In today’s Exponential Investor

  • Closing the loop on metals, minerals and miners
  • Pushing towards a global circular economy
  • How to play the energy transition through critical commodities

Covid-19 taught many people in the developed, middle class, or Western world about something we haven’t had to worry about in a long time.

Empty shelves.

It was rammed home to us how fragile our supply chains are, how reliant we are on just in time delivery, on foreign suppliers, on international transit, on the Suez Canal even.

Globally, we are entering a new resource age.

Not only is the nature of energy changing, from coal to gas and renewables.

From oil to lithium-ion batteries, backed up by nickel, cobalt, manganese and other rarer metals.

But the process of extraction is undergoing a fundamental change in every sector.

The world is waking up to the importance of supply chains.

Would you pay more for clothes to make sure they weren’t made by Muslim Uighurs, forced to work as part of their deceptively named “re-education”?

Would you choose recyclable/compostable plastic packaging over the single-use plastic covers we see today?

If you could replace cyanide in the mining process, with a sustainable, non-toxic alternative, would you?

If choosing between two equal items, would you choose the one with the higher or lower carbon footprint? The better or worse working conditions? The one with the best recycling options in place?

And if almonds are so water-intensive that they are causing droughts in California, then is almond milk really a great alternative to dairy?

We are at the beginning of a generational shift.

It’s from a system of supply where demand must be met at lower and lower monetary costs, no matter what the externalities are…

To one where efficiency and circularity are at the heart of everything we do. Where environmental, natural and physical costs of doing business are factored in alongside monetary costs.

Where we understand the natural limits of the world around us, and work incredibly hard to move to a more sustainable footing on planet Earth.

It’s like we’re a marathon runner. At the moment, we’re trying to run as fast as we can right at the start, burning through our energy at an unsustainable rate. It would be better to pace ourselves, and stretch out our useful life. A more balanced approach is better in the long term.

Or, like a retiree, spending money in retirement. I am no expert, but it seems like a risky strategy to start eating into the capital instead – you risk running out, and you reduce the income it produces too… My guess is that it’s wiser to only spend what income is produced by the underlying capital, as much as possible. That’s sustainability in action.

Don’t spend more than you’ve got coming in. Don’t sprint out of the gates if you can’t keep up the pace.

It’s the same at the planetary level, and the world is waking up to this fact.

Brave New World

We’re moving towards a world where new technologies are being found to clean up the environmental damage of mining gold, lithium, or copper – three key metals for a world awash with fake money and fossil fuels.

Where brilliant minds are finding ways to turn orange peel into clothes, find hydrogen in the bottom of used oil wells, convert waste back into useful hydrocarbons, or just straight into electricity, and where food is being grown in cities, in labs, and in our own homes – all as part of the transition to a world where demand can be met sustainably.  

Where and how we use land, how we manage forests, and oceans, and how we limit our impact on biodiversity and the natural environment really do matter.

As David Attenborough said last year,“Our blind assault on the planet has finally come to alter the very fundamentals of the living world. It’s surely our responsibility to do everything within our power to create a planet that provides a home not just for us, but for all life on Earth.”

The energy transition has a huge part to play in this. It’s a transition which will place an enormous burden upon the extractive businesses of this world.

A recent study came to these conclusions about the incredible amount of demand coming down the pipeline – just from moving towards electric vehicles…

If we replaced 1 billion gas-guzzling cars with electric cars, we would need 85 million tonnes of copper (21Mt mined in 2019), 56 million tonnes of Ni (2.3Mt mined in 2019, only 50% suitable for batteries), 7 million tonnes of manganese (18Mt mined in 2019) and 7 million tonnes of cobalt (140Kt mined in 2019).

But it must be better than what came before. It’s no good going electric if the cobalt was mined by children in the DRC, if the plastic components get dumped in the ocean afterwards, or if the leather interior means more deforestation for cows to – excuse me – fart us into a climate crisis.

That’s why it’s exciting to see emerging technologies for less disruptive lithium extraction, new nickel mines opening up, and new battery technologies coming through with lower cobalt content.

Playing the energy transition through materials and metals could actually be a great way to go.

Rob West, CEO and founder of Thunder Said Energy, recently released his own forecast for lithium demand growth between now and 2050…

And it was for 30x growth.

Or you could talk about copper.

Copper is a crucial material for all energy technologies, from solar panels to wind turbines, batteries and electric vehicles, geothermal, tidal, hydrogen, and biomass.

Just looking to the EU or the US, the post-Covid years are going to be defined by one thing.

“Build, build, build”.

Biden is throwing literal trillions at this.

Metals, miners, and materials. Innovators, inventors, and entrepreneurs.

The way we find, mine and refine the fundamental building blocks of the energy transition are a very important way into the story.

It’s a transition to a more sustainable footing.

A transition that all investors can benefit from, by simply clicking this link.

All the best,

Kit Winder
Editor, Southbank Investment Research

PS My colleague Sam Volkering’s UK-focused investment service is determinedly seeking out the very best ways to benefit from the energy transition.

Resources are just one way to benefit from this incredible trend, to see what others he has found…

Click here now.