00:08:16.240 going for all of these commodities. Gold and precious metals 152 00:08:16.480 --> 00:08:18.639 have always been in an area where I haven't really 153 00:08:18.639 --> 00:08:21.639 been able to understand what's going on. But in silver 154 00:08:22.160 --> 00:08:25.319 at the moment, most of what's happening is because of 155 00:08:25.360 --> 00:08:28.839 the industrial demand situation for solar panels. Obviously, solar panel 156 00:08:28.839 --> 00:08:31.319 demands gone ballistic over the last two to three years, 157 00:08:31.920 --> 00:08:35.159 and that's really tightened out the physical market. So we 158 00:08:35.279 --> 00:08:39.399 have on a physical basis a very substantial supply demand 159 00:08:39.399 --> 00:08:42.480 imbalance really over the last seven or eight years. And 160 00:08:42.519 --> 00:08:44.919 when I look at the supply demand chart, there's a 161 00:08:44.919 --> 00:08:47.639 big deficit. And if I saw that for an industrial metal, 162 00:08:47.720 --> 00:08:51.519 I'd be hugely bullish on it. What we have exacerbating 163 00:08:51.639 --> 00:08:54.720 the silver market is obviously there's a lot of undisclosed 164 00:08:54.720 --> 00:08:58.759 stocks people with silver jewelry and silver photo frames and 165 00:08:58.840 --> 00:09:01.799 silver stuff in their house that can potentially come out 166 00:09:02.120 --> 00:09:06.039 into a ball market. And then one of the other 167 00:09:06.080 --> 00:09:09.320 things is because on top of the industrial demand for silver. 168 00:09:09.720 --> 00:09:13.399 We have a big speculative slash investment elements in the 169 00:09:13.399 --> 00:09:17.399 silver market as well. Really is an astoundingly complex market 170 00:09:17.759 --> 00:09:20.679 on the physical side of things. There's a big imbalance 171 00:09:21.279 --> 00:09:25.240 on the paper side of things. People are betting multiples 172 00:09:25.279 --> 00:09:28.639 of the physical size of the market almost every day. 173 00:09:28.720 --> 00:09:32.000 I mean, as we record this yesterday, there's reports of 174 00:09:32.080 --> 00:09:36.799 a massive short position on the SHFE in Shanghai, which 175 00:09:36.840 --> 00:09:39.799 is bigger than the existing physical market for silver in 176 00:09:39.840 --> 00:09:42.240 a year. You are sort of sitting there scratching your 177 00:09:42.279 --> 00:09:45.960 head and going, well, the paper markets seem to they're 178 00:09:46.000 --> 00:09:48.600 not too much resemblance to what's going on in physical 179 00:09:48.639 --> 00:09:49.519 markets at the moment. 180 00:09:50.080 --> 00:09:53.279 Yeah, And to add to your argument, we're talking about 181 00:09:53.279 --> 00:09:56.960 aluminium two thousand dollar paton couple thirteen thousand paton and 182 00:09:57.000 --> 00:09:59.519 of course SiO we took in answers, but if you 183 00:09:59.559 --> 00:10:03.720 took put it's two million dollar a ton. It's very 184 00:10:03.919 --> 00:10:06.679 very expensive, and I know it must have some extraordinary 185 00:10:06.879 --> 00:10:10.360 electrical property also that they're put in cellar panels. But 186 00:10:10.559 --> 00:10:13.279 I know the Chinese and I'm sure they're working very 187 00:10:13.360 --> 00:10:15.039 hard for substitution here. 188 00:10:15.759 --> 00:10:19.559 We've seen thrifting in silver in solar over the last 189 00:10:19.600 --> 00:10:21.799 sort of four or five years, and in fact it's 190 00:10:21.840 --> 00:10:24.679 a recurring thing and it's built into my models that 191 00:10:24.720 --> 00:10:29.799 we will see lower silver loadings going forward. It's definitely issue. 