Andrea Hotter, a mining journalist, discusses the current state of the mining industry and the challenges it faces. She shares her journey into mining journalism and highlights the exciting time for metals journalism. The conversation delves into the potential for a new super cycle in metals and the factors that could drive it. The discussion also focuses on the challenges in the nickel market, particularly the impact of Indonesian nickel production. Finally, the conversation explores the geopolitical considerations in the nickel trade, including the potential for sanctions. The conversation covers various topics related to the London Metal Exchange (LME) and the metal markets. It discusses the potential impact of sanctions on the LME and the challenges faced by the exchange. The controversies surrounding the LME, including the suspension of contracts and criticism from major producers, are also explored. The role of exploration companies in the development of metal projects is highlighted, as well as the strategic investments made by major producers. The uncertain future of the metal markets and the potential impact of a recession are discussed, along with the role of China in the market. The conversation concludes with a reflection on the current state of the industry.
We’d like to thank our sponsors:
Arizona Sonoran Copper Company (ASCU:TSX) is focused on developing its brownfield copper project on private land in Arizona, a tier 1 location. The Cactus Mine Project is located less than an hour’s drive from the Phoenix International airport via highway i-10, and with grid power and the Union Pacific Rail line situated at the base of the Cactus Project main road. With permitted water access, a streamlined permitting framework and infrastructure already in place, ASCU’s Cactus Mine Project is a lower risk copper development project in the infrastructure-rich heartland of Arizona.For more information, please visit www.arizonasonoran.com.
Fireweed Metals is advancing 3 different projects within the Yukon and Northwest Territories, including the flagship Macmillan Pass Project, a large zinc-lead-silver deposit and the Mactung Project, one of the largest and highest-grade tungsten deposits in the world. Fireweed plans to advance these projects through exploration, resource definition, metallurgy, engineering, economic studies and collaboration with indigenous people on the path to production. For more information please visit fireweedmetals.com.
Vizsla Silver is focused on becoming one of the world’s largest single-asset silver producers through the exploration and development of the 100% owned Panuco-Copala silver-gold district in Sinaloa, Mexico. The company consolidated this historic district in 2019 and has now completed over 325,000 meters of drilling. The company has the world’s largest, undeveloped high-grade silver resource, which will grow with a resource update in early 2024. Learn more at https://vizslasilvercorp.com/
Victoria Gold operates the Eagle Gold Mine within the Dublin Gulch Property. Eagle is the largest gold mine in Yukon’s long history of gold production. In addition to the long-life Eagle Gold Mine, the Dublin Gulch property has upsized exploration potential including priority targets Raven and Lynx among others. Follow all the gold production and exploration news at vgcx.com.
#msd #miningstockdaily #msdlongform
And good day good morning everybody welcome into Mining stock daily and this week’s long form episode I’m your host Trevor Hall getting you through the last day of trading for this week and into the weekend and we have an incredible conversation with one of the few real journalists following the mining sector
And all the big producers throughout the world Miss Andrea hotter from Fast markets joins us for a huge long conversation about what we’re seeing from the major producers geopolitical tensions and we spend a lot of time talking about the wrecking ball that is the nickel Market fascinating conversation with Andrew it’s one I
Think you want to listen to in its entirety special thank you to fir weed medals Arizona sonor copper Victoria gold and Visa silver for their continued support of Mining stock daily and if you wouldn’t mind as always leave a comment like subscribe share with others this is
A great conversation one that’s I think is really going to open some eyes for a lot of people maybe if they don’t follow the metals and Mining sector so we cover a lot of ground here all right everybody have a great weekend let’s get into my conversation with Andrea All right everybody welcome into our long form discussion this week I got a very special guest in fact it’s taken me a little bit of time to get her onto the Mining stock daily podcast because she’s quite busy uh she is the special correspondent over at fast markets uh following everything mining production
From all over the world uh it’s a fabulous beat she’s on fellow journalist so I’m really looking forward to this conversation Andrea hter thank you so much for joining us well thank you Trevor for inviting me and I’m sorry you’re make you’re shaming me here that it’s taken a while to get
Our agenda well get my agenda aligned and schedule and work this out but I’m so glad that we have well in all honesty I mean you you said like we could talk for three hours but I don’t have three hours so we got to narrow down the
Conversation but we are going to try to cover as much of the stories and narratives that’s going on right now in the mining sector because uh the the entire industry has got their head on a swivel obviously we have deflationary forces we have higher interest rates uh
You know the the these markets are cyclical in nature so what was hot back in 2022 may not be hot right now we’ll talk more about this in a few moments but I’ve got to ask you from one journalist to the next I mean I know how
I found this sector it’s it was very strange how I fell into it so I got to ask you I mean did you wake up one day saying you know what I’m a journalist I want to follow the mining Market I can assure you I did not in
Fact I think I wanted to well I definitely wanted to be a war correspondent when I was little my I used to dress up and and kind of wear like camouflage gear and have a notebook because I thought I was in a war zone much to my mother’s horror so um I
Really really did not expect to fall into this sector if anything it was going to be um a foreign and political correspondent I would really liked to have done that um and I guess you could argue there’s quite a lot of that in Commodities anyway but yeah it was just
One of those things that I graduated um in London from the University of London at Kings college and I was looking for a job and I just needed to do something and I applied for a job that didn’t really tell you what the company was um
And it just said that if you like if you like to travel um you know you speak a couple of languages Etc you you’re interested in the world around you this is a great job for you so I applied and when I went to the interview it was um
It was metal bulletin which is what fast markets used to be called yeah and I thought oh my word no I don’t know anything about metal and this is going to be really dull but again I was you know 22 and wanting to to to do something and earn some money and and
Not be stuck living at home with my parents that kind of thing so I took the job and just didn’t look back I really fell in love with the be and the the the kind of the I guess the the characters in The sector the twists and turns of
