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Author: James J. Puplava, CFP®, CTS™, CES™, AIF®, CIS™, CFS™, CAS™, CSS™, FPWM™
As global policymakers push to move away from fossil fuels, demand for alternative fuels is Mineral and metal prices are soaring. The International Energy Agency (IEA) predicts that by 2030, 50 new lithium mines, 60 new nickel mines, and 17 new cobalt mines will be needed to meet growing demand for electric vehicles (EVs) and renewable energy infrastructure. sauce).
The green revolution is creating unprecedented demand for metals and minerals. EVs, solar panels, wind power and power grids require huge amounts of strategic resources such as copper, cobalt, nickel and lithium.
What’s interesting is that despite the trillions of dollars spent on renewable energy around the world over the past 20 years, It does little to eliminate our dependence on fossil fuels.
As Vaclav Smil recently pointed out, fossil fuel use has actually increased since the signing of the Kyoto Protocol in 1997, and to this day accounts for an overwhelming share of global energy production.
“Despite international agreements, government spending and regulations, and technological advances, global fossil fuel consumption surged by 55% between 1997 and 2023. And fossil fuels’ share of global energy consumption declines from about 86% in 1997 to only about 82% in 2022.”
His recent report, “Halfway between Kyoto and 2050: Zero Carbon is a Highly Unlikely Outcome,” and his book, How the world actually worksis a must-read for anyone who wants to understand the facts and realities of today’s world.
EVs, solar panels and windmills look pretty, but the dirty reality is that they require a lot of mining. For example, EVs require 6-10 times more mining than gasoline cars. This is because EVs replace one power source (fuel) with a wide variety of metals that are much harder to mine, refine and process.
Mark Mills, executive director of the National Energy Analysis Center, discussed the subject on our Financial Sense Newshour podcast last month, providing a surprisingly detailed look at just how much dirt would have to be dug up to get just one ounce of copper.
Unfortunately, despite all of the new mines that will be needed over the coming years and decades, mining projects across the United States face significant obstacles, with numerous proposals rejected in Arizona, Nevada, Minnesota, Maine and Alaska. Environmental litigation by various parties often delays development, and new mines take 10-15 years to come online. This long timeline poses serious challenges to achieving policy goals that call for hundreds of new mines to come online.
Critical mineral supplies are already struggling to keep up with demand. A silver supply shortage is expected to begin in 2023 and grow every year until 2050. Copper, which Goldman Sachs declared the new “oil,” has fallen from a 130,000 ton surplus to a 50,000 ton deficit this year. As Mark Mills explains in the podcast above, copper grades are also falling, now averaging just 0.2%, meaning 800 tonnes of rock need to be processed to produce one tonne of copper. Large amounts of copper are needed for every power plant, wind turbine, geothermal plant, hydroelectric dam, and EVs, making it one of the most important commodities in the transition to green energy.
As the world tackles the challenges of the green transition, other technological revolutions are happening in parallel. AI and robotics are poised to transform manufacturing and labor markets. Companies building new manufacturing plants will increasingly rely on AI and robots that don’t require overtime, healthcare, or other employee benefits. While this change may cause inflation in the short term, AI and robotics are expected to have a deflationary effect on the economy in the long term, lowering labor costs and making companies more profitable.
The geopolitical situation is also changing, with the dominance of the US dollar being threatened by China, Russia and a larger coalition of BRICS countries. China and emerging markets control almost all strategic commodities, and their central banks are strongly backing gold. For this reason, as Ronald Stoffel of Liechtenstein recently pointed out, governments need to change their strategies on gold and 60/40 portfolios in general, and increase the proportion of real assets in this decade.
Given these trends, smart investors are turning to commodities such as copper, lithium, cobalt, nickel, base metals, iron ore, oil and natural gas. Precious metals, especially gold and silver, are seen as a hedge against currency devaluations and geopolitical uncertainties. Finally, technology sectors such as AI and robotics are poised for significant growth as they revolutionize manufacturing and the economy as a whole.
Considering the AI revolution, greening and currency depreciation, these investment themes will dominate the market for the rest of the decade and possibly beyond. Our investment portfolio, which is managed with a long-term perspective, makes heavy use of these themes. These themes include sectors such as base metals, precious metals, energy, power and technology. The specific themes we focus on are:
- Healthcare: Due to an ageing population.
- Essential Goods: These are goods that are essential to life, given that consumers are struggling with debt and inflation.
- Base metals: Essential for the green transition.
- Precious Metals: A hedge against currency depreciation.
- Technology: Covering the AI revolution and robotics.
As long-term investors, we aim to identify promising themes early and continue to invest over the long term to maintain stable, sustainable returns.
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Editor’s note: The summary bullet points for this article were selected by Seeking Alpha editors.
