In our second interview with Anthony Milewski, CEO of Cobalt 27 (TSX-V: KBLT), soon to be Nickel 28 due to a recent acquisition from Pala Investments. It’s been a bad year for Cobalt and we ask Anthony what he has learnt over the last 2 years. He tells us that demand outstripped their forecasts from the IPO but that the supply-side was unpredictable.
We also discuss artisanal miners, small metal market and pricing mechanisms, the need to educate analysts better so that buyers can make more intelligent investment decisions and the importance of liquidity.
- Update and recent news – Pala Investments and Nickel 28.
- The Cobalt market drop.
- Big issue in the space and what needs to be fixed.
- What would have been done differently? Lessons learned.
- Difference between Cobalt and Lithium.
- Nickel 28 and how the strategy reflects Cobalt 27.
- Batteries and the evolving market of Green Energy and Nuclear Power.
Click here to watch the interview.
Matthew Gordon: It’s good to have you. We had a good chat last time. Now a few things have happened since.
Anthony Milewski: Yeah, one or two.
Matthew Gordon: One or two, so why don’t you tell everyone what’s happened?
Anthony Milewski: Yeah, since we were last in here, Pala Investments has made a bid for the company. And with that bid there’s a spin co, that will spin out some of the Nickel assets into a public company, Nickel 28. It’s really unexpected…
Matthew Gordon: 28th on the periodic table…
Anthony Milewski: Yes exactly, Cobalt 27. Nickel 28
Matthew Gordon: That is really clever, really clever.
Anthony Milewski: What does that mean for Copper in the future? It’s an interesting time, a lot going on corporately. As you know, the circular is prepared in the coming weeks. Ultimately the circular prints, I think in probably, call it three weeks. And then the shareholders vote, probably mid to late August.
Matthew Gordon: Okay, well, we should get together around that time to get into the detail. That’d be fantastic. So why don’t we keep it broad? Last time we spoke you educated us about the marketplace. So why don’t we start with Cobalt? Obviously, it’s had a bit of pressure on it recently. What’s been going on?
Anthony Milewski: Yeah, Cobalt a year ago was $44, today, it’s probably $13.50 to $14. I think the outlook for Cobalt and my view of the outlook for Cobalt hasn’t changed. I mean, incredibly bullish. Timing, of course, can change, right? And so, I think there’s a couple of key factors that have impacted the Cobalt price. One of those is simply the DRC in Congo.
Matthew Gordon: What’s happening there?
Anthony Milewski: Well what we saw was artisanal miners, which is literally someone showing up with a shovel, very hard to control. Last week, tragically 36 illegal miners died. So artisanal miners effectively are just digging up the material for their own kind of account and then they sell.
Matthew Gordon: Remind us why you think that’s not necessarily a good thing. So obviously they’re looking after their livelihood, but what are the impacts, just remind us?
Anthony Milewski: Well, there’s a few kind of aspects of that. One is simply health and safety. If you go dig a hole, and it’s not engineered, it can collapse. So that’s part of it. Another part is just environmental damage. When you don’t have a Feasibility Study, when you haven’t properly engineered it, you can cause significant environmental harm. Then I think the third, and the one which has gotten the most attention is, of course, child labour. And we need to be clear, not all artisanal mining is child labour. Those are two separate issues. But all three of those are key issues. And what we saw was, when Cobalt ramped up into the $40’s, a wave, kind of tsunami of Cobalt came on. Now what we’ve seen on the way back down is, that Cobalt, that incremental artisanal producer, really dies out of the market, probably in the high $20’s. Around $29. So right now, artisanal mining has really slowed down compared to the peak at $44. But you have a pretty significant amount of material from that period that’s not able to be consumed yet, just because of one origin, but two, the market is not there for it. And then I think you had de-leveraging in China. What that means is consumers of materials, for your listeners, consumers will carry a stockpile and then they’ll borrow against that for working capital. And if for whatever reason, interest rates hike, or something like that happens, they’ll reduce their stockpile to help manage their working capital. So, you had de-leveraging in China and the artisanal material and what you’ve really done is created a situation where there’s a surplus in the market, temporarily.
Matthew Gordon: By de-leveraging – just to help everyone with the terminology here – you mean the Chinese running down their stock. What do they see, that we should know about?
