Mark Mills: The energy transition delusion:

inescapable mineral realities

Unknown 0:07
morning.

Unknown 0:08
Thank you, Tim and the skogen team for the pleasure of joining you in a southern latitude. At least south
of where I grew up in Canada. It's a pleasure to be one of the sunsets so early.

Unknown 0:23
I'm heading to Miami this afternoon.

Unknown 0:28
The series said I'm going to talk about not investing per se but a macro a technological macro. I am
involved in. I am interested in investments. But having been trained and spent my early career as a
physicist I tend to focus throughout my life whether it's in the public policy or in the investment world
and underlying facts and phenomenologies If you like so, the world is at it. People say this a lot at a
pivot. We've It feels like we're at a pivot point. The pivot in energy sense is in the direction of what
everybody is talking about, which is the energy transition. And the key issue with the energy transition
rhetoric and policies is not one about aspirations which I'm not going to talk about, and not one about
structural possibilities which are non trivial, but rather it's it's about minerals and mining as Siri pointed
out, so my focus is almost entirely on that

Unknown 1:28
in a sense of in this is this is not naked adulation for Norway, Norway. It's in a sense the the policies of
the world are focused on trying to become Norwegian. I have stolen the famous Kennedy line. It's
behind Berliner to translate it, I think correctly into I want to be a Norwegian.

Unknown 1:51
No, I mean, Norway last year is I'm sure you all know what had the record in the world. 80% of all new
cars were electric that were purchased here. And Norway gets 90% of electricity from renewables. It
gets half of its primary energy from renewables. This is, in essence, the goal of the entire energy
transition world that's in a nutshell where where the where the world thinks it must go or where it
thinks it can go. I mean, Norway has some advantages. Maybe perhaps, obviously, its wealthy. I mean,
it's 700% wealthier than the world average. Its wealthier than America by a significant margin, even
even even in economically challenging times. They think it's about 30 to 40% wealthier per capita than
America. Norway also enjoys the benefit of exporting in dollar terms, something on the order of $25,000
per capita of oil and gas sales to the world. This again in production terms is about 400% greater per
capita than US oil and gas production. The US remains the world's biggest absolute producer of oil and
gas. So those are advantage and the other advantage I would point out which is just as in the underlying
physics of energy is of course the the renewables that Norway likes to use and is dominantly using have
a particular advantage the the the machinery the hydro dams last about four times longer. Than the
machinery of preference in the energy transition when Melson solar arrays and they produce roughly
four times more energy per dollar of capital invested. So that 16 fold Energy Economics advantages a
modest modest leg up over the rest of the world's aspirations but that said, this is the vision and to
point to where I'm gonna go. The Vision incorporates a fact built into the nature of the world we live in
at the moment, which is that every Norwegian that buys an electric vehicle has essentially purchased 20
to 30 barrels of oil equivalent of energy being consumed somewhere else. And fully half of that energy
content, in fact is oil and the rest is almost entirely coal and natural gas. So the single Evie that is
purchased in Norway and when it goes on the roads before it's seen its first electron move into its
batteries has already consumed at least 25 barrels of oil global of energy in hydrocarbons.

Unknown 4:21
The question of whether the world will become Norway or not is quite a velocity and materials. And by
velocity I mean the world today is just a statistical fact that I would have to put this out since you
probably all know this, but it's you have one has to have this one's head that the world today gets about
3% of its total energy supply from wind and solar, the preferred sources of energy, the energy transition,
essentially all the IEA and IRENA plans world bag, all the all the energy transition aspirations of pivot
around wind, solar and batteries. 70% of the net new energy supply and the forecasts in the next 20
years are to come from wind and solar mediated by batteries, whether in cars or upgrades in buildings.
So free percent Well, it's not nothing in a world as big as it is, but just again, it's a sense of whether or
not we have made a transition, as opposed to having an aspiration for transition. 3% is obviously not a
transition. In fact, that's 1/3 as much energy as the world gets from burning wood, the oldest source of
energy other than muscle on the in the history of the human race still provides 350% more energy to the
world than all the world's wind turbines and solar arrays combined.

Unknown 5:38
This would suggest that transitions are slow and difficult and expensive. The world has spent something
on the order of $5 trillion in the last 15 years indirect spending and probably that much again and
indirect spending to achieve a change that is not in fact, in semantic terms a transition. So the transition
is really about the future. And the scale to go from 3% Let's say to 10% of world's energy from wind,
solar and batteries is also not a transition, but it would be quite a remarkable accomplishment. If you
think about the state of the spending and the state of where the world is today. A 300% increase in a
very short time period and capital spending and physical infrastructure is quite quite remarkable.

