General Motors digs into mining business to lead race for EV metals

Bloomberg News | February 17, 2023 | 

GM Ultium battery. Credit: General Motors

General Motors is trying to speed ahead in the race for metals underpinning the industry’s shift to electric cars.


The US automaker is competing for a stake in Vale’s base metals unit, people familiar with the matter said this month. A deal may give GM access to the Brazilian mining giant’s copper and nickel resources that are key to making EV batteries.

GM has made several such wagers recently, buying equity while rivals mostly sign supply deals. Last month, it bought a $650 million stake in Lithium Americas to help develop Nevada’s Thacker Pass mine, which may support output of as many as 1 million EVs a year. In October, GM invested $69 million in Australia’s Queensland Pacific Metals, a producer of nickel and cobalt. The moves are strategic bets to secure supplies that are getting increasingly sought-after.

“We’ll continue to work with many people in the industry, especially in lithium and the other critical minerals,” CEO Mary Barra said in an interview with Bloomberg Television in New York on Thursday. “I think we’ll be positioned to have a competitive advantage.”

GM is pledging to sell nothing but plug-in models by the middle of the next decade. The Detroit automaker has opted to build its own battery pack and dedicated EV platform rather than move quick with converted internal combustion hardware, slowing its initial electric push. Still, Barra said that output of EV models such as the Hummer pickup, electric Cadillac Lyriq, Chevrolet Silverado pickup and Blazer SUV will ramp up this year.

Securing stable battery-metal supplies would be a boon — especially given the sector’s volatility. Cobalt prices, for example, rallied sharply last year but have since come crashing down amid a sharp drop-off in purchasing from the Chinese electronics sector. Nickel briefly soared to over $100,000 a ton in March before ending the year under $30,000. Lithium became so expensive last year that Chinese factories that typically make ceramics for bathroom tiles produced the EV battery material instead.

GM is part of a bigger trend. Automakers including Ford have signed long-term mineral supply deals. Germany’s Volkswagen last year agreed to form a €3 billion joint venture with Belgium’s s Umicore for cathode materials. In 2021, Tesla struck a nickel deal with BHP Group and a cobalt pact with Glencore, and in March that year got involved in a mining venture in New Caledonia.

Those deals may also help the miners. Barra said GM can provide them with additional cash and will be a stable source of demand thanks to its target to sell 1 million EVs in 2025, and many more beyond that.

The industry may want to tread carefully. Amnesty International has warned that mining is linked to environmental issues and claims of human rights abuses. In an era when environmental, social and governance shortcomings carry severe reputational risks, GM could be exposing itself to criticism.

Vale faced criticism after the collapse of the Brumadinho dam in Brazil, which killed 270 people and released toxic sludge into the environment. The accident caused Vale to lose its position as the biggest iron-ore producer and sparked a company-wide safety and governance overhaul. Reparations continued to take the shine off its financial results years after the incident.

Several companies are looking for ways to reduce the environmental footprint of mining to minimize those ESG concerns. GM has invested in Controlled Thermal Resources, a startup working to extract lithium using renewable energy, and is backing Lithion, a Canadian startup that recycles EV batteries to reuse materials.

Despite its mining foray, GM has some catching up to do on EVs. The Detroit automaker sold just under 40,000 EVs last year, finishing behind Ford and far short of market leader Tesla. Barra vowed the company is just getting started, including with Chevrolet’s Equinox and Blazer models coming out this year, which start at around $30,000 and $40,000 to $45,000, respectively.

“These are very affordable vehicles,” the CEO said. “There is going to be a huge opportunity to sell a lot of them.”

(By David Welch)

Tesla considering a bid for Sigma Lithium

Bloomberg News | February 17, 2023 | 

Construction at the Grota do Cirilo lithium project in Brazil. (Image courtesy of Sigma Lithium.)

Tesla Inc. has been weighing a takeover of battery-metals miner Sigma Lithium Corp., people with knowledge of the matter said, amid rampant demand for the metal used in electric vehicle batteries.


The EV maker run by Elon Musk has been speaking with potential advisers about a bid, said the people, who asked not to be identified discussing confidential information. Sigma Lithium is one of multiple mining options Tesla is exploring as it mulls its own refining, one of the people said.

