When Elon Musk
announced last year that Tesla had large contracts up for grabs for low-carbon
nickel producers, it set off a global rally among developers and producers to
meet the requirement. But it's not as clear-cut as Musk made it out to be.
Entrepreneurs such as
Musk like to create drama such as the call for net-zero carbon nickel, but it’s
a question of what comes first: the chicken or the egg?
In the wake of his
announcement, several developers were quick to highlight their respective development
projects' low-carbon credentials, including Canada Nickel and its Crawford
project in Ontario, which soon after launched the NetZero brand for its suite
of future products destined for the battery metals market.
Another developer, FPX
Nickel which is developing the Decar nickel project in British Columbia, conducts
field tests that demonstrate the potential for significant direct air carbon
capture in tailings at its Baptiste deposit. The tests, conducted by
researchers from the University of British Columbia (UBC) and funded by FPX and
the Canadian government, demonstrate that projects such as Baptiste's tailings
can sequester significant quantities of carbon dioxide (CO2) when
exposed to air through a natural process of mineral carbonation.
Another company also
collaborating with UBC on the CO2 capture potential of its tailings
facility is Giga Metals Corporation and its nearby Turnagain project. Giga is going as far as noting that it could
be the world’s first carbon neutral nickel mine with the CO2
sequestration of it’s tailings.
However, these
projects are still years away from development and production, leaving North
America’s environmental-conscious electric vehicle (EV) makers searching for
low-carbon nickel and batteries elsewhere.
The problem is, if it were
easy to produce low-carbon nickel on demand, the market would be awash with these
products.
Another way for
producers to meet the challenge of bringing to market new low-carbon nickel is
to buy carbon credits for existing low-intensity operations and thus cover their
greenhouse-gas emissions. No nickel producer has done this yet….
These credits can be
registered on the Verra Registry, which contributes to calculating producers'
environmental, social, and governance scores, something investors increasingly
use in their deployment of capital.
The market is increasingly
hearing from original equipment manufacturers (OEMs) that their vehicle
line-ups will progressively have a net-zero carbon footprint. One such example
is Volkswagen which announced all 2021 Golf vehicles would have a carbon-neutral
footprint.
VW accomplishes this
by purchasing enough carbon offsets during the manufacturing process. It’s a
very positive step and a clear example to follow.
However, anti-mining NGO’s
are not just looking at greenhouse gas emissions. They're taking significant
issue with the question of tailings management and land reclamation.
It boils down to the
heightened sensitivities from the investor side of the equation. Are you
producing acidic tailings? Are you dumping those tailings in the ocean, or
disturbing land with those tailings? These are the questions they ask.
The reality is one cannot
mine and produce metals without creating tailings. The big questions are: what
is the responsible treatment of those tailings? And how can you convince your
investor that you are genuinely transitioning to a climate friendly operation?
I’ll share my deeper thoughts on these items in a later article. For the time
being, I want to turn the spotlight on nickel consumers.
Put your money
where your mouth is
Right now, the same OEMs
putting pressure on suppliers to supply a clean product also have to show a solid
return for shareholders while also striving to reach cost parity with internal
combustion engine-driven vehicles.
To accomplish this,
they are buying their batteries from China. They do so because it makes
economic sense, regardless of the fact that China does not yet seem to care
about carbon footprint or ESG for the production of their nickel.
So, where do we go
from here? The reality is that all of the significant projects capable of
producing nickel sustainably have realistic capital cost estimates attached to
them. And their internal rate of returns and economics are not as favorable as
a project developed in Indonesia, for example.
You can't produce
nickel if you can't finance it on the back of favorable economic assessments. With
most Western investors holding on to their cash out of fear of getting burned
(again) by the cyclical nature of the nickel price and Chinese undercutting, we
need the low-carbon paradigm's cheerleaders such as Tesla, Amazon, and Apple, to
put their money where their mouths are. They need to finance low-carbon projects
outside of China, not to make extra money, but to enable the growth of a fully
integrated North American battery metals supply chain at a reasonable cost.
Anthony Milewski
About Anthony
Milewski
Mr. Anthony
Milewski is the Chairman of Nickel 28 Capital Corp. He has spent his career in
various aspects of the mining industry, including as a company director,
advisor, founder and investor. In
particular, he has been active in the commodities related to decarbonization
and the energy transition, including nickel, cobalt, copper and carbon credits.
Anthony has served on the London Metals Exchange Cobalt Committee, which
includes representatives from the largest mining and commodities companies
globally, to represent the interests of the industry to the board of directors
the LME. Anthony Milewski previously worked at Renaissance Capital and Skadden,
Arps, Slate, Meagher & Flom LLP in Moscow, where he focused on advisory and
transactional work in metals & mining and oil & gas sectors. He has lived and worked in Africa and Russia,
including a year as a Fulbright scholar, and has spent considerable time in
Central Asia. Mr. Milewski holds a B.A. in Russian history from Brigham Young
University, an M.A. in Russian and Central Asian Studies from the University of
Washington, and a J.D. from the University of Washington.