Ernest Scheyder is a Reuters reporter covering the clean energy transition and author of the new book, The War Below: Lithium, Copper, and the Global Battle to Power Our Lives.
Motley Fool Host Deidre Woollard caught up with Scheyder for a conversation about:
- Tradeoffs in mining, and why the U.S. is falling behind in the race for precious minerals.
- Tensions of the clean energy transition.
- The "wacky journey" of a junior mining company.
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This video was recorded on Feb. 3, 2024.
Ernest Scheyder: We're just used to showing up to a store and buying something without thinking through how it was made, what are the building blocks behind that? Now as we're at this point where we're changing our whole economy to move from primarily fossil fuel base to slowly moving in the direction of being materials based, where do we get those materials? We're not having those discussions right now. If we're not careful, we are going to repeat the same mistakes that we made 100, 150 years ago.
Mary Long: I'm Mary Long, and that's Ernest Scheyder, a Senior Correspondent at Reuters and author of the book, The War Below, which tells the story of lithium, copper, and the minerals that power the modern world. Deidre Woollard caught up with Scheyder to discuss what a lowly leaf blower tells us about the supply chain, environmental pretty privilege, and a mining company that spent more than a million dollars on partners.
Deidre Woollard: Just to set the table for people, why are lithium and copper so important when it comes to EV's and batteries in general?
Ernest Scheyder: Sure. Lithium and copper really are the building blocks or the cornerstones for lithium ion batteries. Lithium ion batteries are used not just in electric vehicles, but in millions of other consumer electronic devices that now make up basically our everyday lives, things like cellphones and many other devices. Those are built with lithium and copper. You can imagine whoever controls the production of those essential critical minerals really will control the 21st century economy. That's what's at stake here.
Deidre Woollard: Most of that currently is not happening in the US?
Ernest Scheyder: That's right. I mean, for lithium, I mean, the biggest producer in the world right now are Australia and Chile. The biggest processor is China though. It's the world's largest EV market. That's really cornering the industry in recent decades. For copper, countries like Chile and Peru are big producers. China is a huge consumer though, so whatever it and its manufacturers want in terms of buying different types of copper, obviously has a huge sway over the global market. China realized this about 10, 20, 30 years ago that the global economy was moving in this direction, and it really developed a huge focus on this area, economically speaking. That's why it's got so much market prowess nowadays, and the US and other Western nations are just trying to play catch up now.
Deidre Woollard: It's not for lack of us having the resources in the ground?
Ernest Scheyder: Correct. The United States has abundant supplies of copper, especially in the Western United States and in Alaska. Lithium is found in a lot of different places across the United States and really North America. When we think about the Inflation Reduction Act, also there's a lot of countries with US free trade deals that can get IRA credits for their metals that are allies with the United States that can partner there. There's a lot of potential there to produce more. One of the key themes that I explored in The War Below is just the idea of choice though, are we willing to make the tough choices needed if we want to green energy transition? I hope folks grapple with that key question, because we're not doing it now. That's really what led me to write this book.
Deidre Woollard: That definitely is the theme that I want to talk about, because the book is so great on all of that. I'm curious though, because you went from covering fracking shale, that big boom, the way that that changed economies in certain states like North Dakota. I mean, I can see what's similar about the two bits, obviously, but what's the different?
Ernest Scheyder: I would say, I mean, the similarities certainly present themselves there. What's different, I think it is just the sheer complexity of the supply chain. Supply chain used to be a boring phrase, but I think the coronavirus pandemic really brought to the fore for a lot of people. When we think about the critical mineral supply chain, we have to be thinking about the whole host of metals and how they're extracted from the ground and then processed. When you think about petroleum, I mean, about crude oil or natural gas, I think most people have a rough understanding of putting crude oil into a refinery, and then out you get diesel or gasoline or jet fuel. That process is maybe, broadly understood by a lot of people, but how you process copper is very different than how you process lithium. In fact, there are several different ways you could process lithium, because you get it not just from hard rock that you take out of the ground, but you can also get it from brine deposits. Brine is salty water that can be an underground reservoirs. That all depends on what part of the world that you're in. How you process copper can be different than how you process nickel, for instance, which is also a key metal used in batteries. The same thing goes for cobalt, which is primarily produced in the Democratic Republic of the Congo. Then just to add more complexity to this, there's a minor grouping of metals known as rare earths. There are 17 rare earths, and they're found all across the world, but rarely are they found in large enough quantities to make them economical. When you do find a quantity that's economical to mine, there's this very specific way of processing them. There can be radioactive waste as a byproduct. That's just a very broad overview and it just shows the complexity of the supply chain, and it shows also how we have to be thinking about this entire new transition in a different way than we approached it, say, 100, 150 years ago, when the petroleum-based economy was first taking off. That's why I'd really hope that folks be thinking through this and the tough choices that we're facing.