Sigma’s US shares surged more than 25% in aftermarket trading.

Sigma Lithium’s biggest shareholder has been exploring a potential sale of the company and gauging interest from miners and carmakers, the people said. Its biggest investor, holding 46%, is A10 Investimentos, a Brazilian private equity fund that Sigma Co-Chief Executive Officer Ana Cabral-Gardner helped establish. Co-CEO Calvyn Gardner, also owns part of the miner.

Deliberations are in the early stages and may not lead to a transaction, according to the people. Potential suitors may hesitate to bid after shares tripled in the last 12 months and on high price expectations by the owners, the people said. Sigma’s owners could also wait to develop the company’s main project further before seeking an exit, according to the people.

Elon Musk, representatives for Tesla did not respond to requests for comment. Sigma Lithium’s Cabral-Gardner declined to comment on “rumors.”

The company is developing a large lithium rock deposit in Brazil known as Grota do Cirilo. The company said in December that it’s considering nearly tripling lithium production at the project in 2024 after survey revealed mineral reserves 63% higher than previously thought.

Automakers have been pushing into mining more aggressively in an effort to lock in supply for metals needed for EV batteries. General Motors Co. is said to be competing for part of Vale SA’s base metals unit, and took a stake last month in Lithium Americas Corp. to help develop a Nevada mine.

Sigma Lithium’s Toronto-listed shares have soared along with surging lithium prices, giving the company a market value of C$4.2 billion ($3.1 billion). Demand for the silvery white metal, which is key to making EV batteries, is greatly outstripping supply amid the push to electrify transportation in a shift away from fossil fuels.

Sigma Lithium may also attract interest from large miners as well as customers of the metal. Rio Tinto Group, the world’s second biggest mining company, is actively looking for lithium acquisitions, but isn’t currently interested in Sigma Lithium because of the high asking price, one of the people said.

The company has already signed supply deals with LG Energy Solution and Japanese trading house Mitsui & Co.

Stria Lithium has Deep Drilling Success on Quebec Pontax Property

byColin Sandell-Hay, Contributor - The Assay
8 hours ago


Stria Lithium Inc. (TSXV:SRA) has obtained promising assay results from the first two drill holes at depth on the Pontax Lithium Project in the James Bay region of Québec, Canada.

Assays include 10.2 m (true width) at 1.34% Li2O, and a doubling of the depth of known mineralization to 230m.

These results further confirm previous exploration activities on the site and are only the first results of 14 holes drilled to date, totalling 3,858 metres, as part of an aggressive 15,000-metre definition and exploration drilling program now under way on Stria’s Pontax property in the west-central Eeyou Istchee James Bay (EIJB) Territory.

A winter road has been opened from the main highway to the Pontax site, and mutiple drill rigs are now on site with the aim of establishing a maiden resource by mid-2023. Assays from the remaining 12 holes are currently pending at the laboratories.

The drilling programme at Stria’s Pontax property is being financed and conducted by Stria’s project partner, Cygnus Gold Ltd of Australia, and has been designed to systematically step out from known mineralization at Pontax Central – an extensive spodumene-bearing pegmatite swarm which outcrops over 700m of strike.

Drilling was conducted with a single heliportable rig by RJLL Drilling Co. from Rouyn-Noranda and supervised by IOS Services Geoscientifiques Inc. Collar location was measured with a high resolution GPS Geode device, while downhole deviation was measured with the use of a Reflex device.

Core, NQ in diameter, has been logged on site and expedited by road carrier to IOS facilities in Saguenay, Quebec, for sampling and storage.

“We are excited to be finally getting an aggressive drilling programme at depth under way and are very encouraged by the promising results of the first two holes of 14 drilled to date,” CEO, Dean Hanisch, said.

“The winter road is open and providing economical access to several additional heavy drill rigs. We look forward to reporting more assay results as they become available.”

The latest drilling has stepped out 50m to 100m below existing mineralization to a vertical depth of 230m, effectively doubling the depth of known mineralization which remains open in all directions.

For further information please visit: https://strialithium.com/

Put Simply, the World Needs African Minerals
byJoe Mazumdar, Editor/Analyst, Exploration Insights


For most North American retail investors, it is easier to put the entire African continent into one category: too complicated. The region covers over 30M km2 and features over 50 countries where 3,000 distinct ethnic groups speak 2,000 languages (some endangered).

