Who Will Finance the Energy Transition's Mining Projects?

Financing remains a key challenge for raw materials

According to Benchmark Mineral Intelligence, if the world is to meet the increasing demand for battery metals, 59 new lithium mines, 62 new cobalt mines and 72 new nickel mines will be needed by 2035 (without including recycling).

However, financing, together with permitting, is still a hurdle for projects to come online. Discussing the roadblocks to securing investments during a panel at the Battery Gigafactories Europe conference, Franklin Templeton’s Anthony Tse said that one of the biggest challenges is the lack of talent and the lack of experience.

Today demand is growing at a pace whereby somewhere between 10 and 12 new projects must come online every single year, Tse said. He was formerly the managing director and CEO of Galaxy Resources, which is now Allkem (ASX:AKE,OTC Pink:OROCF).

“We don't have enough roadmaps to execute on these projects going forward,” he pointed out. "And therefore, that's also going to be creating a hindrance, both from an equity side, but also from a debt provider side."

Societe Generale's (OTC Pink:SCGLF,EPA:GLE) Csaba Bellay also spoke about financing for the energy transition during the Hungary-based event. Sharing his thoughts with the audience, he said that when it comes to difficulties financing projects, currently it really comes down to the four cornerstones of structured finance.

“Who's going to build your project? What's the project going to sell? Who's going to buy the stuff that you're building? Where is the technology going to come from?” he said. “Raw materials is the most important part of these four lists, particularly in Europe.”

For Nishant Das of Standard Chartered (LSE:STAN,OTC Pink:SCBFF), the key challenge will be education.

“I think, ultimately, for project finance to succeed, we need to have an established risk allocation which works. The standards are not quite there,” he said. “So it's a question of banks — project finance banks — working closely with industry players and trying to put in place those frameworks, and the initial deals are the hardest.”

Also sharing his insight on financing challenges was Tim Van Pelt of ING (NYSE:ING), who said the path to success is quite narrow.

“All stars need to align to make these types of things work. That equally holds true, or maybe even more so, for the projects that need to come online for the upstream,” he said. “It's clear that if you have any kind of shiny gigafactory, but you don't have supply, nothing really matters anymore — it doesn’t work.”