Electric Minerals: Tesla, Chrysler Feel the Heat as African Nations Demand Bigger Cut
Officials from mineral-rich African nations met with representatives from the ‘big mining’ industry at the Mining Indaba investment conference in Cape Town this week, with each hoping to make headway amid newly-simmering economic tensions.
Those tensions have been fuelled by a realization on the part of certain African nations that they now hold all the cards when it comes to producing minerals essential for the manufacture of electric vehicles.
As such, countries like Democratic Republic of Congo and Zambia have demanded a bigger piece of the pie from mining companies, so much so that the CEO of multi-billion dollar mining company, Barrick Gold, has already labelled the situation ‘untenable’.
This economic standoff threatens to makes itself felt in the U.S, where both political and financial pressure has already hit electric car manufacturers hard – in the balance books and on the assembly lines.
Africa Wakes Up
Electric cars use almost ten times as much copper as conventional cars – 185 pounds compared to around 18 pounds. The amount used in the production of electric busses is a staggering 800 pounds.
Zambia recently raised taxes on copper by 5%, and announced plans to add a further 10% if (when) the price of copper exceeds $7,500 per tonne. Currently, a tonne of copper costs $6,200 on the world market.
When Barrick Gold CEO, Mark Bristow, called the situation untenable, he was referring specifically to demands made by Tanzania and Democratic Republic of Congo. The Tanzanian government is currently attempting to squeeze a $190 billion tax payment from gold mining company, Acacia. Meanwhile, the DRC continues to flex as many muscles as it can, safe in the knowledge that the modern world relies on its cobalt and tungsten.
With western nations, and particularly the eurozone, making strong commitments to converting to green energy in the coming decades, electric car firms now find themselves being pushed and pulled in several directions.
On the one hand, they must innovate quickly enough to keep pace with government fuel efficiency targets; while on the other they must balance the environmental and financial cost of acquiring the minerals required to make their machines more efficient.
Both Tanzania and DRC refused to send any delegates to the Cape Town conference; instead choosing to dig their heels in and stick to their guns.
The President of Ghana, Nana Akufo-Addo, was present at the conference, and as custodian of Africa’s second largest gold reserves, Addo spoke up in favour of African nations getting the best deal possible. He said that international companies should no longer expect any special relationships or deals from African nations, and that:
“…The people of Africa do not have to be poor for others to be rich.”
Major mining companies voiced concerns that they would be forced to shut up shop and find somewhere else to mine for minerals. Some have even gone so far as to begin exploring new ways to make electric vehicles which don’t rely on Africa’s conflict minerals.
Tesla’s Elon Musk has been very vocal about the fact that his company has to move away from reliance on the ‘Blood Diamond of Minerals’ (cobalt), and that the next generation of Tesla vehicles would not use any at all. Last year he tweeted:
“We use less than 3% cobalt in our batteries & will use none in next gen…”
Last year, an analyst at Benchmark Mineral Intelligence, Caspar Rawles, described how cobalt use has already been greatly reduced by the likes of Tesla and Panasonic – but that they may have reached a ‘bottom’. He said:
“Tesla uses a formulation called NCA (nickel, cobalt, aluminum) that is already very low-cobalt. Over the last six years, Tesla and Panasonic [which supplies batteries to Tesla] have reduced cobalt dependency by about 60 percent already. That’s already very low. We think it’s going to be difficult for them to go much lower because you run into engineering problems.”
Cobalt isn’t a problem in itself, it just so happens that some of the most mineral-rich nations also happen to be mired in decades-old conflicts and civil wars. And those are often exacerbated, not helped, by the influx of foreign money.
But in 2017, Tesla made moves into the small Canadian town of Cobalt – which has, as it happens, a huge supply of… cobalt. As quoted in Bloomberg, Roger Bell, director of mining research at London-based firm Hannam & Partners, said:
“Anybody who has cobalt outside the DRC is in a better situation because carmakers are very worried about their supply chains.”
Within months of the move into Cobalt, two cobalt mining companies saw their stock rise from between 90% and 600% – purely on speculation, and despite having zero revenue at the time.
Breaking the reliance on African minerals is a major goal for global manufacturers, and Tesla’s Conflict Minerals Report from 2017 aimed for the same:
“Tesla does not and will not accept human rights abuses in our supply chain. While Tesla’s responsible sourcing practices apply to all materials and supply chain partners, we recognize the conditions associated with select artisanal mining (ASM) of cobalt in the DRC.”
Tesla published the names of all of their supply chain interactions in the report, and filed it with the Securities and Exchange Commission in the same year. Tesla has been one of the ‘cleanest’ operators when it comes to conflict minerals, but its two rounds of worker layoffs at the end of last year – including over 50% of its delivery force – highlights the difficult industry it finds itself in.
Fiat Chrysler Coughs Up
Italian-American car company Fiat Chrysler recently felt pressure from the other side of the fence, when it was forced to pay a $77 million fine for failing to meet fuel efficiency requirements in the United States.
The FCA (Fiat Chrysler Automobiles) stock price sunk 15% in the past week, and is only now starting to rebound. A gap between financial targets and economic reality caused the stock price to drop, and FCA continue to lobby the Trump administration for a relaxing of fuel economy laws. Fiat Chrysler say the laws target them unfairly due to their cars increased default size and bulk compared to cars in the general market.
Featured image courtesy of Shutterstock.