All-In podcast discusses “critical minerals”.

This interview from the All-In Summit broadly discusses the critical minerals supply chains and how there has been decades of underinvestment in the physical economy in the West.

Watch the entire interview here.

Below are our key takeaways:

• The “real economy” has been starved of investment in the West. Most of the incremental commodities capacity over the last decade has come from China who has continued to make investments in both downstream and upstream capacity in the “real economy”.
• Four of the top 10 OEM carmakers (by battery manufacturing capacity) are based on China.
• More investment in minerals like nickel, copper, cobalt, lithium and rare earths is required to meet future demand for battery manufacturing capacity. James claims “the world needs >US$200 billion in CAPEX per annum to satisfy future demand”. Chamath claims that the number is closer to US$3 trillion over the next decade.
• The cost of capital upstream is limiting new investment in new projects, James claims that there is a good chance that the downstream operators like Tesla who have a much lower cost of capital may look to move upstream and acquire new mining projects directly.
• The panel also makes reference to the recent Tesla earnings call where Elon Musk mentions that Tesla is considering “becoming a mining company” by purchasing and operating mines specifically in the critical minerals space. The panel also specifically mentions Elon’s quotes encouraging entrepreneurs into the lithium mining industry.
• In the future where these minerals are considered “the new oil”, countries will need to build up strategic reserves just like they have done so with oil and gas. The panel also touched on the security risks that could come as a result of geopolitical tensions over a rush to try and secure supply chains of these minerals.

One thing that really stood out for us was around the idea that there could be a merging of downstream operators with upstream mining businesses.

We have seen the cost of capital issues in developing mines first hand here in Australia, where the government has had to come in and provide loans to companies like Iluka Resources (recently loaned $1.3 billion from the federal government) because capital markets were unwilling to finance large scale commodities related projects.

We believe that the “critical minerals” investment thematic is only just getting started and think that the future of mining will be for the operators to have some presence either via partnerships, direct equity stakes or joint ventures in downstream capacity.