Deidre Woollard: Well, let's talk about one of those choices because, like you mentioned earlier, there was this theme of what is the higher good throughout the book, so what matters more? You've got this little white rare flower called Team's Buckwheat that's part of the story of the book. It just happens to be right near a giant US based source of lithium. This dynamic tension you've got here, as an ESG investor, what questions do you need to ask yourself?
Ernest Scheyder: I mean, one of the main questions that I was really exploring here is, how the investment community will react to this. This is accompanying Ioneer, which is based in Australia, but staff across the world, and it wants to develop this lithium deposit at Relight Ridge, which is roughly to 250 miles North of Las Vegas. The lithium deposit sits beneath this habitat for this rare flower found nowhere else on the planet. Team Buckwheat, as you said, is what it's called. We brought up issues of choice here. As an investor, you obviously want to be attuned. Investors are attuned to, what do federal regulators think about this? How is the state reacting to the state regulators? What are the paradigms in place to protect this flower? These are things that came up time and time again while the project was moving forward. Part of the book explores how the company spent a lot of money, more than a million dollars on greenhouses and botanists. Deidre, I can just tell you most mining companies don't have botanists on staff.
It's just not a thing that they do. That was an area for investors to think through. How is the company allocating resources around this very necessary area to focus on this plant? Reporting at this book led me down that journey, and to say, what are the things that this company might not have expected that it had to do in order to gain the license to operate or the social license progress in its project? I can tell you right now that the company did not expect to hire botanists or spend all of this money on greenhouses or sea pro-preciation or other things when it started this journey, but that's where they are today. I think you'll start to see more and more situations like that come up. I mean, maybe not with building greenhouses, but taking other different avenues that investors and companies might not necessarily have expected when they started a mining journey. I think we'll start to see more of those in the years ahead.
Deidre Woollard: When you mentioned China being ahead of us, so part of this conundrum too is the battle between jobs and opportunities in the US for workers as well, versus wanting to protect the environment. Given the last couple of years, do you feel like the attitude toward globalization has shifted dramatically?
Ernest Scheyder: I think certainly the pandemic taught us all how much we are interconnected as a world. I love to give the example of masks, for instance. I mean, when 2020 really got underway, we all discovered that the United States doesn't make any masks or didn't at least then. I think it reinforced to people these extremely long supply chains. Do we want that for globalization? When you put climate change on top of that, I think it leads to more questions. Think about the example of lithium. If it's distracted from the ground in Northern Chile right now, then it's sent to the coast, and then it's shipped across the Pacific Ocean to Asia, where it's put into a cathode and then put into a battery pack. Then maybe shipped to a different part of Asia where it's put into a larger battery. Then shipped back across the Pacific Ocean to say, Tesla's Giga factory in Nevada. Then shipped to, say, a dealership in Florida just to paint a hypothetical, you can see the huge long supply chain there. Not only are you having extremely large emissions from the shipping, but you're also exposing yourself to potential supply cutoffs due to any number of factors. If we want a green energy transition, if we think that this is one way to address climate change and also to help boost transportation in other sectors, should we be producing that more domestically or at least more regionally in North America? I think many officials would say, the answer is yes. Many investors, many companies would say yes. Therein lies the tension point that I was really exploring. A lot of people want to have not only electric vehicles, but many other gadgets that are powered by lithium ion batteries, but what are the choices we're willing to actually make? Are we willing to have a "Mine" in our backyard?
Ernest Scheyder: People aren't having that discussion right now. I think they just show up to an Apple store and buy an iPhone. But the copper insight that iPhone comes from somewhere as does all the other minerals used to make that device.
Deidre Woollard: I think you made a good point there too, that it's not just EVs, it's phones, it's the move toward home batteries and home storage as people wrestle with grid transition. There's a lot at stake here.
Ernest Scheyder: Exactly. One of the chapters in the book I had a lot of fun writing was about leaf blowers. That sounds of innocuous on its surface, but I became really curious with this idea as you were saying, about what more parts of our everyday lives are going to be touched by batteries that aren't already. It's not just electric vehicles. A few years ago, I got a house, I got a backyard, decided I'm going to get a lawnmower myself. I decided to go all electric. I got an electric lawn mower, an electric weed whacker, and yes, an electric leaf blower. That led me down this rabbit hole of where did the lithium and the copper inside that battery come from. Was the cobalt inside that battery mined by a seven-year old in the Democratic Republic of the Congo? Did the copper come out of Northern Peru where farmers have bitterly complained that the copper trucks that supply these mines kick up dust that pollute their crops? Did the lithium come from Western Australia and then be processed in China? I don't know. I went down this huge investigative search for the progeny of those metals and I couldn't figure it out. That was just for my lowly leaf blower. Now when you amplify that across the entire global economy and you look at the implications for us all, if we are truly to go green, you start to see really interesting questions about where things are produced or we don't know things are produced. I think increasingly, consumers are going to ask this and I think companies and their investors are going to have to be thinking through that as well. People are going to want to know that the products that they buy, weren't built with materials that were produced at low labor standards or at shoddy environmental standards. They're going to want to know that if they're buying a product they think is helping the environment, it's actually helping the environment.
