Mining minerals

Q&A: This analyst thinks minerals for the green economy could trigger a bigger boom in the Netherlands than oil

Larry Short says there is a continued reliance on oil because the transition to renewables is hitting several bottlenecks. (Garrett Barry/CBC)

There has been a major global push to decarbonise economies as much as possible, with many industrial countries embarking on strategies to develop alternative energy sources.

Yet one important forecast points to rising, not falling, demand for oil. The International Energy Agency has released its forecast for 2023 for oil supply and demand, with indications of an increase in oil demand.

At the same time, the conversion to renewable energy sources has not happened as quickly as some might wish, and this is partly due to a shortage of so-called critical minerals – nickel, zinc, lithium and copper, to name a few – which can power electric cars, batteries, turbines and other products.

Larry Short, Portfolio Manager and Senior Investment Advisor at Short Financial, went over the issues with Krissy Holmes during a recent CBC Radio interview. St. John’s Morning Show.

His thinking may surprise some people. He believes the mining sector could experience a boom that could surpass what the province has experienced with offshore oil development.

This interview has been edited for length and clarity.

Q: So what’s going on? Why is oil demand expected to increase next year?

A: Largely because China has always been blocked for the past eight months. As much as the rest of the world has come out of the COVID crisis, China has not. So they fought it by doing major lockdowns. There are still hundreds of ships off Shanghai waiting to be loaded and unloaded.

The reason we are still seeing shortages around the world is because the manufacturing that China has been trying to do, the products can’t get into the ships.

Burning coal, as in this plant, also releases mercury into the atmosphere. (Shutterstock)

Electrification – we’ve certainly talked about this transition over the past few years. Is there a report? Is it happening as fast as it should be?

Oh, heavens no, nowhere near her. According to the figures that we are still accumulating, 33% of the world’s energy still comes from coal, for God’s sake. In fact, China recently announced a new project using coal, which will actually use more coal than all of Europe currently uses.

We are not moving forward to reduce carbon emissions largely because we are not able to make changes fast enough due to bottlenecks.

One of the main bottlenecks is that of critical minerals. Basically, we’re not leveraging all the things we need to do the conversion at a fast enough rate.

Looking at countries like Indonesia, Pakistan and Bangladesh with large populations. They all want air conditioning, running water, television and a car. The world is still trying to meet the demand for these products and services, which means that the total demand for energy in the world is increasing, while the world’s ability to generate alternative energy is simply not there. .

Russia’s invasion of Ukraine this winter helped trigger a huge spike in oil prices around the world, with many countries halting purchases from Russia. (Andrei Rudakov/Bloomberg)

Let’s talk about what this means for Newfoundland and Labrador. Where do we stand on the supply side here?

Over the years, many people have argued that if you simply shut down oil development off Newfoundland, it would help convert the entire world to alternative fuels. What we’ve seen lately is 4 million barrels per day shut down because of Russian sanctions.

The result was not a quick conversion to alternative fuels. There has actually been an increase in inflation. On the contrary, it should help people understand that in terms of transition, the focus has been on the wrong area. Emphasis has been placed on the supply of oil, while it must be a question of replacing oil entirely by the use of alternative energies, which require critical metals.

The one thing that the province of Newfoundland and Labrador has proportionately more than anywhere else on Earth is all of those critical metals that need to be mined to build electric vehicles.

In terms of supply, what is the opportunity here for offshore? What could that mean? Is there potential for another boom here?

We could definitely see a repeat of the boom. Oil development, any field already discovered, such as Bay du Nord, will be developed before new exploration takes place, because the world is still not funding new oil projects or new oil exploration projects.

The potential mineral boom in the province of Newfoundland and Labrador is bigger than the oil boom.-Larry Shorts

Again, the reason we are in this crisis is because it was thought the world might convert faster than it could. What we’re seeing is that everybody’s been dropping oil at the same time, so the supply that we need even to do the conversion, we don’t have.

Second, the potential mineral boom in the province of Newfoundland and Labrador is bigger than the oil boom. So the opportunity here is much greater if we can find a way to help supply the world with all the metals needed to make the conversion, because that’s where the money is currently flowing all over the planet.

Side-by-side images show nickel on the left and a Tesla logo on the right.
Earlier this spring, Vale signed a supply agreement with Tesla to supply nickel for electric car batteries, with some coming from its nickel mine in Voisey’s Bay in northern Labrador. (Radio Canada)

Could the mining potential be greater than the oil potential of this province? Can you give us an idea of ​​the scale we’re talking about here?

Just to make an electric automobile you need about six times as much metal, most of it being copper, lithium, cobalt, nickel, etc. There was an article not long ago that talked about the need to increase the amount of minerals mined by a factor of a thousand over the next ten years in order to meet climate goals.

You can see the opportunity for this province. The opportunity is absolutely huge in the future.

Are you saying looking into mining might help undo some of the, for lack of a better word, bad [things that come] with some of the emissions associated with oil production? Could one cancel the other?

More than that. The fact is that environmentalists have been saying for a long time that we have to get out of oil. This is how the province gets rid of oil revenues.

The key thing here is that as a province, we have to find a way to open mines faster than the 14-year average, because that misses the whole opportunity. But, on the other hand as well, if we can find a way to do it in an ethical way, if we can find a way to do it within environmental standards, then we will become one of the world leaders. We have this possibility.

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