PDAC 2018: Energy technology optimism buoys mood at convention

By IM Staff
Published: Tuesday, 13 March 2018

The protectionism of US President Donald Trump or the uncertainty of Brexit may overshadow the global minerals industry but optimism was evident at a recent mining and development conference in Canada.

By Daniel Sekulich in Toronto

A more positive outlook was noticeable at the 2018 Prospectors & Developers Association of Canada (PDAC) convention, trade show and investors exchange in Toronto.

On the convention floor, in the presentations and at the many social events that make up PDAC, there was a genuine sense that the industry is moving ahead towards renewed strength, buoyed by optimism about growing battery and other renewable energy technology markets.

This was despite announcements on US steel and aluminium tariffs and the eighth round of talks aimed at updating the North American Free Trade Agreement (NAFTA), the potential demise of which would have serious ramifications for Canadian companies.

"We’re here to focus on concrete steps in moving forward, not to worry about early morning tweets [from Trump]," one prospector said.

For PDAC 2018 delegates, growth in the global battery market is far more important. Lithium, alongside other electric vehicle and renewable energy markets, "is still the flavour of the month," observers told Industrial Minerals.

While the number of exhibitors devoted to the sector was not significantly higher, investors, analysts and other miners clustered around at booths promoting lithium, graphite, rare earth elements (REEs) and other energy-related minerals and metals.

"What we’ve noticed with the show is a shift in interest towards graphite, lithium, cobalt, where it used to be more gold, silver and those sorts of minerals," Laura Armiento, head of corporate development with Canadian junior Focus Graphite Inc, said.

At the exhibit for Oslo-based Nordic Mining ASA, chief financial officer Lars Grøndahl agreed: "It is a totally different environment and mood here than what we’re used to back home. This is our third year at PDAC, and it is an even better mood this year."

Like many of their competitors, both these firms hope that increased interest in the green energy sector will translate into secured partnerships.

For Grøndahl, construction financing is a primary goal while Nordic develops its projects, which include sourcing lithium, rutile, garnet and quartz in Scandinavia.

Meanwhile, the target for Ottawa-based Focus Graphite is the "construction of our mine in northern Québec in the next six to 12 months, with production in 12 to 18 months," Armiento said.

Henk Van Alphen, chief executive officer of Vancouver’s Wealth Minerals Ltd, is slightly sceptical that all the projects touted will achieve these short-term goals. But the attention is a sign that much more money will be hitting the market, he believes.

"This is one of the best PDACs I’ve seen for a long time" he said. "There’s people actually wandering around, wanting to give you money. I didn’t notice that last year."

He also noted a change in interactions with potential customers, citing a meeting he had with an unnamed European company that plans to build several operations dedicated to storage solutions.

"This is the first time this has happened to me, whereby you have battery plants coming to talk to you as a miner," he said. "We’re a long ways away from lithium production but they’re already talking to us. I have never seen that."

But as with any expansion of demand, there are always parallel concerns about sustainability. Despite some talk at last year’s event of a potential lithium bubble, discussions took on a new urgency at PDAC 2018 thanks to a Morgan Stanley report released days before the event.

It warned of a potential significant oversupply of lithium, forecasting it would amount to 190,000 tonnes in 2022, causing the bank’s researchers to peg projected prices of the mineral at 45% of earlier predictions.

While reactions to the report varied, those with an interest in the sector tended to dismiss it.

At a well-attended private reception near the end of the convention, only one delegate - attending PDAC with an associate from an international mining-focused private equity firm - out of around 50 that spoke to Industrial Minerals concurred with the report’s conclusions.

"I think there’s a lithium bubble so I am cautious about it," he said on condition of anonymity.

While promoting a graphite project in Madagascar that his firm is developing Brent Nykoliation, senior vice president for corporate development at Toronto-based Next Source Materials, gave a blunt assessment of the green energy market.

"Some of the lithium projects out there? There is going to be a bubble. Cobalt? There’s going to be a bubble. And there’s no shortage of graphite. China is drowning in graphite. But there is a shortage of economic graphite," he said.

Nykoliation is critical of those who are jumping on the lithium bandwagon without having enough experience in the sector.

"For instance, people will tell you grade is king. In graphite, grade is not king. It’s such an opaque market that you can say whatever you want and no one will say you’re wrong," he claimed.

While he remains certain that the lithium ion battery market will take off, Nykoliation thinks it will realistically be another four or five more years before it does so.

Tyler Dinwoodie, president of Vancouver-based firm Alabama Graphite Corp, agreed, highlighting a difference in how his company sees itself. Alabama Graphite has opted to pause the development of a mine in the US state of Alabama for about five years and instead focus on dealing with existing low-cost supplies of graphite.

"We’re not a mining company - we’re a technology company. I have the mine but I’m not going to put $30 million into the ground right now. I’d rather put it into building a factory in the United States to make American-made, battery-ready graphite," he said.

Only after the market stabilises will Dinwoodie decide whether to resume his mining operations.

"You hear all these people saying they want to be in production by December. It’s a lie. This is just a promotional ploy by the pumpers of stocks," he claimed.

"Others [here] are pleading for money and we’re going to have a mine in operation," James Tuer, president of Vancouver-based Hudson Resources, which is bringing online an anorthosite project in Greenland.

"We built 50% of it last year and this year we’ll complete it. There is no other calcium feldspar mine in the world, and we’ll be shipping material by October," he added.

While diamonds and gold projects garner the most attention, industrial minerals firms such as Hudson quietly work on their projects, away from the limelight, Tuer noted.

And while Hudson can sell all the material produced at the White Mountain (Qaqortorsuaq) mine to the e-glass industry, it is looking at additional downstream markets to augment its business model.

"We want to be a green technology company, not just a miner," Tuer said. "So, we want to develop new materials. And that’s a challenge, though not a bad challenge. That’s the future for us."

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