Top 5 Commodities - The Impending Energy Revolution

Rodney  Forrest

With the world embarking on a potential Third Industrial Revolution, according to one well-known economic advisor to China and the European Union, Jeremy Rifkin, the landscape for the commodities of today may well not be the commodities of tomorrow. Rifkin recently said:

“Premier Li read my book … and he then instructed China to move to a Third Industrial Revolution … GDP is slowing all over the world … it is over for fossil fuels … the next big bubble will be the US$100 trillion in stranded assets in the fossil fuel industry that will make the subprime 08 like the small game,”

This is where billionaire mining entrepreneur, Robert Friedland may well be ahead of the curve problem solving for the Third Industrial Revolution. Robert has always been worth following. He has been recognised by the Mining Journal, as one of the most influential people shaping the future of the world of mining. BMO Capital Markets Metals, Co-Head, Egizio Bianchini, has known Friedland since 1984 and says of him:

“He’s a dreamer and the glass is always half-full. He sees things way before others do – he’s early.”

In this wire, we explore 5 commodities that Robert Friedland is currently working on and how they might influence a new paradigm shift in the impending energy revolution.

Water

“Just like butter is the new kale, water is the new oil. We think water is going to become one of the most valuable commodities in the world,” Robert has said.

According to Hexa research, the global water and wastewater market is forecast to reach $674 billion, by 2025 (growing at 7% pa), driven by the rising demand for freshwater for drinking, industrialization and agriculture.

Robert is involved in two ventures related to water, through his private company I-Pulse and ASX listed Clean Teq Holdings Ltd. Clean Teq (ASX: CLQ) has a partnership with Ionic Industries and Monash University following a Federal Government funding allocation, to develop energy efficient wastewater treatment technology using graphene oxide technology. The graphene technologies being developed include a graphene oxide nano-filtration membrane and graphene oxide coated sand that aims to supersede activated carbon as an absorbent material.

CLQ also has a strategic partnership with Pengxin Mining, a private Chinese conglomerate based in Shanghai with interests in mining, real estate, construction, water-treatment, technology and dairy farms. According to ASX announcements, Pengxin is the largest shareholder in Shanghai-listed Heilongjiang Interchina Water Treatment Co Ltd, one of China’s largest publicly-traded water treatment companies and is working with Clean Teq to support rapid development of their business.

Vanadium

“We think there’s a revolution coming in vanadium redox flow batteries,” says Friedland.

He goes on to say “The beauty of the vanadium redox battery is that you can charge and discharge it at the same time, something that can’t be done with a lithium battery. With a vanadium redox flow battery, you can put solar power and wind power into the battery, and you can put excess grid power into the battery at night, and at the same time you can have a stable output into the grid.”

A Vanadium redox battery, is a flow battery with electricity storage technology to support a more efficient, reliable, and cleaner electrical energy market. The Chinese Government, recently issued a policy document, “Guidance on the Promotion of Energy Storage Technology and Industry Development”, which called for more investment in energy storage, including flow batteries - $320b by 2020.

Friedland says “China has the largest and highest-grade vanadium resources in the world and is poised to use this miracle metal to fundamentally transform its electricity grid. With massive amounts of renewable energy and storage coming online, China will create the most modern, clean and efficient grid in the world.”

This really does appear to be a key game changer to the renewables space in China.

“Earlier this year, Chairman Xi and I discussed the opportunity to utilize Hubei’s abundant vanadium resources and Pu Neng’s next generation technology to set a new benchmark for the global energy storage industry. This is just the first step of what will be many projects working together,” said Robert in a Pu Neng press release.

Interestingly, Pu Neng is a private clean technology, chaired by Robert Friedland with the CEO of Pu Neng, Eric Finlayson, the former head of Rio Tinto exploration in Australasia. Eric is also a Non-Exec Director of Clean Teq.

Copper

In the Democratic Republic of Congo, Ivanhoe Mines, founded by Robert Friedland is developing the tier-one Kamoa-Kakula Project – independently ranked as the largest copper discovery in the history of mining on the African continent and the world’s largest high-grade copper discovery. As the world moves to green energy, Friedland expects copper demand to increase and prices to rise even higher, as it will be essential to the green energy revolution, as it has the highest conductivity of any non-precious metal and plays an important role in all energy production, has the highest conductivity of any non-precious metal, and plays an important role in all energy production.

