Battery Metals

Gold prices need to push higher before investor optimism flows back into the mining sector, according to one mining executive.

In an interview with Kitco News, Rich Munson, CEO of Sandspring Resources, said that although the physical metal is attracting new investor attention, it has still been difficult for junior miners to find much-needed capital.

“With so much market uncertainty, gold looks really attractive right now but prices are still lower than they were a year ago,” he said. “The mining sector still needs to see higher prices. I think that is the biggest factor right now.”

He added that investors need to see a little more conviction of a stable uptrend before they move back into the mining space. He noted that investors appear to be more cautious as their enthusiasm in previous years turned to disappointment because of the lack of sustainable momentum in the gold market.

Munson’s comments come as gold prices continue to hold above the critical psychological level at $1,300 an ounce. April gold futures last traded at $1,320.20, up 0.49% on the day.

“If we could see gold prices sitting at $1,350 in 2019, then I think the sector is back,” he said. “If prices fall back below $1,200, it will be difficult for a lot of projects to move into production.”

However, Munson said that he is optimistic that gold prices will continue to push higher as the U.S. dollar will be unable to maintain higher levels as low growth fears weigh on investor sentiment.

“I think once the U.S. dollar starts to turn, gold is going to be the only safe-haven asset investors can turn to,” he said.

Munson added that it is difficult to have strong conviction in the U.S. dollar or any global currency when global debt is at record highs in a low-growth environment. Quoting international reports, Munson said that gold prices last year hit record highs against 72 currencies.

“I think the next market to turn will be the U.S. dollar,” he said. “It’s only a matter of time before we see gold prices move higher against the dollar.”

Munson added that central banks’ growing appetite for the yellow metal is also another sign of long-term price sustainability. He said that it looks like central banks are boosting their gold reserves to protect their currencies as nations push closer to a global debt crisis.

Sandspring continues to develop its Toroparu property in Guyana, embarking on a project re-scope that would reduce its upfront capex costs to push closer to production. Munson said that if gold prices continue to push higher, he could see initial production in 2023.

With a resource of more than 10 million ounces, Toroparu is the largest undeveloped gold deposit in South America.

“In an environment of depleting resources, Toroparu is too significant for the market to ignore for very long,” said Munson. “We just need to see higher prices to make this project really exciting.”

As the global middle class rapidly expands, so too does the worldwide demand for energy and its subsequent carbon footprint. Global climate change will be one of the greatest, if not the single greatest, challenges of this next century, and one of the few feasible solutions that is generally agreed upon by scientists and politicians alike is a wide-scale transition from the use of traditional fossil fuels to renewable energy resources.

Around the world, there is a race among researchers to more efficiently and cost-effectively implement renewable energy as a long-term solution to global climate change, and there is even a concerted effort to switch Europe’s energy consumption to 100 percent renewable energy as soon as the year 2050. However, even if Europe achieves this target and takes the lead as the rest of the world follows down a path toward 100 percent renewable energy, we still would not be living in a completely sustainable, green energy utopia–there is a considerable downside to this seemingly perfect plan.

Even renewable energy relies on certain decidedly non-renewable resources. Even the eco-friendliest solutions such as solar panels can’t be made without the use of finite rare earth elements. Batteries, too, are completely dependent on finite earth-sourced materials for their fabrication. What’s more, China currently has an overwhelming monopoly on a great number of these rare earth elements (although not all are as rare as this label implies). This means that in a renewable energy-based world, energy security could become a major issue. In addition to rare earth elements, there are myriad other non-renewable materials used in the production of renewable energy. Currently, the one that has everyone talking is lithium.

Lithium is an essential component to many kinds of batteries, thanks to its lightweight and highly reactive properties. This makes lithium an essential element in the renewable energy sector because, in order for renewable energy to work on a grand scale, massive amounts of energy storage potential are paramount. Even when the sun isn’t shining on solar panels and the wind isn’t turning turbines, energy demand stays constant. On top of being a key component of energy storage, lithium is also an essential ingredient in the batteries that power both hybrid and electric vehicles, another big part of the plan for a sustainable energy future.

If all the conventionally-fueled cars in the world were replaced with electric cars overnight, the global supply of lithium would be completely depleted in just approximately fifty years. Yes, this is purely hypothetical; about three million electric cars are currently in use globally–just a drop in the automotive ocean. That being said, that number is projected to skyrocket over the next decade, reaching a global fleet of approximately 125 million by 2030.

While both electric vehicles and renewable energy resources are still very far away from being widespread enough to threaten the world’s lithium stores in the near future, lithium itself is not really the point. It’s just one small problem that exemplifies a larger issue with renewable resources–they are not completely renewable, and we still haven’t discovered the technology to get around that fact.

