Analyst John Meyer reviews the new Tesla truck and names the six mining stocks that could benefit from its success.
Lee Wild, head of equity strategy at interactive investor:
John, what do you think are going to be the main trends driving metal prices in 2020, is it Chinese demand, sales of tech products, currencies?
John Meyer, mining analyst at SP Angel:
Well, Donald Trump is the key factor in all this and, unfortunately, his impact on trade flows and global economic growth is going to trump everything else, excuse the pun.
But if we put that aside, the other big theme is the drive towards electric vehicles, grid power support, other types of battery backup. So, all the things related to the electric vehicle revolution I think are very important. Tesla (NASDAQ:TSLA) has announced the Cybertruck and we've been comparing that with other types of pickup trucks sold in the US.
So, the most popular, and the obvious one to look at, is the Ford F-150. It's a very well refined vehicle, and is now made out of aluminium, whereas the Cybertruck is made out of this super strong, almost, well it is bulletproof steel.
Something that the Americans like, bulletproof steel, bulletproof cars, the Cybertruck is a bit heavier at three tons, and it has a big battery pack that will do 250 miles on a single charge. And that's all very nice, so it is a bit weightier than the F-150, but it'll do, from a cost per mile perspective, it looks like it's about 20% of the cost if you're going to drive that in the UK looking at our power prices versus our gasoline prices.
So yes, I think Tesla is onto a winning mix there. I wondered for a while why people haven't been buying more 4x4s, SUVs with batteries in them. We've got the Mitsubishi PHEV that's out there, and now Tesla's coming into this market as well.
So, I think there's going to be a lot more activity in this area because it's easier in many respects to turn a bigger car into a better battery vehicle. And it's not just passenger cars, it's moving into electric buses, maybe even into fuel cell type vehicles, because they give a better range, and there's a lot of spare hydrogen in the world, certainly in Germany, in parts of the US, it depends where you are.
I think there's going to be a mix of new renewable energy generation, and also renewable energy consumption as well. So yes, we go more and more on the side of battery vehicles, electric vehicles, fuel cell vehicles, that sort of thing. And I think that's definitely going to drive the types of metal being consumed.
What materials are used in the batteries of these cars?
Three key materials really - lithium, nickel and carbon. Okay there's some cobalt and some manganese and there's some different chemistries within these lithium batteries, but lithium-ion batteries are the mainstay of the electric vehicle market. You’re not going to change that technology radically for a while.
There are about 11 different types of chemistry being used, and batteries for trucks are slightly different chemistries to batteries for passenger vehicles. But essentially, they're roughly the same.
If we look at, well what's common between these batteries, lithium is clearly common amongst all these batteries, because it's very lightweight, so that's why lithium is really the dominant metal there.
Nickel, which is much heavier, but is resistant to corrosion, is important. And carbon, because carbon is the current collector there, it's a very important thing to get right. And, actually, one of the things about a better battery is getting the purity and the quality of that carbon just right.
So if you've got the mix of carbon right in your battery, and in fact BMW have been talking about this, you'll create a battery that you can charge more quickly, more frequently, well more often and actually get more miles out of it, so it becomes particularly important.
And companies that are working towards this, on the Graphite side, Renascor Resources (ASX:RNU) and Talga (ASX:TLG), which are listed in Australia. In the UK for the Lithium, Savannah Resources (LSE:SAV), which has a lithium project in Portugal, very sensible project and good management on that.
- Take control of your retirement planning with our award-winning, low-cost Self-Invested Personal Pension (SIPP)
And on the Nickel, there's less options in the market at the moment, but Amur Minerals, has a huge nickel project in Russia of strategic interest out there. So, there are a number of companies that one can look at, and these are the key companies we would focus on.
And what's in the motors for these vehicles?
Well the motors are really important because that's the bit that drives your car. And we think the motors are going to carry on improving in performance going forwards. I mean they're already very efficient at converting energy into power at the wheel, and they give fantastic torque.
But what makes a really good motor is the copper windings and the neodymium and praseodymium that make the magnet, the permanent magnets within those motors. And in fact, also within the braking system, because you can use regenerative braking, so every time you hit the brakes, you get about 65% of that power back into your battery, and you will then get most of that back into the wheel again when you start off, let’s say after you've stopped at the lights.
So, it's a really, really good system. But the critical bit here is the neodymium and praseodymium rare earth metals. They command relatively good prices in the marketplace. But I do think prices are going to rise substantially there, and if we look at certain companies in the marketplace, Mkango Resources (LSE:MKA) and Rainbow Rare Earths (LSE:RBW), both very important companies I think, in the London market for leading that, helping to lead the battery revolution for electric vehicles.
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.