The stories and just how tangible it is really you know they affect everyday life um Commodities so yeah that was how I got into the sector and I and I never left yeah uh how tell me a little bit about kind of cutting your teeth as a young professional in this sector who
Knew very little to nothing in mining is you know because I I could you and I could share stories just about the mistakes we made and the dumb questions we asked when we were first starting oh plenty of dumb questions but I think there were never a dumb question right
If you don’t know something it’s better to ask and pretend you do but I think that I was lucky I found people along the way who were great mentors who were in the industry and really helped explain things patiently and spent the time and took the you know the time to
Do that for me which was really really lucky um and I I put in a lot of work trying to learn the sector but I think more than anything it was just some of it was just that being in the right place at the right time I dealt with a lot of big
Kind of sexy stories broke when I just got into the industry there were massive trading scandals there were there were kind of oligarchs were kind of jostling for power and Russia and in Ukraine and and Kazakhstan and there was a huge amount of just fascinating stuff going
On and I think that I think it just captured my attention and I I got to do some amazing travel as well um I still do but I I was getting on planes with with Ukrainian Warlords at the time I mean it was just it was a fascinating
Period I think when I first started and I literally went around the world I was very very lucky was there was there a story that um you published that maybe put the stamp on your career to really you know jet you know really for you to take off
Professionally um it’s hard to say but I do think that one of the things that I got to really dig my teeth into was a a big lawsuit that involved a brokerage firm at the London Metal Exchange was being sued by one of its clients and it
Was a over a hundred years old exchange but there was this huge lawsuit it span out into all kinds of different areas it was in the high courts in London so I could go and sit there and actually do a lot of the court reporting which was
Great and talk to both sides and I think that it was such a big story at time um that it it really kind of probably pushed me a little bit more above the parapet than it would have done if I had not had that story so whether for good
Or bad um it was definitely a uh a really interesting one and I I would say that was a that was a probably quite a key one for sure I had a a great conversation here on the podcast back in late November with Andy Hol and he said
That this period right now is the most exciting time for medals journalism he’s ever seen in his 30 year career and I kind of shook my head it’s like well my career is not 30 years long but I it is very exciting right now so I’d love to
Pose that question to you I mean what are you seeing right now or do you do you feel like this is an incredibly exciting time to be writing and Reporting on the medals trade it is and let me just just say as well a huge shout out to Andy because
Andy is one of the people that I would credit for really helping me get my teeth into the sector after I left m Bolton I went to bridge news and he was my boss there um a real mentor and a friend to this day actually I saw him
Very recently um in London so I I have huge respect for him and what he does um if he says that it’s the most exciting period I would therefore say it probably is but but um I would I I I think that I’ve been I could been saying that since 2004
2005 when that first real Bull Run happened and the markets just really took off that was fascinating especially in Copper because that was the emergence of China and so on and then we had the crash a few years later then the comeback then the decline again and so
That’s been a real roller coaster but I do feel like every single day now you wake up and you’re not sitting there thinking oh it’s going to be a quiet day today those don’t exist anymore I think that there are structural changes that are happening rather than cyclical ones
We’re seeing the influence of technology in the markets that we never saw previously we’re seeing you know this dling for for for I guess dominance among um the various participants in the sector and on the trading side so the hedge funds are they you know they’re
All there but they kind of taken this step back but they could very quickly change things if they come back in there’s just so much going on the exchanges are being challenged the traditional exchanges are being challenged for the by the their contracts by newcomers um yeah and obviously we’ve
Seen a huge amount of at the moment um kind of just distress in the sector as the cycle sort of turned so it’s definitely a really good time to be a journalist the LM is always the gift that keeps on giving I always say with the stories from the exchange um not
That it always tries to be but it is and yeah the industry the mining industry is just going through a huge transition so I I suspect that in five years time as well we’ll be sitting there and talking about you know some huge cyber security issure that’s affecting less than five
Years everybody and Ai and how that’s impacting the sector in a much more prevalent way and obvious way than we’re seeing right now because I think it’s just quite nent yeah I I think so you know I I do want to go back and maybe talk about that cycle between the early
2000s to the runup in uh you know 2012 or whatever that that cycle was really predicated on as you said an emerging China and uh incredible construction stimulus all those things the hoarding of raw materials on their side uh and we are still waiting for that next I guess
Super cycle in commodity specifically in the metal side of that sector but if it’s going to happen I mean I would love to get your thoughts here on what will predicate that next cycle because it just doesn’t seem to me it’s just going to be China there’s a lot of people
Expecting a China stimulus but at the same time the world continues to De globalize we’re talking about major infrastructure Spence that needs to happen in the west oh and as you mentioned we also have this artificial intelligence which will require massive digital infrastructure data centers all over the place
Uh you know as you you know with one of these major Cycles under your belt here I would expect that you’re not assuming that it all uh is similar but there’s going to be massive differences the next time this thing has jet has jet fuel yeah I mean I think that and it’s
Really interesting I do a lot of you know I speak a lot to mining CEOs and and for years all they would talk about when they wanted to talk about demand was China um it’s been very interesting in the last several years that their comments about China have really Fallen
Away and that’s not the kind of well China is the great Savior for us because I think they’ve recognized it isn’t and that has been that’s situation has been accelerated in my opinion by the um the supply chain disruptions which then have been exacerbated by things like you know
Look at the tensions in on the Red Sea and the war in Ukraine all of these these issues covid um Etc but then on top of that the regulatory backdrop that we’ve got now where governments are trying to resore capacity work with friendly Nations and so on and if you’re