This is not to say that renewable resources are a waste of research and development, or that riding fossil fuels into the ground is the answer. What it does mean is that there is no time like the present to start planning for how we will recycle and replenish elements like lithium, or–even better–search for energy alternatives that don’t depend on finite natural resources–before we arrive to a stage where we are dependent on a resource that’s vanishing in front of our eyes–sound familiar?

Bloomberg New Energy Finance predicts that there will be 559 million electric vehicles on the road by 2040. But electric vehicles don’t last forever. And their batteries are not always filled with the kinds of materials you would want leaching into the environment if they’re disposed of haphazardly. Policy makers and researchers have started considering how to deal with end-of-life on electric batteries, and recycling is often considered as an option.

Researchers from Carnegie Mellon University published a paper in Nature Sustainability this week that looks at the emissions and economic costs associated with recycling automotive batteries. They specifically addressed batteries with three types of cathode chemistry: nickel manganese cobalt oxide (NMC), nickel cobalt aluminum oxide (NCA), and iron phosphate (LFP). The first two cathode chemistries are common in passenger vehicles, and LFP is common in buses (bus maker BYD uses LFP batteries, for example).

Since the packaging of batteries is important to the recycling method, cylindrical batteries (the types of cells that Tesla makes) are compared to pouch cell batteries in the analysis.

The researchers also compared recycling methods. These include pyrometallurgical recycling (exposing the valuable parts of the battery to high temperatures and then recovering those metals as alloys), hydrometallurgical recycling (leaching valuable metals from batteries and separating the desired metals from the resulting solution), and “direct cathode recycling,” where the battery’s cathode is retained as-is, but new lithium is added in such a way that the battery regains its original performance.

To find avoided emissions from recycling, the researchers did a life-cycle analysis on the various battery chemistries. They estimated emissions, energy use, and the cost to extract and refine materials and then assemble and ship new batteries compared to producing recycled batteries.

Reuse, recycle

Ultimately, LFP-cathode batteries were not able to avoid additional emissions under any recycling circumstances. The iron materials used in those bus batteries are already efficient to mine, the paper notes. This results “in a smaller GHG [greenhouse gas] emissions offset from the recovered materials that is insufficient to offset the energy and GHG emissions associated with the recycling processes considered.”

For now, new bus batteries seem to be cheaper and better for the environment than recycled bus batteries.

The story is more complicated for electric passenger vehicle batteries, however. For both NMC and NCA cells, hydrometallurgical and direct cathode removal recycling methods do result in a reduction of GHG emissions, but only recycling via direct cathode removal with pouch cells shows a statistically significant reduction in emissions.

The effects of pyrometallurgical recycling are less straightforward. The researchers found that this recycling method increases the emissions tied to the life cycle of the battery in every case, but the materials recycled in this method don’t always get repackaged into more batteries. The method is often used in Europe, where 50 percent of the total weight of the battery is required to be recycled. After the cathode and cell canister material is reduced to metal alloy, “The other non-combustible cell components are output as part of slag that can be repurposed as cement input materials,” the paper notes.

Cement production is the third-largest source of human-derived greenhouse gas emissions on Earth, according to a 2018 paper. That comes after the use of fossil fuels and land-use change (like deforestation). But the analysis in this week’s Nature paper did not take into account non-battery downstream environmental impacts, so there’s still some ambiguity in the impacts of pyrometallurgical battery recycling.

Let’s talk money

The economic benefits of recycling batteries are less apparent than the (admittedly murky) environmental benefits of recycling batteries. The economic benefits improve, of course, depending on the volatility of the price of the metals used by the specific battery chemistry.

Cobalt, for example, is quite volatile and was extremely expensive in recent years. The ability to recycle cobalt helps countries and companies reduce their reliance on it, which may have geopolitical and humanitarian benefits as well. (The paper cites a 2018 study showing that “populations surrounding artisanal mines in the Democratic Republic of the Congo have elevated levels of cobalt in their urine and blood, potentially adversely affecting the heart, lungs, blood, and thyroid.”)

The paper suggests that, in cases where recycling automotive batteries is not economically defensible but shows clear environmental benefits, regulators could step in and implement a deposit system to fund or encourage electric vehicle battery recycling.

The researchers also found breakeven costs for “relithiating” batteries that are recycled using direct cathode removal. If recycling NMC cathode material can be implemented for $15 per kg or less, and if recycling NCA cathode material can be implemented at $19 per kg, then “the refunctionalized cathode materials could be produced at the same cost as traditional cathode manufacturing methods, making direct cathode recycling economically competitive,” the paper notes.

