“There is a new crowd starting to appear. A mid-tier that is saying ‘I want to be relevant’,” according to Rob McEwen, president and chief executive officer of McEwen Mining, adding that larger miners or traders were no longer the only ones seeking to form mergers and acquisitions (M&A) with explorers or junior miners.
On March 9, the multi-national automaker Stellantis announced on that it had acquired a 14.20% stake in McEwen Copper to “be able to supply some of the projected copper demand starting in 2027.”
The Canada-based junior nickel miner Power Nickel is also in talks with a company that is interested in investing in its nickel project and doing a full feasibility study.
“Because of the changing market conditions, [market participants] that never used to talk to miners are now talking to miners,” Power Nickel chief executive officer Terry Lynch told Fastmarkets.
Joint ventures (JV) between original equipment manufacturers (OEMs) and junior miners have picked up recently.
In North America, Stellantis signed a deal with the California-based lithium projects developer Controlled Thermal Resources and the US-based Piedmont Lithium has a supply agreement with the electric vehicle (EV) producer Tesla, while the US car-maker Ford announced in April that it was entering a JV for a nickel project in Indonesia.
Tesla also has an agreement with nickel miner Talon Metals for nickel concentrate produced from the latter’s Tamarack Nickel Project in Minnesota.
Western companies are following the example Chinese automaker, who had earlier established their upstream position against the risk of a lack of supply, according to Fastmarkets analyst Phoebe O’Hara.
“We saw an explosion in the number of upstream investments in the past year,” O’Hara said, adding that there were 18 such investments by OEMs in 2022, tripling since 2021.
“Vertical integration is becoming increasingly necessary if OEMs are to minimize their risks and ensure adequate metal supply,” O’Hara said.
This steep increase in the number of JVs is due to Western OEMs realization that they had no assurance of upstream supply as well as the volatility in the price of metals used in EV car batteries in the past year, according to O’Hara.
“This indicates the pressure to secure supply,” she said.
Not the first time OEMs have looked to direct material sources
McEwen said that automakers were looking to source their supply needs at the origin and that this had precedence in the past.
“OEMs are doing what Henry Ford did when he went to Brazil for rubber at the turn of the century: They are going to the source for their metal needs,” he said.
From 1928-1945, the Ford Motor Company built rubber tree plantations in Brazil in an attempt to produce the rubber required for its car tires.
“We have seen a couple of times before: [Car manufacturer/consumers] need to get product and M&A activity will increase with that,” McEwen added.
Considered to be among the world’s largest undeveloped open-pit copper deposits, McEwen Copper’s Los Azules project in Argentina is currently in the preliminary economic assessment phase. The company is planning on moving to the feasibility study by the end of 2024 and for mine production to start by 2029-2030 at the earliest.
The project also foresees a cathode production plant, which will make the company the only producer of copper cathodes in Argentina.
“Traditional developers are no longer the only game in town anymore. They could still well be the partner of choice, but [this new approach] will make [the traditional developers] compete harder for mining projects as now end users or processors the next step up are in the game,” Lynch said.
Power Nickel is currently conducting a metallurgical study in its Nisk nickel, copper and platinum group metals (PGM) project in Quebec, Canada. On May 10, the company announced it had discovered a new high-grade copper and PGM deposit northeast of its Nisk Deposit.
“From a deposit perspective, [Nisk] is closest to Lynn Lake or Voisey’s Bay,” Lynch said.
Vale’s Voisey’s Bay mine in Newfoundland and Labrador, Canada produced 24,400 tonnes of nickel in 2022.
“We believe based on analogy of other high grade Ultramafic deposits like Lynn Lake and Voisey’s Bay that the mine could ultimately to have a deposit of 20-50 million tonnes or north of 1% nickel,” Lynch said.
Production is the hardest factor to predict because “we don’t know what we don’t know,” according to Lynch, whose “best guess” for the start of production at Nisk was also 2029-2030.
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