In the states or in Canada or in Australia or the US you’re or the UK you’re trying to get away from your alliance on China and diversify your supply chains and so that means China cannot be your Saving Grace you can’t have it both ways you can’t say I don’t want to buy
Anything from China anymore but we want to sell them everything they they have to find new customers they have to work out a way to find a new mean medium in this in this in this new world and that also leads me to think that this whole sort of reshoring diversification can’t
Happen overnight because the world does still need China and it’s it’s processing capacity and so on and its consumption however um something will have to change so will it be China suddenly kind of revving its gears again I don’t think that can happen there are now rules in place saying you don’t get
Credits if you’re doing XY Z you can sell capacity and you can sell um products to China but is China going to want to buy them I don’t know I these are just big questions but I do feel like something has to give and I do think that the trade back backdrop is
Really important now with the regulat side um in addition to that I think the other side is access to Capital and financing I mean you’ll no Trevor from your dealings with a lot of the junior mining companies that that dries up during tough times um I don’t think the
Sector’s ever really caught up and there are now a lot of struggling companies um there was a a massive figure by BHP this week um talking about I think it was a one and a quar trillion dollars is needed out to 2030 just for copper um to Green Light I think 10
Million tons of copper they were talking about that’s what they say the world needs but last year only I think it was just over 300,000 tons 324 5,000 tons was green l so this financing is not there this the expenditure capex budgets are getting blown out and
Companies are sort of Falling by the wayside as our projects and I think therefore you’ve got this supply side which is probably going to be more of a propeller than the demand side necessarily um obviously the demands there long term but I think if you want
Prices to to kind of go back to where we saw them previously and don’t forget they are still structurally a lot higher than they were um I do think we’re going to need to see um I don’t think we’re necessarily going to need to see that demand from China I
Think the supply side’s going to be a big help you you think the supply side of this equation will push these factors into equilibrium at some point I I think that well I don’t know if that’s going to be the case I think it will be a
Massive crunch Point it’ll be a disaster at some point if the world does not produce more of these critical minerals and we’re talking about copper and nickel as well as lithium and all of the other raw materials that we need but that has to have an impact at some point
And I actually would argue that last year when which was considered a bad year and commodities was the worst performing asset class and instead of the best from 2022 it was the worst in 2023 I would argue that the markets would have been in a lot worse shape if
They hadn’t had that supply side problem um and as we are now starting to see as in um copper you know copper was probably a big beneficiary of that shortage last year and that’s only just starting to kick in this the deficits are kicking in this year I think there
Will be deficits again next year our analysts are certainly predicting that and I think all of these factors are definitely going to provide a level of support that maybe we talked about structural um supplier shortages for years but there’s always been a new project I don’t think with the demand that is
Expected um that those supply project those projects are there and therefore I think there is a problem coming down the pipeline right um copper between the markets yeah sorry to interrupt but I mean copper mines have been shutting massive copper mins have been shutting down uh left and right for the last few
Months I we just got note that a valet operation uh in Brazil is is halting uh this is on back of cop Panama obviously m of Supply coming offline uh you know the list kind of continues to go on and on uh yeah but on the economic side Here
Andrew I mean we also have a serious problem as far as people um on one hand saying that they see the supply they want to capitalize uh and invest in this side of things but then they see the price tags to get these operations up and going and
They’re like no the risk is too high the the the interest rates are too high you you there’s no way they can fund it so again like what what something you’re right something has got to happen to a breaking point to where you know either
The price is going to ref the price of the metals got to reflect the cost to produce this stuff or we continue to see deflation and those costs come down but that also has implications on the spot price of the metal so I you know it’s
Just an absolute mess right now and I don’t blame people for staying on the sideline and trying to wait for the Seas to calm down right exactly I mean I think seems like we’re at an inflection point with Central Bank monetary polc policy at the moment which should
Hopefully trigger an improvement to that sentiment you’re talking about there but China I don’t know there I’ve been listening to people talking about maybe China’s lost control of its economy now I never would not bet on China having control of over what it’s over its economy right but but it’s definitely
Not kind of throwing the billions at um a a stimulus package that you would have seen maybe five 10 years ago it’s very nuanced where they’re putting their money and I think that that’s a that’s definitely a change um however that said this year I believe they’ve called it
The year of consumption prot promotion um 2024 in China so that bodess really well for Industrial Metals like copper we hear a lot about India but it kind of we’ve been hearing about India maybe for the last decade and that hasn’t really taken off a way I’ve noticed companies are starting to talk
About hindian more but I want to see that translate into actual solid demand um we’ve got a l Less hawkish Federal Reserve at the moment as you noted so that can help but I don’t know I just feel like the the the old rules don’t necessarily apply anymore um we’re
Definitely in a new era and that does make it exciting so Andy’s right uh you I think I think you posted on Twitter I mean you listen to all these uh uh Financial calls every quarter and I think you tweeted out that there was the third company you had
Heard quote Improvement in Chinese construction within their call I can’t remember if that was you or somebody else but I think that might have been somebody else maybe somebody else yes yeah I think but that’s interesting because you know is that translating into anything that show me where that’s
That’s leading prices higher I mean to a certain extent the markets are underpinned by higher prices copper is not running at kind of $6,000 a ton you know we are we are at much more comfortable levels you’re not seeing the the closures because of um costs you’re seeing closures for different reasons