192 00:10:30.039 --> 00:10:32.399 I was reading a piece of research that said at 193 00:10:32.399 --> 00:10:35.399 one hundred and thirty dollars an ounce, it's no longer 194 00:10:35.480 --> 00:10:39.000 economically viable to use silver and solar panels. If you 195 00:10:39.039 --> 00:10:42.320 want to look at a physical markets, at industrial markets, 196 00:10:42.720 --> 00:10:45.320 that's got to be the glass ceiling. But obviously if 197 00:10:45.320 --> 00:10:48.440 you're looking at as an investment vehicle, similar to gold, 198 00:10:48.799 --> 00:10:50.080 then things can go higher than that. 199 00:10:50.879 --> 00:10:54.320 Matt, I can ask you about a really niche market commodity, 200 00:10:54.440 --> 00:10:57.440 and that's just electrical steel and obviously this is used 201 00:10:57.480 --> 00:11:00.919 for transformers and stuff like that. It's pretty critical and 202 00:11:00.960 --> 00:11:03.600 there's a shortage of transformers up. What's your view on that. 203 00:11:04.279 --> 00:11:07.360 It's a really difficult market. And if I hadn't worked 204 00:11:07.360 --> 00:11:09.200 to the Hedge Fund for the last five years, I 205 00:11:09.240 --> 00:11:11.240 would have had to say I don't know anything about 206 00:11:11.279 --> 00:11:13.720 that market. I do know a little bit about that 207 00:11:13.759 --> 00:11:17.720 market because I'm aware of the huge global shortage of transformers. 208 00:11:18.039 --> 00:11:20.679 But the problem is it's a very opaque market because 209 00:11:20.720 --> 00:11:24.720 it's buried the electrical steel divisions are buried in the 210 00:11:24.720 --> 00:11:27.799 big steel makers and it's a tiny part of their markets, 211 00:11:28.480 --> 00:11:31.320 so you don't really get a lot of information about 212 00:11:31.360 --> 00:11:34.919 electrical steel. But it is a market where demand for 213 00:11:34.960 --> 00:11:37.720 transformers is growing very, very rapidly, and it is a 214 00:11:37.759 --> 00:11:40.600 market where we're struggling to keep up supply. But the 215 00:11:40.639 --> 00:11:42.759 problem is that there are no pure play ways to 216 00:11:42.799 --> 00:11:45.320 play that. It's like a sort of one or two 217 00:11:45.399 --> 00:11:48.559 percent share of the big steelmaker's business. 218 00:11:49.159 --> 00:11:53.919 Great, let's pish to litium and its consequences on the batteries. 219 00:11:54.639 --> 00:11:57.320 The price of litium is more than doubled. Is it 220 00:11:57.320 --> 00:11:59.360 going to impack batteries? And I know a lot of 221 00:11:59.480 --> 00:12:02.639 listeners investing in batteries and they enjoyed the prices going 222 00:12:02.679 --> 00:12:04.679 down on stop for the past ten years. But now 223 00:12:04.720 --> 00:12:07.519 all of a sudden, maybe there's going to be a 224 00:12:07.559 --> 00:12:10.720 difficult wake up call. So are we entering in a 225 00:12:10.759 --> 00:12:12.440 short phase of lytium? 226 00:12:13.200 --> 00:12:15.559 I think it's a slightly longer phase of strength and 227 00:12:15.639 --> 00:12:19.120 lithium prices. Lithium prices obviously went up very strongly. That 228 00:12:19.200 --> 00:12:22.120 went up to just shy of twenty five dollars a kilo. 229 00:12:22.480 --> 00:12:23.799 They've come back down again. 