Anthony Milewski: The read through was just the cost of capital. This is very much, “you are a business and you’re borrowing against your stockpile”, and there’s a cost of that borrow whether it’s 2% or 7%, or whatever it is. That’s just part of your working capital. And so, de-leveraging in this context means they’re reducing the amount that they’ve borrowed. And then a corollary to that is a margin cost. At $44 the amount you can borrow against this is one thing, at $14, it’s another. It’s really, we’re talking about managing capital structures, so that put a whack of material into the market. And then I think really, and most importantly, Congo, put a whack of material and then of course, the final factor would be new a mine ramp up and increased output.
Matthew Gordon: Quite a few moving parts there, but in terms of the total size of the market, how much does China, DRC represent?
Anthony Milewski: The official market today is around 110,000 metric tonnes.
Matthew Gordon: Is there an unofficial market?
Anthony Milewski: Well, I would say that the Congolese material that’s artisanally produced is definitely unofficial. I would say that consumed unofficial market – and no one knows for sure. You can look at export data, but it’s probably not that accurate. It’s at least another 20,000 to 30,000 metric tonnes. However, the amount produced in that run up period could have been, and most likely was, materially higher than that. It’s interesting because actually if I had sat here with you and projected EV demand today at the time of the IPO, what I would tell you is we were wildly wrong, we were too conservative. So the demand has actually outpaced any analyst’s expectations. It’s just that on the supply side, there’s been some bumps that probably mean that Cobalt is less interesting for the next three years, although ultimately the demand side is intact and more bullish than we’ve ever seen.
Matthew Gordon: That’s going to be quite scary. You’re saying we were wrong, but in a good way.
Anthony Milewski: Yeah the demand side. Yeah, we over-estimated demand. That’s true.
Matthew Gordon: Let’s go back a couple of years. You’re saying, “Right, we’re doing our projections. Cobalt is…” and I remember these conversations from brokers. They were like, “Have you got anything in Cobalt in Africa?” as I’ve done a lot of work there. And that was the big thing two, three years ago, and you must have been having the same sorts of conversations then. And you think, Cobalt, battery market, Nickel, huge correlation, this has got to be a good thing. But obviously, the market has come down. It’s gone from $40 down and you’re saying it’s entirely due to Chinese, DRC actions, things you couldn’t predict?
Anthony Milewski: Well, I mean, there’s also an element of legality. The particular material like the child labour, conflict material in Congo, it’s a very complex issue. For instance, your refinery in China, even if 9 out of 10 of your sources are legitimate, if the 10th one isn’t and you are just combing all the material…Atoms are atoms, and it’s all mixed now. I think that what I thought on the front-side was that ultimately automakers, but also really consumers and battery makers would demand a higher level of transparency in that supply chain and it’s definitely started to happen. But I think the lack of supply chain transparency allowed for a huge amount of artisanal production to come into the market. Now, there’s been a great Wall Street journal article six months ago, and the FT has done some work on it. And I think they’ve brought this issue to light and there are a bunch of different groups working on ways, maybe using Blockchain or like a Kimberley style process, but that hasn’t happened. I think the lack of that process allowed for a huge amount of artisanal to come into the market that was not anticipated because I don’t think most people really believed that the Cobalt in their phone may have been dug up by a nine year old boy.
Matthew Gordon: But those things are driven by a number of factors. Someone’s got to pay for the building of an AI or a Blockchain solution to be able to do this tracking. Is it necessarily in each of the relevant company’s interest or the industry’s interest to do that, because that’s another overhead at a time when it was quite tough. It’s also, and I think we touched upon this the last time we spoke here, is these things are driven in other sectors – whether it be environmental or otherwise – issues are driven by marketing initiatives and go “Well, this is a point of differentiation for us.” So the automotive industry would need to push this harder. The Chinese would need to push this harder.
Anthony Milewski: And diamonds is the example, right?
Matthew Gordon: Absolutely.
Anthony Milewski: Diamonds and also Tin is another example of that.
Matthew Gordon: Yeah. So, what’s got to happen? What’s going to give in this space because it’s a big issue? It’s one of the first things you look at.