However, judging by the following problems that the global mining industry is facing, it is easy to conclude that everywhere is complicated:Changing investment climate in critical mining jurisdictions (e.g., Chile and Peru)
Water shortages throughout the western half of the Americas that make projects and operations more difficult to permit and sustain. Also, Chile, Burkina Faso, and Namibia are considered high to extremely high in the water-stressed economies list
Environmental and indigenous pushback on mining that challenges the social licence to operate. Recent examples include the Jadar lithium project in Serbia and Resolution copper project in Arizona
Lengthy permitting timelines in the US such as the Arctic polymetallic VMS project and creeping nationalism, which is playing out at the Cobre Panama porphyry copper mine, not to mention the impact of ESG-related investing on access to capital

(Africa’s mineral occurrences. Source: Frost-Killian, Master, Viljoen and Wilson, IUGS, 2016


Back to Africa, its mineral potential is well-proven and comprises major resources of gold (South Africa, West Africa, East Africa), diamonds (Angola, Botswana, and DR Congo), platinum group metals or PGMs (South Africa), copper (DR Congo, Zambia and Namibia), coal (South Africa, Mozambique, Zimbabwe), uranium (Namibia, Niger), iron ore (South Africa, Guinea), and bauxite (Guinea, Ghana). Furthermore, many of them are considered critical by more advanced economies.

The global mining industry invested US$1.1-1.2B in exploration in 2022 on about half of the African nations, mostly on gold in Mali, Ghana, Côte d’Ivoire, South Africa, and Ghana, and copper and gold in the Democratic Republic of the Congo.

(Annual exploration expenditures in Africa for 2022 [dark green bars] and the peak for each country over the  past 15 years [light green bars]. Source: S&P Global Market Intelligence and Exploration Insights)

The 2022 investments represent only 35% of the peak annual spending over the past 15 years. Part of the decline can be attributed to negative market trends, which make it more difficult to invest in geopolitically challenged jurisdictions.

Over the past decade, the proportion of global exploration expenditures directed to Africa shrunk from 16-17% in 2012 to less than 10% in 2022.

(African exploration budgets since 2011 [US$ M]. Source: S&P Global Market Intelligence)

For example, last year’s mineral exploration expenditures in Eritrea were less than 5% of the peak recorded in 2011 due to restrictive internal policies, including forced conscription.

In a case that gained notoriety a couple of years ago, Nevsun Resources had to settle a dispute with three Eritrean refugees who accused the Canadian miner of being linked to human rights abuses. Although Nevsun was acquired by Zijin Mining (HKE: 2899) in 2018 for US$1.4B in September 2018, the case was settled in a Canadian court in 2020. The case illustrates how difficult it is for a company operating in the country to be considered an attractive target by ESG-linked equity funds.

In contrast, Côte d’Ivoire achieved peak expenditure in gold-focused exploration as it may be attracting funds previously directed to Burkina Faso (20% of peak in 2022), which is experiencing an increase in Islamic extremism. Nonetheless, Orezone Gold Corp. (TSX: ORE) declared commercial production at its Bomboré open pit gold mine (5.2Mtpa) in late 2022. The project was funded, in part, by US$96M in debt from a West African Bank at a cost of 8-9% (Coris Bank).

The Democratic Republic of the Congo (DRC) recorded an annual exploration expenditure of about a third of its latest peak in 2012 (US$132M). Interest in the highly endowed region of central Africa has been negatively impacted by the exodus of major North American-based copper producers over the past decade.

For instance, First Quantum Minerals (TSX: FM) left in 2012 upon ending a legal dispute that netted it US$1.25B in compensation. Also, in 2016, Freeport McMoRan (NYSE: FCX) sold its majority stake (70%) in the Tenke Fungurume copper-cobalt mine for US$2.65B to China Molybdenum (HKE: 3993).

However, over the past several years, exploration and development of the high grade Kamoa-Kakula underground copper mine, operated by Ivanhoe Mines (TSX: IVN) in a joint venture with Zijin Mining, has reinvigorated exploration in this part of the Central African Copper Belt.