You’re seeing closures because companies are either facing Supply disruptions we’re seeing smelters closed because they can’t get concentrates um but we’re not seeing closures because companies are running out of money and the price is too low like in nickel um when you’re talking about copper for example so there are
Nuances between the markets aluminium capacity is closing because the price of um energy has been so High um you know so there are there are different nuances between each market and I think no size fits all for sure uh we”ve got a talk about nickel I want to spend some time talking about
Nickel because this has just been uh it’s been a wrecking ball I guess you could say uh it has absolutely crushed companies financials I mean everybody including the big boys Glen core BHP uh they had quoted declining nickel prices on their sheets with their challenges for 20 you know financially in
2023 um you know this the high pressure your ass of leech processing uh out of Indonesia and dumping a lot of that material into the markets cheaply is been it has been devastating but we know markets are cyclical this can’t last forever and so you know obviously you’ve been spending
A lot of time watching the nickel trade and the processing and what’s going on so maybe you could just kind of paint a picture here with a broad brush about what’s you’re seeing currently as you said here I mean I I it’s funny I’ve written more about nickel this year I
Think I ever have in my entire it’s just been kind of okay what day is it okay another nickel story you know so it’s been it has been a whirlwind and as you say it’s just absolutely nuts what’s been happening I think after being the worst performer of the you know on the
Alanda Metal Exchange last year I think prices fell by over 40% I think it was around 44% that inevitably had a knock-on effect you know you’ve got these high cost producers and they’re high cost because of energy and labor in regions like IND Indonesia um and also in newal sorry not Indonesia in
Australia and in uh new calonia being big areas they’ve really struggled to cover the cost of production and then you’ve got these lowcost regions and I’m particularly talking here about Indonesia where nickel production has just continued to grow and we can talk about that craziness um but that’s put a
Huge amount of pressure on the market and has led to production cuts and you you know you meant Val today talking about um CEO uh with you know earlier with copper well we’ve had with nickel there just been so many we’ve had Wu with um The Calder operations in
Australia that had a KnockOn effect with calder’s concentrator which is owned by BHP um there was first Quantum suspending Raven th you had panoramic resources um at Savannah nickel iGo at Cosmos last week BHP said it was going to put Western Australian assets which are basically all of its nickel West on
Notice for care and maintenance which is massive I me we can go into Australia in a minute and then new caledonians really is really really struggling too you’ve got glenor has put con ambo on car and maintenance there are problems at operations run by aret and prony
Resources and trafigura you know so our Analyst at fast markets estimated that 300 I think it was 378,000 tons per year if capacity has gone off because of low nickel prices and nickel that’s absolutely massive and despite all of this the Market’s still in a surplus which is just crazy um BHP
Said in its um earnings that its base case for nickel is that it may rebalance by the late 2020s I kind of read that and said May rebalance GH that’s awful you know so I think if you’re in the nickel industry you just need to buckle
Up you don’t always get it’s a tough business you don’t get these long long cycles of of great years you get couple and then you have a difficult multi-year run and I think that that right now is being really exacerbated by what’s going on in Indonesia um we can dive a little
Bit more into con ambo and and and new calonia if you want or I can talk about Indonesia well I I do want to I maybe let’s talk about uh people listening who I I think they have some familiarity most people have some familiarity and
Maybe we can just kind of dive down into exactly what is happening to create these low nickel prices um just on the technology you know maybe just a little bit of a background story yeah um so Indonesia basically very smart um in 2020 they added nickel to the list of um
Exports of or that were not allowed to be exported anymore in fact they were banned and it was all part of this effort to draw onshore investment and add value to their industrial trains they did it with alumina well bite to add alumina in the country they did it
With copper in order to add value to Copper so you’re seeing smelting capacity going in and they’ve been doing it in nickel as well a lot of these projects um are not just Indonesian they have a Chinese shareholding base as well um they normally Indonesian in the
Mining phase of it and then the Chinese come along in the smelting and refining phases um whether as a partner or a mixture of the two um there are Western companies there but I think that the majority I can count in my hand the number of projects of scale that are um
That have a Chinese um ownership and so this plus a technology change which allowed them to um basically I don’t want to get too technical to to produce the kind of nickel that nobody expected them to be able to produce um for Batteries instead of just the steel um
Shocked everybody um the S the sfide nickel and the L the L yeah exactly nobody thought that they could get this working they did and as a result now they’re on track to account for about 60% of global nickel Supply by next year and 75% by the end of the decade and
Probably more potentially than 75% you know maybe that’s a a kind of an underestimate given how quickly they’re they’re moving so it’s been a massive issue um for the rest of the world obviously you can see the impact that that has had it is not without its um
Criticism there have been questions over safety and environmental standards and all kinds of things um there’s a big issue right now which I think will be a real test case because the Indonesian government has been very quick to reassure that there are standards because they know that they need not
Just re to rely on China too they want to have a diversified um customer base and they also want to do business with the West so they are trying to very very much reassure the rest of the world that there are high level of Standards at their operations there there was an
Explosion at a furnace in December where over 20 people I think it was 25 um a lot died um which is terrible it was a Chinese run operation um and at the moment we’re kind of waiting to sit back and see what they do about that because
I think that’s going to be a bit of a test case to see how they handle ESG are they going to go tough on and the company that owns it is sing Chang which is the I would suggest potentially their biggest investor um across the country
So you know that’s going to be really important and a and a real signal to the rest of the world how Indonesia handles um problems with ESG um but there’s a lot going on they’ve just had an election as well you know there was a lot of question marks
Over who’s going to be elected um as it turns out the son of the former and now you know the ex president um Joo wi Doo who nickname Jo jooi he um his son was the running mate for the new president they got elected and I think