Anthony Milewski: I think one of the issues was the automakers said, “Oh, this isn’t our problem, this is really the battery maker’s problem.” I think that was initially the case. And so ultimately, the consumer with all the reports in media, are saying, “Guys, this needs to be…Custody needs to be…Will it be shown all the way back to the mine?” So, I think the consumer is now driving that and the automakers are unable to just throw their hands up and say, “Well, it’s not us.” And you are starting to see some of that accountability flow all the way through, but I think it’s such an esoteric thing, including Lithium, but different issues. These are industrial materials that the automakers, by and large, had not used historically, at least not in large quantities. Unlike say Copper or Aluminium. I think they didn’t know what they didn’t know. That was that was part of the learning curve and all these factors which were hard to foresee created a scenario now where the market’s probably quiet for a few years.
Matthew Gordon: If I look in another space, plastics, recycling of plastics. Huge push from the public. Lots of PR around it. We saw David Attenborough talking about it at the Economic Forum recently. I was listening to an article the other day about the UK – we ship a lot of plastic over to Turkey to be recycled. So forget the carbon footprint issue there. It gets to Turkey, only 30% of it gets recycled, the rest of it is landfill. We’ve just moved the problem, because of what you’re saying, there’s no tracking and no accountability. But the public feels there is. They’re filling up their recycling bins with great pride, but there’s no accountability in terms of, or visibility of where that goes or what happens, and therefore no one cares.
Anthony Milewski: That’s a great observation and I would just say the whole green revolution is intensely complex.
Matthew Gordon: It is.
Anthony Milewski: And displacing Coal is great and we’re doing that. But you also have to think, “Okay, what are the implications of whatever the other things are that we’re mining? And what are the products we’re making? And can you recycle them?” It’s intensely complex in a world with regulatory environments in every single country. Hopefully the WTO (World Trade Organisation), and some of these global organisations are working on initiatives that can actually be implemented. That’s why the consumer hopefully puts up the demand, because if the consumer buys the car, they’re voting with their pocketbook and that would be the most effective way. I think the way that the consumer does that is through, like I said, there’s a guy at the Wall Street Journal who has covered this really well – by making that information available to consumers, I think that they’re ultimately voting with their pocketbook. And if they’re not prepared to buy a car because the basic materials custody isn’t shown, then that’s a plus. On a practical level, that’s why I think it can manifest itself.
Matthew Gordon: Yeah. Okay. But I would argue with the plastic example, they’re voting with their pockets to a point and then it gets grey, very grey. Conversation for another day.
Anthony Milewski: Yeah, it’s a good observation. It’s not perfect and we have 100 years now of carbonisation, of intense carbonisation around the world. And hopefully it doesn’t take a 100 years to decarbonise, otherwise you might find that our great grandchildren don’t have a place to live. But I do think that these are intensely complex issues. But, the technological advancements are happening at an accelerated pace and the battery revolution that’s happening in stationary storage as well is changing the economics of renewable energy. I think it’s all positive, but there are definitely going to be speed bumps, and we shouldn’t forget that some of these industrial minerals are coming from tough places and we should examine how they’re being mined. In the case, to be clear, in the case of Glencore or these more mechanised mines, I think it’s pretty transparent how that’s happening. And it’s okay. I think where it’s more complex is in a poor country like the Congo. Artisanal mining is not universally illegal. There are artisanal mining claims and so it’s breaking down that issue into the sub issues around child labour and environmental and permitting, that’s complex and maybe beyond the reach of someone who’s casually thinking about buying a car.
Matthew Gordon: You’re one of the smartest guys I’ve interviewed. You’re a bright guy. If we look at you, look back to two years ago. What would you have done differently then? What would you have demanded of the companies that you invested in, back then, which may have changed the…because we’ve all got a role to play in this. The public has got a role to play in it, but you’re one of the guys at the front of this. You’re in the mining space.
Anthony Milewski: We definitively did not invest a single penny and haven’t invested a single penny in the Congo.
Matthew Gordon: So that’s one thing.
Anthony Milewski: And I think that’s the key. That was the big thing because if you look at the trouble that Glencore’s had, and that’s a big-cap, major company, the feeling was always like, ”How are we going to do it if they can’t do it?” So that’s avoidance…
Matthew Gordon: …Of my question?