230 00:12:23.879 --> 00:12:24.159 Now. 231 00:12:24.679 --> 00:12:27.279 I'm pleased that they came back down again, because I 232 00:12:27.279 --> 00:12:31.240 think they'd run too high too fast. For the battery industry, 233 00:12:31.320 --> 00:12:34.120 we don't want volatility and raw material prices. We want 234 00:12:34.200 --> 00:12:38.080 raw material prices to go up gradually, consistently and not 235 00:12:38.159 --> 00:12:41.279 be jumping around all over the place. And if prices 236 00:12:41.320 --> 00:12:44.320 go up very rapidly, and that leads to an increase 237 00:12:44.360 --> 00:12:48.000 in sell prices, and potentially that can be damaging to 238 00:12:48.039 --> 00:12:50.919 THEESS business, It can be damaging to the EV business, 239 00:12:51.279 --> 00:12:53.639 and it can be damaged to the manufacturers as well, 240 00:12:53.720 --> 00:12:57.399 not just the consumers. For the industry, I'm pleased that 241 00:12:57.519 --> 00:13:02.360 prices corrected slightly. For lithium producers. A year ago, we 242 00:13:02.399 --> 00:13:06.399 wouldn't have even thought or dreamed about lithium prices being 243 00:13:06.440 --> 00:13:09.799 this high. So I think the lithium producers are pretty 244 00:13:09.799 --> 00:13:12.200 happy with the prices that are in the market at 245 00:13:12.200 --> 00:13:15.399 the moment. My gap feeling is that there are a 246 00:13:15.399 --> 00:13:18.919 few risks this year, particularly around ESS, where we started 247 00:13:18.919 --> 00:13:21.159 to see inventary build in the last days or nine 248 00:13:21.200 --> 00:13:25.840 months or so, and potentially ESS might be more elastic 249 00:13:26.000 --> 00:13:29.879 to lithium prices than the EV market is. But beyond that, 250 00:13:30.360 --> 00:13:33.480 at the moment. If ess continues to grow as it 251 00:13:33.519 --> 00:13:37.080 has been growing, we would likely see quite a significant 252 00:13:37.120 --> 00:13:39.840 supply demand in balance over the next couple of years. 253 00:13:40.240 --> 00:13:43.159 Because when we had the spiking and or twenty two 254 00:13:43.720 --> 00:13:47.919 and lettium briefly went to eighty don apukilo, there was 255 00:13:48.120 --> 00:13:50.960 a lot of people going on the media and hypie 256 00:13:51.200 --> 00:13:54.360 either a new technology or a new mine. I'm not 257 00:13:54.399 --> 00:13:56.919 going to go over Lake Resource, which has been a 258 00:13:56.919 --> 00:13:59.879 bit of a disgrace. The stuff went from zero to 259 00:14:00.360 --> 00:14:02.919 I don't know, ninety eight dollar or share and down 260 00:14:03.039 --> 00:14:07.279 back to ten cents or something. But also we had 261 00:14:07.320 --> 00:14:12.000 a lot of discussion about Daly directly tium extraction, which 262 00:14:12.039 --> 00:14:15.000 has vanished all of a sudden, and now it starts 263 00:14:15.000 --> 00:14:17.840 to reappear. And on the top of that, Sorry, my 264 00:14:17.919 --> 00:14:20.320 question is a bit long, but now there is the 265 00:14:20.360 --> 00:14:24.960 sodium battery thing. So between the new mines, between the 266 00:14:25.039 --> 00:14:29.679 new techniques of extraction and between sodium, how is it 267 00:14:29.720 --> 00:14:31.799 going to play in the region market. 268 00:14:32.080 --> 00:14:36.279 My feeling is that we'll see slightly shorter cycles. And 269 00:14:36.320 --> 00:14:39.960 the reason I say that is because prior to sort 270 00:14:39.960 --> 00:14:44.639 of twenty eighteen twenty nineteen, we hadn't really explored for lithium. 