That you can it can be very safe to say it’s a bit of a continuity result um if anything potentially even more tough on making um companies step up and um Banning exports and and becoming tougher on companies to contribute to the local economy um but definitely it’s not the
Disruptive outcome finical that people expected it to be but even so um even if you are an Indonesian lowcost nickel operation at some point in this current environment you are likely to be struggling so I would argue that something’s got to give to with some of those slightly higher cost um operations
On the Indonesian cost Cur yeah I I so many followup questions with this I mean in that technology you know hpal in in that processing technology obviously you have to sleep in the bed you made and I just you know how much of this product can
You dump into the market and and and and and just push that price lower lower until you’ve actually done yourself more harm than you’ve done good I mean what are I guess that has a follow what’s the economics of this right now yeah you know it’s really interesting obviously
It’s it’s I don’t know the data off the top of my head and I I you know would not be the best person to ask for that however um obviously it’s significantly cheaper but I actually did an interview with the um with one of the government
Ministers and he said to me I asked him that question you know about pricing at what point does this start to become a major problem um and he said we don’t actually want to we’re not trying to take out the market there is a point
Where we want to we want I think they’re trying to keep their projects at a certain level the costs at a certain level so they don’t ever get too low so that they flood the market too much um because they have a break even price too those those
Operations um so I think they would like to have more influence over the price um there is obviously concern about that in the West too so it’s a really interesting time um Indonesia is launching its own prices um for nickel it’s looking at doing that so I think that that
Situation’s got to change too but yes you’re right there has to be a point where they are aware that too much nickel is too much nickel right right um right there is some geopolitical um I guess questions that need answered here specifically if Indonesia’s looking to diversify their
Uh Partnerships with the West because of that inflation reduction act you know a lot of that battery grade material has to be uh processed through uh countries that have a free trade agreement with the United States and I don’t I don’t think Indonesia is a part of that
Agreement and so is there a campaign happening as we speak with the Indonesian government uh kind of trying to Buddy up with the uh the Biden Administration or the US government right now for sure I mean so Indonesia is definitely pushing to have a free trade agreement with the US and that’s
Obviously really important as you know because it gives it access to all of those um EV tax credits the country is trying to build a battery industry not just um Miners and smelters you know it wants to have a battery manufacturing plant there at some point it wants to
Have uh be able to produce EV I think eventually I mean we had a a moment where we saw Elon Musk visit Indonesia and we nothing has materialized from that but who knows in the future um but as you also say yes they have they’ve been trying to get that but um we’ve
Seen a lot of opposition from that in the US um Senate we’ve seen letters written um expressing this opposition and saying do not do this this is not good and they’re arguing on the grounds of the ESG um stuff that we talked about earlier in other words they do not meet
The right criteria on environmental social and governance issues and therefore we don’t want to um we don’t want to have that FTA with with Indonesia and also bear in mind the ownership of a lot of those assets why would we want to go and put all of our
Eggs effectively in a China basket now that’s the um the argument that they’ve been making I think what’s been important within that as well is the foreign entity of control definition which is very very important because it talks about for the purposes of the inflation reduction act a foreign entity
That’s owned or controlled by um these what they call I guess a covered nation and those covered nations are China Russia North Korea and Iran right right so those four when we’re talking about Indonesia we’re talking about China and the definition has come out and said if
You’ve got more than 25% ownership or control by China effectively a fore an entity of concern then you don’t get those tax credits so that that includes board seats voting rights or any equity and so if that stays the way it isn’t at the moment a lot of those projects that
Are more than 25% owned by Chinese companies will not be eligible for tax credits so there’s even if they get the Free Trade Agreement there’s going to have to be some quite a lot of maneuvering um potentially and maybe that will happen clever restructurings of equity Stakes or board seats to try
To take ownership lower than 25% I don’t think that’s going to be possible across the board um and therefore everyone’s expecting this big wave of capacity to come and hit the EV Market it won’t necessarily it can still be there but it’s not going to have that Free Trade
Agreement um the access to the IRA credits and the tax credits as a result so that pushes up the cost and that’s not something that those projects are really looking for so I think it’s it’s going to be interesting to see how that all plays out there’s definitely a lot
Of pressure um not to do this free Trading agreement but at the same time if a country accounts for by the end of the decade 75% of the world’s nickel production and that’s before we account for all the rest of it that’s being taken into care and maintenance right
Now it could be greater than that then they’re going to have to have to do business with Indonesia in some way so that Situation’s yet to to kind of fully play out but I do think you know it’s it’s not as straightforward as it may seem uh you don’t think subsidizing
Projects within us Canada or some of our you know Free Trade Agreement partners other countries is a solution if they are going to turn their back on Indonesia well you can okay so let’s look what the Australian government’s doing right now so you’ve got all of these nickel projects are in an absolute
Mess and they’ve said okay this week we’ll put nickel on the critical minerals um list which they hadn’t done before which is kind of mindboggling um which op which opens up its coffers for the mineral to access financing um that they that is held back for those raw
Materials so that gives them access to the I think it’s $4 billion of critical minerals facility and to Grant programs that are for critical minerals so in this case nickel is that going to be enough no is it going to be in time no um they also said that they would
Provide and you talked about subsidies um rebates um and royalty relief right so they’ve said that’s coming in from March for 18 months that’s great but when that period ends it’s got to be repaid within 24 months so this relief is shortterm and very very temporary and
It’s going to cost them you they’re not doing this um without expecting some money back so what happens when that money ends I don’t know they’ve got to hope that the price has picked up enough but if you listen to what BHP said this week we’re talking about the end towards