Despite the many challenges mentioned, the DRC, considered a highly risky jurisdiction in 2022, had the second highest exploration expenditures among a peer group of African countries I surveyed (Mali was no. 1).

Other risks faced by the mining industry in Africa include, inadequate infrastructure, political instability, corruption, lack of social licence to operate, and stability of tax and royalty agreements, although these are by no means limited to the continent.

Of course, the ease of doing business (EDB) is an important metric for attracting foreign direct investment. Normally, expenditures in a country are positively correlated with a lower ranking.

(Risk profile [political, economic, legal, tax, operational, and security, bars] versus 2022 exploration budget
[squares]. Source: S&P Global Market Intelligence and Exploration Insights)

Risk profile [political, economic, legal, tax, operational and security, bars] versus 2022 exploration budget [squares]. Source:
World Bank, S&P Global Market Intelligence and Exploration Insights)


However, there are anomalies such as the DRC, where the potential to develop high quality deposits (Kamoa-Kakula) trumps the risks of operating in shaky jurisdictions for companies like Ivanhoe Mines and Chinese state-owned entities such as Zijin Mining.

The Kamoa-Kakula, which hosts ~23Blb of copper grading 4.47% in proven and probable reserves, reflects its quality and underpins its favourable operating costs that fall in the lower part of the global cost curve. Another prime producer in the Central African Copper Belt is the Kansanshi open pit mine in Zambia, operated by First Quantum Minerals, which lies in the middle part of the cost curve.

Encouragingly for all miners and explorers, the new Zambian government (New Dawn) has improved the investment climate and the ease of doing business in the country, including reintroducing the deductibility of mineral royalties against corporate taxes effective in January 2022.

Critically for First Quantum, its long-term plans to expand operations at Kansanshi (>US$1.35 B) were approved after the resolution of outstanding value-added tax receivables and a new way to use repayments to offset future mining taxes and royalties.

(2022 total cash cost [US$ per lb] for copper producers. Source: S&P Global Market Intelligence and Exploration Insights)


A push by western economies to secure the supply of critical minerals in the current environment of deglobalization and market fragmentation triggered a September 2022 meeting between the US administration and five African nations including the DRC, Zambia, Namibia, Mozambique, and Tanzania.

A memorandum of understanding (MOU) to develop electric vehicle supply chains was signed with the DRC and Zambia only a couple of months after that meeting, reflecting the urgency of the US strategy,

Although the bulk of exploration expenditures in Africa is directed to gold, the push for critical minerals will continue attracting the interest of the US and Europe, potentially generating more foreign direct investment and facilitate the influx of new miners and explorers to countries that host such resources.

Summary & ConclusionsThe myriad challenges faced by the mining industry around the world, including, among others, access to clean water, social license to operate, ESG investing, changing geopolitical climate, lengthy permitting timelines, stability of tax and royalty agreements, and nationalization, render many jurisdictions too complicated to invest

When market sentiment is bleak, investing in riskier jurisdictions is challenging. Exploration expenditures in 2022 were on average only 35% of the most recent peak over the past 15 years. Although some of the drop can be linked to the overall market, Africa’s proportion of global exploration expenditures has fallen from 16-17% in 2012 to less than 10% in 2022

In Africa, anomalies running contrary to the trend of investing in favourable jurisdictions with low ease of doing business (EDB) rankings include highly prospective geological terranes that can generate high quality deposits, like the Kamoa-Kakula copper mine in the DRC

A positive change in the Zambian government policies last year supported a major copper producer’s decision to trigger a multi-billion investment in expanding its mining and smelting operations at Kansanshi

A West African gold developer managed to attract funding from a local bank to build its open pit gold project in Burkina Faso at a reasonable cost of capital of 8-9%
Western countries keen on securing supply of critical minerals in a bid to reduce their carbon footprint, like the US, are signing MOUs with the DRC and Zambia to advance their strategy

Although most exploration expenditures in Africa are directed to gold, the push for critical minerals has piqued the interest of the US and Europe, and has the potential to generate more foreign direct investment and facilitate the influx of new miners and explorers to the continent

Zambian Copper Attracting Strong Global Investment Support

byColin Sandell-Hay, Contributor - The Assay
1 day ago


The US government, a company backed by one of the world’s richest men, and a relative newcomer – all are amongst those that are looking to help Zambia maintain its rating as a leading copper producer.

