Resourcefulness is finally coming to the resource sector

In the weakest of the Daniel Craig series of James Bond films, we actually find my favourite villain.

He is not a thug, a wild-eyed psychopath, or a cuckolded stepbrother from a bygone era.

In fact, I’m going to try and convince you all to be like the all-too-appropriately named Dominic Greene.

Quantum of Solace (the name of the film) involves your friendly neighbourhood James Bond discovering a plot to “corner” a market.

Cornering the market involves buying up so much supply that you build up incredible pricing power – a one-man cartel.

The Hunt Brothers tried it with silver, OPEC has succeeded in doing it for oil (for the most part).

But what Dominic Greene wanted to corner was neither silver nor gold nor oil. It was, instead, the most valuable commodity on earth – one we quite literally cannot live without.

Water.

There is never a good time to learn about scarcity

Covid-19 taught many people in the developed, middle class, or Western world about something we haven’t had to worry about in a long time.

Empty shelves.

It was rammed home to us how fragile our supply chains are, how reliant we are on just in time delivery, on foreign suppliers, on international transit, on the Suez Canal even.

Globally, we are entering a new resource age.

Not only is the nature of energy changing, from coal to gas and renewables.

From oil to lithium-ion batteries, backed up by nickel, cobalt, manganese and other rarer metals.

But the process of extraction is undergoing a fundamental change in every sector.

The world is waking up to the importance of supply chains.

Would you pay more for clothes to make sure they weren’t made by Muslim Uighurs, forced to work as part of their deceptively named “re-education”?

Would you choose recyclable/compostable plastic packaging over the single-use plastic covers we see today?

If you could replace cyanide in the mining process, with a sustainable, non-toxic alternative, would you?

If choosing between two equal items, would you choose the one with the higher or lower carbon footprint? The better or worse working conditions? The one with the best recycling options in place?

And if almonds are so water-intensive that they are causing droughts in California, then is almond milk really a great alternative to dairy?

We are at the beginning of a generational shift.

It’s from a system of supply where demand must be met at lower and lower monetary costs, no matter what the externalities are…

To one where efficiency and circularity are at the heart of everything we do. Where environmental, natural and physical costs of doing business are factored in alongside monetary costs.

Where we understand the natural limits of the world around us, and work incredibly hard to move to a more sustainable footing on planet Earth.

It’s like we’re a marathon runner. At the moment, we’re trying to run as fast as we can right at the start, burning through our energy at an unsustainable rate. It would be better to pace ourselves, and stretch out our useful life. A more balanced approach is better in the long term.

Or, like a retiree, spending money in retirement. I am no expert, but it seems like a risky strategy to start eating into the capital instead – you risk running out, and you reduce the income it produces too… My guess is that it’s wiser to only spend what income is produced by the underlying capital, as much as possible. That’s sustainability in action.

Don’t spend more than you’ve got coming in. Don’t sprint out of the gates if you can’t keep up the pace.

It’s the same at the planetary level, and the world is waking up to this fact.

Brave New World

We’re moving towards a world where new technologies are being found to clean up the environmental damage of mining gold, lithium, or copper – three key metals for a world awash with fake money and fossil fuels.

Where brilliant minds are finding ways to turn orange peel into clothes, find hydrogen in the bottom of used oil wells, convert waste back into useful hydrocarbons, or just straight into electricity, and where food is being grown in cities, in labs, and in our own homes – all as part of the transition to a world where demand can be met sustainably.

Where and how we use land, how we manage forests, and oceans, and how we limit our impact on biodiversity and the natural environment really do matter.

As David Attenborough said last year, “Our blind assault on the planet has finally come to alter the very fundamentals of the living world. It’s surely our responsibility to do everything within our power to create a planet that provides a home not just for us, but for all life on Earth.”

The energy transition has a huge part to play in this. It’s a transition which will place an enormous burden upon the extractive businesses of this world.

A recent study came to these conclusions about the incredible amount of demand coming down the pipeline – just from moving towards electric vehicles…

If we replaced 1 billion gas-guzzling cars with electric cars, we would need 85 million tonnes of copper (21Mt mined in 2019), 56 million tonnes of Ni (2.3Mt mined in 2019, only 50% suitable for batteries), 7 million tonnes of manganese (18Mt mined in 2019) and 7 million tonnes of cobalt (140Kt mined in 2019).

But it must be better than what came before. It’s no good going electric if the cobalt was mined by children in the DRC, if the plastic components get dumped in the ocean afterwards, or if the leather interior means more deforestation for cows to – excuse me – fart us into a climate crisis.

That’s why it’s exciting to see emerging technologies for less disruptive lithium extraction, new nickel mines opening up, and new battery technologies coming through with lower cobalt content.

But for me, two of the biggest themes when it comes to how we use resources are the most fundamental.

Water and air.

Air pollution is responsible for one in ten premature deaths worldwide – that’s more than HIV, TB, and Malaria combined. An extraordinary stat.

I’ve been kind of taken aback by just writing it actually.

And it reminds us that clean air is reason enough to move rapidly away from coal and diesel, without even getting into the deeper environmental effects of those fuels.

Water, meanwhile, was the subject of Dominic Greene’s grand plan.

He was a fictional billionaire leading an environmentalist enterprise, Greene Planet.

His plan was to buy land, dam the main river in Bolivia which flowed through it, and then by helping an exiled dictator to take back the country, compel him to sign over the water rights.

Greene, in the film, called water “the world’s most precious resource”.

Meanwhile, in the real world, Eastern Ukrainians haven’t had safe access to drinking water in seven years, since war broke out.

According to the UN, they are just some of the 2.2 billion people in such a predicament.

Or, with Covid-19 in mind, imagine that there are three billion people without basic handwashing facilities at home right now.

Water and air. Metals, miners, and materials. Innovators, inventors, and entrepreneurs.

From energy to food to resources, a picture is emerging of a world in transition.

A transition to a more sustainable footing.

A transition that all investors can benefit from.

Watch this space…

All the best,

Kit Winder
Editor, UK Uncensored

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