Month: November 2018

Patania II, owned by Dede of Belgium

 

Introduction

Today we noted two contrasting developments, 1) the price of Brent crude oil had fallen below US$60 per barrel, and 2) a company will start deep sea mining of precious metals.

In the 1980’s I worked as a refining planning engineer in ESSO’s refining unit in Port Dickson, Malaysia. During that time, as a refining planning engineer, I was tasked on production planning to refine Tapis crude, which was pumped from oil platforms located offshore in South China Sea.

Like crude oil before, precious metals used to make batteries for electric vehicles will also be mined from sea beds. According to a report in The Times London, Patania II, a 25-tonne robot tractor, will spearhead the latest push to mine precious metals from the ocean floor. Patania II would be lowered 4,500 metres to the Pacific Ocean sea bed between Mexico and Hawaii in April 2019. It will gather nodules of rock on the ocean floor that contain high concentrations of metals used in electric car batteries and renewable energy systems. The companies which are racing to mine the ocean floors are hoping to recover manganese, molybdenum, cobalt, nickel and vanadium. The companies contend that their deep sea mining operations would cause less environmental damage than producing the same mount on land by drilling and blasting millions of tonnes of rocks.

Britain is one of several countries sponsoring sea-bed mining companies that have obtained licenses from the International Seabed Authority (ISA), based in Jamaica, to explore the Clarion Clipperton Zone, an area in the Pacific Ocean covering about six million sq km. This area is thought to hold more of the metals being targeted than all terrestrial metal reserves (see our earlier blog). Access to its mineral reserves is controlled by the ISA because it is beyond the jurisdiction of any nation.

Chris Williams, the managing director of UK Sea Bed Resources, owned by Lockheed  Martin of the US, said that his company planned to mine about 9,000 sq km of the zone. “Sea bed mining will form an essential path to the future supply of precious metals for electric vehicles,” he said.

The ISA, however, needs to agree a mining code with environmental safeguards before extraction can begin. A draft has been produced to be agreed in 2020 but some of the ISA’s 168 members have a vested interest in delaying progress to protect their land-based mines from cheaper sea-bed minerals.

Environmental Concerns of Sea-Bed Mining    

The mining companies need to complete environmental impact assessments before starting extraction. The pilot operation of the Patania II, owned by Global Sea Mineral Resources (GSR), a subsidiary of the Belgian dredging company Dede, will leave nodules on the sea bed. A research vessel with 50 scientists on board, funded by EU, will study the impact. It is estimated that each nodule typically weighs about 1 kg and contains several different metals, meaning one sea-bed mine could deliver as many commodities as two or three land-based mines.

 

The industry argues that sea-bed mining would reduce reliance on countries such as DRC, which produces most of the world’s cobalt for batteries.

Michael Lodge, the ISA’s British secretary-general, said that commercial extraction could start in 2023 but that depended on whether investors considered it as commercially viable. He added that some damage is inevitable but sea-bed mining was “the most highly regulated activity that’s never taken place”.

Watch out DRC on future development of sea-bed mining!

Please click below on polymetallic nodules published by the ISA.

Polymetallic nodules

 

Background

We noted an interesting article by Roger Boyes in the London Times on November 14^th, 2018. He predicted that the push to produce electric cars worldwide would alter the dynamic of the existing energy-producing countries. The International Energy Agency has forecast that oil use by cars will peak in seven years because of the increasing number of drivers in emerging markets and Asia mega-cities. Then, electric vehicles will start to make a significant impact:300 million electric cars on the road by 2040. This will alter the energy value chain. The source of energy will shift from fossil fuel (crude oil) to mineral-based, namely lithium and cobalt to make powerful rechargeable batteries.

The Applications of Lithium

According to US Geological Survey, Mineral Commodity Summaries, January 2018 (The Report), global end-use markets of lithium are estimated as follow :

1. Batteries, 46 per cent
2. Ceramics and glass, 27 per cent,
3. Lubricating greases, 7 per cent,
4. Polymer production, 5 per cent,
5. Continuous casting mould flux powders, 4 per cent,
6. Air treatment, 2 per cent, and
7. Other uses, 9 per cent.

 

Prices of Lithium

The Report noted that spot lithium carbonate in China ranged from US$15,000 to US$24,000 per ton throughout 2017 owing to tight supply of spodumene from Australia. The rest of the world experienced more modest price increases owing to supplies available from more diversified sources of lithium. Spodumene is a pyroxene mineral consisting of lithium aluminium inosilicate, LiAl(SiO₃)₂, and is a source of lithium. It occurs as colourless to yellowish, purplish, or lilac kunzite, yellowish-green or emerald-green hiddenite, prismatic crystals, often of great size.

Three spodumene operations in Australia and two brine operations each in Argentina and Chile accounted for the majority of world lithium production. The table below shows mine production and reserves of lithium.

 

Countries	Mine production in 2017 (Tons)	Estimated reserves (Tons)
US	–	35,000
Argentina	5,500	2,000,000
Australia	18,700	2,700,000
Brazil	200	48,000
Chile	14,100	7,500,000
China	3,000	3,200,000
Portugal	400	60,000
Zimbabwe	1,000	23,000
World total (excluding US)	43,000	16,000,000

Source: The Report

 

 

Owing to continuing exploration, lithium resources have increased substantially worldwide and total more than 53 million tons.

Substitutes

Substitution for lithium compounds is possible in batteries, ceramics, greases, and manufactured glass.

 

The Applications of Cobalt

According to The Report, Democratic Republic of Congo (DRC) is the leading source of mineral cobalt, supplying more than one-half of world cobalt mine production. With the exception of production in Morocco and artisanally mined cobalt in DRC, most cobalt is mined as a by-product of copper or nickel. In 2017, average annual cobalt prices more than doubled, owing to strong demand from consumers, limited availability of cobalt on the spot market, and an increase in metal purchases by investors.

China is the world’s leading producer of refined cobalt. Much of China’s production was from ore and partially-refined cobalt imported from DRC. China is the world’s leading consumer of cobalt, with nearly 80 per cent of its consumption being used by the rechargeable battery industry.

The table below shows mine production and reserves of cobalt.

 

Countries	Mine production in 2017 (Tons)	Estimated reserve (Tons)
US	650	23,000
Australia	5,000	1,200,000
Canada	4,300	250,000
DRC	64,000	3,500,000
Cuba	4,200	500,000
Madagascar	3,800	150,000
New Caledonia	2,800	–
Papua New Guinea	3,200	51,000
Philippines	4,000	280,000
Russia	5,600	250,000
South Africa	2,500	29,000
Zambia	2,900	270,000
Other countries	5,900	560,000
World total	110,000	7,100,000

Source: The Report

 

The Report noted that terrestrial cobalt resources are about 25 million tons. In addition, more than 125 million tons of cobalt resources have been identified in manganese nodules and crusts on the floor of the Atlantic, Indian and Pacific Oceans.

Substitutes

In some applications, substitution for cobalt would result in a loss in product performance.

 

Conclusion

The electric car revolution would increase the consumption of cobalt and lithium, and the reduction in the consumption of petrol from crude oil. These mean countries such as Australia, Argentina, Chile and DRC would be the new energy giants in the next decades. What would the existing energy giants such as Saudi Arabia, Russia and Venezuela do with their plentiful reserves of crude oil?