The Tesla led electric vehicle boom will lead to a tsunami of demand for the EV metal miners

The recent electric vehicle (EV) stock prices surge is telling a story. The story is one of change. The change is that electric vehicles are coming much sooner than many think. While EV manufacturer stocks have surged, battery manufacturers have done well, the EV metal miners are yet to jump. This presents one of the biggest investment opportunities of the 2020s decade, as a tsunami of demand hits the EV metal miners.

Tesla’s (NASDAQ: TSLA) stock is up over 8 fold the past 14 months (up 492% the past 1 year) and is now the world’s largest car company by market cap. Tesla is rapidly gaining market share and is severely production constrained, as shown by their over 650,000 Cybertruck orders, not to mention a backlog of orders for Model Y, Roadster 2 and Semi.

In fact it was reported yesterday: “Later this year, we (Tesla) will be building three factories on three continents simultaneously.” This followed the Tesla Q2 earnings release with Tesla now achieving 4 quarters of consecutive profitability making them now eligible to join the S&P500, a move that would typically see a surge of Index funds buying the stock. Meanwhile other pure EV plays are also booming. Nikola Corporation (NASDAQ: NKLA) is up 285% in the past year and NIO Inc. (NYSE: NIO) is up 250%. Will Fisker (NYSE: SPAQ) be next?

Lithium-ion battery megafactories are being built as fast as they can to meet the surging battery demand. There is currently over 115 Li-ion battery megafactories either built or in planning until 2029. This equates to enough capacity to make 39 million EVs per annum by 2029. This is a massive increase on the 2.2 million electric cars sold worldwide last year.

As a result, shares of the leading battery manufacturers are flying higher. LG Chem is 57% higher the past year and Chinese giant Contemporary Amperex Technology Co., Limited (“CATL”) is 174% higher over the past year.

The 2017 boom in EV metals was merely the entree. What is coming this decade is so much bigger. Nickel sulphate battery demand is set to lead the pack with a staggering 14x increase in demand from 2019 to 2030. Aluminum, phosphorous, and iron will also be needed to meet the EV production surge. Copper demand for EVs is forecast to surge 10x due to its use in electric motors, wiring, and charging infrastructure. Finally the other battery metals are all set for a surge in demand. These can perform the best as they are often smaller markets with supply constraints as most investors know with cobalt in particular highly reliant on the volatile and corrupt DRC.

  • Graphite – A 10x increase in battery demand from 2019 to 2030.
  • Lithium – A 9x increase in battery demand from 2019 to 2030.
  • Cobalt – A 3x increase in battery demand from 2019 to 2030.
  • Manganese – A 3x increase in battery demand from 2019 to 2030.

Note: Rare earths will also see a surge in demand as they are needed for powerful magnets in EV motors and wind turbines.

Bloomberg forecasts a tsunami of demand coming for EV battery metals this decade

When have you ever heard of a car manufacturer publically saying this? Elon Musk’s plea yesterday for mining companies is quoted below:

“Please mine more nickel……Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way.”

Closing remarks

The EV boom is about to take off as EV prices become purchase price competitive with conventional cars by ~2022. The battery factory build out is well underway. What is lacking is investment into the EV miners to supply what will be the much needed raw materials, hence Elon Musk’s plea to miners. Many investors don’t understand to bring on a new mine to full production can take 5-10 years, compared to 1-2 years for an EV or battery factory. EV metals supply constraints will be the biggest obstacle that the EV boom will face this next decade.

For investors the opportunity is now clearer than ever. Buy EV metal miners with quality assets in safe jurisdictions and with ability to scale rapidly to meet surging demand. While current producers are the safest and preferred way, the near term junior producers (developers) can offer tremendous returns, albeit with higher risk.

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Disclaimer: The InvestorIntel Sr Editor Matthew Bohlsen currently owns shares in Tesla. The information in this article is general in nature and should not be relied upon as personal financial advice. For more information, contact Tracy Weslosky at info@investorintel.com.