Anthony Milewski: No it’s the sin of omission versus the sin of commission. What wouldn’t you do differently without being able to predict the price? Maybe one of the ways would have been to get involved at the very beginning and bring to the forefront that artisanal issue.Be a voice in that because I think then maybe the demand for that material wouldn’t have been there and so you wouldn’t have had as much of it come into the market. To think you would have stopped it, is impossible. But at least if you had the battery makers, the Umicores, the Panasonics saying from the outset, “We don’t want that material. We don’t care how it comes to us.” If you had that from the beginning, maybe what would have happened was less material would have come out of the Congo. But it’s really hard to say because the flip side of this is you’re an individual, you don’t have a livelihood, and someone presents you with the way to make – whatever the number, I don’t know if it’s $20- whatever that number is a month, and that’s your only livelihood, it’s pretty darn hard to turn that down.That’s why these are intensely complex
Matthew Gordon: I get it and I don’t think one person fixes it all, but it’s a case of we all have a role to play, people like you more than most. You can’t predict the future, but you can learn from the past. You are obviously getting into a new venture. We’ll talk about that in a few weeks time in terms of what that structure is and what it looks like. Are there things that you’ve learnt? I said you’re smart, but are the things you’ve learnt in the last two years which make you think, “Well, I’m going to look at the market differently, I’m going to look at my company differently?”
Anthony Milewski: I think there are interesting things to take away from that, which is in a commodity like Nickel or Copper, where it’s a much bigger commodity, I think you have more efficient pricing mechanisms with more liquidity. I think the market is more efficient. And in Cobalt, but not just a Cobalt, in a lot of smaller, more thinly traded metals it’s more complex that pricing dynamic.
Matthew Gordon: Well, I’ve been interviewing a few Uranium people who would definitely agree with you on that one. But there are many.
Anthony Milewski: And so I think one of the interesting things that I observed is even the difference between Cobalt and Lithium. If you look at it globally, there are how many Lithium projects out there that are interesting? There are plenty. And consequently, there’s enough market cap spread among a variety of players to allow for proper analyst education. And for a sell side community to really fully understand Lithium or to really understand at least at a pretty high level, they get the pricing and it’s industrial and it’s a chemical and hard rock. So they sort of have that. When you look at Cobalt, there’s no one else out there because actually, there’s no such thing as a primary Cobalt mine, with the exception of Manajem in Morocco. And so, what you’re really talking about with Cobalt is Nickel mining globally, or Copper mining. And what that means is even though we have a lot of analyst’s coverage, it’s very challenging for an analyst to be fully abreast of the changes because they’re not covering seven Copper companies. And with that comes challenges around misinformation. It comes with challenges around ultimately where the equity price is because buyers don’t necessarily have the best information because it’s not like… let’s just take Copper or even Lithium where I think you have a lot of different data points and that makes it a little bit easier to come to a more educated view. Whereas with Cobalt, for instance, to get one of the main pricing sources, you have to pay. If you just own $10,000 of the stock, you’re not going to buy the service. There’s that kind of dynamic which is interesting.
Matthew Gordon: That’s interesting, but what about you? That’s the market. The question was, what do you think you’ve taken away from the market?
Anthony Milewski: Well the point is I think that there is value in liquidity. That’s really the message. And Nickel, I think one of the interesting aspects of Nickel 28 will be that, as chemistry shifts towards a more Nickel rich battery.
Matthew Gordon: Tell us about that because you did mention it last time in terms of the construct and the different inputs there.
Anthony Milewski: What’s happening is the original chemistry is at 111, save it for Tesla, which is kind of a different story. And today it’s a 532 moving into a 622 and an 811.
Matthew Gordon: What are people looking for? Why is this migrating…efficiency I guess?
Anthony Milewski: Yeah, the driver of the change is simple. It’s consumers, because consumers are demanding two things; range and recharge-ability. And so those chemistries are attempting to maximise energy density for range and recharging efficiency. And ultimately as you shift into these Nickel rich batteries, what they’re trying to do is have a car that can go as far, or further than current cars, and that’s really down to the size of the battery. Size of the battery also equates to cost, more basic materials you have. And then right now what they’re trying to do is get rechargeability down to be something more akin to a gas station stop. It’s getting that into that sub 15-minute level would be big.
