Is Mining-Tech the Next Convergence Story?
Technology and mining are two sectors that have managed the pandemic relatively well compared to other industries. It is perhaps not surprising then to see that the majority of the high performing companies on this year’s TSX30TM are from these two sectors.
The technology and mining industries are really interlinked, and that’s not always fully appreciated. Many people want to criticize mining for being a carbon intensive industry, but all these green technologies you hear about are extremely metal intensive. Whether it’s electric cars or renewable energy, our ability to supply critical metals like copper and nickel is vital to the manufacturing and mobilizing of these technologies on a global scale.
Decarbonization and convergence
Mining is an industry that has always benefitted from new ideas and fresh perspectives, and we’ll need plenty of both to uncover the next generation of great metal deposits. Meanwhile, technology companies will encounter ever-increasing challenges in terms of securing raw materials if they do not address the supply chain at the most basic level, where these materials are extracted and processed.
The lack of exploration investment over the last 25 years has resulted in a potentially precipitous shortage in critical raw materials needed for the adoption of technologies vital in tackling serious global problems like climate change. You cannot have world-scale electrification without unprecedented amounts of certain so-called “green metals”. There is a lack of understanding that we currently do not have the mineral supply we’ll need to accomplish a fraction of some of these ambitions.
For example, we recently heard Elon Musk on a Tesla earnings call asking miners to help him produce more “clean” nickel. That’s an easy thing to say, but our industry knows the challenges and limitations associated with finding and developing quality nickel deposits that meet that type of criteria. The same principle applies to copper and a myriad of other minerals that are required for electric cars, solar panels, computers and cellphones.
There’s a real question in terms of where we are going to source the metals that will be needed for the next generation of cleaner, more efficient technologies. Investors will need to choose mining companies that produce the metals the world needs for its clean-energy revolution, while doing it in an environmentally and socially responsible manner.
Advanced technologies and mining
Canadian mining companies have always been renowned for their technical skills in exploration and development. Now, advanced technologies like 3D modelling, AI and automation have led to new opportunities in terms of making mining safer, more efficient and more inclusive.
Within the Ivanhoe group of companies, we have several private companies that are leading the transformation of certain technologies that are cost-effective, efficient, and green. For example, at I-Pulse, our proprietary, sustainable technologies convert small amounts of electrical energy into limitless levels of power to shape and assemble metals to previously unachievable degrees of precision. I-Pulse is commercializing these applications in industries such as advanced manufacturing, the discovery of water, and the discovery of electric metals like copper, nickel, vanadium, platinum group metals, and zinc.
We also are involved in grid-scale electricity storage using giant, industry-leading, vanadium-flow batteries being built by VRB Energy. These batteries are ideal for storing vast quantities of clean, renewable, electrical energy generated on an intermittent basis by wind and solar power, allowing power utilities around the world to replace their dirty, coal-fired power generating systems.
While the mining’s performance on TSX30 is laudable, the sector appears to remain under-appreciated and under-valued. Multiples for technology companies like Apple™ and Tesla™ are higher, which doesn’t compute given how reliant these companies are on mining to manufacture their products. It seems like subsets of investors may be starting to figure that out, but we still have a long way to go in terms of welcoming larger pools of capital into our business.
It might be too late for true convergence, but technology and mining have a lot to offer each other on a more strategic level, and we’ll likely see major movement toward supply-chain integration and cross-industry cooperation in the future.
TSX30 is a ranking of the 30 top-performing stocks on TSX based on 3-year dividend-adjusted share price performance. See the full rankings and methodology at tsx.com/tsx30.
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