The end of the decade before we see the market back to where they need it to be to be sustainable given current prices so I don’t know it’s difficult one no government wants to see workers put out of um jobs either so there’s that pressure too right um right but um this
Relief for these projects isn’t necessarily going to going to do the the trick I mean new calonia is a great example of that we’ve seen um I think it was last year so it’s a French territory the French government said that it needs at least an emergency cash injection of
1.6 billion for the three companies the three nickel big main nickel companies there so that’s glenor um aramet and prony resources and trafigura and so Glen CO’s already put its assets on car and maintenance Connie ambo and said we’re out with we’re selling the stake and we’re not putting any more money
Into it um find us a buy we you know we’re looking for a buyer um aramat effectively said we’re not going to put any more money into these operations either they said that at the end of the last year they got an emergency loan for
A year to keep it going um and then we’ve had uh prony resources well I don’t know this has not been confirmed by traffic Ura but we understand that they’re also seeking financial assistance from the French government and maybe even a new investor because draig has equally said I’m not just
Throwing endless money into this pit quite literally um and so we’ve heard and I don’t know if this is confirmed that they have received a an Emergency state-backed rescue loan and an energy subsidy to keep them operations funded till the end of 2026 but what happens after this point you know right new
Calonia is a high fuel F environment it’s got coal and freight costs that are significantly higher because of the location and that’s the energy source they rely on and they’ve been they faced political tensions for a long time plus you know going back to technology these projects are hard um they’ve taken a
Really long time to get to this stage and they have not ever yielded the operational results that the companies had hoped um there was a very entertaining um comment made a decade ago by the glenor head of nickel um at the time and he talked about conambo having thrown
Billions of dollars at it and it would produced a teacup of nickel and they said when they put it on care and maintenance recently that they have never ever realized a profit there for over 10 years that they’ve been funding it they’ve funded in this 10 years in
This decade um I think it’s 4 billion and more than 9 billion has gone into the project since in ception and it’s still it’s still nowhere near where it needs to be to reach capacity and they and they’re out so it begs the question how much money is
Going to be enough to get these operations up and running uh nobody ever said mining was easy specifically for miners um you know and I wonder where that breaking point is when you go from you know Running on Fumes putting this on car putting those projects are the
Like on car maintenance and needing emergency funds just to even do that I mean where where do you get to the point to where listen we’re on downright closure we’re closing these things we’re we’re done and we’re never coming back we’re gon to you know we’re going to refurbish this
Thing when does that happen I know I mean it sounds like it’s happening for some of these companies right obviously was enough was enough for glenor it’s out I mean let’s see what happens with with prony’s resources and and the assets there because maybe traffic era decides it’s out
Maybe um this is a good time to be savvy Look forward and say the world’s going to need nickel look at all the backdrop that we’ve talked about with Indonesia and and the Reliance and the need to diversify maybe this is a good time for m&a if you’ve got the money and you’ve
Got a big deep pocket and I you know I was thinking about this I was kind of where is that money going to come from we’ve seen a lot of interesting critical minerals from Saudi Arabia and their Sovereign wealth fund has been very very active maybe they’re a potential buyer
Um maybe a Chinese firm steps in but is that going to happen in Australia through the through the approvals process I don’t know um maybe who knows you know I think it comes down to the sort of the ethical decision versus the we need to protect jobs who knows um
Maybe we see private Equity focused on critical minerals you know MC Davis Vision blue resources um the the conambo asset in um new calonia was actually extras when he was the CEO there before glenor acquired them so maybe they come back in but again and he is focused on critical
Minerals but how deep a pit do you need to keep plowing money into operations unless somebody can see some kind of amazing something I can’t see at the moment um and obviously these companies can’t see otherwise they’d be doing it um and unless there’s a massive turnaround
In uh you know the pricing of these markets and the cost environment for these markets and the backdrop of supply and and the pressures we’re seeing on the market and also a pickup in EV demand as well which will come but it’s not that hasn’t helped it’s the last couple week
In the last couple weeks it seems like it’s been uh decreasing you know that that’s obviously going to be cyclical as well not everybody buys a brand new vehicle every year right exactly so I think there’s so much that’s going into this but yeah I think we are starting to
See um a really kind of interesting time and nickl is just nickol is taking the brunt of so much at the moment um yes it is let’s see what also happens don’t forget sanctions um that’s going to be really interesting you know if H pal wasn’t
Enough for you now we can talk about sanctions with right yeah I mean we’re waiting to see if there if nickel is added to the sanctions list I mean it hasn’t been and I think a lot of that is because of this Reliance on these assets that are there
And maybe that’s a deterrent maybe that pushes the pushes everybody away from you know the governments of the West away from sanctioning Russian nickel they haven’t sanctioned Russian aluminium they haven’t sanctioned Russian copper they’ve done a little bit around the edges with steel and some copper Executives um actually um were
Sanctioned by the UK today but nothing crazy significant but if you think about it um 47% the LM data I look this up the LM data shows that 47% of their stock is now Russian in across their warehouses 90% of aluminium in their warehouses is Russian um 36% of
Nickel is Russian 37% is Australian at the moment um and copper 46% of copper and LM warehouses is Russian so if that material is sanctioned and suddenly nobody’s allowed to move it that would be a very interesting situation um when the UK issued sanctions they they got lucky that there
Was no Russian metal whatsoever sitting in their warehouses in the UK but if the US does it and if and if Europe does it that could be a very different situation um you would hope that well well it depends what your your view is whether
You want to kind of go for the jugular but if you’re a consumer of any of these products you’re probably hoping that they issue licenses to allow you to do business with the trade deals that you already have that exist currently um but it’s going to restrict the warranting of
