thank you I'm Priscilla Barrera with the investing News Network and here with me today is Simon Morris who CEO of Benchmark mineral intelligence Simon thank you so much for joining me today thank you very much Priscilla and it's good to see you again very soon yes that is that is true and we're here today at the battery gigafactories Europe event in Budapest so to start I wanted to ask you and get your thoughts on the main trends that you've seen in the region when it comes to building a Lithium-Ion economy as you


call it yeah the main trends for me it's geopolitics right it's it's the inflation reduction act in the US has kind of put the cat amongst the pigeons if you like very English phrase uh over here in in the European Union especially and politicians have been scrambling to react basically there was a fear that the money going from that was that was being handed out by the US government and with investors following the money that's happening in North America was drawing or potential to be quite


destructive on what was what was being built over in here in Europe and that that's mainly gigafactories that are being built but um of course the the start of a supply chain mining um the start of mining although it's going too slow and refining so the fear it could destroy that semi-momentum that Europe had um well for me the big thing on this is a solution has been found as of 10 days ago when President Biden and Ursula Von delay and president of the EC met but this this kind of trend this


geopolitical trend is kind of um it's it's blanketing this industry which has really gone from which was in ludicrous mode but has now kind of turbocharged it into into a rocket ship really so geopolitics for me is the ultimate Trend at the moment here in Europe and when it comes to supply of critical raw materials you've mentioned in your recent presentations that we need to scale up Supply and shift from the thousands of tons to the million of tons globally what does that mean for a


region like Europe where actual production of key raw materials such as lithium is so very limited yeah it's you know I think it's it's really important like you've gone from Europe is really quite far behind in other regions in the world certainly I mean since the US has kind of got its act together in the last year and a half on on the inflation reduction act um which is which has kind of connected battery makers of chemical makers with with mining we're starting to see that


that hasn't that connection hasn't really happened over in the European Union and you kind of can probably for a number of reasons it's but but the key thing for me is Europe or the the EU did lots of things really well from 2017 honors they founded the battery Alliance um which really got together industry Finance um and politics they got the discussion going early which did result in gigafactories being planned and built quite a few of them yet that supply chain coherence hasn't


really followed um so I think just to build mines here in Europe to to scale and get that Supply um permitting has to be addressed as the number one thing in fact Ursula of underline mentioned that of getting mind permitting under two years to be fair if the European Union can do that two years are under and guarantee it all that guarantee it then you will see a critical minerals mining boom here so that really is the one thing to watch looking um at the overall supply chain for critical minerals what do you think


Europe is getting right and work really learn lessons from Asia or even the US what is Europe getting right for critical minerals um what it discusses them a lot it has prioritized them in terms of policy and the beginnings of legislation I think again the European Union has a structural issue here whether it's it's you know it's not like the US which is a country the European Union is a is a collection of of countries with the same you know the same kind of um interests or similar interests


um yet it's not a country structurally or it's not a country at all so I guess my point is that you know you can make a decision at a European Union level but then it goes down to individual countries to implement and they will have their own rules they'll have their own um momentum um or decision making on the ground so and it's become in Europe it's become quite competitive if you look at um Germany who's been driving the interest in Germany VW if you look at France what's been


driving um interest there it's their automakers so are they on the same page or are they competing for the same kind of market share and Marketplace that needs to be fixed that needs to be actually what the US has done which is spark it sparked the domestic industry as a whole to movers one and investors one and I think really that's where the European Union has its work cut out but to be fair the stuff we've heard over the last two months is really good stuff from the EU it seems coherent and if the European Union


and the US can do a deal whereby um inflation reduction act benefits can be invested in Europe in return for a share of production or whatever of these minerals whatever the deal is then that would be the best thing possible I think for the European Union otherwise the EU and the US will be more competitive than Partners yeah right and let's just uh touch on that um we've we've seen a lot of tension after the the U.S launched the IRA but it does seem like they're going to be working together with Europe when it


comes to critical materials uh any other thoughts on that and do you actually expect to see more collaboration between regions going forward yeah so collaboration with the European Union and the US the inflation reduction Act turbocharged USA um I do think the answer is yeah yes I expect to see that partnership that's what's been announced that something's in the pipeline it's really interesting listening to the top of the European Union set talk about batteries and critical minerals it


wasn't about cleantech it wasn't about solo and all these other Industries it was about batteries and it was about critical raw materials critical minerals this is what the EU were worried about that the the US will take will basically lock up the whole Market outside of China with what is a incredibly generous inflation reduction Act as a result I do think that I mean we're waiting on the language what does it look like I don't know but it will be it will be something like if you're