The EV disruption continues to roll on…

An update on the EV sector and a look at the latest electric cars from the Canadian International AutoShow in Toronto

The electric vehicle (EV) roller coaster ride has continued the past few months with near-record December 2019 sales followed by a coronavirus led sales slump in January 2020. Meanwhile, more governments have moved to ban the Internal Combustion Engine (ICE) vehicles, and tougher emissions standards have now come into force in Europe and China motivating car manufacturers to sell more electric cars.

The latest EV news

  • 2019 global electric car sales were ~2.2m, up ~10% on 2018. Tesla Model 3 was the electric car sales leader by far, selling almost 3x its nearest competitor.
  • China announced that “China will not cut NEV subsidies in July 2020.”
  • Indonesian President Jokowi announced: “Only green vehicles for Indonesia’s new capital.”
  • The UK announced: “Britain will ban sales of new gasoline and diesel cars from 2035 — five years earlier than planned.”
  • Yesterday Reuters reported: “Singapore aims to phase out petrol and diesel vehicles by 2040.”
  • Toyota (TM) makes a new A$571.18 million bet on electric flying taxis, and Hyundai Uber electric air taxi service is planned to launch by 2023.
  • Tesla in talks to use CATL’s cobalt-free batteries in China-made cars – sources.

Hyundai Uber electric air taxi service is planned to launch by 2023

The latest electric cars from the 2020 Canadian International AutoShow in Toronto

InvestorIntel has been busy at the show checking out all the latest electric cars to show our readers.

InvestorIntel CEO Tracy Weslosky was there and had this to say:

“The love affair with the car continues if crowds are any indication. Genuinely impressed by the BMW i8 aesthetically, I am told that it’s ‘barely’ electric so that places me back standing at the Porsche. This said, while electric cars were front and center stage and everyone is in the game, my Father who accompanied me — wanted to look at the Buicks. I liked the bike with sneakers.”

Some of the cars on show in Toronto this week

Lexus LF-30 electric concept car

The BMW Vision iNext incorporates Autonomous driving, Connectivity, Electrification and Services (ACES)

BMW i8 hybrid with a small range – production may end soon

Audi Q5 hybrid

GM Bolt – 100% EV

Porsche e-mobility (Porsche Taycan 100% EV)

The sneakers bike that Tracy liked

Closing remarks

Nobody said a revolution was easy. The EV revolution (or “evolution”) is certainly happening, but with plenty of associated dramas. As usual, Tesla is at the center of attention with its genius leader Elon Musk. In the past few months, Tesla’s stock price has rocketed from below USD$ 200 to above USD$ 800 at present, “burning the shorts” as they lost billions of dollars, with Elon left smiling and even dancing in Shanghai.

The EV disruption continues to roll on despite short term setbacks and is in for an amazing ride ahead with sales likely to rise as much as 10 fold in the 2020’s decade.

Tesla hits new highs with Elon Musk proving the skeptics wrong

Source

Elon Musk dancing in Shanghai after Tesla stock quadrupled in price the past 8 months

Source




Tesla is Using Nortel’s Business Plan (that’s not a good thing)

Those who don’t learn from history are doomed to repeat it, so let’s use Nortel’s history to learn why Tesla, Inc. may be about to drive itself into deep trouble.

If you’re reading this, you’ve heard of Tesla. It has been a stock market marvel. The past five years have seen wealth created for long-holding shareholders – 5 years ago, Tesla was trading around USD$45 a share, and today it’s around $297. The chart from Nasdaq shows for the last year Tesla has been the poster child for “choppy”, as its stock price has oscillated with amplitude between $390 and $245 per share.

Tesla’s PromotionMachine has been sleeping at the factory trying to convince the investing public that revenue and earnings will ultimately catch up with the stock price. Bears and shorts are convinced the last part of that sentence is backwards.

