The mining industry could miss out on a “generational opportunity” by under-investing in the energy transition, says Colin Hamilton, commodities analyst with BMO Capital Markets.
In February Hamilton spoke to Kitco Mining at the 33rd BMO Global Metals, Mining & Critical Minerals Conference in Hollywood, Florida.
“We're great engineers in the world, we will design ways… that are maybe less metals-intensive if the supply isn't there, so I think there is a risk that the mining industry by being a little bit conservative is going to miss out on let’s say a generational opportunity,” he said. “If we want to decarbonize the world, we need the mining industry to do more,” he added.
Hamilton is bullish on copper and gold but bearish on nickel.
He said the raw material end of the copper market has tightened dramatically, with almost a million tons of mine supply taken out over the past three months.
“You look at where treatment and refining charges are now, that's telling you that the raw material end is tightening up and that will flow through to the refined market,” he said. “We’re used to supply problems in copper, but they have been extreme in terms of the assets taken offline, so in terms of copper we would be expecting a higher price now.”
Hamilton said BMO Capital Markets uses $9,000 a tonne as the price that should incentivize new copper mines and he sees “long-run pricing in an upward trend.”
In contrast, he said BMO has lowered its long-term price expectations for nickel, a key component of electric-vehicle batteries. That’s because less nickel is being demanded for nickel-rich battery chemistries like NMC and NCA; two-thirds of the Chinese battery market is now nickel-free, Hamilton said (lithium-iron-phosphate batteries are the norm there), so BMO has stripped about 900,000 tonnes out if its model through to 2030.
“Plus, you've seen the heavy investment in Indonesian supply, which has led to a surplus in the market so it's natural economic conditions,” Hamilton said. “I mentioned before that you're seeing long-run price expectations generally move up, but not in the case of nickel. At the moment we are looking at it saying well actually maybe this market does have a few challenges. What you need to see now is more supply cuts and we're starting to see them.”
Over the past two weeks nickel mines have been shuttered in Australia, Brazil and New Caledonia due to low prices.
Coverage of the BMO Global Metals, Mining & Critical Minerals Conference sponsored by First Majestic Silver (NYSE:AG).
0:00 Gold and copper
5:29 Risk aversion
7:14 Gold equities
8:09 Consolidation
9:33 Chinese companies buying
12:54 Base metals
14:13 Year-end forecasts
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