Unknown 6:23
And there's no shortage of money that's being allocated to making this transition.

Unknown 6:30
happen in at all if not tried to accelerate it this total capital spending this is IEA data in the green
transition is on a tear to say the least. I mean, we're spending now something order of $800 billion a
year direct money. And I dare say that the real numbers are higher because mandates have have a real
cost to the economy mandates. It is all over the western world. Governments are requiring utilities and
energy companies to make transitions that don't show up in direct spending, but they show up in the
real costs of the economy. So there's no shortage of spending and and I show you the conclusion from a
very recent Electric Power Research Institute study which is a nonprofit research group in the United
States for the electric industry that looked at the structural issues with respect to the transition, not the
cost issues, but the structural issues and reached reached the conclusion that you can read the
conclusion that it doesn't look like it's structurally possible to make the transition in the way you
imagined the typical response to that is we should spend more money and try harder, which is not an
unreasonable response in the face of structural concerns.

Unknown 7:38
I would I would hazard the opinion that spending more money won't cause the structural issues to go
away. But that's not what I want to talk about. What I want to talk about is the fact that what's
interesting to me is one particular study typical of most completely glosses over the underlying question
of where does the Where did the materials come from? So let me let me turn specifically to this material
in mineral issue for a very simple reason, sort of locked into the reality of the world we live in. There is
no shortage of energy energy is not in short supply and the physics of the universe we live in. Energy is
in fact an infinite supply of energy. For functional purposes. All forms of energy, are functionally an
infinite supply. The challenge for humanity has always been in figuring out how the systems work in
nature, designing machines that can extract nature's natural energy sources and convert it into forms
that are useful for humans at a price we can afford. And price is principally economic. The price also
includes social, environmental, and geopolitical features. These are all costs, but they all distill
ultimately, to money and they all require machines. One has to build machines, all machines were out.
It's the nature of the universe free and probably the most enduring law of physics entropy. We age
things wear out this is true of all machines, so batteries of solar arrays, combustion turbines and cars. So
the wearing up process means that you're always in this sort of Sisyphean battle of building new
machines finding new materials.

Unknown 9:05
The IEA deserves credit at the sort of structural staff level for doing some of the best frankly, and most
comprehensive work looking at the structural underlying engineering economic realities of really of any
of the organizations that talk a lot about the energy transition. It may not be the top line issue that the
IEA talks about when Fatih Birol speaks to the world he he rarely talks about these issues he does
sometimes, but this data that I'm showing you in this graph comes from IEA report. This is the
underlying single fact that's built into the energy physics of the machines other principle vector, the
energy transition, again, wind, solar batteries and electric cars. The underlying fact that's important is
the quantity of minerals needed per unit of power to build the machines and I've taken the whole
basket of minerals, which is not just copper, and I've made copper and everything else as opposed to
copper, molybdenum and lithium, neodymium you know, manganese is a suite of minerals, aluminum,
essentially a basket of two dozen minerals that are essential to the building and construction of
batteries and energy transition machines. But if you just divided the two buckets, copper and everything
else, you get this picture to build a machine to replace combustion turbans. What this shows you is that
you need between 1002 1,000% more minerals to deliver the same unit of power and you need some on
the order of 400% more minerals and metals to deliver the same vehicle. So an electric vehicle requires
400% more metals and minerals to build it compared to a conventional car. This is in energy terms. This
is understating what's actually going on because as I said at the outset, the advantage hydro dams have
over windmills and solar arrays is that they operate very differently. Obviously hydro dams, especially in
Norway produce energy more than 90% of the time windmills and solar arrays. Self evidently do not. So
if you just this data for energy delivered as opposed to power, the actual requirement to deliver the
same unit of energy to society is a 2000 to 7,000% increase in the metals required to deliver the same
mile of driving the same hour of heat, the same amount of illumination the same hour of compute time.
So this quantity of minerals required to deliver the same energy service to society as a consequence. I
mean, if you go back upstream, and again IEA data, they aren't alone in doing this. The finished
Geological Survey has done similar work many other serious organizations and researchers have looked
at the implications of the massive increase in metals needed per machine and look upstream to how
much more mining does that mean and what it means. And this is as a down selection into the a suite of
five minerals that are obvious ones right Cobalt is still a relevant metal despite despite the attempt to
minimize cobalt use. Cobalt is pretty much in every single electronic device battery because it adds a
feature of energy density. It's critical. It's still in most electric car batteries, but there are options to
cobalt, typically nickel. And there are some other options but before we get to the options, the key fact
here that is central to the question of how fast and how effective and how expensive and expensive
again in every term economic, geopolitical, social, environmental how expensive the energy transition
will be, with machines of a kind that are now being built is anchored entirely in this one slide. The
magnitude of increase in the amount of demand for metals and minerals in the world. Put this at
percentage terms because we talk about growth if you're at a business you talk about increasing supply
or demand, depending which side of the equation you're on in the heavy industries by numbers like five
or 10%. A movement in oil markets of five percentage points is massive. I mean 5% loss of of demand or
supply. If it's a 5% loss of supply, prices take off a 5% increase in supply with demand not following it is a
huge collapse of price. So five and 10 percentage points changes are huge and commodity markets. This
is a change in demand from 700% to on the order of 4,000% and total supply of these metals. And this is
this is the increase in demand and the increase in therefore supply that we required in the coming two
decades.

