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.