Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Washington’s growing financial support for companies that produce metals used in electric vehicles will likely prove fruitless unless the federal government streamlines the mine permitting process, investors, executives and consultants told Reuters.
President Joe Biden last week doled out $2.8 billion to miners developing new US sources of lithium, nickel, copper and other EV minerals, as well as battery parts manufacturers and recyclers. Those grants followed August’s Inflation Reduction Act, which links EV tax credits to minerals extracted domestically or from 20 allies.
Both measures aim to spur domestic mining and push the country closer to Biden’s goal for half of all new US vehicles to be electric by 2030.
But it currently takes a decade or longer to obtain a US mining permit, an arduous process that frustrates miners who welcome the financial support but want more permitting transparency. Biden’s administration has also opposed permits for several proposed mines.
“The US government is saying ‘Go! Go! Go!,’ but the environmental review process is extremely cumbersome,” said Jerry Hicks at the Optica Rare Earths & Critical Materials ETF, which holds shares of Albemarle Corp, Freeport-McMoRan Inc and Glencore Plc.
“China has the infrastructure in place, and it’s going to take a long time for the US to get anywhere close.”
Related: US to support new mines that avoid ‘historical injustices’, Biden says
Senator Joe Manchin, a West Virginia Democrat, failed to push permitting reform through Congress last month, though he is expected to try again later this year.
“What I would like, if I could ask for something, is predictability,” said Arne Frandsen, chief executive of mining investment group Pallinghurst and a director at Talon Metals Corp, which received $114.8 million from Biden to partially fund a nickel processing plant in North Dakota that will supply Tesla Inc.
“It’s difficult to get capital to commit if you don’t know if you’ll get a permit in 12 months or five years.”
Some projects receiving government funding may have an easier path to permitting than others. Recycling plants, for example, are more akin to manufacturing operations than open-pit mines.
Privately-held Nth Cycle Inc is building a recycling plant in the US Midwest expected to be producing 5,000 tonnes of nickel annually by 2025. That is about when the only current US nickel mine prepares to close.
“People have a misconception about how quickly we can get mines up and running given the US permitting process,” said Megan O’Connor, Nth Cycle’s CEO.
Albemarle is betting that the $149.7 million grant it won last week will ease its path to obtain permits to reopen a mothballed North Carolina lithium mine.
“Hopefully, they’ll give us some help and fast track some of the permitting process,” said Kent Masters, Albemarle’s CEO.
Yet most proposed US mining projects would be new mines that face widespread pushback, several from Biden himself.
Lithium Americas Corp’s efforts to build the largest US lithium mine are mired in a court battle. Piedmont Lithium Inc, which received $141.7 million from Biden, faces opposition to its North Carolina mining project.
“What really needs to happen is not for permitting to be relaxed, but to be expedited to ensure we can build the mines that can supply the automakers,” said Jordan Roberts, a minerals analyst at consultancy Fastmarkets.
Permitting delays may paradoxically keep EV prices high by limiting the domestic supply of minerals needed to reduce battery prices, said Hicks of the Optica Rare Earths & Critical Materials ETF.
The yawning divide between America and China’s approaches to funding the EV supply chain is now a top concern for many policymakers and their advisers in the nation’s capital.
“Unless you can break ground on these sites, you’re not going to be able to take advantage of those funds,” said Abigail Wulf at SAFE, an energy-focused think tank.
(By Ernest Scheyder; Editing by David Gregorio)
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