Billionaire Investor Erik Prince Launches Fund For Electric Car Metals
A couple of weeks before the turn of the year I wrote a comment under an article on a tech site in which the author devoted a couple of thousand words to singing the praises of electric and hybrid cars, and Tesla cars in particular, the usual ‘clean, green, sustainable, transport of the future spiel. Now I did not get into the usual criticisms, poor range, length of time to recharge, massive upgrades to the electricity distribution system to support ‘fast chargers’ which are still painfully slow compared with pumps that pump liquid.
Nor did I point out the technical problems that will beset these vehicles when they start to be used outside towns and away from the coastal strip. In short, they don’t do steep hills very well. OK I know some plank is going to say “Ah but regenerative braking systems mean they generate electricity when going down hills,” and OK that is true, but what is generated going down is a tiny fraction of what is used to haul a car, driver, passengers, and battery pack up.
Holding the opinion that I do still believe Self-Driving or Autonomous Vehicles are a luxury rather than a necessity…www.datadriveninvestor.com
Instead of all that I settled for pointing out that as well as electricity which is still mostly generated by coal while, with wind and solar falling short of expectations, nuclear remains the best bet for generating energy by a process that is Carbon Dioxide free.
While the author of the piece I had commented on recommended his readers to get their savings invested in electric car makers (and Tesla in particular,) at a time most wise traders were short-selling Tesla stock. Now I’m not against electric cars in principle but I thought that was bad advice so I told readers to get into funds specializing in lithium, cobalt and rare earth metals. Then once a few fundamental problems (like the tendency of Tesla cars to spontaneously combust more frequently than Spinal Tap drummers) are solved, you can risk some of your profits on electric vehicle makers if you are a gambling type.
One of the unmentionable problems with electric vehicles is that although they do not need fuel obtained from ‘fossil’ the based deposits coal, oil and gas, other finite resources are essential to the manufacture of these vehicles which some stupid politicians say will totally replace fossil-fuelled cars and trucks by 2040, (yes I might be talking about you Monsieur Macron you idiot, or you Mr. Trudeau, you plonker.) There are currently an estimated 1.4 billion cars and light goods vehicles on the roads of our planet, and there is not enough lithium in reserve stocks to make battery packs for a tenth of that number. And then there is cobalt, needed in far smaller quantities but a far less plentiful resource and most of the known reserves are controlled by China. And if they dominate the market in a resource the west needs they ain’t going to be giving the stuff away.
So on the same day as I read of Tesla’s latest troubles with build quality, safety, and cash flow it was no surprise to read that the latest shot in the escalating trade war between the USA and China was fired by President Xi when he warned that if the USA continues to increase tariffs on Chinese goods, China will ban exports of not just cobalt but all rare earth metals. Last year when a trade war with China was still limited to threats and rhetoric, analysts warned that if the Trump Administration continued to piss off the Chinese after Beijing had signaled its intent to undermine the $US by creating an alternative to the petrodollar, one of the five “nuclear” options with which China could hit back should the US go through with threats to impose tariffs, was a block on cobalt and rare-earth metal exports to the US, potentially crippling countless US supply chains that rely on these commodities, and forcing painful and costly delays in US production as alternative supply pathways would have to be implemented.
It is not only electric vehicles that depend on rare earth metals, smartphones, tablet computers, laptops, televisions and just about every electrical gadget you can think of will require a small quantity of one of the elements. As a result investment analysts have been expecting Beijing to respond to Trump’s recent tariff hikes by blocking the exports of one or more rare-earths, although this still hasn’t happened. But that doesn’t mean the strategic materials will not soon be weaponized in China’s tit-for-tat war with the US, and the latest noises from China suggest it may be sooner. As Bloomberg reported yesterday, shares in JL MAG Rare-Earth surged after Xinhua said the Chinese president had visited the company’s site in Jiangxi, a move designed to send a diplomatic message about what China could do next.