Tesla is at a difficult stage of its existence as it tries to go from start-up to establishment. It needs to show the doubters that it has revenue, that the pre-orders for the Model 3’s are not being cancelled and are actually being converted to sales, and that the Holy Grail of positive cash flow is glowing in the road ahead. The latest Q2 was Tesla’s most productive in its history.

The problem is, Tesla has had and continues to have horrific issues on the shop floor. Production, while up, remains far behind the original and the revised targets. Panasonic and the Cobalt Cliff have something to do with this, but Tesla has acknowledged the production failures are mainly a function of over-automating the shop floor to a point of unmanageability.

Tesla and its CEO Elon Musk need this year to be an operational success. The company can’t run forever on champagne wishes and caviar dreams. It must show Wall Street and the global green investing community that it can dent the Detroit Big Boys, it can take a run at Honda and Toyota, that German engineering is secondary to American gee-whiz know-how.

Litigation lawyers will tell you when the facts are against you, pound the law. When the law is against you, pound the facts. When the facts and the law are against you, pound the table. Tesla looks like it’s opting for the table pounding.

The Wall Street Journal reported recently that Tesla, “has asked some suppliers to refund a portion of what the electric-car company has spent previously”.  WSJ also reported that Tesla confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven’t been completed.

Did we mention that Tesla is burning through about USD$1,000,000,000 per quarter, with only about $2.7B in the bank ? And don’t look at the convertible debt pricing issues lurking over the horizon…

What Tesla needs is a much higher stock price, for the inevitable equity financing and to help with those pesky convertible debt problems.

Bring Nortel back into the picture. Visit the Wikipedia page for Nortel  for links to the painful facts below.

Nortel Networks Inc. (then called the Northern Electric and Manufacturing Company Limited) was partially spun out of a predecessor to mighty BCE Inc. in 1895 (yes, 123 years ago), and completely spun out from BCE in the internet madness of the year 2000. It was a huge financial win for BCE. Nortel ultimately made equipment for the heavy-breathing internet industry – switches and multi-protocol optical networks.

Nortel was a strange chimera, a combination R&D – manufacturer – vendor; much like Tesla is today. The hype machine was running well ahead of the financial statements as the company was worth roughly one-third of all companies then listed on the Toronto Stock Exchange.

You remember what happened next, right?

Sufficient cash flow and revenue failed to materialize. Nortel’s market cap went from close to $400B to only $5B, and ultimately Nortel filed in court in Canada and the USA for protection from its creditors. Goodbye, over 95,000 jobs worldwide.

The bankruptcy process ended in 2017, by when over $2,000,000,000 had been chewed up in the process, including legal fees.

Prior to bankruptcy, one of Nortel’s operational problems was negative cash flow. Despite growing revenue, over the years its cash flow never did catch up to the expected glowing future and the soaring stock price. The car-wreck crash in the stock price, followed by the creditor protection process, were reflections of that failure.

Nortel’s management team used every tool at hand to bring new revenue onto the P&L. Some of those tools could not be used today under new accounting standards such as under IFRS 15. Back then, one of the tools available to increase revenue was to vendor finance its own customers.

That vendor financing worked like this. Internet usage was booming, so websites and networks needed better equipment capable of processing the growing loads. Nortel and its advanced optical technology were the solution, but the equipment was very expensive. Not many start-ups had $10M to spend on a network switch, but without all those start-ups buying equipment Nortel couldn’t hit its targets which would have lead to a cratering of its stock price.

Nortel’s fix was to finance those start-ups and deliver the switches before receiving full payment. In some cases up to 80% of the purchase price was financed, which meant Nortel was using its working capital to sell at a loss to gain future cash and to buttress the current revenue number.

As always, after the boom comes the bust. Internet stocks tanked in 2000, killing many of Nortel’s customers and wiping billions in financing off Nortel’s financial statements. The cash flow that seemed so clear just months before failed to materialize, eventually taking Nortel into the sad tale of creditor protection.

