Interactive Investor

Critical minerals: a market update

Industry experts and analysts discuss the inside take on key minerals such as copper, lithium, rare earths and more.

27th March 2024 08:59

Lee Wild from interactive investor

At the recent Mining Indaba in Cape Town, South Africa, we spoke to industry experts and analysts about the big issues, including the inside take on key minerals such as copper, lithium, rare earths and more.

​​​Julien Bosche, vice-president EMEA, Trident Royalties (LSE:TRR): So, when you look at copper, theres two sides to the equation, demand and supply. If you look at demand, I think everyone sees that there's quite a sharp increase of forecast demand. Largely due to the energy revolution, aside from just general population growth and that kind of thing. Because copper is a key piece of all the infrastructure for electric vehicles (EVs). Not only EV cars themselves, because they use a lot more copper, but all of the charging infrastructure that goes with it.

On the supply side, the picture's a lot murkier. You have very few large-scale deposits that can step in to help feed that. So youre talking about a lot of smaller mines. There are a lot of permitting issues and social licence-to-operate issues that come with the big deposits as well. And even on existing operations, things like Cobra Panama, for example, having to shut down again because of social licence to operate. We've seen loads of these issues in Peru as well. There's a very big problem with security of supply for copper.

And so, we think that when you put it all together, it's very supportive for copper pricing to drive that incentive price up to bring more copper mines that might not be as economic today. But these do need to come online, and the only way that's going to happen is with a more supportive copper price.

Sheldon Modeland, mining analyst, Shore CapitalLooking at copper, again, supply and demand. You had some big mines like in Panama forced to shut down, which was a significant amount of copper. So that's come out of the supply chain. It is quite a common element in US trusts but it's quite low grade. So you have to move a lot of material to get copper. It's quite challenging in some jurisdictions. In terms of demand, it's only going to go up. It's probably, what, 20 million tons of supply every year which seems like a lot, that's a big number, but it's not enough, so we're going to need more.

So, we need new mines, and these mines take a long time to develop. From discovery to production, probably an average of 10 or 12 years at least. So that's the struggle and everyone's getting nervous about having enough copper.

Ian Stalker, chair, Bradda Head Lithium Ltd Ordinary Shares (LSE:BHL): Lithium has only become popular since around about 2015, when the demand for phone batteries started to get interesting. Phone batteries then went into vehicle batteries because we wanted a clean environment. The world has got to a situation where we're really anxious about the environmental situation we find ourselves in. Whether we believe in global warming or whether we don't, the world is anxious. So therefore, we need to improve the emissions that come from most motor vehicles.

One way of doing that is by electric vehicle penetration. And so once that started to get momentum, the lithium market started to grow and the demand for it was huge by comparison to the supply. But over the last 12 months, the supply has caught up with the demand. And with the recession looming, particularly in the Western world, i.e. America, Europe, etc, the demand for electric vehicles is regarded now to be slowing down.

So now you've got, to some extent, supply outstripping demand. And we all understand supply and demand and what it means. So, some of the lithium suppliers are now stopping production in order to try and maintain a stable lithium price. But it will come back.

John Meyer, head of research, SP Angel: It's an interesting situation. China was so fast to ramp up battery production, they were terrified they'd produce so many cars, they wouldn't have the batteries for them. And also what's happened is the battery pack sizes got bigger for everybody. So China overproduced and then they said, Oh dear, we've got too many batteries, and the gigafactories have had to slow down. And they stopped buying for a bit. And this is the way China works. It can be very stop-start sometimes.

So prices came back quite slowly, but yes, it looks like a collapse over the course of last year. We think that will bottom out very soon. And we think that will be back up, as the gigafactories come back buying the materials.

George Bennett, CEO, Rainbow Rare Earths Ltd (LSE:RBW)So, rare earth prices currently are at the low end of the spectrum. We see neodymium-praseodymium at $55 a kg. Whereas 18 months ago, it was $110 a kg. One of the reasons why the price has halved is that, well, you've got four reasons, I believe. One is that you've got a slowdown in growth in China, which means less electric vehicle sales in China. You've got less wind turbines being rolled out over the last 18 months. In 2022, we had a massive spike in earth prices because you had massive roll-outs in wind power.