Unknown 13:29
Not to to put to have a two pot to find or hyperbolic point on this. This is this this would if it were to be
achievable is the largest single increase in demand or supply of metals in all of human history. It's never
happened. So in the title of my presentation when I put the question and use the provocative word,
delusion, by delusion, I don't mean that people are delusional about their aspirations. I think they're
suffering some modest modest a delusion about what the possibilities are in the mining sector. I mean,
the whole thing distills to mining is it possible can the world increase the production of these kinds of
metals not by 10 or 20%? Not by 50%, not by 200%, but from 700 to 7,000%. In in timeframes that are
that are meaningful, which is in the next decade or two.

Unknown 14:22
If you think of this in the macro tonnage terms, as opposed to in terms of kilowatt hours, or machines,
and look at the context of the total tonnage of all materials that humanity extracts, moves and
processes to keep civilization running. This is an OECD data series. It tells you something that's
important, again, from an economic and environmental perspective, the world all in all kinds of
materials, biomass, food, fuel construction materials, has to extract move and process about 100 Giga
tons of materials a year. This is a remarkable increase. Over the last 50 years from 25 gigatons for the
planet. This trend is not going down. This trend. This trend line has implications again, across all domains
of economics and environment, geopolitics. The thing I want to point you to is the energy part, which is
you can see the oil, gas and coal and this is measured in tons terms. What we're proposing to do with
the energy transition is to shift the majority of the world's energy supply from liquids and gases to
solids. So measured in tons terms, what that means is that you will increase the wedge that's in gray by
tenfold Or put differently, the energy system in the future is imagined the transition will require the
extraction and movement of quantity materials equal to or greater than the quantities materials that
humanity extracts, moves and grows for all other purposes. combined.

Unknown 15:54
I don't think that's going to happen. I mean, this is not a statement of politics or a statement of
aspiration, or an objection to motivations. It's just not going to happen. The world is not capable of
doing that with the technologies that exist today. These are astonishing numbers. We also know a lot
about the minerals and metals world I think the skogen team is particularly expert at this I told I've had
some very interesting conversations about travels into the into the into the fragile political, physical
ecosystems where we do all this mining which I'll get to what we know a lot about mining we've been
mining for a long time mining is the oldest industry. Full stop mining impact. Copper is the oldest mined
metal and it predates written history. We know a lot about mining. What we do know is a world is not
now mining enough materials nor is it planning to the mind enough materials, or pictures copper here
but this is in you all probably have seen various photographs of the world's biggest copper mine in Chile.
It's a very, very large, very large mine. You can you can barely see the town that's at the edge of the the
open pit and Chile.

Unknown 17:00
So the world produces enough metals right now, to supply the transmission machines. For a very simple
reason they constitute about 3% of the world's energy. If we imagine tripling the share of the world's
energy coming from wind, solar and batteries, we will necessarily have to at least triple the quantity of
metals those machines required to be belt. We know for a fact this graph shows you the red line which
is the demand that the energy transmission transition we'll put on copper, we know that the supply lines
which are the dark blue existing mines and the light blue lines, which are all existing mines plus all
announced plans for expansion whether underway or or are proposed.