Matthew Gordon: Yeah. Supercharge.
Anthony Milewski: Or maybe that’s not possible. I mean, they’re looking at other solutions in Israel right now. There’s a stretch of highway where they’re actually charging as you go. So there’s different ideas and different solutions. But back to Nickel 28, what is interesting about the liquidity aspect is, Nickel and Cobalt are intertwined, globally. What you see in Nickel 28 is exposure to a producing mine and you also still retain some Cobalt exposure, but you have the potential I think for a much bigger story in Nickel when the Nickel moment comes. And that comes as you see not only the ramp up in purchase of electric vehicles, but also that Nickel rich cathode…
Matthew Gordon: Well, that’s what I’m asking. Because if we look two years back, you had a view on the Cobalt market, which was true at the time…
Anthony Milewski: Which is still true. Everything is true…
Matthew Gordon: Yeah. It’s outperformed in somethings, but things have affected the price. You think that from the investor’s point of view, the price was $40. It’s now a third of that and you can’t predict these things because like you say, the demand has outstripped even your expectations, but the market got hit. What’s the learning? You are going into the Nickel market now, you’re making your call today based on the data that’s available and this changing battery environment.
Anthony Milewski: Nickel’s at the bottom by the way. This is the moment for Nickel.
Matthew Gordon: Okay, this is the moment for Nickel. Tell us about some of the hypothesis or thesis behind that.
Anthony Milewski: So Nickel is a 2.2M tonne market with, I would say over 70% today going into Steel. It’s a Steel market. But that market is really two markets. You can cut that market in half, with half of it really being like an NPI, a Nickel Pig Iron product and the other half being a class one Nickel that goes into things like batteries. And what the really critical thing for listeners is that the crossover price to create class one Nickel from NPI is probably double Nickel’s price today. There’s lots of Nickel sitting in Indonesia, but in order to take that and put it…
Matthew Gordon: That’s the pig iron version?
Anthony Milewski: Yeah exactly. In order to take that and put it into a battery, you’re talking about a huge CapEx, and you’re talking about the need for a double from here most likely. That’s the delta. It’s really interesting what happened in the last Nickel bull market was China came in, building like crazy, industrial Revolution. Nickel gets bid up, and then this new technology came out, which dramatically lowered the cost. And I think investors still feel the concern around that and so what that’s done, combined with the fact that HPAL – High Pressure Acid Leach – has been one of the truly great ways to destroy value in mining. Whether it’s Gora who I think might be six or seven billion, two billion intended, Ambatovy probably almost single handedly put Sherritt almost out of business. These HPAL cost overruns have been in the $2Bn to $5Bn range, so those overruns and then the experience of creating a process to dramatically reduce costs in the last cycle has meant that almost no inflows have come into Nickel in terms of building new production. It’s once again a constraint story and then you have to subdivide that market and you say there’s almost no production of any note that I can point to right now that’s going to be class one Nickel, adding that million tons. It’s all going to come online in the next three to five years.
Matthew Gordon: We’ve seen a couple of reports. What are the sources that people can go to just to understand the Nickel market a little bit better.
Anthony Milewski: I mean you can Google. You know, Benchmark has some great, Benchmark Minerals has some great articles that are free. Obviously CRU is great, but I think that’s paid. There’s been some great… Annals Reports, McQuarrie…
Matthew Gordon: Worth looking at.
Anthony Milewski: Yeah, you can Google it. There’s a bunch of stuff out there.
Matthew Gordon: They all seem to be, give or take, predicting quite a significant growth, and a ways out. Not just short-term, but the long-term for Nickel does look very strong.
Anthony Milewski: Especially as the chemistry has become more Nickel rich and by all accounts, that’s how we’re going. And the other part which is interesting for investors – and this is not a criticism of Cobalt – but a realisation, is that there’s a wide range of things you can buy. You can buy Norilsk or Western Areas, larger cap companies. You could go buy Turnagain, which is at Giga Metals which is a Nickel Sulfide, huge undeveloped. $10M to $15M market cap, can easily be $400M to $500M in the next cycle. Or you can buy something in between, like a Nickel 28. And so, I think the ecosystem will be sufficiently large, that it will be able to attract much more liquidity across the full spectrum of opportunity.