Of material after the day those sanctions issued and that’s that’s pretty big so everybody is now looking to see what could happen there um you know the LM is not going to do anything unilaterally it’s going to wait to see um what governments do and act in line with International sanctions it
Doesn’t have to but it will um it will with the us because you know its contracts are in dollars the EU has less pressure to necessarily respond to impose those sanctions they wouldn’t necessarily be binding on the LM but um I would imagine the pressur is there and
Then what do we see the contracts um basically suspended I mean that would be incredible um I’m not saying they’re going to go that far but it would be a scenario yeah um it’s you think back the last two years here Andrea and the moment Russia invaded
Ukraine the LM has been at the center of this geopolitical deglobalization absolute show Y and everything it just the way the world works it all it just seems like majority of it funnels through the lme as far as you know metals and resources go and they have you know they
Go from this nickel debacle that happened two years ago where they just absolutely messed that up to now we have a nickel Market that’s in the gutter and it didn’t take that long to do it I mean hey what what does an LM do I mean I I I
I I I guess I have a Little Bit of Sympathy for him you know it’s this this legendary institution yeah I mean yeah and I think look let’s you know we could we could spend another hour talking about what happened in in March 2022 and I actually come down on
The side of whether it was right or wrong they had the right to suspend that contract and cancel those trades because their rule book says it right so that’s my opinion not everybody will agree with it but that’s that’s the rules them’s the rules right so that’s kind of that’s
The way that is um they have done a lot they got slapped on the wrist very publicly they probably will get slapped on the wrist by The Regulators further but they have kind of they’ve been cleared in the courts of of acting inappropriately um they’ve upset the
Fund Community because you know if you had your trades canceled and you were on the other on the on the positive end of that trade you would not be a very happy person but um was that the lm’s fault that the market went in that direction
You know they’re there as a platform um some people think it is so I you know again we could we could talk the we could talk about this for hours and hours and hours but yeah you’re right they have they have been doing things
Since then to try to fix it and I have to say volumes are up significantly compared to where they were so that’s a really Poss thing um but yeah it’s just when I said it’s the gift that keeps on giving it’s exactly what I meant it there is always something that they are
Struggling with and I I feel huge sympathy actually for them because one one day it’s this the next day it’s sanctions then it you know it’s always something um and I suppose that’s that them’s the breaks when you’re the biggest kind of nonfer trading Exchange
In the world but it’s it’s a tough job being the CEO of the lme I would imagine I sure it is I I actually kind of miss when when that thebuckle happened in the spring of 2022 the the most iconic photo was that like Circle red couch it’s the
Only photo of the elmy anybody ever had in any of their reporting and so it’s like cue the red couch because that is the LM for some reason that that red couch is the LM that’s the only thing I like the visually what I can like picture when somebody mentions
The elm it’s not like warehouses of metal it’s the right couch yeah I love those red couches I was very lucky actually the day that that all went down in March 22 I was actually at the LM for a meeting oh wow and so during the suspended nickel ring I went down and
Took a picture and I have a picture of the couch with the nickel clock in the background and there’s nobody sitting there so it was the empty couch during that suspended time but it was it that was an amazing kind of roller coaster ride and um you know the repercussions
Of it have been far reach in so yeah it’s it’s it’s just unfortunate that nichel is right at the center of all this crazy stuff um the LM has been bashed in the last week or two by BHP and glenor whove said that one of their efforts to that they got criticized for
Was that there weren’t enough Brands um that could be delivered against the lme contract right that was one of the big problems with this um problem in March 2022 that the Indonesian um capacity wasn’t that the wasn’t the right kind of nickel to be delivered so they opened up Brands um to
Those projects in Indonesia and now they’re being slammed for doing that something that everybody thought was a great idea and now they’re being slammed for doing that because that capacity is coming into warehouses and they’re saying this is a problem it’s flooding the market with Indonesian nickel and
This is adding to the pressure you know remember everybody the LM is not a producer so they’re just a platform so it’s if the those stocks are meant to be there as a market last result so don’t get too excited be careful what you wish for if you wanted more material in in
Warehouses you’ve got it that’s that’s Supply demand that’s not the W the lm’s fault but they are still getting bashed for it so I don’t think they can win yeah uh got a few minutes left I I do want to ask you maybe pick your brain a
Little bit more coming down the food chain and the development and exploration stories on the back of the major producers you know 2023 was quite interesting uh despite markets just absolutely being in the tank for the last two years uh on the metal side um not you know not the tech not Tech
Sector but the the real stuff uh we did see a lot of these the major Global metal producers start taking strategic Investments Partnerships and some of the bigger well-known uh exploration development projects in the west uh we can talk about multiple things in vun District in Argentina riotinto still kind of dabbling the
Waters in Yukon um you know not that this is necessarily the beat you follow but I just maybe if you did any sort of questioning as far as you know their ability to think or need to think 30 40 years down the road and why is now the
Time to start kind of picking away at some of those ideas I mean okay so that’s what they do that’s what those big companies do when um right now they will have tightened their belt so exploration is the first thing that goes so they rely on these
Companies to continue to do that work as long as they can so that when they when they have the ability to go back out there they’ve still got these projects that have been developed and they can go in at different stages with Equity stakes and I think that’s what we’re
Seeing um part one part two my second point on that would be that you know you talk about looking down the line permitting permitting takes a decade or more for for projects with critical minerals in the US um it’s really lengthy and ridiculous and it’s the same
In many other jurisdictions and if it’s going to take that long they need to think 20 years out um you know from start to finish these projects are taking 15 to 20 years so if we’re talking about needing all of these millions 10 million tons by of copper by
The end of the decade they should have started 30 years ago right um that’s a huge number of massive new mines so they’re not there and that’s what we were talking about earlier with the supply crunch that’s definitely looming um so exploration companies have a critical role to play I think that gets