Unknown 17:40
Put in simple or simplistic terms. The world will be short copper and a year or two, that there'll be
physically less copper available in the world, then the demands of the energy transition will place on it.
What happens in a world like that? Well, I like s&p did a big copper study. If you haven't seen it, I
commend it. I think it's available for free from IHS SFP. They asked a very diplomatic gentle way in a will
the shortage of copper short circuit the energy transition. The question answers itself. The copper is not
as it turns out as one of the metals it's not does not have a substitute. It's not replaceable. The only
place copper for electrical purposes has a substitute is aluminum for high dis high voltage, long distance
transmission transmission lines. It does not for electric vehicles. So if you look across all the metal
spaces, you find similar graphs. I'm not going to go through them all, but you can pick every metal you
can make lithium and cobalt, nickel, aluminum. There's a shortage of all the metals in the coming years
the IEA has pointed out the world will need hundreds of new mines to meet the materials demands of
the energy transition. And what they've also pointed out something that's beyond obvious to anybody
that's worked in mining early in my career and my pet shows youth I worked for a mining company I
never thought I'd come back to talking about mining again. It was a gold uranium and silver miner in the
northwest territories of Canada. On the Arctic Circle. This may be the only one in this room that's been
the bottom of a several 1000 foot vertical hard rock shaft. It's very dark and very hot at the bottom but
it was very it was very interesting.

Unknown 19:17
I like mining I like miners I think we'll do a lot more mining and the problem is the average is about 16
years to find an open a new mine globally.

Unknown 19:27
If you think about this, and very simple terms. That means that if we tomorrow started investing the
necessary amount of capital and exploration efforts, it will be 16 years before the first mines that we
need will be open. You can do your arithmetic on this. This is a long way after the aspiration so kicked in
to build the quantities of batteries, windmills and solar arrays that the world imagines outside of
Norway.
Unknown 19:53
And we also know a lot about how much money the world's mining industry is spending here. This is
wood Mackenzie's graph. They did a very nice job last year, mapping out the historic capital spending
globally in top metal mines and the forecast the hash lines are the levels of investment that will be
required in the next few years. The dark colors are the levels of actual investment from the global
mining industry. We can distill this not in dollars terms and billions of of US dollar terms but just in
relative terms. The world is not investing 90% of what's required or 50% of what's required by world I
mean the world's miners. They're not even investing 10% of what's required in global mining expansion
to meet the aspirations to build the quantities of machines to have again the rest of the world follow
Norway. We also know something about the geopolitics and the social features, if you like of mining, the
mining is elsewhere. It's it's not largely in Europe, the expansions are not in North America, largely
they're in Sub Saharan Africa and they're in south or south America and the Asian nations.

Unknown 20:57
I happen to like trade I mean this may be an artifact of being from a country with like Norway, small
numbers of people are large quantities of resources. So I'm, I'm pro trade I'm a trade bowl. I think the
world should do these things. But I think the world should not be naive about both the social and
environmental problems that occur as we expand mining in these parts of the world nor the political and
economic challenges in the geopolitics are China is not the world's biggest miner they are the biggest
refiner. And when you're measured in energy, minerals terms, again, this is IEA data, China's share of
refining. When you must refine copper, you must refine lithium, you can't use lithium in its elemental
form in a lithium battery batteries, nor any of the metals or minerals and elemental form. They all
require the very inconvenient, very expensive and very environmentally challenged process of refining.
China has chosen to become the world's energy minerals. refiners was not a secret policy. They
announced it 20 years ago, they announced that their 10 year plan 10 years ago, and today China enjoys
a market share in global energy minerals refining that is more than double OPEX market share in oil
markets.

Unknown 22:05
That was a smart strategy. I would I would offer it, but also has implications do you politically and
economically that it would be to put it diplomatically profoundly naive to think it has no implications for
the state of the world as we go forward?

Unknown 22:21
It also has some implications economically at the macro economic level this this is an analysis that I'm
showing you one graph of many from International Monetary Fund paper that was done about a year
ago, The Economist there did something that I'm shocked at more, more analysts have not done. The
economists at US Geological Survey have done a similar analysis. And it's a very simple question that
they asked as economists if the world chases more, there's more demand for product in the world can
respond and supply. What will happen is inflation. This is not complicated. That's the textbook definition
of inflation. The question you would ask is how much inflation would we get what what's the range of
inflationary pressure on metals as the world chases the energy transition, but the world's miners aren't
able to supply the quantities of metals? And they answered the question with the typical, you can see
the pink zone, a graph depending on the assumptions you make, the underlying fact is one prices don't
go down.

