Critical Metals Go Mainstream

Written by Gerardo Del Real
Posted October 9, 2017 at 7:56PM

Throughout the year I’ve outlined why the electrification of vehicles and battery storage trend is in the early stages of a mega-trend that will make speculators positioned correctly a fortune.

There are now what seems like daily announcements from the biggest companies in the world going all in on the electrification of their vehicle fleets.

On September 22, 2017, Mercedes-Benz announced it would offer electrified versions of all of its cars by 2022.

electric cars oil demand graph

Daimler is pouring $1 billion into the 20-year-old factory the company runs just outside Tuscaloosa, Alabama. A 1-million-square-foot expansion will be added, with construction starting in 2018 and vehicle production expected to start in the early 2020s.

As the article points out:

Mercedes will also build batteries in another new addition to the facility. That will give the company valuable proximity to the vehicle production line, but also could help it compete with Tesla in another new section of the energy market that it’s been testing lately: home batteries.

LeasePlan, which manages vehicle  fleets for companies in 32 countries, plans to electrify its internal fleet by 2021.

Even Swedish — Where’s Leading Edge’s Woxna plant at again? — furniture chain giant Ikea is betting big on electric vehicles.

At New York Climate Week, the company recently announced that 355 Ikea stores in 30 different markets will switch entirely to electric car transportation and infrastructure.

Ikea is part of a coalition of 10 global corporations, called EV100, that recently announced its support for electric vehicles. Ikea is joined by companies including Unilever, DHL, HP, Baidu, and Swedish energy company Vattenfall.

Bloomberg recently explained how electric car sales aren’t the only trend to watch for, it’s the car sharing and ride pooling market that can make current estimates very conservative.

The total cost of ownership of electric and oil-fueled vehicles will reach parity in 2020 for shared-mobility fleets, five years earlier than for individually-owned vehicles, according to Bloomberg New Energy Finance.

In London, Uber plans for its UberX service to be hybrid or fully electric by the end of 2019. Its rival, Lyft, aims to provide at least 1 billion rides a year in autonomous electric vehicles by 2025. That’s a demand game changer.

According to BNEF, a London-based researcher, electric cars could displace about 8 million barrels a day of oil demand by 2040, more than the 7 million barrels a day Saudi Arabia exports now.

Another incentive for mainstream car makers to adopt electric vehicles is the mechanical simplicity.

electric cars overtake gas and diesel

UBS Group AG recently took apart a Chevy Bolt and found that the electric motor had just three moving parts.

How many did a four-cylinder internal combustion engine have? 133.

Let’s be clear that the adoption of EVs will not be completely voluntary.

Governments worldwide will play a critical role as climate change (not global warming) will force major players on the international stage to react to new standards imposed by the trendsetters of the global stage... like China.

China has pledged — by force not choice — to cap its carbon emissions by 2030 and curb worsening air pollution.

The UK and France have made similar commitments by announcing they will be phasing out gasoline and diesel vehicles by 2040.

The announcements have not gone unnoticed. Investors poured about $143 million into the Global X Lithium & Battery Tech exchange-traded fund (LIT), according to ETF.com. Tuesday September 19th alone drew $49.8 million in inflows, nearly 10% of the now $651 million fund.

LIT daily fund flows

That translates into a 58% return this year. Part of the reason that the ETF has done so well is because investors and speculators are just now beginning to differentiate the real players in the critical metals space from the pretend companies that change their names every time a new trend emerges.

I believe money will begin to bow out of these ETFs and slowly but surely find its way into companies like Advantage Lithium and Leading Edge Materials as the companies mature and pursue more senior listings.

That’s still months and maybe a year or so away but the pieces are starting to fall into place.

Recent and planned site visits to lithium majors and surprisingly select juniors have or will include the biggest names in the investment bank business, vampire squids and all. The money will follow.

I could show you more graphs and cite more numbers — and I will in future articles — but the main takeaway for now is that the need for critical metals is real. Real companies with real projects will slowly but surely reap the rewards.

The trend will continue to accelerate between now and year end and will only pick up momentum in 2018. Being selective will be — no pun intended — critical.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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