Now that wind power will come back as people try and achieve these targets for 2050. So, the wind turbine business is going to reignite very soon. And then also your construction industry in China, which at the moment has been depressed with the collapse of Evergrande in China, the large property company. So, your construction industry is experiencing a slump in China. And, of course, Chinese buildings take many millions of air conditioners. And these air conditioners, as I said recently, have been decreed that they need permanent magnet motors.

So, all these reasons are why there's less demand for permanent magnets to go into these various areas. And then third, the Chinese are, we believe, manipulating prices as well. Because they want to stop other rare earth projects coming on stream outside China. They've been the dominant player in the market. They started to target rare earths 30 years ago, and they want to try to keep that dominance. But the outlook is very strong,because internal Chinese growth is going to see demand for these permanent magnets outstripping their own mine supply.

And we know that the West has got certain targets they have to meet. So, the outlook for permanent magnets and neodymium-praseodymium is very strong. And we expect to see prices recovering very strongly over the next 18 to 24 months.

Anthony Viljoen, CEO, Andrada Mining Ltd Ordinary Shares (LSE:ATM)Tin is a remarkable element. For many years, it's always been associated with tin cans and tin cups. But with the technology revolution, tin is a vital element in all your electronic equipment. Specifically, what people don't understand is when you read about the semiconductor market, tin is a critical element of holding all your semiconductors together.

So, what we are seeing now is the emergence of newer technology of artificial intelligence (AI), of new computer boards, new technologies hitting the market. Solar installations use a lot of tin. So, it's really having a whole renaissance in terms of the market. And we are seeing that thematic come through into the market now. We're seeing there's very little new supply coming on stream.

You've got this increase in demand. You've got difficult mining conditions where it is currently mined. So, we do see that there's a confluence of factors that's really going to propel the tin price and propel tin into the forefront of new technology metals. We are always naturally bullish on tin. We are mining more and more tin as we start expanding the company. But we do see that the tin price can’t sustain these current levels. And we are seeing it increase and we do believe that a long-term sustainable tin price will be well in excess of $30,000 a ton.

Shaun Bunn, managing director, Empire Metals Ltd (LSE:EEE)Titanium mainly goes into very high-quality titanium dioxide pigments that go into your paints, everyday uses around the world. So, the majority of the titanium is very much linked to gross domestic demand across the globe. But it's a huge industry. It's $28 billion per annum. This is not a bubble. And the price structure is really quite steady. The price is conditionally just growing over time. So, we really like the fact that it's not a huge cyclical demand price collapses, price goes up. It's a nice mature industry dominated by big chemical companies which make the pigments.

So, it's a critical mineral and it's a critical mineral because the majority of its uses relate to the metal side of the titanium industry. So, it's a very strong, lightweight material and it's used in multiple applications in the aerospace industry. For instance, aircraft undercarriages, turbines. It's used in the medical industry, people have replacement hips, I've got a titanium hip. It's something that I think the world put on the critical minerals list many years ago because they realised the importance of it.

And, yeah, we think that will be something that will be an important part of our strategy going forward is to tap into that sort of unique demand for titanium.

Charles Bray, chair, Aterian (LSE:ATN): Niobium is a very interesting metal. It is utilised primarily as an alloy material. And most recently, we've seen the likes of tantalum and niobium utilised by militaries quite a bit. It's used to harden metals and make armour. It's used in the deployment of weapon systems. There's been quite a bit of demand recently. It's an item that trades for about $50,000 per ton, so it's relatively expensive, concentrate. And we find it generally associated with tantalum. Tantalum is utilised quite a bit in mobile phones, in computers, any sort of electronic device.

That market has been a little softer but it's still very strong. What we find is that tantalum’s price is correlated with the lithium price. I mentioned earlier that what we have in Rwanda, and as well over most of the world, are LCT pegmatites. And those are lithium, cesium, tantalum pegmatites. So, generally, if you're mining for lithium, you have tantalum as a by-product. And so when you're mining for tantalum, you often will find lithium as a by-product. And that's how we've come about our joint venture with Rio Tinto Registered Shares (LSE:RIO).

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.