Battery Day is almost upon us.
The world’s biggest and most forward-looking electric vehicle maker Tesla () is about to showcase some developments in the battery space which, according to chief executive Elon Musk, will “blow your mind.”
Exactly what that means we won’t find out until after the London and New York markets close on Tuesday, but it’s been widely speculated that amongst other things Tesla wants to develop an electric vehicle battery that can do without cobalt, which comes with the twin disadvantages that it’s relatively expensive, and it’s not easy to source ethically.
Tesla signed a major deal with Glencore () this summer, securing its immediate cobalt needs, and as part of that transaction, Glencore undertook to ensure that all its cobalt is ethically produced.
But Glencore’s main mines are in the Democratic Republic of Congo, which has a notoriously volatile political backdrop, and where regulation has been slow to catch on. In today’s hyper-charged climate of political correctness, it wouldn’t be surprising if Tesla moved to mitigate any risks to the moral contamination of supply and worked towards cutting the cobalt out of the battery altogether.
Indeed, in 2018 Musk was quoted as saying that with cobalt comprising just 3% of the current electric vehicle battery, Tesla would work to eliminate it completely in “the next generation of batteries.”
Will it be able to do this, and is Tesla about to unveil that next generation?
The speculation is that it might, and that the focus will turn more to the other key components of its electric vehicle battery, nickel, aluminium, and to a greater degree manganese.
While Glencore is a big enough beast to look after itself, and will in any case likely generate significant profits from the copper it produces whatever the next generation of batteries looks like, given the amount of copper wiring that goes into electric cars, other companies may be more sensitive to tomorrows news.
Take South32 (), also known as the unloved parts of BHP Group (). South32 has significant exposure to manganese with its mines in South Africa, and what’s more it has performed relatively poorly compared to the wider mining sector over the past five years. A greater focus on manganese from the world’s biggest electric vehicle manufacturers could provide it with a real shot in the arm.
Other companies that could benefit from a greater focus on manganese include Jupiter Mines (), and by extension significant shareholder Red Rock Resources ().
Interestingly, VALE (), the Brazilian mining champion, has significant capability in both manganese and nickel, the other metal set to be increasingly in demand from rising use in electric vehicle batteries.
The other majors, in particular BHP, Anglo American () and Rio Tinto (), also have major exposure to nickel, aluminium and manganese, and should be clear beneficiaries.
It’s harder to find companies with exposure to magnesium, though, another commodity touted as likely to move into favour if cobalt is ousted.
One or two juniors are knocking around, like Western Magnesium () and (), but there aren’t too many others.