Matthew Gordon: Let’s talk a little bit about Nickel 28. We’ve had Cobalt 27. We’ll discuss the deal in a few weeks time when the circular’s out. I’ve made my opinions public on it already. What’s the thought around what you’re trying to build there with Nickel 28? I’m going to assume Pala is going to be involved in some level?
Anthony Milewski: I think they’ll still be a shareholder for sure. But I think the key assets in that company and they are really three. The first and most important asset, of course, is the Ramu joint venture. This is probably the single best producing HPAL facility ever created. It’s operating above capacity. It’s almost guaranteed that your watch right there might have Cobalt in it from this facility. It’s going into all the batteries and automobiles, major automobile makers end up with this material. So this is a great asset, this is a world class asset and it’s run by a world class operator. It’s going to be our job to really tell that story to the market, Justin and I. Then you have a royalty over Turnagain. Turnagain it is one of the largest undeveloped Nickel sulfide deposits. It’s a personal favourite. I’ve bought in the market. I think I probably own around 4% or 5% of it now, personally, which is fully disclosed. And then there’s Dumont. Dumont is shovel ready. However it’s owned by a private equity firm by and large, and their intentions have not been made public as to what they’re planning to do with it. So you kind of have these three assets, which give you…
Matthew Gordon: We know it through RNC Minerals, obviously. We know a little bit about it. It’s a world class asset in terms of scale.
Anthony Milewski: It’s a big CapEx as well.
Matthew Gordon: It’s a big CapEx. They’ve got a few things to work at. I think they upgraded their DFS recently, made an announcement on that, but now people are looking for guidance as what they’re going to do next.
Anthony Milewski: Yeah, that’s why Turnagain is great. Turnagain’s CapEx is more like a $500M to $600M CapEx. So you kind of have the spectrum. You’ve got earlier stage in Turnagain. You’ve got Dumont, which really needs to work out its CapEx. I agree with you. And then you’ve got production. And the important thing here is Nickel is the primary on all of those, but every single one of them also has the potential, or is a significant Cobalt producer.
Matthew Gordon: See that comes back to your strategy with Cobalt 27. Certainly when we spoke last, you were trying to cover a bunch of bases, kind of blend that risk profile. And it sounds like you’re doing the same thing here again, right?
Anthony Milewski: Yeah, exactly, and also world class assets. I mean, if you look at that asset base, I can really arguably only think about one or two other assets, which by the way aren’t even available, that are out there for that portfolio. And so once again, when people buy it, it’s going to be an expression of not just the adoption of electric vehicle, but also the transition in chemistries. You see CATL and some of the others really pushing this 811, and Valet has been a big proponent of this, what’s going to happen in the Nickel market, and so I think as you see that shift, Nickel will come into favour in a big way in the coming, I even think by later this year in terms of people’s interests will come into favour, but certainly in the coming years.
Matthew Gordon: People need to believe in the Nickel story. They need to believe your model.
Anthony Milewski: They need to believe in the EV story because this is really still driven by batteries.
Matthew Gordon: Okay, so let’s talk about batteries for a second, because again, you’re great at educating people on these things. The battery story is evolving, Nickel is becoming a bigger proportion of that story. You’ve got things like Vanadium coming in for these longer storage batteries, where they can take renewable energy and keep it for a little bit longer. There’s a whole evolving universe around batteries. There’s a lot going on. And there’s going to be new technologies as well. There always is. Things come on right.
Anthony Milewski: Yes. I’ll tell you how it looks today. On the EV side, definitively unaware of any major push outside of the Lithium-Ion battery. So that’s electric vehicles. On the industrial side of electric vehicles, like auto buses, and…
Matthew Gordon: Boats, planes…
Anthony Milewski: I would say with buses and potentially like trucks at mine sites, fuel cells are interesting, because you’re on a fixed route. Okay, so infrastructure, so there’s that. And then if you shift over to home use, Lithium-Ion batteries are interesting for home use. But then you have all these other applications, like if you want to talk about renewable energy, then Vanadium Redox Battery is intensely interesting because of its size, its recyclability.
Matthew Gordon: Absolutely.
Anthony Milewski: And also the cycle length. Right?
