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3 Key Issues Impacting the Future of Metals and Mining

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"We are really at the beginning phases of this transition and the impact on the metals is going to be significantly bigger than people anticipate at the moment," says Charl Malan, the Senior Analyst, focused on minerals and metals, VanEck.

What are the three key issues facing the metals and mining industry? That was one of the many topics discussed during TheStreet's Investor Playbook: The Resource Transition, hosted by Susan McGinnis, which includes an all-star team of portfolio managers and analysts.

  • Shawn Reynolds, Portfolio Manager for VanEck’s Global Resource Fund GHAAX and Environmental Sustainability Fund ENVAX, VanEck
  • Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck
  • Veronica Zhang, Deputy Portfolio Manager, and Analyst focused on renewable energy, VanEck
  • Charl Malan, Senior Analyst, focused on minerals and metals, VanEck

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Editor’s note. The webinar was recorded on December 22, 2021.

3 Key Issues For Metals & Mining Industry:

  • Decarbonization is metals dependent
  • Decarbonization is metals intensive
  • Supply (Volume, sustainability, and security of supply)

Video Transcript Below

Charl Malan: The way I look at this is we have to remember that the mining industry underpinned the fundamental shift in global living standards over the last number of centuries. I believe in a similar fashion, the mining industry is going to underpin the expansion of green applications or green technologies. And it's the mining industry that's going to move the world towards a greener and more environmentally friendly place. For me, there are really three key issues that I believe people need to focus upon. First of all, decarbonization is metals-dependent. Secondly, decarbonization is metals intensive. And lastly, supply is a significant concern for me in terms of volume, terms of sustainability, as well as in terms of security of supply.

Quote by Charl Malan, Senior Analyst, focused on minerals and metals, VanEck, on three key issues facing the metals and mining industry.

Quote by Charl Malan, Senior Analyst, focused on minerals and metals, VanEck, on three key issues facing the metals and mining industry.

Supply Is a Concern In Terms of:

  • Volume
  • Sustainability
  • Security of Supply
Quote by Charl Malan, Senior Analyst, focused on minerals and metals, VanEck, on three key issues facing the metals and mining industry.

Quote by Charl Malan, Senior Analyst, focused on minerals and metals, VanEck, on three key issues facing the metals and mining industry.

Video Transcript Below

Charl Malan: Maybe I can unpack those three things a little bit for you. Just, first of all, we think of volume. You know this industry over the last half a decade, maybe a little bit more than that has moved away from a mantra of let's be big. They've moved into a mantra, of let's be profitable. And because of that, their CapEx allocation to bring new minerals and metals to the market or has significantly changed. And so lack of new capital or new CapEx spending has resulted that there are a lot fewer new discoveries to be made. 

The second aspect within that volume is then even if we do make a discovery today, the amount of exploration required, feasibility studies required, constructions required, various other legislative issues, and community issues that need to be handled. At the time from initial exploration to final product in the market, 16 years, depending on which commodity. But that's sort of the time frame we are looking at on average. 

And then if we think of sustainability and security of supply, and sustainability is quite critical, in the following aspect is that the United States, Europe does not control the supply chain, both from the extraction point of view, as well as from a processing point of view. So we are completely dependent upon the import of these materials. A lot of it is coming from Africa, like the Democratic Republic of Congo, or Zambia, from an extraction point of view. And then from a processing point of view, we are highly dependent on places such as China. Just to put those two things in context, from both the extraction point of view and the processing point of view, China controls about 80-85% of the market. So clearly the U.S. is very dependent upon that. 

And so the third aspect to the supply issue for me is just the security of supply. And if you go back to what we've seen going back to President Trump, and now followed up by President Biden, is this move to what I call onshoring: onshoring of both the extraction as well as the processing of these materials is the biggest problem we have. We've seen this in other commodities, specifically through the things such as a PJM world, platinum group metals, that goes basically in your exhaust to reduce your emissions. Through the period of COVID where there was no shipping taking place, there was a lack of PJM being supplied to the auto industry. So now the auto industry, from a security point of view, says we want products X, Y, and Z produced onshore so that we can send a truck down to the factory and pick it up if we need that. So in case, we have another supply constraint as we're currently experiencing. So again, supply is the biggest risk for me in terms of volume, sustainability, as well as security of supply.

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