271 00:14:44.879 --> 00:14:48.240 We obviously knew the salars in Latin America orchu in lithium, 272 00:14:48.519 --> 00:14:51.879 but outside that we hadn't really explored for lithium. Since 273 00:14:51.919 --> 00:14:54.159 the mining industry has got to act together over the 274 00:14:54.240 --> 00:14:58.159 last six or seven years, we've actually seen better expiration 275 00:14:58.279 --> 00:15:02.039 for lithium, and a lot of expiration hits on lithium, 276 00:15:02.200 --> 00:15:06.000 particularly hard rock lithium. There's hard rock lithium in Canada, 277 00:15:06.320 --> 00:15:11.039 in the US, in Africa, and more in Australia than 278 00:15:11.279 --> 00:15:14.720 we perhaps thought there was, and in China, in Tibet 279 00:15:14.840 --> 00:15:18.159 in places like that. So it's not that difficult to 280 00:15:18.200 --> 00:15:21.240 find lithium. But we are still stuck in this situation 281 00:15:21.320 --> 00:15:24.080 that it takes a long time to get new minds 282 00:15:24.120 --> 00:15:27.080 in processing well not so much processing plants, but minds 283 00:15:27.080 --> 00:15:30.960 into production. The cycle and lithium will be shorter, that 284 00:15:31.120 --> 00:15:34.360 upsiple will be shorter in the medium term, for instance. 285 00:15:34.919 --> 00:15:37.519 I'm not too worried, but I do think that we 286 00:15:37.639 --> 00:15:42.600 will see hopefully see less cyclicality going forward. Then on 287 00:15:42.639 --> 00:15:46.399 to your other question about new technologies, Well, dly did vanish, 288 00:15:46.759 --> 00:15:49.240 but it has been bubbling under for a long time 289 00:15:49.320 --> 00:15:51.360 and lost of companies have been working on it for 290 00:15:51.399 --> 00:15:54.600 the last four or five years. But certainly, as with 291 00:15:54.679 --> 00:15:57.600 all these new technologies like solid states, it takes a 292 00:15:57.639 --> 00:16:01.679 relatively long time to bring into commo usage. The first 293 00:16:01.720 --> 00:16:06.080 dex China DLE project, which is being operated by Aramet 294 00:16:06.120 --> 00:16:11.039 in Argentina, went live last year and it's starting to 295 00:16:11.080 --> 00:16:14.240 sort of hit its target. But the problem with DLE 296 00:16:14.559 --> 00:16:17.159 is it's not a sort of one size fits all technology. 297 00:16:17.639 --> 00:16:20.799 Your salar briane project is very different from your gear 298 00:16:20.840 --> 00:16:24.720 thermal briane project, and then each gear thermal brind project 299 00:16:24.840 --> 00:16:28.080 is different because it got different solid loading in your 300 00:16:28.120 --> 00:16:31.679 brinds and all sorts of things. So just because DLE 301 00:16:31.879 --> 00:16:34.240 works on one project doesn't mean it's going to work 302 00:16:34.279 --> 00:16:37.759 on another. DLE has certainly taken longer to roll out 303 00:16:37.799 --> 00:16:41.440 than we would have thought, it costs more, capital intensity 304 00:16:41.519 --> 00:16:45.159 is really high for DLE projects, and in fact operating 305 00:16:45.200 --> 00:16:47.240 costs are coming in in the second and third quarter. 306 00:16:47.440 --> 00:16:50.039 So it's not the promised land that we APPS were 307 00:16:50.039 --> 00:16:51.159 promised five years ago. 308 00:16:51.840 --> 00:16:54.159 MA Can I maybe just follow on the other part 309 00:16:54.159 --> 00:16:57.120 of the rands cart, which is the substitution effect in 310 00:16:57.159 --> 00:17:00.240 other words, that we move all the best projects from 311 00:17:00.240 --> 00:17:02.679 lithium mind to soldier mine, have you a view on that? 312 00:17:03.679 --> 00:17:08.359 Yes, I do. And when lithium was sort of going up, up, up, 313 00:17:08.599 --> 00:17:12.000 I was really worried about it because I get the 314 00:17:12.000 --> 00:17:16.079 impression that best projects work according to the IRR of 315 00:17:16.119 --> 00:17:19.000 the project. That's sort of what investors are looking at. 316 00:17:19.079 --> 00:17:22.440 And if I look at the impact of the higher 317 00:17:22.480 --> 00:17:26.160 lithium prices on cells and batteries and ess projects. So 318 00:17:26.400 --> 00:17:29.400 the lithium price basically doubled up to about twenty five 319 00:17:29.440 --> 00:17:32.680 dollars a kilo, that's adding something like fifteen dollars a 320 00:17:32.720 --> 00:17:35.319 killer what hour in terms of the sell prices increase. 