Unknown 23:23
They just don't go down. If you have 16 years to add supply, on average, a decade at best, and you
increase demand immediately which we are now dealing with policies everywhere in the world. You
should expect prices to not only go up, but to perhaps go up a lot. In fact, their principal conclusion
which I replicate here is important what I have in mind, they've looked at a century of trailing data on
supply demand metrics for metals. And they point out that the energy transition plans will put pressure
on metals that will cause all metals to reach historic price levels for unprecedented length of time. They
think for about a decade. So metals then go from being just volatile, and short timeframes with being
volatile over a much higher price base. This should have an effect it will have an inflationary effect. I
mean, first of all, at this current level of abstraction, the cost of metals in the world's economy is in the
noise a few percent of the global GDP is consumed by the prices of metals. But if you cause metal prices
go up two to 300% or 400% or lithiums. Case 1,000%. You'll see a have a top line effect in global and
global inflation. So while I think inflation moderates this year, I'm with the conventional wisdom on that.
I think that the moderation ends rather quickly in the next two or three years because of metals price
inflation, which the economists bizarrely are not modeling in the at the macroeconomic level. It will also
impact wind, solar and battery and Evie prices because they're made from this those metals. That's the
whole demand pressures coming from those metals. Almost the entire increase that's been going on at
the cost of build wind turbines, solar modules and batteries is because of the increasing costs of the
mineral inputs. It is true that the supply chain disruptions of the great lock downs and some modest
comparatively supply chain disruptions from the odious invasion of the Ukraine have had an impact too,
but they've been short term. This is this is a long term phenomena. roughly 70 80% of the costs of
fabricating an electric battery today is in the purchase price of the materials. 80% of the cost of a solar
module is module is in the purchase price of the materials, not the energy costs, but the purchase costs
of the materials. So if you pay for by the wind turbine, it's about 30%. So if you increase the cost of
materials by two to 300%, you should expect to see a curve like this again, this is IEA data, the vontade
continual decline in the cost of energy transition machines ended and the prices are going up. That's
been acknowledged in IEA. In other areas now but the what they're now putting in play is a forecast that
after two or three more years of rising prices for electric vehicles, batteries, wind turbines, and solar
modules. These are rising real prices. Governments can hide that rise with subsidies for a while, but the
real costs are going up. They're forecasting it'll start the curve will bend back down. The question that I
would ask is to a rhetorical one that I think answers itself when I pose it On what basis or what possible
basis our forecasts are saying that metal prices are gonna go down after they've been rising in the face
of these kind of demand pressures? I don't think they're going to go down but you know, this is a bet
that people are making. This is the the basket of principle metals that go into making an electric vehicle
every Tesla Hyundai or BYD. This brought Biden to in Norway that 20 the 20 to 25 Barrels oil equivalent
of energy that's associated with making that vehicle a lot of it is associated with extracting finding
moving and processing the metals and minerals. So when you look at the aluminum, steel, nickel and
cobalt and look at the cost of purchase of the make a single Evie that cost per Evie was around $4,000
Before metal price inflation really started to kick in, and it doubled to about $8,000

Unknown 0:02
It doubled to about $8,000. A lot of that was still doubly a seal increase the steel part why fake may
relax, but the aluminum copper nickel, those parts are not going to relax. If you might have in your head
what what does this picture look like for a conventional vehicle?

Unknown 0:20
One can have exactly the same graph. The input costs for the metals are less than half for a conventional
vehicle and they don't use of course, any of the other suite of metals are under incredible pressure.
They use nuclear theum no cobalt since you know neodymium.
Unknown 0:36
The entire motivation for this energy transition is anchored in carbon dioxide. It goes without saying so I
want to throw out one other fact to have in your head. And this is an important one obviously is that if it
in the manufacturing and the electric vehicles in the acquisition of the materials and metals to make this
one necessarily consumes energy, the 25 or more barrels of oil equivalent of energy to manufacture an
Eevee are almost entirely in the form of hydrocarbons globally. And that means it's carbon dioxide
emissions elsewhere. Volkswagen to their credit published this is a one of the graphs from the
Volkswagen study published at their website where they are showing total lifecycle carbon dioxide
emissions that are associated with driving an electric SUV versus a diesel powered SUV and what you
see in their graph is the is the illustration not in energy terms, but in carbon dioxide terms that when the
electric vehicle shows up in your driveway, it's already admitted about 14 tons of co2.

Unknown 1:36
conventional vehicles already admitted about five times to manufacture it. And then of course, what
you see is over the life of the vehicles that they both consume fuel and emit carbon dioxide, the battery
one through the grid that it's using. This is the average European grid, and of course, the diesel one from
the fuel. What you see in this study is that using this model that is not until about 60,000 miles of
driving, that driving the electric Volkswagen in the European grid that you actually end up with a net
reduction in co2 and by the end of its life, you've got a net net reduction of about 20% 20% is not
nothing. I just want to stipulate that's not zero. So the mythology that it's a zero emissions vehicle it's
just a pure myth, and eliminating all of the combustion turbines and all the coal use on the on the grids
of the world. may happen one day, it's entirely possible to happen one day, but it's not going to happen
the timeframes of the operations of these vehicles so they're going to consume electricity in a fashion
similar to this graph. That's simply what's happening in the world not what's what's aspired to.

