Mining stocks, Trump, tariffs, China and critical metals

As well as President Trump, mining experts at this year’s Mining Indaba in Cape Town, South Africa, talked to us about Chinese electric vehicle manufacturing, lithium prices, copper, graphite and the race between the US and China for super intelligence.

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Lithium

John Meyer, mining analyst, SP Angel: “We think lithium prices have bottomed. In fact, we’re now seeing prices come off the bottom. There was a big stock build in China. I think they were hoping that the electric vehicle market would grow faster than it was. I mean, it has grown pretty damn fast. There were 300 automotive companies in China. I mean building cars, mainly electric vehicles. That is now slimmed down to about 50. In fact, the forecast is for that to cut back to about seven. So, we’ll see where that goes. They’re not going to produce any less electric vehicles, that’s for sure. They are stimulating domestic consumption. So, China is going to be driving around in a lot of EV cars.

“I think for the West, the market doesn’t need to grow quite so fast. Why should we? Yes, we want to clean up our cities, and that is happening at a decent pace. But we are rolling out the infrastructure that is required, and we are going to be driving electric vehicles going forwards. But I am personally quite happy to wait two or three, five or 10 years more, to get something with a much better battery in it. I think the designs, the voltages, the systems that run those electric vehicles, are still evolving. And the battery chemistries are still evolving.

“I still think lithium is going to be the dominant metal. And the simple reason for that is that it’s very light. That’s on the cathode. On the anode side, I think natural graphite will become dominant. There are issues to do with natural graphite which has slowed the development of it. Everyone’s using synthetic graphite, whereas you will get better-quality material from narrow-vein natural graphite mines.”

Charles Bray, executive chair, Aterian (LSE:ATN):“I think the United States administration and their use of tariffs, whether from a negotiating standpoint or in reality the implementation of the tariffs, is going to lead to changes in the supply chains. And in particular with lithium, I think given that the Chinese are the dominant refiners, it’s going to ultimately drive refining capability. What we hope is within Africa itself, we’d like to see those refiners end up being local, so that the added value is something that’s spread to the local communities.

“But, ultimately, I think it’s going to lead to situations where you have countries like Canada engaging in free trade agreements with groups like – whether it’s Mercosur in South America, or the EU. And battery gigafactories setting up in Canada, and batteries built in Canada as opposed to the United States. Which, as an American, I very much regret. I’m an old-school globalist who believes in markets, free trade and competition, and just hope that these trade wars don’t come about, and that this is much more about negotiation than reality.”

Neil Herbert, executive chair, Atlantic Lithium Ltd (LSE:ALL): “Today the price of spodumene concentrate is sitting around $800 to $900 per ton. That comes down from a level which just two/three years ago, when there was a supply crunch for lithium, when it was at times in individual spot sales at over $8,000 per ton. I don’t expect prices to return to those sort of levels. Projections for the medium term are looking at $1,300 to $1,400 per ton. Last year was a particularly bad year. Prices fell all the way to under $800. However, prices have already recovered around 20%. What we’re seeing is that the supply of lithium concentrate is tightening, and we expect to see the price rise through this year, albeit slowly.”

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Graphite

Sapan Ghai, chief commercial officer, Sovereign Metals Ltd (LSE:SVML): “China has a number of graphite mines already up and running. There’s very few graphite mines up and running in the rest of the world. And the reason for that is essentially the price of your worst graphite. So, graphite isn’t one price, it’s a basket of prices depending on the underlying flake size of your graphite. If you imagine a bowl of Cornflakes as your graphite, the bigger the flake, the higher the price.

“So, the smallest flake size today gets a price of about $400 a ton. Now when you see the Western world on average can only produce graphite in any of the projects that are now developing at maybe $550/$600 a ton, it’s pretty hard to make economic sense out of actually constructing those and developing those projects. China mines at an average of $250 a ton for their graphite. So, it makes complete sense for them to run those mines.”

Copper

Charles Bray: “Copper is an absolutely fascinating metal element. Copper is being driven – longer term – with the energy transition, we fundamentally believe, and there seems to be a tremendous amount of evidence that copper prices should be accelerating and going higher in the relatively medium term, and significantly higher.