Deidre Woollard: It's interesting because we've started to have some of that transparency with food and with fast fashion and things like that. But it is nowhere even close when it comes to electronics.
Ernest Scheyder: Exactly.
Deidre Woollard: I want to talk a little bit too, about the miners in general because you've got the big players, the expected players, like a Rio Tinto or some of the other big ones. But then you've also got these new upstart companies. You mentioned Ioneer. There's also Lithium Americas, this one is fascinating. You share a little bit about the wacky journey of that company and where it's going now.
Ernest Scheyder: Sure, yes. Lithium Americas started out as many junior mining companies typically do. Was actually two different companies. One focused on South America and then one focused in the western United States, and what they decided to do was join forces. The company focused on South America was known as Lithium Americas, and it was bought by its company known as Western Lithium, which was focused on the western United States. You got this company that was focused on two different wildly distant areas. This project in Argentina that was going to be a brine project and then this project in Northern Nevada on the Oregon border, that was going to extract lithium from clay. Both projects were being developed in tandem and the company started to find, though, that there was a lot of opposition in the United States from some quarters to this project in Nevada. At the time, the company became a huge darling of a lot of investors on Wall Street who were really bullish about lithium and where it's going. What I track in the book is the history of the company and the deposit itself. The deposit actually was once owned by Chevron, the oil giant. Then we tracked the history of the company and the opposition that it was facing from some local indigenous groups, as well as from some conservationists that raised some interesting questions about tee industrialization. Should we, as a way to fight climate change, just get rid of all electronics, deindustrialize our entire global economy as a way to basically, stop carbon emissions. This is a group that gained a lot of power.
They ended up being on the front page of The New York Times, and so they used that to a huge benefit for their cause. The group Fox, the mine in court, and it wound its way through many court hearings. The company itself, as probably your listeners know, split last year, and so now it's actually two companies, one focused specifically on Argentina and then the one focused just in the United States. That whole history there, as well as the opposition is baked into this chapter and I had a chance while reporting this book to actually go to the site in Nevada known as Thacker Pass, beautiful place, and really got to see it through the eyes of some of the people that are opposed to the project. For me, it was really important to show the human side of this issue, and to not really denigrate one side or the other or any of the sides, but to really show everyone the tough choices here, and the human side of all of this because I think there's a huge interest in certainly lithium production as well as the many different sides of this coming from not only the conservation circles, but also the indigenous rights circles as well. I'm excited to share this because I think for investors as well, thinking through what some of the other side thinks is really important. Because this is not just a black and white issue. There's humans on all sides and I was really excited to share their perspectives in this book.
Deidre Woollard: It's not a clear green or not green issue, Eiger, which I think is what makes it so complicated. You mentioned earlier the brain aspect of things and one of the reasons I was excited to read the book and to talk to you is I get to ask you about one of my favorite places, which is probably nobody's favorite place, the salt and sea. It's this ecological nightmares. This inland sea in the middle of nowhere in Southern California, it just happens to have this huge store of lithium if we can figure out how to access it. This is a not great place to visit, but you go to some other places in the book that are really beautiful. One of the questions I was curious about is this idea of do we only protect the places where people or where people find attractive? Because you talk in the book about boundary waters in Minnesota, Pebble in Alaska. Is there almost like a pretty privilege in terms of where we consider where we want to start digging.
Ernest Scheyder: It's a really interesting question, Deidre Woollard. I was at pains when I was writing the book to step back and use myself almost as a mirror for the reader to experience for her or himself. Not only the beauty of the places that I visited, but also the choices that we face. Do we think that just because a place is physically beautiful, but it has a ton of the metals, we might need to fight climate change, should that be completely off guard and we should not be touching it at all. We're not having that discussion right now and I think we need to be having those discussions not only in the investment community, but in the regulatory community, at Thanksgiving tables, as families, we should be having this discussion.