Nortel, like Tesla, artificially distorted its own business model by causing elements in its supply chain to finance its activities. Nortel used its clients, Tesla is using its suppliers.

Tesla declined to provide the markets with a copy of the recent memo but confirmed it is seeking price reductions from certain suppliers for historic projects, some of which date back to 2016, and it is engaged in discussions concerning future pricing based on production ramp-up.

The automotive industry is a highly competitive margin-driven business, and Tesla is looking to save a buck / make a buck anywhere it can, as it should. While it’s true that ongoing discussions with Tier 1, 2 and 3 suppliers are common, asking suppliers for cash back is closed-system cannibalistic behaviour, and reeks of desperation. As Tesla’s cash dwindles and its options slowly disappear, Tesla must fix its manufacturing issues and create real value by executing on its business plan, not by parasitically sucking cash out of the system by draining its suppliers.

Nortel taught the lesson. Will Tesla learn from it or repeat it?




Prophecy’s Oosterman on being the only U.S. player for vanadium supply

June 26, 2018 – “China controls about 56% of the vanadium in the world. The other two big players are Russia and South Africa. As a result, of course, it has been deemed as a strategic metal. The United States, for example, imports about 99% of its vanadium. It is a key metal in construction. It is a key metal in the aerospace industry. Really this is where our project is poised to basically be the only player in the United States for vanadium supply.” states Danniel Oosterman, Vice President of Exploration at Prophecy Development Corp. (TSX: PCY | OTCQX: PRPCF), in an interview with InvestorIntel Corp. CEO Tracy Weslosky.

Tracy Weslosky: Vanadium is one of those critical materials with regards to a lot of sustainability issues that are currently happening today that very few people understand. Would you mind giving us kind of an introduction to vanadium?

Danniel Oosterman: Vanadium, even though it is not widely known about, it is widely used and widely applied in a number of applications. The principle application is actually steel. 92% of vanadium used in the world is used in steel. A small percentage added to steel actually doubles the strength and lightens it by 30%. As such it is ideal for, not only, rebar in construction and steel for skyscraper and such, but actually it is very useful in the aerospace industry as well.

Tracy Weslosky: Of course, we cannot forget the electric vehicles and the battery storage sector. 

Danniel Oosterman: The battery space is a growing space, lots of excitement. You have a lot of big players, key players, like Robert Friedland, now are paying attention to it. That really puts us in a position where we with our project may be able to access every single one of these aspects, aerospace, chemical industry, steel industry, with our project in Nevada.

Tracy Weslosky: Respectfully, to Robert Friedland, which we all know in the resource sector, we have major players, mainstream players, like Elon Musk, that are drawing attention to the requirements for vanadium in their batteries. Give us a little bit of an overview of vanadium. We know that the Chinese control 90% of the rare earth and 80% of the graphite. What do the Chinese control of vanadium?

Danniel Oosterman: Well, Tracy, China controls about 56% of the vanadium in the world. The other two big players are Russia and South Africa. As a result, of course, it has been deemed as a strategic metal. The United States, for example, imports about 99% of its vanadium. It is a key metal in construction. It is a key metal in the aerospace industry. Really this is where our project is poised to basically be the only player in the United States for vanadium supply for the United States. That really just puts our project in an advanced position. If you look at the political landscape in the United States, with Donald Trump deregulating a lot of things, he recognizes a lot of strategic value of certain metals. Principle of that, and we have had discussions with the Federal government in the United States regarding this, our project in particular is a high priority project because vanadium is considered one of these critical metals in the strategic sense that Trump has raised concern. As such we will essentially anticipate that we would move to the front of the queue in terms of our project going ahead and eventually put it into production…to access the complete interview, click here

Disclaimer: Prophecy Development Corp. is an advertorial member of InvestorIntel Corp.