As of 2022, the African nation is currently the world’s ninth largest copper producer, and Africa’s number two, with forecasters and government predicting a production acceleration.

A mining powerhouse for well over 100 years, the Zambian economy rebounded in 2021, with GDP growing at 4.6%, from a contraction of 2.8% during the pandemic in 2020.

Its recovery was driven by high copper prices, post-election market confidence, and continued recovery in agriculture. GDP is projected to grow by 3.8% over 2022–24, buoyed by an improved macroeconomic environment; a positive copper price outlook and stable and predictable mining policy environment; and improved electricity supply, according to the World Bank.

The Zambian government’s support for the mining sector has been highlighted recently by the US government, global investors, and local mining industry executives.

The Zambia Chamber of Mines recently reacted positively to the 2023 National Budget announcement, calling it an encouraging move towards the re-establishment of Zambia as a key mining investment destination.

“The budget announcement shows that the government clearly understands what investors need to commit to Zambia. Taken together, the budget measures are likely to be viewed as an encouraging move, although we will know more once the details have been fully analysed and the attendant legislation is finally passed,” said Sokwani Chilembo, CEO of the Chamber of Mines.

The Chamber said the government’s amendments to the mineral royalty tax to be calculated on an incremental or sliding scale basis will start to bring Zambia’s tax regime back in line with other mining countries.

‘A big deal’

Zambia’s copper riches were headlined globally recently when the Bill Gates-backed KoBold Metals announced a US$150 million investment in the large Mingomba Copper Deposit during the Biden Administration’s 2022 African Leader’s Summit.

Confirming the company’s investment, KoBold’s president, Josh Goldman, said the company had identified Zambia as an ideal location for its support and the use of its game-changing artificial intelligence technology.

“We use artificial intelligence to find ore deposits that everyone had missed until now. But that’s not enough. For our business to succeed, we have to invest in the countries that offer the best opportunities. And when we look around the world, for the best places to invest, Zambia rises to the top,” Mr Goldman said.

“Zambia is a safe and peaceful place where we can hire exceptional people, where the laws support investing for the long term, where we can operate in ways that protect the environment and support local communities. And where the government supports our investment with actions that are fair, and transparent, and fast.

“That’s why I’m here to announce the largest investment yet in our company’s history, and investment to own and explore and develop a deposit in the Zambian Copper Belt. We are excited to join with two important business partners, the global mining investment firm EMR Capital and Zambia’s public-private mining companies SEC MIH,” he added.

Owen Haggerty, executive chairman of EMR Capital, said the investment company had chosen to take a long-term position in Zambia because of its stability, investment-friendly jurisdiction, and attractive infrastructure.

“We see this transaction as a significant step forward to unlocking considerable value for all stakeholders. Importantly, the transaction is fully aligned with Zambian National Minerals Resources Development Policy to maximize exploration throughout Zambia.”

US commerce secretary, Gina Raimondo, said that when people look at countries like Zambia, they see a good climate to do business and a government that is making it easier to do business.

“This is a commitment for US$150M into Zambia’s mining sector. And I think this is a model for what we need to do more of. It’s a big deal,” she said.

Zambian minister for mines and minerals development, Paul C. Kabuswe, said the mining sector is critical for the country.

“I hope that this could be the beginning of the many billions of dollars that you would invest in Zambia, especially in the Copper Belt, so that there will be creation of jobs, there will be creation of more resources to the Treasury.

“An investment of such magnitude means that there’ll be creation of jobs, there’ll be creation of direct jobs, there’ll be also creation of indirect jobs, meaning there will be more suppliers.

“We are on a vision of doing 3M tonnes of copper in the next 10 years. Zambia is around 850,000 metric tonnes today. But with the vision and the drive of the current president now, we want to reach 3M tonnes in the next 10 years.”

Hakainde Hichilema, president of the Republic of Zambia, said his message to the world is that his country is ready to do business.

“When you invest in Zambia, you invest in the environment that is conducive, as we’ve heard already, from the speakers before me, an environment that will assure you returns. And we’re talking about also working on our policy, environment, business operating environment, so that we have not just attractive policies, but also consistent [policies].