Anyone who challenges the official narrative that electric vehicles will replace the internal combustion engine over the next couple of decades will lay themselves open to attack from the usual suspects, US Democrats and European socialists, the Antifa rent-a-mob types, weirdie — beardies, LGBT lobbyists, Church of Scientology fanatics etc. and of course the internet trollbots used by political and corporate interests to influence opinion. Fortunately I don’t take any more notice of the voices that bounce around the liberal echo chamber of the internet than I do of politicians who are trying to buy our votes so they can use them in the cause of enriching their paymasters, or of mainstream media, where the propaganda of the establishment is endlessly parroted.
It was, of course, gratifying to learn that people who matter agree with me. Earlier this year Financial Times welcomed the New Year with a report that Erik Prince, the founder of Blackwater, the private security giant intends to launch a $500m investment fund to capitalize on the rush to secure investments in the metals required for batteries that power electric cars.
It must be stressed here that the so-called rare earth metals are not particularly rare in terms of actual scarcity, they are rare in the sense that a huge amount of bedrock has to be mined in order to extract a commercially viable amount of the elements. Then there is the problem of separating the element out from the rock; deposits do not occur singly — more likely several rare earths will occur in a copper ore deposit. And extracting then separating them is an energy-intensive process that requires large quantities of highly toxic chemical compounds.
And then there are political problems. China has no qualms about buying from mining companies that employ workers under slave labor terms or force children to do filthy jobs in dangerous and health destroying conditions, but when western liberals finally get the message that their fashionable gadgets are made with the use of slave labor they might not be too happy. Having said that, liberals and socialists are known for their double standards and it’s quite likely they will be posting outraged tweets about the disgusting exploitation of children and poor people on their smartphones and tablets that could not be sold at affordable prices without such exploitation.
Erik Prince, an adviser to president Trump and brother of White House official Betsy DeVos told the FT, “For all the talk of our virtual world, the innovation, you can’t build those vehicles without minerals that come from generally weird, hard-to-access places.” He’s correct of course, and the more the world comes to rely on electronic technology, particularly mobile technologies, the more competition there will be for these finite resources. As I wrote back in 2010, for years due to pressure from the greeny — weeny, weirdie — beardie faction because the mining and refining of these rare earth metals is a filthy and energy-intensive process, the developed world’s governments have been handing control of such vital resources to nations with are not greatly concerned with issues like human rights, health and safety or looking after the planet, nor are they exactly friendly to our governments or way of life.
Mining companies in China, Russia, India, Brazil, and Australia have been investing billions into these essential metals as the electric vehicle industry expands and sales of gadgets continue to grow, which include cobalt, neodymium, gold, tellurium, and terbium as well as copper, lithium, and cobalt.
One of the largest investors has been China, with Chinese companies buying stakes in deposits in the Democratic Republic of Congo and in Chile this year. Mr Prince also runs a Hong Kong-listed security and logistics company that is backed by China’s state-owned Citic Group. — Financial Times
Prince’s new fund will specialize in funding enterprises involved with exploration and securing extraction rights to as yet unknown deposits before selling them on to larger mining companies and, Prince told the FT, cash in its the business model is to cash in its investments and devote the revenue to new projects within four or five years. His experience in providing private armies to secure assets in well-known trouble spots should prove invaluable.
It is well known that Chinese companies have little interest in speculative exploration, which led Prince to create a gap in the supply chain he hopes to fill.”
More than sixty percent of the world’s cobalt is mined in the Democratic Republic of Congo, a nation plagued by tribal and political conflicts which have scared off western investment. This has paved the way for Chinese companies such as Jinchuan Group and China Molybdenum to commit billions on developing the sites. Cobalt is not unique in presenting difficulties to the supply chain. Apart from a few high altitude salt lakes in Chile, the only other known area from which lithium is easily extractable is Afghanistan, not the easiest place for foreign interests to operate.
Prince first gained attention as the founder of Blackwater — the world’s most famous private military security contractor, which has been hit with lawsuits alleging involvement with civilian deaths in Iraq. Since selling Backwater in 2010, Prince has been running Frontier Services Group, which supplies logistics support and security services to western companies operating in politically unstable countries. They have provided anti-piracy operations for Somalia and security for oil companies operating in civil — war-torn South Sudan. Prince himself is a former US Navy SEAL, now resident in Abu Dhabi, his long established business links with China will certainly give him a head start in this new venture.
Sources on rare earth elements:
Rare-earth metals in magnets for electric-car motors