Northern Graphite CEO on their patent pending purification technology

March 23, 2018 – “We were the original new graphite company a number of years ago. We have been at this a little longer than everybody else. As a result of that we have a project that has a full feasibility study. We have our major environmental permit.” – states Gregory Bowes, CEO and Director of Northern Graphite Corp. (TSXV: NGC | OTCQX: NGPHF), in an interview with InvestorIntel’s Andy Gaudry.

Andy Gaudry: Thank you very much for coming. How is PDAC treating you this year?

Gregory Bowes: Pretty good. It is a little more upbeat than last year.

Andy Gaudry: That is wonderful. We are talking lithium batteries.

Gregory Bowes: Yes we are.

Andy Gaudry: Can we touch more on that please?

Gregory Bowes: Yes. I think graphite is a little bit underappreciated. We hear a lot about lithium and we hear a lot about cobalt. The price of both of those minerals has appreciated substantially. The third major battery mineral is graphite. Graphite is the anode material in the battery. You cannot have a lithium-ion battery without graphite. By weight there is 10 times more graphite than there is lithium in a lithium-ion battery. Elon Musk himself said it should be called a graphite-nickel battery. 

Andy Gaudry: Really? Interesting, I did not hear that. Now to your project, it is quite technologically advanced. Can you please touch on that?

Gregory Bowes: Yes. We were the original new graphite company a number of years ago. We have been at this a little longer than everybody else. As a result of that we have a project that has a full feasibility study. We have our major environmental permit. We could probably be in construction late this year or early next year. The next step is $100 million dollars Canadian in financing to build the mine. This is not a junior exploration story. This is a predevelopment story. 

Andy Gaudry: That is wonderful. What kind of strategy will you be using moving forward with that technology? 

Gregory Bowes: The basic mine itself produces a concentrate. In order for that material to be used in batteries it has to go through various upgrading manufacturing type steps. All of that is currently done in China. A key step is purification and they use hydrofluoric acid, which is a very nasty substance. If you want to produce anode material for batteries in the West you need an alternative process. We filed a patent in January on a proprietary purification process that we developed. The thing that makes that unique is that Hatch Engineering, which is one of the world’s preeminent process engineering companies, is the co-inventor on that patent and our technology partner. That is pretty strong third-party endorsement that we have something that has a real chance of being a commercial process that can compete with the Chinese…to access the complete interview, click here

Disclaimer: Northern Graphite Corp. is an advertorial member of InvestorIntel Corp.




Peak positioned to capitalize on explosive EV marketplace over next decade

The electric vehicle (EV) market is beginning to move far quicker than many first anticipated, and the shift is strongly reflected in the associated metals’ prices. Lithium and cobalt have been climbing for some time now, but we are finally seeing movement on neodymium / praseodymium (NdPr) oxide; between November 2016 and June 2017, a 32% increase in spot prices has been recorded, prompting Peak Resources Ltd. (ASX: PEK) (“Peak”) to push ahead with the permitting stage of their Ngualla rare-earth element (REE) deposit in Tanzania.

This month, Tesla will release their Model 3 vehicle, or at least the first 30 units. Elon Musk has stated that production will be stepped-up throughout the year until the company is producing 20,000 vehicles per month by December. The Model 3 has been reportedly pre-ordered by over 450,000 people so far, pretty much guaranteeing its initial success and cementing the need for reliable supplies of the component parts. NdPr, being an ideal material for the manufacture of permanent magnets, represents a key ingredient in our cleantech future and is likely to experience a considerable price surge over the next five years as the cultural shift towards new modes of transport reach tipping point.

We’ve known this was coming for some time, but markets tank and wannabe producers began dropping like flies. Heck, even established big-guys were dragged under by the obstinate downward trend that refused to abate in the face of hype-fuelled overproduction, but we now have a situation in which plenty of material will be required, with very few players left producing them. This is what puts companies such as Peak in a great position looking forward; not only did they survive the bottomed-out metals markets of recent history, but they are in possession of one of the lowest-cost REE deposits in the world thanks to repeated efforts to reduce operating costs.