321 00:17:36.000 --> 00:17:38.920 And then for a four hour duration best which is 322 00:17:39.119 --> 00:17:42.240 doubling up twice on lithium ion batteries, that's a thirty 323 00:17:42.240 --> 00:17:45.440 dollars per killer what hour, And that's pretty substantial impact 324 00:17:45.799 --> 00:17:48.640 on the cost of your best system. If you know 325 00:17:48.720 --> 00:17:51.359 in China it's seventy dollars a kilowater hour at eight 326 00:17:51.400 --> 00:17:55.240 dollars a kilogram lithium. So that's what worried me. That 327 00:17:55.480 --> 00:17:58.519 IRR of the projects is going to be affected, and 328 00:17:58.599 --> 00:18:03.559 therefore you would see best consumers flipping into sodiumin or 329 00:18:03.599 --> 00:18:07.359 potentially into long duration text like flow batteries now at 330 00:18:07.359 --> 00:18:09.480 the moment, flow batteries are very expensive, so they're like 331 00:18:09.480 --> 00:18:11.599 two hundred dollars a kit or what hour. If lithium 332 00:18:11.599 --> 00:18:14.160 prices go up, and I spoke to a number of 333 00:18:14.200 --> 00:18:17.079 people about this, and you get a very different answer 334 00:18:17.240 --> 00:18:20.000 in China to what you get in Europe and the US. 335 00:18:20.319 --> 00:18:24.079 So in Europe and the US transportation costs, insurance taris, 336 00:18:24.079 --> 00:18:27.960 et cetera. They contribute to a higher cost for best 337 00:18:28.160 --> 00:18:31.000 which means that your raw material cost is lower. But 338 00:18:31.160 --> 00:18:33.720 in China your raw material cost is still a big 339 00:18:33.799 --> 00:18:37.119 chunk of the battery. So it is a concern for 340 00:18:37.200 --> 00:18:39.720 me that if lithium prices go too high, too fast, 341 00:18:40.160 --> 00:18:42.960 we will see substitution out of lithium mine into sodiumin 342 00:18:43.599 --> 00:18:45.880 And the other point to make is that, coming back 343 00:18:45.880 --> 00:18:49.240 to your new year outlook call as well, if lithium 344 00:18:49.240 --> 00:18:53.839 prices continue to rise and they drive best sell prices up, 345 00:18:53.920 --> 00:18:57.079 then you're going to see higher best costs as well. 346 00:18:57.839 --> 00:19:01.599 Will Yo Tinto just budged for the fifth time is 347 00:19:01.680 --> 00:19:06.519 merger with glen Core a few years ago invested almost 348 00:19:06.559 --> 00:19:09.960 ten billion dollars in lithium in a retrospect. Was it 349 00:19:10.000 --> 00:19:10.519 a good move? 350 00:19:11.240 --> 00:19:13.680 To tell you the SITH. I didn't think so at 351 00:19:13.720 --> 00:19:16.839 the time, but the more I have had the chance 352 00:19:17.400 --> 00:19:20.279 to think about what they acquired, I think it's a 353 00:19:20.319 --> 00:19:26.039 cracking move. They've actually acquired optionality in the lithium market. 