“I think many of you are aware of shifts and policies that can affect your returns on your investment. We’re determined to make the business operating environment system, therefore, predictive, so it’s easier to make investments … There has never been a better time to invest in Zambia.”

Central Copper Resources

One company getting in on the action is Central Copper Resources. The company describes Zambia as a “world class mining jurisdiction governed by a strong mining code”.

“Copper has historically been Zambia’s largest export and continues to be to this day. The country is home to the ‘Copper Belt’ deposits which are mined by some of the world’s most prolific mining institutions,” the company states.

The company’s wholly owned Zambian subsidiary, the Lunga Basin Project, holds an exploration permit covering an area of 292km2, located in the Lunga basin, which is highly prospective for copper and lies in close proximity to the Chifumpa mine that has a historical mineral estimate (non-JORC Code (2012) compliant) with a grade of over 4% copper.

The company acquired the project In 2020 through the acquisition of Armada Minerals Limited. The planned work programme includes airborne and ground geophysics, infill soil sampling, and 3,000m of RC drilling to test priority target areas where geochemical anomalies have been identified.

IEA

The global energy crisis pushed fossil fuel consumption subsidies to an all-time high in 2022

Fossil fuel consumption subsidies globally rose above USD 1 trillion for the first time in 2022


Toru Muta, Senior Energy Analyst
Musa Erdogan, Energy Analyst

Commentary — 16 February 2023


Fossil fuel consumption subsidies worldwide soared in 2022, rising above USD 1 trillion for the first time, according to new IEA estimates, as turmoil in energy markets sent fuel prices in international markets well above what was actually paid by many consumers.

Last year’s record subsidies – amid the global energy crisis triggered by Russia’s invasion of Ukraine – were double their 2021 levels, which were already almost five times those seen in 2020.

These escalating outlays were in sharp contrast with the Glasgow Climate Pact, which in November 2021 called on countries to “phase-out … inefficient fossil fuel subsidies, while providing targeted support to the poorest and most vulnerable”. Our analysis shows that many of these government measures were not well targeted, and while they may have partially protected customers from skyrocketing costs, they artificially maintained fossil fuels' competitiveness versus low-emissions alternatives.

For many years, the IEA has monitored subsidies for fossil fuels, evaluating situations in which consumers pay less than the market price of the fuel itself. According to our preliminary estimates for 2022, oil subsidies increased by around 85% while natural gas and electricity consumption subsidies more than doubled. As noted in the World Energy Outlook, high fossil fuel prices were the main reason for upward pressure on global electricity prices, accounting for 90% of the rise in the average costs of electricity generation worldwide (natural gas alone for more than 50%).

Fossil fuel consumption subsidies globally rose above USD 1 trillion for the first time in 2022

Fossil fuel consumption subsidies by fuel, 2010-2022

Open

Governments took a variety of measures to protect consumers from the worst effects of the energy crisis. The most common, as usual, was simply to fix end-user tariffs, or to cap fuel or electricity price increases. For example, the Peruvian government decided in April 2022 to temporarily include a number of transport fuels in the State Fuel Price Stabilization Fund to curb the rise in prices. Many advanced European economies limited consumer exposure to the full impact of spiralling natural gas prices. Thailand introduced a price cap of THB 30 (USD 0.85) per litre of diesel. Some successful subsidy reform programmes were interrupted: Egypt, for example, extended electricity subsidies, which it had previously planned to phase out by the end of the 2021-2022 fiscal year.

Almost all of the consumption subsidies that we found with our price-gap methodology were in emerging and developing economies. More than half were in fossil-fuel exporting countries.

But measures to limit the effect of price volatility were much more widespread, notably in Europe. Most interventions in advanced economies did not meet our definition of fossil fuel consumption subsidies, because average end-user prices remained above market-based values. But they were nonetheless a significant drain on fiscal resources1. The IEA’s tracking suggests that more than USD 500 billion in extra spending was committed to reduce energy bills in 2022, mainly in advanced economies; this is addition to the fossil fuel consumption subsidies identified elsewhere.

These measures included exemptions from various taxes and levies, compensation mechanisms for different affected groups of consumers, efforts to ease payment terms or to put a moratorium on disconnections for non-payment. Many utilities and other energy companies, as well as energy-intensive industries received additional support to manage higher fuel-related costs, especially for gas and electricity.

