Barry FitzGerald: Can Tesla’s search for clean nickel herald a new dawn for Clean Teq?
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Is it time for the sun to rise on, err… Clean TeQ’s (ASX:CLQ) $1.9 billion Sunrise nickel-cobalt-scandium project near tiny Fifield in central New South Wales?
It’s the project pitched to meet the green metals demand of the battery-powered revolution in the electrification of transport and the decarbonisation of stationary power.
The big capital cost reflects the scale of the project and its 40 year-plus life.
Securing funding remains the key challenge; after all, Clean TeQ’s market cap is all of $250 million.
But the recovery in Clean TeQ’s share price from 11c in March last year, when COVID-19 concerns exploded around the world, to 28.5c last week suggests things are swinging its way.
Commodity price improvement in the key metals from Sunrise – nickel and cobalt – has underpinned the recovery.
Nickel has been on the tear and cobalt is in recovery mode.
The price gains for the metals reflects the world’s accelerating green or decarbonisation efforts in the wake on COVID, with successive governments setting aggressive zero emission targets.
The problem with the targets is that no one is sure where key battery metals like nickel and cobalt – and to a lesser extent lithium – will come from to meet the coming tsunami in demand.
As Clean TeQ’s co-chairman Robert Friedland puts it, it will be like trying to funnel the Hoover Dam through a garden hose.
The billionaire Singapore-based mining investor also believes that as the coming supply squeeze – exacerbated as it is by tightening environmental, social and ethical demands on the mining industry – dawns on investors, the market will eventually “comprehend the strategic significance of assets like Sunrise”.
Commenting in an update on Sunrise last August, Friedland said the project was a template on how to build a mine for the future for emerging, technology-driven markets.
“If a company like Tesla can clearly articulate its concerns – ‘please mine me more environmentally friendly nickel’ – it’s now for the mining industry to determine whether it can deliver a solution,” Friedland said.
The reference there to Tesla – now a $US750 billion company (or three BHPs) – comes from Elon Musk’s plea to the mining industry last year to mine more nickel.
“Go for efficient, you know, environmentally friendly, nickel mining at high volume. Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally friendly way,” Musk said.
As an aside, a recent note on the phenomenal growth of Tesla’s market cap (it grew by 740% last year) got the auto analyst at US research and brokerage firm Bernstein pondering what Tesla could/should buy, if anything – an auto group, a battery maker or a miner?
“Given Musk’s urgency to drive an EV world, a case could potentially be made for acquisition(s) that would accelerate Tesla’s growth – likely by increasing capacity or removing bottlenecks to production,’’ Bernstein said.
But it also argued there was a low probability to Tesla making a mining acquisition on a number of grounds, saying that partnerships, minority investments and supply agreements could achieve the same goals.
Friedland too is not a believer that the auto groups will acquire mines, saying they would not want to take on the risk.
Of all of the nickel stocks listed on the ASX, it was only Clean TeQ that got a mention in the Bernstein report, albeit in passing.
Bernstein said that as an alternative to acquiring its own mine supply, “Tesla could help finance new Class 1 nickel supply (such as for example the Sunrise project headed by Clean TeQ) via some long term pre-purchase agreement or a financing arrangement.’’
When a leading auto analyst puts your project on the radar as an example of how the battery materials supply concerns for the global auto makers might be resolved, you’ve got to be happy.