Forgotten though on the financing side because everybody expects them to have just survive these troughs in the same way that um the the big miners turn off capacity they expect these guys to be able to keep going and and continue their exploration but as you know from your conversations with these people
It’s not that simple they need capital A lot of projects Fall Away look at TSX 10 years ago and look at it now you know you see the Peaks and the troughs of the listings and it’s it’s evident that um there are good projects out there and
Equally there are bad ones they’ll fall away naturally um but I think that seeing Majors coming into taking stakes in projects earlier than they may have done previously is a really positive thing because it prevents them from falling away they recognize that there are Peaks and troughs if you were a
Lithium Miner right now is a terrible time to be kind of on your own as an Explorer whereas if you have got a big um a big or medium to large size mining company as a backer or private Equity or whatever it may be um you’ve got a
Lifeline that can keep you going when for longer when times are tough so I think that aspect is really important and I think that’s slight difference if you’re talking about the timing of them coming in and taking these projects now rather than waiting till they have these great results they’re taking more risks
Um but I think they have to I really do um and that’s a good thing for the for the juniors it’s a really good thing for the juniors um was interesting this morning we got news out of Newmont I mean a lot of this conversation’s been focused on you know critical minerals
Based base Metals in the gold space newon announced that they were going to divest from six big projects Tred to raise a couple billion dollars from divesting and it includes like currently operating mines Elenor Creek and Victor in Colorado and obviously there’s some later stage exploration development
Projects within that list um and so it’s not so it’s not just like the glenor and bhps that are stricken with bad nickel prices I mean the the gold producers are absolutely Ely having to deal with higher inflationary costs and they’re taking losses on their financials over
2023 I so it’s you know it this wrecking balls running its course rout all of mining it’s not just the deflationary base medals right and I think the interesting thing will be at what point does it turn you know if you’ve still got um if if you’ve got Majors like BHP
Saying nickel prices are still going to be in the doldrums in in a several years time you know then that that sector could be in a very different shape in six months let alone in several years time that’s that’s you know could be potentially disastrous for many of these
Projects but are we going to see a wholesale cyclical upturn or are we going to see individual Market start to move and to their own to the tune of their own Supply demand fundamentals and kind of break away from that pack that might be the way things go I don’t know
When the flood of money comes into Commodities it lifts everything um but but um you do tend to see a shake out and I think if if you are a longterm if you have a long-term view then great you know these markets are going to come back and everybody
Knows we need the the critical minerals but um yeah there there how this How This Ends I don’t know right now this wrecking go where it where it lands um ah it’s it is a mess it is a real mess I’ve always you know my thesis has always been a actual recession would
Create a reset in this metal space uh we’re just kind of waiting for that to happen um have you had any you know thoughts discussions on ramifications of an actual recession in the west and if that would maybe you know tame the waters a little bit for the next move
Higher I think everybody feels like we’ve passed those days to a certain extent that there was that concern about recession I mean UK is maybe my home country is maybe a bit of an exception in terms of recession but um you know I think that if you look at the US
Economy it’s it seems to be out of the danger territory waters you know it’s avoided a recession if you look at the other major economies around the world I don’t think that there is that concern that there was particularly as we start to enter this slightly more deflationary
Environment or at least know that we’re not necessarily getting to more inflationary environment um but um would a recession reset things yeah it does I mean it does it has to right you’ve got to hit a lob what goes up must come down and so on but um I
Don’t necessarily know that that’s around the corner anything’s P I’m going to be on record now saying that and then obviously that’s going to happen but but um I don’t necessarily think that that’s around the corner and the data doesn’t suggest it’s around the corner Corner um
What I what I think is that we’re just everyone’s still nervous that you know this we should be seeing a more risk on approach um because of the factors we’ve just talked about you know slightly more stimulus more deflationary environment economy is looking stronger jobs data looking pretty good year of consumption
Promotion in China Etc but we have not yet seen that um and I think everything is playing to the tune of fundamentals for the individual markets rather than the bigger macro backdrop and that’s only providing a sort of a slight um kind of support so where
Things go I don’t know if China suddenly comes in um incredibly bullish and you know starts buying everything in site then that’s a different that’s a different story um but I don’t think that that seems to be its Mo right now um it doesn’t seem to be trying it’s
Definitely not trying to stimulate its housing in real estate sector in terms of building more right it doesn’t need to do that he needs to rescue the companies that are active in it so that’s not good for steel it’s not good for copper and so on um you know there’s
There’s so many different facets to this right now but I think I wish I had a crystal ball I think I need one I think I definitely need one but yeah I mean who knows well there’s there’s very few people in this world that has an ear
To the ground in this beat quite like you do and so I’m really thankful that we could spend some time discussing because your work is incredible uh your Twitter feed is a must even if you don’t read all the Articles and columns you put out on on Fast markets and you can
Go follow her on Twitter which she excellent Snippets from the news of the day and Andrea hotter uh I appreciate you so much thanks for all the great work and I hope we can do this again and and uh and Due Time absolutely I’ve really enjoyed our chat and I I will do
Better at making sure my schedule is like right we’re doing this on this day we’ll get it in the diary next time oh I tell you what if you saw my diary it would be it’s an absolute mess so you probably did me a favor by punting a few
Weeks all right all right Andrea have have yourself a great weekend thank you so much thank you Oh
3 Comments
apart from the metals knowledge, certainly lives up to her last name
The super cycle concept is simply a way to generate interest in the metals market with if you’re missing out being the primary goal
you could've at least left a link to her twitter and blog here mate….