Phasing out fossil fuel subsidies is a fundamental ingredient of successful clean energy transitions, as underscored in the Glasgow Climate Pact. However, today’s global energy crisis has also highlighted the political challenges of doing so. Russia’s invasion of Ukraine caused the crisis, but 2022’s subsidy jump brings some broader lessons on the need for orderly and people-centred transitions.

Periods of high and volatile fossil fuel prices drive home the unsustainability of today’s energy system and underscore the benefits of energy transitions, but these episodes come with significant economic and social cost. High fossil fuel prices are no substitute for consistent climate policies.

During an energy crisis, government commitments to phasing out subsidies are overshadowed by the priority to protect consumers. The resulting government actions reduce hardship but also weaken incentives for consumers to save or to switch to alternative sources of energy, and use up public funds that could be spent in other areas, including on clean energy transitions.

High fossil fuel prices hit the poor hardest but subsidies are rarely well-targeted, and as a result tend to benefit the better-off. Effective targeting to protect vulnerable groups requires investments in better data collection and in setting up effective cash transfer mechanisms.

But well-designed policies should avoid fuel supply getting too far out of step with demand in the first place. Resources are best deployed to provide lasting protection against volatile fuel prices. This means anchoring market-based prices in a broader suite of policies and measures that enable households and industries to make cleaner energy choices. High-efficiency and low-emissions equipment and services need to be readily available, and poorer consumers need support to manage their upfront costs. It is far better for governments to spend time and money on structural changes that bring down fossil fuel demand, rather than on emergency relief when fuel prices go up.

Lessons for phasing out fossil fuel consumption subsidies

References

These types of interventions are assessed also by inventory-based subsidy assessments . https://www.oecd.org/fossil-fuels/

Fossil Fuels Consumption Subsidies 2022

Policy report

February 2023
LicenceCC BY 4.0


The IEA has been tracking fossil fuel subsidies for many years, examining instances where consumer prices are lower than the market value of the fuel itself. Our systematic analysis highlights the magnitude of these subsidies, and the potential benefits of their removal for energy markets, climate goals and government budgets. This report provides our first estimates for 2022, which show that global fossil fuel consumption subsidies doubled from the previous year to an all-time high of USD 1 trillion.

The Glasgow Climate Pact emphasized that phasing out fossil fuel subsidies is a fundamental step towards a successful clean energy transition. However, today’s global energy crisis has also underscored some of the political challenges of doing so. This report suggests lessons for energy subsidy reform from today’s energy crisis.

About this report

Prices for fossil fuels were extraordinarily high and volatile in 2022 as energy markets grappled with the strains caused by Russia’s invasion of Ukraine – in particular the sharp cuts in Russian natural gas deliveries to Europe. In many countries, though, the prices actually paid by consumers for these fuels remained at a much lower level. A range of policy interventions insulated consumers from ballooning prices, but with the adverse effect of keeping fossil fuels artificially competitive with low-emissions alternatives. In 2022, subsidies worldwide for fossil fuel consumption skyrocketed to more than USD 1 trillion, according to the IEA’s latest estimate, by far the largest annual value ever seen.

The IEA has been tracking fossil fuel subsidies for many years, examining instances where consumer prices are less than the market value of the fuel itself (adjusted for transport costs and VAT, as applicable). Our first estimates for 2022 show that subsidies for natural gas and electricity consumption more than doubled compared with 2021, while oil subsidies rose by around 85%. The subsidies are mainly concentrated in emerging market and developing economies, and more than half were in fossil-fuel exporting countries.

READ ON Fossil Fuels Consumption Subsidies 2022 – Analysis - IEA

First Quantum sets Feb. 23 as date to halt Panama operations amid dispute

Reuters | February 17, 2023 | 

Aerial view of Cobre Panama. (Screenshot from First Quantum video | YouTube.)

Canadian miner First Quantum Minerals said it may halt operations in Panama on Feb. 23 as it approaches a “critical point” of copper storage capacity after the government suspended its loading permissions at a port.


The Vancouver-based company said Panama’s maritime authority halted its loading operations last month over allegations its scale was improperly calibrated.