building a lithium mine in the European Union you can accept U.S um the US will allow you to take their subsidies to build the mine providing um a refined product or something is guaranteed to be bought by us-based customers or us-based companies it has to be that has to be for the benefit of the US industry as much as ensures that this money doesn't stays within the European Union I don't know for sure what the what they'll end up with but that's key and then the second part of that question


yeah would you do you expect to see more collaborations between regions even outside of Europe and the US with South America with Africa in Asia yeah and this is what we saw before the EU came out 10 days ago with um with this agreement we saw the US creating the start of a trade block which is what I thought was a trade block which is very interesting key Partners like Australia Canada Argentina the UK was on the list but the UK is not really doing anything even that's where I'm based and where I'm


from um but nonetheless why not um and a few other countries whereby they were doing critical raw material agreements they wasn't on that list so not then it will be now so um yeah they I think that other countries outside of these regions will do deals we'll band together the question is how China reacts because it does feel uh and what's happening at the moment is the world is banding together to cut China out the equation um but China is the leading company in the space it knows how to mine refine


make batteries make electric vehicles it pretty much dominates every section of the supply chain and when it doesn't dominate on mining Chinese companies have Partnerships with mines outside of China so um we will see how China reacts but at the moment it's very much the USA and the EU versus China and I don't think the top of the Chinese government will be too happy about that obviously government policy is is one of the drivers in in building this lithium-ion economy and another one is


the industry and since we spoke last time we've seen moves um from car makers and Battery makers trying to secure Supply from from Junior miners companies that are yet to be in production are these deals getting any better for for the junior miners yeah I mean Junior miners let's call it the junior minus development stage minus everything that's not in production yeah the deals are getting bigger and better quite frankly um I think certainly in the US well certainly in the US and Canada now


which is all inflation reduction act money you see the lithium Americans deal with General Motors 650 million um that's for me a new Benchmark it's a new high for these kind of deals it's not just big big money um it's an oem investing directly into a minor it's a new asset um that isn't yet and wasn't yet funded a new asset Nevada lithium asset that has to be brought on stream um so I think all other oems now will be looking at that deal and saying how can we do something similar I think it's


probably shop the market a bit with the fact that GM and OEM are now investing in mining I think that's going to set a trend another thing I would mention is Albemarle is this 1.3 billion um mega lithium Refinery they call it megaflex or something but I call it a mega lithium Refinery let's say this is really expensive Refinery but not expensive in a lot of money is what I'm saying a lot of a big chunk of investment 1.3 billion is loads right our industry is used to 50 million investment 100 million it wasn't used to


the 650 coming from the lithium America's GM deal it's definitely it's not used to at all Billion Dollar Deals effectively um and certainly incumbent lithium producers spending that amount of money both are inflation reduction acts backed um and that's the kind of deals that can happen because the industry needs to go from Anisa think from the hundreds of millions into the billions and ultimately eventually needs to think into the trillions but we're not there yet we're just starting at the


the one billion map all right and looking specifically at lithium um actually Albemarle made a takeover offer for lion Town resources recently um do you see this as the start of consolidation in the lithium space yeah I think I think you're going to see quite a bit of that going forward I mean lithium is going into a lower price environment as we've seen a spot spot price in China come off quite a lot in the last three months that began really back in November but it's it's kind of


gathered hold and gathered um headlines in the last probably three weeks it doesn't mean lithium is going to be a rock low price it doesn't mean it's going to crash it means it's a lower price a medium-term price environment which is good for anyone that wants to buy lithium resources um any M A that might happen it's good for the price of Lithium-ion batteries which have been hampered to Rising because of the impact of certainly the prices of lithium and what that means then is you're only


going to have a low price environment for probably a three year period usually these kind of Ebbs and flows of prices they start they rise over at two or two and a half three year period they fall over at two two and a half year period they start Rising again because lithium isn't scaling quick enough for the demand um and so you've only got a window I would say of to three years Max to do as much M A as you can because lithium the cost of lithium extraction the fat there isn't just physically


enough Supply in the pipeline there's not enough lithium units in the pipeline for the medium term let alone let alone the long term means it's a lithium land grab and M A has to happen as a result then let's just stay on the topic of prices as you mentioned we've seen prices for lithium in China uh decline what would you say to the investors listening to our conversation today about what this price decline is telling us about the current market how much should they worry any thoughts