Ernest Scheyder: We were talking earlier about the parallels with the oil and gas industry. One thing about oil and gas is you put a straw on the ground and you suck it out. With mining, you have giant holes that can be a mile across or almost a mile deep and have huge impacts. They scar the landscape for generations and so it's much more visually changing than an oil or gas operation certainly and so we need to be having these discussions. Are we willing to make these tough choices? Are there some places where we're just going to say no, like the boundary waters? The concern there is that if the copper and nickel and cobalt deposit were mined, would be an underground mine and it's underneath a waterway that eventually feeds the Great Lakes. The rock that this copper and cobalt and nickel is in has been known to basically turn to acid when exposed to water. You can think of rain or even you're in a watershed already, and the company that wants to develop this mine is very certain that it would not leak acid into the waterway. But if you pollute the Great Lakes, you can just think about the entire North American water infrastructure where the Great Lakes, of being the heart really of all the waterways across the continent. There end lies the choice and the tough things that we have to think through and I had the great opportunity to go up to Northern Minnesota for a few days and meet with folks that are for and against this project, both for very earnest reasons and talk through and really hear their stories. It's a beautiful place, it's stunning. A lot of the people that are for this project say, why are we relying on China to build all of these electronic devices that we need? Why are we relying on the Democratic Republic of the Congo, which uses child labor in some cases to produce cobalt? Why can't we do it here in the United States at the high ESG standards that we have here? These are the things that I hope people think through because we can't just put our heads in the sand anymore.
One of the reasons I focus specifically on mostly US projects is because I think for too long, especially in the United States, we're just used to showing up to a store and buying something without thinking through how it was made, what are the building blocks behind that? Now as we're at this point where we're changing our whole economy to move from primarily fossil fuel based to slowly moving in the direction of being materials based. Where do we get those materials? We're not having those discussions right now. If we're not careful, we are going to repeat the same mistakes that we made 100 and 150 years ago. What do we get out of that? We got climate change, we got several wars. We got a giant cartel that controls a lot of the petroleum production in the world. Many consultancies and analysts have warned that if we're not careful, we're going to replicate the same situation with copper and with lithium. Already, the world's largest copper producer is owned by the Chilean government, which is friendly to the United States and other western nations. But there's a lot of business, of course, with China and others. We've already got several presidents across Latin America saying they want to form a lithium OPEC. The President of Bolivia wants to do that. What would that mean for Albemarle and Arcadium are two of the huge privately held or publicly traded, I should say, but not controlled by any government lithium producers in the world. There's really implications here for the investment community as well to be thinking through.
Deidre Woollard: At the same time, you've got both the legacy car makers and Tesla figuring out how they're going to solve this problem and making announcements without necessarily anything behind them certainly in Tesla's case. But you got test Ford and GM. They're all trying to figure out how to get into that supply chain but it's been tricky so far. Do you think that we're going to see more investment there? I know that both Ford and GM, they got into battery production, they've scaled it back a little bit. It seems like there's something happening there with the attitude around EV's too. What are you seeing?
Ernest Scheyder: Yeah, I think certainly the past few weeks we have definitely seen some lips in the EV market, and so I would say two points to respond to your question. I think there's definitely been blips in the EV market in recent weeks and part of that is due to oversupply concerns mostly coming out of China. We think that that will iron itself out because certainly when you look at EV penetration versus 12, 18, 24 months ago, the numbers certainly are higher. The demand projections in the long term are moving in the upward position. Will we have blips in the near term? What we're seeing certainly that there are blips right now. For lithium and copper and other critical minerals, it's just even beyond EVs and so there's many of these other devices that are out there. I think we'll start to see, certainly demand continue to rise for those specific metals. For the automakers, it was a different muscle for a lot of these companies to have to use when they thought about going directly to the mines. This goes back to Henry Ford in the rubber plantations from 100 years ago. For a long time, the automakers had been used to having folks between them and a lot of the suppliers. If you needed to figure out the plastic that went into a seat, you're not talking to an oil company for instance. But here you've had a lot of the auto giants having to say, go directly to an ioner or a lithium America's and negotiate directly with them for supply.
One of the things I talked about in the book, that's a bit of a reveal, is Elon Musk going directly to a US lithium project and having his staff negotiate directly with them. This was a project that was very, very nascent, but it just showed that Elon Musk took it so seriously enough, the supply of lithium that he had his staff go directly to a junior minor and have them negotiate for a supply. It's things like that, that I think we'll start to see a lot more. We've already seen a lot of it, Ford, General Motors have thrown around a lot of money here because they know that the supply is really constrained by various factors, especially this opposition that we've been talking about, whether it's from conservationists or the indigenous communities and so that's why I think it's so important for investors to fully understand the whole ecosphere of the challenges faced by this industry because they're not going to be able to produce the lithium that people think is needed by 2030 due to a host of factors and so that's why when I say whoever controls lithium and copper in this century will have a huge leg up on many other people.
Mary Long: As always, people on the program may have interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against, buy or sell stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.
