INN spoke with Independent Speculator Lobo Tiggre about the new energy paradigm and how it dominated the resource industry in the 2010s.
Speaking to the Investing News Network, Independent Speculator Lobo Tiggre talked about what he thinks was the big story in the resources industry over the last 10 years.
He nominated the new energy paradigm of lithium-ion batteries as a “one way change” in how humans live, from electric vehicles (EVs) to smartphones. For Tiggre, it all comes down to the development of more energy-dense technology, which has been a boon for specialty commodities.
“When the lithium-ion battery really started proliferating—when cordless drills and that sort of thing started happening—I think that was the inflection point,” said Tiggre.
“If you think back on it now with the benefit of hindsight, it was a game changer. The energy density of the lithium-ion battery was such that it opened up vast new applications that hadn’t even been considered before, and ultimately led to Tesla (NASDAQ:TSLA) changing the automotive industry.”
Tiggre argued that advancements in miniaturization are only half the story behind the uptake and popularity of modern connected technology like smartphones.
“The smartphone isn’t a pocket computer now just because we got better at miniaturization — the battery is a critical part of that. If you could have had a pocket computer like an iPhone 20 years ago, the battery would have run out in 5 minutes. It just wasn’t feasible, even if it could have miniaturized.”
Tiggre — who is known for commentating on nuclear energy and the state of the uranium industry, as well as metals like gold — said that the disasters in uranium and the wild ride that gold saw in the last decade pale in comparison to the changes that the new energy paradigm has brought about, as it has fundamentally altered society, even outside the resources industry.
“It’s because it is changing how we live, it is changing what it means to be human. Every child now has the sum total of human knowledge, at least in the developed world, at their fingertips.”
What made the development such a big deal in the news space was that nobody saw it coming, both inside and outside the mining space, said Tiggre.
“If you look at the analyst models and so on, I think they’re all vastly underestimating the rate at which the world will go to EVs,” he said.
“It’s just so much better an idea, and not just because it’s not polluting in the carbon footprint and all that, but because the cars have fewer moving parts, they require less maintenance. They don’t have gasoline exploding inside them, so it’s just that much better a solution to transportation issues, and that’s even before we get into the self-driving aspect … it’s that much better that it is a one way change.”
“In the world within your lifetime and mine … (or) maybe even within 10 years, it may seem quaint and archaic to think of burning fossil fuels to make a vehicle go or for energy at all.”
(Some of) the new energy paradigm metals
Lithium-ion batteries can come in a few flavors, but the basic requirement is they need lithium, cobalt and graphite. Base metal nickel makes up the majority of the battery, and copper is also vital for everything electrical.
Thanks to the EV boom, nickel has seen a marked increase in use on top of its traditional application in creating stainless steel, with demand expected to continue going up.
According to Simon Moores of Benchmark Mineral Intelligence, demand for nickel from the lithium-ion battery sector could increase up to 19 times if current production facilities come online as planned. In 2017, lithium-ion battery megafactories needed over 49,000 metric tons of nickel to meet demand; Benchmark data shows that by 2028 they will need almost a million metric tons.
Despite all that, in 2019 the base metal didn’t see an increase in value over 2009. During the decade it had a wild ride, reaching towards US$30,000 per metric ton in 2010 and 2011 and falling well below US$10,000 in 2015, 2016 and 2017. As 2019 drew to a close, it was fetching US$13,990 on the London Metal Exchange after gaining 30 percent in value in the last year of the decade.
Another major metal — cobalt — saw an even wilder ride, with the important commodity starting the decade at around US$40,000 per metric ton, slowly falling to nearly US$20,000 through to 2016 before rocketing to above US$90,000 in the first half of 2018.
While its fall from those lofty heights was as swift as its rise, cobalt is still hanging around between US$30,000 and US$40,000. The metal has plenty of issues, and lithium-ion battery makers don’t actually want to use it, but it remains a necessary component in the new energy picture and it still remains firmly a part of the EV narrative.
On the lithium side, the commodity saw massive increases in production rates through the decade as companies started to believe that the demand was going to hold up. Going forward, things are likely to get even more lithium focused in the resources industry despite a few rough years for the commodity.
According to Tiggre, while large swathes of the resources industry didn’t see the new energy paradigm coming, many were also slow off the mark once it did arrive. However, he added, they weren’t at fault for that, especially lithium producers.
“It takes a long time to ramp up (lithium) production,” he said.
“Before you’re going to commit the capital to do that, you want to make sure that higher prices are sustained and justify that. You watch the change happening, you watch lithium prices rising before you take any action, and you want to see them stay higher before you take any action. And then when you do take action it takes years for your production to ramp up,” Tiggre added.
“For the big players, they are looking at decades of mine life; they’re not worried about the supply price fluctuation over the next year or four years.”
He continued, “Their decision is, ‘If prices are going to remain higher, then it makes sense for us to invest this capital and supply this market over the decades to come.’ I think they have done that exactly right, and the bigger players, they don’t have to select the ups and downs, I think they’ll do well. It’s not as exciting as a little junior that has nothing that makes a discovery and becomes a producer or something, but it’s much less risky.”
Finally, the metal that makes everything electric, copper, also had quite a decade. Even so, the red metal ended the period on a downward note, despite the gospel that it’s the metal of the future.
At the end of 2019, copper was valued at US$6,155.50 per metric ton after starting the decade at US$7,345. It hit its high in 2011, when it was valued at over US$10,000, and its low in 2016 when it was below US$4,500.
For more thoughts and input on the last 10 years from experts interviewed by INN, read Big Booms and Epic Declines: 5 Experts Sum Up the Decade in Mining.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.