uh yeah I mean I don't think investors should worry like higher prices aren't good for an industry right you're trying to build out a whole blueprint for this energy transition for electric vehicles to feed those gigafactories when the price is so high and I think any lithium price above 40 is is in kind of red alert Zone because of the cost the impact cost on Lithium-ion batteries and therefore the the economics of an EV um certainly if you're going to make more and more of them


you know I think anything about forty dollars a kilogram is is Red Alert Zone you can't be sitting there for the super long term on that certainly prices anywhere in the fifth in the 60s and 70s and 80s which it was that isn't sustainable that's why they're coming down and so um for me it's not okay it's a natural part it's natural flow of supply and demand Dynamics in any industry lithium is a niche industry it's scaling but it's still in the hundreds of thousands and tons not


millions of tons which means these price shocks happen as I said before every two or three years I think that'll be the case going forward and and I think it gives people whether whether lower prices translates to cheaper stocks I actually don't know right the the physical market and the stock market are two very different things but I think it does give the supply chain and oems a little bit of respite a little bit of time to have a breather to work out what they really want to do and in terms of financing what do you


think remains a barrier for the mining industry to attract more Capital to build these mines that that we need to supply the energy transition um I still think it's permitting it's a bit of a boring answer it was very mining orientated answer so it's probably great for your readers but um uh it does permitting right it's like you can't have you know we have this classic phrase in Benchmark that we say it takes 10 years to build a gigafactory sorry what two years to build a gigafactory and 10 years to build a mine


um and actually if it's probably longer than 10 years if you look at some of these critical mineral operations since they were found to when it if they actually get in production but the point is um you can't have a 10-year you can't even have a five-year permitting cycle you know the European Union wants to put that to two years and under if they can do that that will be a game changer for critical mineral mines in Europe I think that's really is one to watch but um permitting permitting permitting if


you don't solve that then you're not going to have your electric vehicles and you're really not going to have your energy transition because the energy transition is mining electric vehicles and batteries are mining I think politicians get that now but the financing industry needs to need to step up and do that and back that as well and I've asked you this question in the past but I think it's it's just interesting to see if things have changed what do you think remains a


misunderstanding for investors uh in the battery metal space yeah well I think there are so many investors coming in right I mean there's the investors have been here a while now five six seven years this institutional money that never was in the space has kind of been around for about five years now I'd say um now I hear Pension funds are coming in which is nuts if Pension funds want to invest you know it's here to stay right um so that's that's an interesting kind of trend at the moment


um it's the same it's the same misunderstanding as it was five years ago and it will always be the same misunderstanding which is that we're dealing with the commodity industry that's easily scalable um and therefore all the lithium in the world all the nickel in the work nickel sulfate in the world all the graphite in the world an anode manganese sulfate um the a what other people say will come on stream there's a likelihood it won't and if it does it won't be on time it'll probably


be about three years late um and that it's a commodity it's not a specialty chemical well all these inputs are Specialty Minerals or chemicals so they're highly engineered and you know it's not just digging material out of the ground and shipping it it's not an iron ore industry this is a specialty chemical chemical industry and I think that's a fundamental thing because when Banks do their supply demand models they add stuff up and they don't really understand that Midstream if you


understand the Midstream you realize where the bottlenecks are there is a fundamental bottleneck on mining that is the number one blocker but getting that material through the the supply chain the Midstream you've got to get a grip of that and you've got to understand really each plan each chemical plant by each chemical plant if you don't then um then your numbers will be all over the place um and that is why Benchmark has a business right as well so I'm not against that but it will help if banks


get a little bit better at that all right and my last question for you today as you think about the rest of 2023 what developments or Catalyst are you looking forward to the most this year in the critical raw material space geopolitics I mean this is the year of geopolitics right like uh last year was a mix a mixed bag of everything coming out of covid um demand for the roof for lithium especially prices going nuts battery industry reaching 750 gig or hours this year or reach over a terrible hour


that would normally be the headline bat lithium the lithium ion battery industry going from 50 gigawatt hours in 2015 to 1 to 1 000 gigawatt hours in 2023 it's not the headline because geopolitics is really has grabbed it is as I mentioned right now it's the US and the EU are positioning of sales against China what's going to happen with that relationship how will China react um you know we're going into a more unstable world there's things with Russia's invasion of Ukraine with the


relationship with China there we're in Hungary at the moment Hungary is part of the European Union but has a close relationship with China it could really be a an asset for whoever really in that in in certainly an asset for the industry but is it a geopolitical asset there's lots of things going on um all the time every day but for me the geopolitics has arrived in the lithium-ion battery industry and that is the trend for 2023. thank you so much for joining me today thank you very much Priscilla


[Music] thank you