The team are now in possession of a bankable feasibility study (BFS) and an environmental certificate that will allow them to make progress on the permitting of Ngualla, which is now expected to produce 2,420 tpa of NdPr oxide at greater than 99% purity. Impressively, Peak originally stated that it would cost $118 million per annum to run the plant in 2014, but this has been reduced to only $83 million as stated in the BFS, making the project one of the most attractively costed resources currently in existence.

Operating at $34.20/kg NdPr oxide means that, on an equity financed project, more than $20 million per annum margin could be achieved on the NdPr oxide product alone, even at today’s low spot prices. Further to this, the company identified a significant opportunity to develop a fluorspar product from the same resource, and although NdPr will likely bring in around 90% of the project’s income, including the ability to produce fluoride products alongside REEs will ensure the project is never short of custom.

Peak have proposed off-site processing in Teesside, England, to take advantage of existing advanced processing technologies, solid infrastructure and a skilled workforce. The company aims to coincide the development of Ngualla with the still-recovering value of REEs, but with EV changeover targets being brought forward as far as three years, we could be looking at an explosive marketplace over the next decade, particularly as President Trump continues to take umbridge with materials mined in the far-east. China itself has been ramping up imports of REEs over the last few years, a sure sign that there are a rising number of potential customers waiting at the end of Peak’s impeccably-timed launch of Ngualla.




Analyst on Nemaska Lithium road to production

Warren Buffet and Elon Musk were onto the growth of the lithium market before it happened. We consider lithium as one of the most applicable metals of modern life. Much of our daily lives are driven by this red metal: tablets, smart phones and electric cars, being only a handful of applications for this minor metal.

A company such as Canadian junior miner Nemaska Lithium Inc. (TSX: NMX | OTCQX: NMKEF) (“Nemaska”)  is well placed to benefit from this burgeoning market.

We think the company is going places. It is well advanced in its construction of its Whabouchi mine, with the latest feasibility study upgrading the company’s resource, while the company is well underway with the construction of the mine’s infrastructure. Phase I of the lithium hydroxide plant has just been commissioned, and the first tonne of lithium hydroxide has just been scheduled for delivery.

Nemaska Lithium has applied for patents in multiple jurisdictions on its proprietary process of its lithium hydroxide and carbonate converted from its spodumene concentrate, which we think is pretty neat.

The life of the Whabouchi mine, which will be open pit and underground combined, will initially be 26 years, and it promises to be a top notch mine with high grade spodumene on what the company terms as the most important lithium spodumene hard rock deposit in the world in volume and grade.

We like that the company is putting best practices in place to ensure sustainable development of its mine and plant, including: reducing the amount of mine infrastructure to be built; keeping the majority of the infrastructure near the ore deposit; and minimize the ecological footprint of the project. In addition, the company has reviewed the location of its stockpiles, basins and effluents as far as possible away from Mount Lake, and reduce wetland losses, as well as conserving potential archaeological areas.

Nemaska has an exceedingly experienced management team, led by Guy Bourassa who has more than 30 years in the mining industry. It is through his leadership that Nemaska bought the Whabouchi deposit and developed the new innovative process of producing high purity lithium hydroxide and carbonate that could shape Nemaska into a world leader in the lithium salts market.

The rest of Bourassa’s team are equally experienced with Michel Baril, the chairman of the board, formerly an executive at Bombardier, and former Rio Tinto engineer, François Godin.

Our verdict on Nemaska Lithium is that the company has a bright future. We expect it to become a lithium player to be taken seriously. It has an excellent resource, managed by a vastly experienced team. Once it starts producing in earnest, we should start seeing some excellent returns on investment. The company already has supply agreements in place, making Nemaska Lithium a solid investment.

For now, the share price is trading within a rather tight band of $1.18 and $1.2, but we see it breaking out of that band as soon as it becomes a fully fledged producer of lithium hydroxide and carbonate. We’re watching its progress with interest.