Matthew Gordon: It’s fantastic.
Anthony Milewski: Yeah, so what you’re going to see inside of the storage market is a multi segmented market. Let’s pretend that you’re in a remote place in the Congo. Well, flying in Lithium-Ion batteries probably makes sense. Let’s pretend you’re a massive solar wind farm where you can drive a truck up to it, Vanadium Redox is probably going to make sense. And by the way through the cycle, as this is really a transformation as it occurs, you’re going to see things like the Lead acid battery is going to have its place and there’s going to be a Zinc battery. And so there’s going to be multiple, well, the technology exists, there are multiple technologies that will have multiple applications across that grid storage. You know, for instance, if you go to a neighbourhood where everyone’s house is already built, you’d probably put a solar roof on and a Lithium-Ion battery. If you’re building a new subdivision, you’d probably put a solar roof on, have a transformer and then you’ll have a Vanadium Redox battery. And so what you’re going to see is, unlike the electric vehicle which is very well set for the next decade in terms of technology, with these applications you’re going to have multiple technologies. And I actually believe – and I wish I knew how to monetise it – but I actually believe that in America, every single person is going to be an energy trader. And what I mean by that is I think over the next 20 years everyone’s going to have solar roofs. And you’re going to be able to buy and sell energy credits, because you’re going to have battery technology. People in Arizona are going to be selling people in the North east energy.
Matthew Gordon: There is a little bit of that going on. We’ve had conversations with traders here in Europe about trying to build up an ecosystem around that where they can they can trade across borders…
Anthony Milewski: Well, right now in the States, you can actually, depending on the utility, you actually can sell — it’s a two-way meter and you sell in and you draw out. But I actually envision something very different where this technology is advancing so quickly that, and maybe it will come in the form of a token. I don’t know what it will look like, but we’re all going to be, If you own property, you’re going to be buying and selling energy, like a personal trader thing. I think that these are the evolutions that are going to go. But a key point on the Vanadium Redox Battery and batteries more generally is, and I don’t know how close you’re following this, but it’s dramatically reducing the cost of green energy. And the reason is because if you couldn’t store the energy, there were times when you couldn’t put it into the grid. So now with batteries, you’re able to balance that out more and push it into the night or draw off from the night or put into the day. You’re able to do different things.
Matthew Gordon: Yeah, more constant stream. Yeah, that’s very exciting. A completely opposite view of that yesterday was put to me by someone, was that a lot of this renewable energy is actually prolonging the life of fossil fuels in a way because there’s so many different solutions out there which have their own issues. I think this guy was referencing wind for instance, or solar…
Anthony Milewski: Was this the Uranium guy?
Matthew Gordon: He may have been the Uranium guy. I said you were clever.
Anthony Milewski: I tell you, the Uranium thing is interesting, but unfortunately for folks, the problem nuclear is, and it’s totally irrational because if you look at the number of deaths in coal mines versus nuclear, it’s not even close. But people are emotional. And when something goes wrong in a nuclear power plant, it’s scary and it’s a huge media event. But I agree with the premise that nuclear would be the cleanest form of energy and maybe they’re able to kind of figure out how to make it safer. Although they would argue it already is extremely safe and factually, they would be correct.
Matthew Gordon: Yeah, I agree. It was an interesting conversation because everyone talks about what’s happened in the Cold War and weapons and the fact that the difference between nuclear for power versus nuclear for weapons is such a significant difference in terms of the enrichment process, but, it is a clean energy, zero carbon. But the thing that people really can’t answer the question on, including the Uranium guys, is where do you store this safely? What do you do with the waste? Some people say you can prolong it a bit and create more energy out of the waste now with new technologies. There’s much longer life reactors. But what do you do with the waste? I think that is the bottom line that needs to be answered before we get comfortable again, right?
Anthony Milewski: Don’t they turn it to glass? I grew up in the west near the Hanford Nuclear Reservation and they had a facility there.
Matthew Gordon: There’s a bit of that but people still, there’s an education process that needs to go on, but that’s for the Uranium guys to deal with not, not us.
Anthony Milewski: But I would say that I kind of reject this idea that somehow this is positive for Coal. I think it’s a false narrative.
Matthew Gordon: Yeah, I’d agree. Not with the numbers I’ve seen, that’s declining.
