David Rosenberg: Junior mining and exploration boom needed to push EVs over the top

But with the world electrifying, will we have enough natural resources to meet this surging demand? The answer is yes, though investments in extraction and processing will need to be ramped up and there are important environmental, social and corporate governance (ESG) considerations that will need to be addressed to make the shift sustainable.

Given current policy scenarios, the International Energy Agency (IEA) estimates the global stock of EV cars will surge to 125 million in 2030 from around 10 million in 2020. Under a sustainable development scenario (where the world reaches net-zero emissions by 2070), this figure could be more than 200 million units. This is still nowhere close to replacing the 1.3 billion vehicles on the road currently, but the future of transportation may involve more public transit and far fewer individual cars than what we see these days. Internal combustion engine (ICE) vehicles will be with us for several decades more, likely not phased out until mid-century.

The transition to EVs will require huge investments into mining for the key resources that go into batteries, namely lithium, cobalt, manganese, copper and nickel. Indeed, the IEA estimates a six-fold increase in minerals will be required by 2040 to meet net-zero targets under the Paris Agreement. This includes a 40x increase in demand for lithium, a 20-25x increase for cobalt and nickel, and a doubling in copper demand.

Whether the world has enough reserves to meet this demand is a bit of a misleading question. Reserves go up as exploration expands, prices go up (making more difficult reserves economical to exploit), technologies improve and regulations change. These kinds of “peak EV resource” predictions are reminiscent of the calls throughout the past half-century for “peak oil.” Remember, new technologies (for example, fracking in the United States and horizontal drilling techniques) unlocked reserves that were previously not economical. Nowadays, when we discuss “peak oil,” the fear isn’t that we run out of reserves, but that some reserves will become stranded assets as we transition to the electric economy.

That said, there is a simmering concern that mining companies have not made the required investments to address growing demand needs. The global mining industry will need to more than double its annual capex expenditures — from around US$80 billion annually to US$180 billion — to meet the net-zero target by 2050, according to Bank of America Global Research. And there continues to be a heavy reliance on countries such as China (rare earths) and the Democratic Republic of Congo (cobalt) where environmental and governance standards are lax. ESG concerns such as child labor, using coal to power mining activities and poor reporting standards in many key mining jurisdictions will need to be addressed and threaten production.

If the U.S. and other western countries hope to secure supplies of many of the key commodities required for the energy transition ahead, they will need to rely on friendlier partners such as Australia, Chile, India and Brazil that have significant reserves of rare earths, lithium and cobalt. This is yet another argument for closer ties with India. The country is home to six per cent of global rare earth deposits, but its production is an underwhelming 1.4 per cent, meaning there are opportunities to engage in resource diplomacy with the country in an effort to counter China and Russia’s commodity dominance.

Strengthening supply is critical. We have all become abundantly aware of how disruptive supply chains can become when they experience major shocks.

Given the concern around supply chains, some of this development will be done closer to home. The U.S., for example, released its National Blueprint for Lithium Batteries in June, which included five goals for the domestic lithium-ion battery supply chain, and the No. 1 goal was securing access to raw materials domestically (where possible). Part of that also means investing in research and development to find ways to decrease demand for cobalt and nickel. Innovations in EV battery technology to remove cobalt are underway, which could shift the composition of resource demand over time. Other key goals are to support U.S.-based materials processing, develop a manufacturing sector able to produce electrodes and cells, and, finally, enable mass recycling of EV battery cells (the European Union has already put in place recycling standards in this regard).

Ultimately, as governments globally invest in better charging infrastructure and the world reaches a critical mass of adoption, ICE-age vehicles will be phased out at an increasing rate, meaning mining will have to keep up to match demand. This means a junior mining and exploration boom is coming, with bullish implications for mining and infrastructure stocks and supercycle EV commodities such as lithium, manganese, cobalt and nickel.

David Rosenberg is founder of independent research firm Rosenberg Research & Associates Inc. Ellen Cooper is a senior economist there. You can sign up for a free, one-month trial on Rosenberg’s website .