Unknown 2:39
The problem with this graph by the way is that the diesel line is fixed based on the physical chemistry of
diesel and this is changing, the electric line will change. This is a small battery this battery and this model
is half the size of the battery that 90% of Norwegians drive. This is the battery instead of typical Tesla or
typical BYD is twice as big is this model, which put differently means if you put your finger on where the
co2 emissions are to deliver that electric vehicle to Norway, it's more like 25 times. Now Norway on a
hydro electric grid, that means that you do end up saving emissions over the life of the vehicle, but not
that much. And the big problem is people will say, Well, what we're going to do now is just change the
chemistry we'll make we'll make we'll use just we'll use lithium iron phosphate we'll use lithium
manganese phosphate will use different classes of chemistry. You can change the classes of chemistry,
you can change the mineral soaps but it doesn't have a material difference at the high level of
abstraction on the quantities of materials required. A typical electric vehicle battery with a got without
regard to the chemistry it uses, weighs about half a time requires about 250 tons of materials to be
mined somewhere on the planet to make that battery. It doesn't matter what class of chemicals you
use, and the idea that we will fix this problem by having a new magic batteries batteries that are
profoundly better than the batteries are using today is not a bad, not a bad response. Technology does
get better. Technology will get better, but it takes time. I think it's important to have in your head two
simple facts. The lithium chemistry was discovered invented if you'd like in the mid 1970s. You may all
know this by exon chemist, and was commercialized until by Sony Tom was 20 years later in the early
1990s. And of course famously it became possible as economies of scale and manufacturing expertise
approved almost 20 years later with the emergence of the first Tesla S sedan 2009 If I recall correctly. So
this is a very long cycle from new chemistry to at scale new classes of industrial batteries. And that scale
will be repeated. There will be better ones 20 years from now 30 years from now but what we build
today are the kinds of batteries we know how to build today. The characteristics aren't like Iron Man's
module in his back in his in his chest, though we can fly. in comic books you get energy of velocities that
look like computers in the real world the velocity of Change and Energy Industrial Systems takes
decades, not yours.

Unknown 5:08
Last couple of thoughts I'll leave you with in the mining world is as what I've I think I was may have
called this but I facetiously call it the iron iron law of all grades. Over all of history. The grade of ore that
we mined has been declining. And especially for the the higher value of metals like copper, iron ore as
much but copper and nickel and molybdenum and magnesium and the our grade I assume you know
what our grade is our grade is the percentage of the rock that you're mining that contains the thing you
want. So copper ore grades are typically 1% That arithmetically means that you have to dig up a ton of
ore to get to 20 pounds of copper. And that doesn't count the tons of rock overburden that are in the
way of the ore that you want to get to so you dig up tons of material to get to pounds of metal that has
relevance that has relevance and cost that has relevance in environmental sense. It also has to the point
I made earlier has relevance to the carbon dioxide emissions in the energy consumed. It means that the
world is chasing larger quantities of metals from declining or grades or put obviously it simplistically is a
larger quantities of metals are produced, larger quantities of energy will be consumed to produce those
metals to deliver to markets.

Unknown 6:24
That increase in energy consumption as ordres decline is nonlinear is another geological inconvenience
in the physical chemistry of getting minerals out of ores. It turns out this this is a graph where the
energy consumed per pound of copper is or grades the decline so your x axis is our grades going down
this way. And the y axis is the energy consumed per pound of copper. You can see that is beyond
obvious this is an exponential not a linear curve that are put differently when you're on the exponential
part and we're at 1% or greater. If you can't see the bottom of the x axis 2% the big the big bunching of
little triangles of the minds of the world are all around the 1% and as you go below 1% the energy
consumed starts to go up exponentially. This is a non trivial problem means that the future electric car
the future solar module, the future wind turbines, carbon dioxide emissions and metal requirements are
rising non linear just to fabricate them. So nevermind whether they're available and what the costs just
to fabricate them will require the world to consume fuels and emit carbon dioxide at levels that are
frankly unprecedented in mining history. We will solve those problems in due course. But in the mining
industry, those problems get solved over decades. Not not in years. So let me end with one last very
high level come back to the macro and the aspirational challenge that we have with an energy
transition. In my mind the energy transition is not one about replacing hydrocarbons, quite frankly, it's
about supplementing them in minimizing their use, and it's a good thing setting aside whether or not
carbon dioxide emissions should be minimized. And I'm not I'm not making a case for that needs to be
accelerated or decelerated. It can't be accelerated as the point that I'm trying to make is that the reality
is that we want to minimize it. So we do want to have more windmills, more solar arrays, more nuclear
power more it to use. The line was used by former president united states we really do want all the
above the transition that's required is to make the pursuit of all the above more economically efficient,
more environmentally tolerable and more economically affordable. This is this is a much different
challenge than the challenge has been presented. It's a transition to a world without hydrocarbons. And
it's gonna be very different, very difficult to achieve that because of this underlying reality that this is
this is over one century of data again his IEA data of the year on year change in energy demand for the
world. Now what you can see is that the absolute percentage rate increase is declining, but it's declining
over a larger base. So you all know what that means investment terms 10% of the big numbers much
more than 20% and a small number. So the percentage increases are declined but they're on a much
bigger base. The most important takeaway from this, this trendline in the world is below the axis that
periods of time and the frequency and the depth of declines in absolute demand for energy have
evaporated.