For now, many electric vehicle companies are exploring alternative solutions, like re-using vehicle batteries as stationary storage on buildings.

Cobalt’s near year-long price slide is finally coming to an end, but high inventories of the battery metal will stop prices quickly re-claiming 2018’s 10-year highs.

London Metal Exchange prices have crashed to two-year lows of $32,000 a tonne compared with levels near $100,000 in the first half of 2018.

The drop was sparked by rising supplies from the artisanal and industrial sectors in the Democratic Republic of Congo and a surplus of cobalt chemicals, used to make rechargeable batteries to power electric vehicles, in top consumer China.

Traders looking to buy cobalt to cover forward sales are expected to help a price recovery, but industry sources say it is likely to be muted as high stocks in Africa will provide a buffer against supply shocks.

The DRC accounts for most of the world’s cobalt supplies. It comes in the form of hydroxide which is converted into chemicals for the lithium-ion batteries also used in mobile devices.

“High cobalt prices encouraged new supplies last year. Artisanal mining supply has exhibited enormous growth in recent years to bridge the gap between supply and demand,” said CRU analyst George Heppel.

“However, artisanal mining supply has declined in the past six months due to lower payables and the falling cobalt price. Artisanal is the swing producer in the cobalt market.”

Cobalt hydroxide prices are typically a percentage of the metal price known as payables and hit levels above 90 percent last year. They have since slipped to around 65 percent.

CRU estimates supplies of cobalt from Congo’s artisanal sector jumped to 24,000 tonnes last year from 19,100 tonnes in 2017 and 10,500 tonnes in 2005, when prices hit 12-year lows below $10 a lb.

Gold firmed slightly on Wednesday as investors held onto the safe-haven metal while seeking more clarity on Sino-U.S. trade talks, and as volatility in the dollar provided further support.

Spot gold was up 0.2 percent at $1,312.82 per ounce as of 0419 GMT, while U.S. gold futures gained 0.2 percent to $1,316.2 an ounce.

U.S. President Donald Trump said on Tuesday that he could see letting the March 1 deadline for reaching a trade agreement with Beijing slide a little if the two sides were close to hammering out a deal to end their long-drawn trade tussle.

U.S. tariffs on $200 billion worth of imports from China are scheduled to rise to 25 percent from 10 percent if the two sides cannot reach a deal by the deadline, increasing pain and costs in sectors from consumer electronics to agriculture.

“There is very little detail behind some of those (Trump’s) comments… There has been nothing really strong enough to drive any strong conviction (for investors),” said ANZ analyst Daniel Hynes.

However, improved risk appetite limited bullion’s gains, with Asian stocks edging higher to a more than four-month peak.

“The safe-haven buying that we saw earlier in the month is now a little more fragile (after recent developments in trade talks),” Hynes said.

The dollar index, however, suffered against its Asian peers, and was marginally lower at 96.68. It shed about 0.4 percent in the previous session in its worst one-day loss in two weeks.

“Any progress in the talks would likely weaken the dollar and elevate gold slightly from here,” said INTL FCStone analyst Edward Meir.

Investors were also worried after Trump said on Tuesday he was unhappy with a deal struck by congressional negotiators on border security that denied him funds for his U.S.-Mexican border wall.

Nevertheless, Trump said he did not expect another shutdown, while continuing to insist he could find a way to bypass Congress and build a wall without lawmakers.

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.4 percent on Tuesday. Holdings are down about 3 percent so far this month after four straight monthly gains.

ANZ’s Hynes said January saw pretty good flows. “Some of those investors take profits and subsequently extract some of those holdings. I don’t see it becoming a longer trade trend,” he said.

Spot Palladium rose 0.5 percent to $1,410.50 per ounce, after gaining 1.3 percent in the previous session – its best since Jan. 25.

Platinum was unchanged at $786.50 an ounce, while silver fell 0.1 percent to $15.69.

According to an announcement by Alcoa, global demand for aluminium is likely to grow this year at its slowest pace since the global recession of 2009.

Roy Harvey, Alcoa’s chief executive, said in a presentation to analysts that the company expected worldwide demand to grow by 3-4 per cent this year, which would be the slowest rate since the world market shrank during the downturn that followed the great financial crisis.

Mr Harvey pledged to respond “with urgency to these dynamic conditions” in the coming year.

He was speaking as Alcoa reported earnings for the fourth quarter of last year that were down 37 per cent from the equivalent period of 2017, but above analysts’ expectations.