The issue with copper is that in the short term, it is still used primarily in construction. And with the Chinese market suffering a bit over the past 12 to 18 months, the demand from China has dropped off. Inventories rose quite considerably. And so what you’re seeing there is that market in the short term is starting to consume its inventory, and it’s starting to lead to the recognition that the longer-term demand/supply equation is out of whack. Some copper mines need to come online and come online relatively quickly.”

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Uranium

Andre Liebenberg, chief executive, Yellow Cake Ordinary Shares (LSE:YCA):“Trump 2.0? I think Trump 1.0, he was kind of neutral on nuclear. He wasn’t against it, he wasn’t pro. Biden was massively pro-nuclear. But I think Trump 2.0 is going to be pro-nuclear, and I think it goes back to the data centre/AI story. We talk about these data centres and artificial intelligence. This really is a race between the US and China for super-intelligence. And in that space, 50% of the world’s data centres are in the US today. I think this falls firmly into the Trump ‘America First’ theme. And his new best friend Elon Musk is a supporter of nuclear. So, I think on that dimension, we’re going to see support for nuclear.

“Tariffs, never a good thing. How does it influence the market more generally? I think you’re going to see adjustments. If there are tariffs on uranium out of Canada, there are no tariffs from Kazakhstan. So, you can probably get some sort of readjustment. But I don’t know how these tariffs play out in the short and medium term. But I think Trump will be supportive of the nuclear theme, because of the AI/data centre story.

“The conversion and enrichment, Russia has 35% of the world’s conversion capacity and 45% of the world’s enrichment capacity. Those things can be built. The technology’s available, the industrial processes. So, in the medium to long term, that will get solved. We’ve already seen Orano and Urenco announce expansion capacity in the enrichment space. But I think the real pinch point right now is conversion. And Cameco Corp (NYSE:CCJ) are now looking at their Springfields plant in the UK that I think shut in 2012. They’re looking at the feasibility of restarting that. So, I think it will come. But I think in the short term, that’s going to be an issue. And we’ve seen the conversion price go from $20 up to $190. It absolutely exploded post the Ukraine invasion. The enrichment price has gone from $50 to $170. Again, an explosion in that side of the fuel chain.

“We haven’t seen the same happen in uranium, because the enrichment and conversion is much closer to the needs, or the refuelling needs, of these power stations. So, I do believe that that flow-through will happen in uranium. Last year was a bit of a – the spot price went down but the term price went up. Long-term price for uranium went up from $68 last year to the low $80s. And everyone focused on the spot price and it went from $90 to $70. But I think the real demand is in the term side of things, and that price has been quite robust.”

Mineral sands

Dennis Edmonds, chief executive, Kazera Global (LSE:KZG):“America at the moment has got very little involvement in heavy mineral sands. The big market for them is China. China is fairly actively involved in Africa generally. So for us, the route to market is probably pretty unaffected. It also appears that South Africa is becoming less and less a favoured partner of America’s, which I don’t think is great for South Africa probably in the long term. But in terms of our operations, it doesn’t have a lot of impact. I would think in terms of price that prices will increase. At the moment, it looks like from my understanding, supply is going down and demand is increasing. So, it’s probably not a bad place for us to be.”

Tantalum

Charles Bray:“So, tantalum is historically a product that’s used as an alloy for the hardening of metals. So oftentimes, you’ll see it used in aircraft alloys, weaponry, but it’s also used as a resistor and a capacitor. So, it’s used in particular as a capacitor in a lot of electronic equipment. The demand for that has been steady and steadily rising. Where we’re starting to see change is in the supply side. So, generally in Australia, tantalum is a by-product of lithium production. So, as lithium production drops, tantalum production drops, and generally tantalum prices go higher.

“We’re seeing...over the past 12 months, tantalum prices has been relatively steady. We think that has more to do with – while the production has dropped off, we believe that the demand has dropped off a bit too, primarily out of China. You’re seeing fewer and fewer electronic goods, in particular from the Western manufacturers, being sold into China. And we think that’s kept the market relatively stable.”