According to Friedland, by 2030 the Earth’s population will reach 8.5 billion, with at least 5 billion people living in urban areas. As the population grows, the need for quality clean air will increase, as cities turn to green energy. As an example, old cars are one of the main sources of pollution, and they are now being banned in cities from Shanghai to Barcelona. They are being replaced by electric cars, which will push demand for copper even higher. That’s because while cars using internal combustion engines require up to 23 kilograms of copper each, a hybrid electric vehicle uses nearly double that amount, at 40 kilograms of copper.

Friedland has said “Electric vehicle sales are expected to overtake internal combustion cars by 2038.” For those sceptical about how fast electric cars can be adopted by the market, Friedland has described how disruption can happen very quickly, as it did with the first cars in the 1900s. “In 1900 you were unable to spot a car in the streets of New York. By 1913, you could hardly find a horse,” he said.

Cobalt

Robert has said: “If I would buy one metal, I would buy cobalt.”

Cobalt is the critical element to electric vehicle batteries, with the price having now risen 65% over the last twelve months to USD$91,250 a tonne. Our research indicates the demand for Cobalt needs to rise 400% from today’s level if it is to meet a three-fold increase in electric car production commitments by 2020, as EV will contribute to 36.6% of total production. Further from a supply side perspective, by 2020 research by CRU Mining, factoring in CAPEX in development, has found there could even be a deficit of at least 10,000 tonnes annually.

Friedland’s Clean Teq recently completed an oversubscribed institutional underwritten raising for the Syerston cobalt-nickel-platinum-scandium project in Australia. What is interesting is Syerston has the largest and higest grade Cobalt outside of Africa, and at todays spot price and guidance of 5,000 tonnes (full ramp up) it could generate revenue for Cobalt alone of cAU$778m. The pre-feasibility study presentation by Robert Friedland in February 2017 had an NPV of US$1.23b and IRR of 30%. At the time the assumed Cobalt price US$12lb, yet Cobalt is now US$42lb, some 350% higher than the original NPV assumption. Syerston also could attract a higher price, as it produces commodities in sulphate form, which can be another 30-70% higher than the metal spot price. The Definitive Feasibility Study (DFS) is due to be released by the end of this quarter, which will bring to light the economics of the project.

Scandium

Robert has said: “Scandium is a miracle alloy, that enables you to 3D print with Aluminium. You can weld with Aluminium and make it more ductile.”

With the Chinese now imposing a 25% Tariff on Aeroplanes weight, Scandium has just become the most important commodity overnight for the aviation industry. Scandium oxide can be used to produce lighter and stronger aluminium alloys and has been found to lower an aircraft’s weight by 15% and save US$9m on construction costs, per plane.

Scandium is a soft, silvery-white metallic element which tends to come as a by-product of the leaching activity associated with production of other metals. However, Friedland’s Clean Teq contains the world’s largest and highest-grade scandium resource. It will be produced as a co-product not by-product. There is an agreement in place with Airbus focusing on working together to determine potential demand for Scandium. Also, a partnership agreement with the world’s third largest Aluminium producer, Chinese Chinalco, to investigate the functional and commercial benefits of scandium used in China’s automotive and aerospace industries.

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So, there it is. Water, Vanadium, Copper, Cobalt and Scandium are 5 commodities Robert Friedland is thinking about and developing right now. In focusing on these five commodities, given his peers see him as someone who sees things way before others, just maybe, Robert has already seen the Third Industrial Revolution and is preparing accordingly.

--- Sources:

SoundCloud publication Episode 70, The unabridged interview with Robert Friedland -

Jeremy Rifkin’s talk on the Third Industrial Revolution - on YouTube "The Third Industrial Revolution: A Radical New Sharing Economy" -

Northern Miner publication “Celebrating a Lifetime of Achievement – Robert Friedland” - (VIEW LINK)

Presentation by Robert Friedland – the future of Electric Metals - (VIEW LINK)

Scandium, re weight/cost saving "Disrupting Metal to Transform Transport" Industry(VIEW LINK)

Forrest Equities Pty Ltd holds shares in Clean Teq Holdings Limited (CLQ:ASX)


About this contributor

Rodney  Forrest

Rodney Forrest

Managing Director, Forrest Equities

Forrest Equities is a research firm undertaking research work for Investment Banks, Superannuation Funds and Wholesale clients.

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