For a critical metal, palladium was treated like any other. In an ideal world with an array of sources for metals from other many regions in the world, the market for palladium, a key metal in catalytic converters and the coming EV boom, was viewed and operated from a very naïve perspective. However, the appearance of an ideal market was shattered by Russia’s invasion of Ukraine in February 2022. This event, while being catastrophic for world economics and geopolitics, has led to mining and metal pundits looking for strategic metals nationally rather than internationally.
Russia’s Dominance in PGMs: Over-reliance vs Political Anomaly
Russia produces anywhere from 30-40% of world’s palladium, worth more than US$6 billion in yearly exports. In wake of the conflict in Ukraine, most of this production could potentially be unavailable to western markets. Not only is it restricted by various industrialized economies, many buyers are “self-sanctioning” Russian palladium so as not to support Russia’s war machine. Where does that leave us?
During World War I, Germany couldn’t source nitrate for ammunition since the supply was mostly controlled by British companies in Chile. Fritz Haber, a German chemist and later a Nobel Prize winner, perfected the Haber-Bosch process of artificially synthesizing ammonia from nitrogen and hydrogen gas, providing Germany with a critical resource for its war machine. While this is a great example of technological substitution, it also highlights the vulnerability of natural resource availability in times of political upheavals and conflict. Major conflicts are rare today, but the implications of one on economies that are not self-sufficient for basic, critical, and strategic natural resources are obvious.
Global or National Metal Markets: A Dilemma for Stakeholders
Fast-forward from February 2022, most of the world not aligned with Russia is scrambling to secure deals to meet their palladium demands. Whereas major automakers are flooding South Africa (second biggest palladium producer) for supply contracts, the rise in demand will take more than 5 years to be met and it may never be fully met (Reid, 2022). For North America, it is about time they start tapping into their own resources with the promise of highly standardized product and process that they already offer when compared to other mining jurisdictions. While it take a long time from the delineation of a metal resource to finally mining the metal, it is still not too late as palladium will be more valuable in the future than it is even now. Canadian mining projects live River Valley PGM Project, owned by New Age Metals Inc. (TSX.V: NAM; OTCQB: NMTLF; FSE: P7J.F), is one such opportunity. After a successful Preliminary Economic Assessment (PEA), the company plans to complete a Pre-feasibility Study (PFS) in 2022. To date, the project is not only potentially viable in an economic sense, but also could be important for providing Canadian palladium, to Canadian buyers, at Canadian discretion. The Canadian government is only now realizing the importance of such minerals and how they impact Canada’s future position as a safe and secure jurisdiction with world-class mining operations and products. Junior miners find encouragement in the Canadian government’s plan to allocate C$4 billion (US$3.1 billion) for critical metals development, and by large miners like BHP and Rio Tinto in renewing support for junior companies to expedite advancement of exploration stage projects (Rajagopal, 2022).
As of today, the biggest question in the Canadian mining industry is the allocation of such government monetary resources to develop and implement an effective plan for exploration and exploitation of critical and strategic metals. As stated by the CEO of TSX, Loui Anastasopoulos:
“We are cautiously optimistic .. but something quite interesting will happen in the mining space over the next 12 to 24 months”.
Bibliography
Rajagopal, D. (2022, June 27). Reuters. Retrieved from Mining.com: https://www.mining.com/web/mining-firms-poised-to-lead-capital-raisings-in-canada-tsx-ceo-says/
Reid, H. (2022, April 6). Reuters. Retrieved from https://www.reuters.com/business/autos-transportation/amplats-ceo-says-carmakers-looking-palladium-after-russia-sanctions-2022-04-06/