Unknown 9:29
The world needs more energy every year. And there are very few periods of modern history for the last
50 to 70 years. Where there's been an absolute decrease in energy demand year on year.

Unknown 9:39
This means Put differently, that the world's appetite for energy and energy minerals and for energy
materials is going to increase not decrease in the Usili for foreseeable future efficiencies don't change
this. We've been becoming more efficient for more than a century effectively becoming more efficient
for centuries.

Unknown 9:59
Efficiency metric increases demand because in economic terms, efficiency reduces the costs of the thing
that you're producing. And since the world needs more energy, this is absolute demand for energy
efficiency will actually accelerate this phenomenology. The last thing I'll leave you with is this thought
because I my my book which I'm which I am obviously promoting by mentioning its fact but it's not the
subject of my of my remarks. My book called The Cloud revolution is about the energies in the book but
about the broad technology trends that are underway in the world today. I I'm convinced and I try to
prove in my book that we're at we are at a pivot in history. We aren't had an energy pivot in history. We
are in a technological pivot in history, not unlike the one of the 1920s where the magnitude, nature and
convergence of technology revolutions across the domains of information, material science machines,
promises economic boom really unprecedented in history over the coming 50 years. I think it's really
quite encouraging quite remarkable, but it will require more energy and more diversified forms of
energy will have to produce it in ways that we find acceptable or put into stone in the most simple
terms. If we're looking at how societies use energy, as opposed to how side is produced energy.
Engineers invent energy demands. It's self evident that there was no demand for energy for flying until
the invention of the airplane. There was no no demand for energy for cars. So the invention of the car
there is no demand for energy to make computers work until the invention of the computer and the
proliferation of computing. Global computing today uses more energy than global aviation. And the idea
that we won't invent new reasons to consume energy in the future is not just naive. It's not true. So to
give you just two examples, the cloud is a phenomenology different than the internet subject for a
whole, a whole other whole other speech. But the net increase in demand to operate the infrastructure
the cloud is likely to increase the net increase in energy demand equal to what's already happened in
computing, which is to put it in an oil term something on the order of 4 billion barrels of oil equivalent of
net new energy demand to fuel Siri in the cloud, so to speak, not care in our as our host. And similarly
for robots and drones. In fact, I'll leave you this one last thought the automation of the world through
through through chat JpT, which is virtual automation through actual mobile robots that can help in
mines, helping manufacturing plants are already helping, already helping in warehouses. They all
consume energy robots are the most complicated machines man has ever invented next to the car. It
will take minerals and materials to make them they will consume energy and their manufacturing and in
in their operation. Or to put it in a very simplistic term set of robots eat too. They will be hungry and
they will consume energy, we will supply it it will cause economic growth to rise, and it will cause more.
Unknown 12:50
We'll call it chaos. And to finish on a note where I think Tim is right. This will be the domain of stock
pickers not momentum traders in the future because this looks like a very complicated future for the
energy supplies of the world. Thank you.

Unknown 13:08
Now we're going to bring in an ESD specialist to challenge you.

Unknown 13:13
And he's been named a leading star under 30 by doggins Snellings. Leave the newspaper and he's from
the hometown of alink blow to alarm. Please welcome Sun let me get

Unknown 13:33
right mark, a leading star under 30. Well, yeah, am I leading star over 30? I would definitely say so.