Anthony Milewski: Even for a different reason. Look at the mandates of endowments and different investment proposals in America.
Matthew Gordon: It’s problematic, for sure.
Anthony Milewski: Yeah. They’re saying you cannot invest in companies that invest in Coal or you can’t be more than a certain percentage. And on the one hand that will create some opportunity for some hedge funds to get a little bit of money, but the reality is that will hasten the decline of Coal companies, or the use of Coal, because it just won’t be bankable. Coal’s not going away tomorrow. But, you know, we’re in China all the time and what I see in China is a real demand to clean up the air, specifically the air quality. And this requires burning less carbon next to major cities.
Matthew Gordon: Well, they’ve also just created the world’s largest, it’s like a vacuum cleaner, which is a large sort of tower which sucks in and filtrates the air. It’s fascinating. I mean, they are are dealing with it, but one for another. Just very quickly before we wrap up, you said there, Vanadium, fascinating, really interesting. How interesting? Interesting enough for Nickel 28 or just a Nickel company?
Anthony Milewski: It’s just Nickel and Cobalt but I would say that Vanadium, there’s two things about Vanadium. I think the technology is interesting. It’s not been rolled out and commercialised on a broad scale yet. And I think what will be interesting is to see what happens with the Vanadium price. By the way, Vanadium is similar to Cobalt, there’s Steel and there’s two types of Vanadium.
Matthew Gordon: 90% and 10%.
Anthony Milewski: Yeah. And so I think before it gets commercialised on a large scale, I think people have to figure out if they feel comfortable around the pricing, and if they’re able to get that material in large scale. Now with Cobalt, for instance, I will tell you, that because Cobalt is sitting at high $13’s, now low $14’s, there’s almost no discussion about substituting it out. I mean, that conversation has died. Now the transition in cathodes is still happening, but that’s not being driven by Cobalt price. And so with any of these new technologies, Lead, Zinc, one of the big factors will just be the luck of the draw on what is the commodity price when it gets rolled out. Because now that Lithium-Ion is dialled in to that Nickel Manganese Cobalt chemistry style, you are kind of hostage. But you’re not hostage in those early days and I harken back to VHS and Betamax. So Betamax by all accounts, may well have been a better technology, and VHS won.
Matthew Gordon: Not as good at marketing.
Anthony Milewski: And by the way, the same thing happened with CD players. I can’t even think what was the other?
Matthew Gordon: CDs and DVDs.
Anthony Milewski: No there was another competitor at the time.
Matthew Gordon: Blu Ray.
Anthony Milewski: It was something. So just because technology is better doesn’t necessarily mean it’s the one that’s adopted. I think in terms of some of these other applications, in particular for the broader grid and the storage, I think there will be an element of luck about which commodity.
Matthew Gordon: Well it’s what you said at the the beginning. It’s timing.
Anthony Milewski: Yeah and you can’t control it.
Matthew Gordon: Like this whole industry. Some of it won’t work. Timing.
Anthony Milewski: You can be really cynical about the mining business and say as long as you’re long in anything, when the commodity price moves like a high tide floats all boats.
Matthew Gordon: Every single expert quotes me that.
Anthony Milewski: And by the way, you can be long in the best in class of whatever it is and when that thing halves, the stocks going down.
Matthew Gordon: Again, the uranium guys.
Anthony Milewski: So I don’t know that you can get away from that. But what I would say is, obviously that’s for people in the equities because when hypothetically when Gold goes up 5%, the equities go up.
Matthew Gordon: Silver’s looking for a pop.
Anthony Milewski: Yeah.
Matthew Gordon: It’s all correlated, but it’s all timing as well. Anthony…
Anthony Milewski: Thank you very much for having me.
Matthew Gordon: I really enjoyed that. And now you promise you’re going to come back and see us or we’re going to speak to you when the circular goes out.
Anthony Milewski: Yeah, when the circular is out. We can’t talk about the details.
Matthew Gordon: It’s an exciting story. I think it’s an exciting story. I’ve told people what I think, I think it should be something people are looking at. Maybe between now and then we can help them with some pricing information too.
Anthony Milewski: Okay. Cool. Thanks a lot for having me.
Matthew Gordon: Thank you.
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