If not quite the oldest profession of all, mining does boast a pedigree that goes back further than the written record and probably beyond archaeological evidence too.
But all that history doesn’t mean it isn’t an industry for the future.
More than most industries with their own sector categorisation on stock exchanges – be it media, leisure or manufacturing – mining is set to benefit from the rise of twenty-first century technologies just as it did from mass industrialisation in the nineteenth century and from globalisation in the twentieth century.
The reasons are not hard to find. Look no further than the latest cutting edge technology, the electric vehicle. Ford Mortor Company (NYSE:F), for example, has just announced an US$11 bn commitment to expanding its electric vehicle range. Most commentators responded with the observation that it’s still behind the curve.
In the same week, Toyota (LON:TYT) announced the acquisition of a significant stake in Orocobre (TSE:ORL), to a similar response.
Working out just who is ahead of the curve is tricky, but certainly all the major manufacturers are heavily into the market. A rundown at the end of the last year by the Independent named Nissan (TYO:7201), Hyundai (KRX:005380), Renault (EPA:RNO), Kia (KRX:000270), Toyota, BMW (ETR:BMW), Volkswagen (ETR:VOW3), and of course Tesla (NASDAQ:TSLA) as among the leading manufacturers.
And what are they putting in all these cars? - products dug out of mines around the world. Mining, in a way, is uniquely placed to keep up with technological change in a way not comparable in any other industry.
After all, while detractors may decry the lithium boom in Australia as full of froth, it’s undeniable that lithium demand is set for dramatic increase. The price over recent years has reflected that, up significantly in spite of increased supply. And, as anyone who follows the junior mining market, and the likes of European Metals Holdings (LON:EMH), Bacanora (LON:BCN), Cadence (LON:KDNY), Liberty One (CVE:LBY) and Savannah Resources (LON:SAV) knows, supply is likely to increase significantly further in recent years. But only a luddite would argue that demand isn’t also going to rise.
The trick for investors will be in working out how the supply-demand scales will eventually balance out. But there’s no question that as the new electric vehicle technology advances, there will be continued demand for metals to go in them.
And it’s not just lithium for the batteries. Because the cars will be more electrified than ever, the amount of copper needed for the wiring inside them will also increase significantly. The copper price has risen noticeably in the past few months, and if electric vehicle demand isn’t the central reason, it is certainly becoming a contributing factor.
Similarly, the market has been running hot for cobalt for nearly two years, because cobalt is also an essential component in electric vehicle batteries. It usually comes as a by-product to copper, and is completely subservient when it comes to the economics of mining, so any standalone cobalt projects, such as that controlled by eCobalt (TSE:ECS), have suddenly swung into sharp focus. eCobalt has become just about a twenty-bagger in a little under two years.
Even the coal market may end up being a surprising beneficiary of new technologies, albeit that environmental campaigners might have something to say about this in the longer-term. Why is coal benefitting? Simply that the mining of bitcoin and other blockchain currencies like ethereum is requiring increasing amounts of power, and in many developing countries, particularly China, that power is being provided by coal.
Will bitcoin lead to a fully-fledged rehabilitation or renaissance of coal? Unlikely. But the connection of coal to bitcoin is a useful reminder that when it’s “in with the new” it isn’t always “out with the old” as well.
Mining has been around longer than any form of vehicular transport, and it will no doubt outlast bitcoin too. In that sense, there’s no better long-term investment.Join Proactive’s Crypto, Blockchain and Cannabis Telegram group here