Unknown 13:43
Thank you very much for it. It really turned out to be a reality check. I would say I think one of the key
takeaways I have from your presentation is is how we talk about clean tech being a transition to solids
from liquids and gas. And as you point out there is a significant undersupply both in terms of the
absolute volume, the pace of that volume and and the quality of the of those materials and so with that
in mind, should investors prepare for a prolonged period of restricted supply in energy markets? Yeah, I
think we're in a period of underinvestment in all energy markets. So we you all probably know this
Skoglund team knows this the world is under invested under invest in oil and gas for the last pretty close
to decades. So even if you believe that we can achieve a peak in energy demand for oil and gas, the
supplies have to be replaced and there are not investments are not commensurate. Same is true for
minerals. So we're short we're short on midterm investment, that is the the two to five year timeframe
in all energy markets, which translates into a pretty bullish price impacts in energy commodities for I
suspect for a very long time. Unfortunate how long it lasts. We'll do it. We'll be political, not just not it
will relate more to politics and it will to that it will lead to what engineers can accomplish.

Unknown 15:07
Because I know the topic I see you write about often is the role between technology and society. You
touched on it on your final slide.

Unknown 15:14
Curiously, we had trucks, Evie trucks. Driving around Norway 100 years ago.

Unknown 15:19
And given that the technology behind EVs is as old as the combustion engine, why did we not stick with
the cleaner option to begin with? Well, first because they engineers knew that the batteries work
cleaner they were different from the very beginning. So people who build batteries or I ran a lithium
battery country for a while as an interim CEO. So I learned I learned more than I really wanted to ever
learn about the physical supply chain and the suppliers and the problems in the battery industry. Edison
had a famous quote that some of you may have heard it gets it's it's not apocryphal it was largely true
just said there are liars and then there are battery salesmen and so it's a version of the Mark Twain line
but statistics they're not they're not cleaner they're different. So that that's so the you're making trade
offs, which is true in all the engineering world. It's a true and all the energy world and the trade offs are
not irrelevant. But there are trade offs. So the nomenclature is misleading. The reason the internal
combustion engine won is because it's better not because it's better everywhere on all the time. I think
that we'll probably see a world or something on the order and I'll pick a number based on my research,
but let's just say 20 or 30% of all light duty vehicles will be electric at some point, roughly speaking,
which would be quite remarkable the massive growth and where we are on the road. 1% of all light duty
vehicles are electric. So that'd be a massive growth, but it would impact global oil demand by about two
percentage points. So what you have is a world where both are possible technologically a lot of
combustion engines for a lot of things and a lot of electric motors for a lot of other things. So I'm in that
camp not so again, I'm having trouble with this transition idea because the underlying energy economics
and the physical realities don't support eliminating one but rather amplifying, modifying and moderating
one. I must I was surprised when when we had our first conversation and how adamant you are that
there is no such thing as an energy transition. So I jumped in tried to challenge you a bit on it. I read an
interesting factoid the other day, which, which said the western countries needed one kilo of carbon
dioxide to produce one unit of dollar GDP, right. China will use half and industrializing countries will do
the same with a third of the co2 input. So how does this decoupling of emissions from economic value
creation fit with with your belief that the idea of an energy energy transition is deluded? Well, if you get
us nomenclature matters, so the what technology does is it creates economic value so you can
accelerate economic value more than you accelerate the quantity of consumption and materials and
energy. We've been doing that for hundreds of years. So you get more dollars for less input of other
materials are energy that's been going on for a long time, it will continue. But that's not a physical
decoupling. The apps that's why I use the OECD graph the physical quantities of materials. We went
from 25 gigatons of materials consumed globally to 100 Giga tons of all materials but the GDP of the
world. So that's a fourfold increase in physical stuff. The GDP a world of that time, went up more than
12 fold. So you have a decoupling in that sense, but people think that means using less, it's less per
dollar, it's beyond obvious, a different thing.

Unknown 18:35
One final question. I think we can do one final quick when you're after all, that host of the last optimist
podcast. So So in that spirit, what gives you the greatest optimism for the future of humanity?

Unknown 18:48
Well, it's hard to be an optimist these days. I have to confess that's why in the last one first, we were
humans. We're very good at technology. Human beings are wired to do technology. So we've been
inventing ways around keeping nature from killing us in ways to make life easier for all of human history.
And I do think we're at a pivot point of accelerating our capacities in that so I'm optimistic about that.
And that will mean by the way, that I do think and it's again a subject for another day we will compress
the time needed to open new mines we will find ways to we already we already know technologically
we can we can find mineral faster, we can mine faster, we can take dangerous labor out of mining, for
example. So I know all these things are possible that weren't possible just 20 years ago. So I'm very
optimistic that we'll achieve many of the goals we want. I'm just maybe a slightly less optimistic that
we'll develop the political patience for how long it will actually take, but just say excellent

This transcript was generated by https://otter.ai

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