Q&A: This analyst believes minerals for the green economy could spark an N.L. boom larger than oil

·6 min read
Larry Short says there is a continued reliance on oil because the transition to renewable energy is hitting several bottlenecks.  (Garrett Barry/CBC - image credit)
Larry Short says there is a continued reliance on oil because the transition to renewable energy is hitting several bottlenecks. (Garrett Barry/CBC - image credit)
Garrett Barry/CBC
Garrett Barry/CBC

There has been a major worldwide push to decarbonize economies as much as possible, with many industrial countries committing to strategies to develop alternative sources of energy.

Yet a major forecast points to a growing, not shrinking, demand for oil. The International Energy Agency released its 2023 forecast for oil supply and demand, with indications pointing to an increased demand for oil.

At the same time, the conversion to renewable energy sources has not been happening as quickly as some may like, and that's in part because of a shortage of what are called critical minerals — nickel, zinc, lithium and copper, to name a few — that can power electric cars, batteries, turbines and other products.

Larry Short, portfolio manager and senior investment advisor at Short Financial, went through the issues with Krissy Holmes during a recent interview on CBC Radio's St. John's Morning Show. 

His thinking may surprise some people. He believes the mining sector may be in for a boom that could exceed what the province has seen with offshore oil development.

This interview has been edited for length and clarity. 

Q: So what is going on? Why is demand for oil expected to grow next year? 

A: Largely because China has still been in lockdown during the last eight months.  As much as the rest of the world has come out of the COVID crisis, China has not. So, they've been battling it by doing major lockdowns. There's still hundreds of ships off the coast of Shanghai waiting to load and unload.

The reason why we're still seeing shortages throughout the world is because the manufacturing that China has been trying to do, the products cannot get into the ships.

Shutterstock
Shutterstock

Electrification — we've certainly been talking about that transition in the last number of years. Is there a relation? Is that happening as fast as it should be? 

Oh, heavens no, nowhere near it. Based on numbers that we're still building, 33 per cent of the world's energy is still coming from coal, for heaven's sake. In fact, China recently announced a new project using coal, which will actually use more coal than all of Europe is currently using.

We're not moving forward to reduce carbon emissions largely because we aren't able to make changes quickly enough due to bottlenecks.

A key one of those bottlenecks is critical minerals. Basically, we're not mining all of the things that we need to mine in order to make the conversion at a fast enough rate.

Looking at countries like Indonesia, Pakistan, and Bangladesh, with large populations. They all want air conditioning, running water, televisions and automobiles. The world is still trying to keep up with demand for those products and services, meaning that the total energy demand around the world is increasing, while the ability for the world to generate alternate energy is simply not there.

Andrey Rudakov/Bloomberg
Andrey Rudakov/Bloomberg

Let's talk about what this means for Newfoundland and Labrador. Where do we fit in on the supply side here? 

We've had many people over the years argue that if you just shut down the oil off the coast of Newfoundland, that will contribute to the conversion of the world over to alternative fuels. What we've seen in the last little while is 4-million barrels a day being shut down because of the Russia sanctions.

The result has not been a conversion to alternative fuels quickly. There's actually been an increase in inflation. If anything, that should help people understand that in terms of this transition, the focus has been in the wrong area. The focus has been on the supply of oil, when it has to be on replacing oil entirely by using alternative energy, which requires critical metals.

The one thing that the province of Newfoundland and Labrador has proportionately more than anywhere else on Earth, are all of these critical metals that have to be mined in order to build the electric vehicles.

In terms of the supply, what is the opportunity here for the offshore? What could this mean? Is there the potential for another boom here?

We could definitely see a repeat of the boom. Oil development, any field that has already been found, such as Bay du Nord, will be developed before new exploration takes place, because the world is still not financing new oil projects or new oil exploration projects.

The potential boom in minerals in the province of Newfoundland and Labrador from this is larger than what the oil boom has been. - Larry Short

Again, the reason we're in this crisis is because the thought was that the world could convert faster than it could. What we're finding is that everybody has given up on oil at the same time, therefore the supply that we need to even do the conversion, we don't have.

The second piece is that the potential boom in minerals in the province of Newfoundland and Labrador from this is larger than what the oil boom has been. So, the opportunity here is much greater if we can find a way to help supply the world with all of the metals that are needed in order to do the conversion, because that is where the money is pouring into right now throughout the planet.  

CBC
CBC

The potential for mining could be bigger than the potential for oil for this province? Can you give us a sense of the scale we're talking about here? 

Just to make an electric automobile, you need roughly six times as much metal, most of it being copper, lithium, cobalt, nickel, those things. There's an article out a short time ago talking about how basically we need to increase the amount of minerals being mined by a factor of a thousand over the next ten years in order to meet the climate goals.

You can see the opportunity for this province. The opportunity there is absolutely huge going forward.

Are you saying that actually leaning in on mining could help to cancel out some of the, for lack of a better word, bad [things that come] with some of the emissions with oil production? Could one cancel out the other?  

More than that. The fact is that for a long time, environmentalists have been saying we've got to get off oil. This is how the province gets off the oil revenue side.

The key part here is that as a province, we have to find a way to open mines faster than the average of 14 years, because that misses the whole opportunity. But, on the other side as well, if we can find a way to do it ethically, if we can find a way to do it staying inside of environmental standards, then we become one of the leaders in the world. We have that opportunity.

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