354 00:19:26.640 --> 00:19:30.000 So they bought some really low cost Brian assets, some 355 00:19:30.119 --> 00:19:33.799 world class Brian assets in Argentina. And the way that 356 00:19:33.880 --> 00:19:35.839 Rio operates is it wants to be at the bottom 357 00:19:35.839 --> 00:19:39.559 of the cost curve in everything. So by going in 358 00:19:39.599 --> 00:19:42.880 and buying those undervalued Brian assets in Argentina, they've given 359 00:19:42.920 --> 00:19:45.799 themselves the ability to dominate the bottom of the cost 360 00:19:45.839 --> 00:19:49.039 curve by going in and buying the assets in Chile, 361 00:19:49.559 --> 00:19:52.880 again bottom of the cost curve, and then if prices 362 00:19:52.920 --> 00:19:55.640 go up, they've got the slightly more expensive hard rock 363 00:19:55.720 --> 00:19:58.400 in Canada to bring on as well. So actually I 364 00:19:58.400 --> 00:20:02.799 think it's a great acquisition by One of the issues 365 00:20:02.839 --> 00:20:06.400 that could dole down volatility in an a lithium space 366 00:20:06.759 --> 00:20:09.519 would be if we could get more majors into the market. 367 00:20:10.000 --> 00:20:13.240 If we had more majors in the market rather than 368 00:20:13.599 --> 00:20:17.960 smaller single asset companies, it would give the supply side 369 00:20:18.039 --> 00:20:20.160 the ability to manage itself better. 370 00:20:21.480 --> 00:20:23.480 I actually go back to almost what Lauren said at 371 00:20:23.480 --> 00:20:26.319 the very beginning, really, is this a supercycle or not? 372 00:20:27.000 --> 00:20:29.880 Yeah, I believe it is. I believe it's a supercycle 373 00:20:30.000 --> 00:20:33.079 in terms of demand. There's all these charts out in 374 00:20:33.119 --> 00:20:35.079 the market that say we're going to have to mine 375 00:20:35.160 --> 00:20:38.119 more copper in the next fifteen years than we've mined 376 00:20:38.279 --> 00:20:41.119 up to Here, we're seeing demand for a lot of 377 00:20:41.160 --> 00:20:44.960 these niche commodities, niche products like antimony and tungsten and 378 00:20:45.640 --> 00:20:48.680 whatnot that we really haven't seen demand for. So it's 379 00:20:48.720 --> 00:20:53.640 a supercycle in as you said at the beginning, electrical commodities, 380 00:20:53.680 --> 00:20:57.319 electrical metals. But it's very different from the last supercycle. 381 00:20:57.839 --> 00:21:01.319 So the last supercycle was the fixed ass investment supercycle 382 00:21:01.519 --> 00:21:04.400 because of China, and it was big and steel and 383 00:21:04.680 --> 00:21:07.720 iron ore and all of these sort of commodity commodities. 384 00:21:08.079 --> 00:21:12.160 This is more focused on specialty materials. But similarly, I 385 00:21:12.200 --> 00:21:14.400 do believe it is a demand based supercycle. 386 00:21:14.480 --> 00:21:19.519 Yes, And maybe to conclude last question, the US Administration 387 00:21:19.839 --> 00:21:24.920 has recently announced a project called Vault where they're going 388 00:21:24.960 --> 00:21:28.319 to put twelve billion dollars, which is a lot if 389 00:21:28.359 --> 00:21:31.799 you consider that the value of the US Strategic Petroleum 390 00:21:31.839 --> 00:21:34.799 Reserve is bulow thirty billions, so that's a lot to 391 00:21:35.200 --> 00:21:39.240 acquire a certain number of those materials and also rare 392 00:21:39.319 --> 00:21:42.200 earth and stuff like that. So what's your view on 393 00:21:42.240 --> 00:21:43.279 this project Vault. 394 00:21:44.039 --> 00:21:46.319 Yeah, my colleague had client has done a lot more 395 00:21:46.319 --> 00:21:50.160 work on strategic stockpiling than I have. It can work 396 00:21:50.400 --> 00:21:53.640 if its target is to minimize volatility in the market, 397 00:21:54.039 --> 00:21:57.759 if it's managed well and they bleed material into the 398 00:21:57.799 --> 00:21:59.960 market when prices are high and they buy it when 399 00:22:00.000 --> 00:22:03.200 it's slow, and we have to see if that can work. 400 00:22:03.519 --> 00:22:07.400 But it's nice to see governments being more proactive in 401 00:22:07.440 --> 00:22:10.960