“Our team is making all efforts to create additional storage space, but we have run out of available options,” an internal memo sent to employees Friday and seen by Reuters said, requesting the government intervene and allow First Quantum’s anchored ship to be loading copper concentrate.

The firm previously stated it may run out of capacity next week, but this is the first time the firm has given a date for halting operations.

First Quantum Chief Executive Officer Tristan Pascall said on an earnings call Wednesday the company could start shipping immediately after the government gives the green light.

A spokesperson for Panama’s maritime authority did not immediately reply to a request for comment.

(By Valentine Hilaire; Editing by Diane Craft)

CRIMINAL CAPITALI$M

Glencore hit by fresh bribery-related lawsuit in the UK

Cecilia Jamasmie | February 17, 2023 |

Katanga copper mine in the DRC. (Image courtesy of Glencore.)

Glencore (LON: GLEN) is facing a fresh lawsuit in the UK related to alleged losses to shareholders resulting from the mining and commodities trader’s involvement in bribery.


Legal & General Group filed claims against Glencore on January 10 in London’s High Court, adding to several lawsuits brought by investors since the company paid about $1.5 billion to settle long-dragged out probes in the US, Brazil and the UK.

Details of the claim are yet to be filed or made public, but sources familiar with the matter told FT.com the case centred on the consequences of Glencore’s pleading guilty to allegations of market manipulation and bribery.

The news comes as Glencore reported this week adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $34.1 billion, a 60% increase from a previous record of $21.3 billion in 2022.

The Swiss company also announced it would return more than $7 billion to shareholders in dividends and buybacks.

The UK Serious Fraud Office forced the miner and commodities trader last year to pay $308 million for bribing its way across Africa.

Glencore, which is also subject to investigations from Swiss and Dutch authorities, has said the timing of those probes remains uncertain but would expect any possible resolution to avoid duplicate penalties for the same conduct.

Cenovus CEO Pourbaix to step down, become executive chair; Jon McKenzie to be new CEO

Amanda Stephenson, The Canadian Press

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Cenovus Energy Inc. chief executive Alex Pourbaix will step down from his CEO role later this year in order to devote more time to his evolving role as an outspoken champion of Canada's oilsands industry and its decarbonization ambitions.

The Calgary-based energy company said Thursday that Pourbaix, who has led Cenovus since November of 2017, will become executive chair, while chief operating officer Jon McKenzie will become CEO in a transition that will take place after the company's annual meeting set for April 26.

On a conference call with analysts, Pourbaix said the change will allow him to focus his attention on external efforts, including working with all levels of government to advance the oil and gas industry's decarbonization goals.

Cenovus is a member of the Pathways Alliance, a group of oilsands companies that together have pledged to spend $24.1 billion to reduce greenhouse gas emissions from oilsands production by 22 million tonnes by 2030.

Pourbaix has been one of the most outspoken advocates of the Pathways plan and has been heavily involved in the group's efforts to secure federal and provincial support for a massive proposed carbon capture and storage transportation line that would capture carbon dioxide from oilsands facilities and transport it to a storage facility near Cold Lake, Alta.

"Next to safety, there is nothing more important to Cenovus and our industry than reaching a durable solution between government and industry to achieve our emission aspirations," Pourbaix said.

"Once I move to the executive chair position, I intend to dedicate even more time to this pivotal external issue for both Cenovus and our industry."

Pourbaix was one of the prominent industry voices who successfully lobbied the federal government for the creation of an investment tax credit for carbon capture and storage projects in Canada, which was announced in the federal budget last year.

However, he has also been vocal in his stance that more government support is needed before companies will pull the trigger on investing in carbon capture. Pourbaix and other oil and gas sector leaders have said Canada needs to do more to stay competitive with the U.S. and its Inflation Reduction Act, which they say offers more incentives for the technology.

Environmental groups have been critical of the industry's lobbying for more support, given the record profits oil and gas companies earned in 2022 due to sky-high commodity prices.

Cenovus earned $6.45 billion in 2022 compared with $587 million in 2021.

Pourbaix said Thursday that he wants to see the industry, the federal government, and the Alberta government come to some type of "durable" agreement as to what this country's emissions reduction ambitions are. He added a structure needs to be put in place to make sure the oil and gas sector can achieve those goals while still remaining economically viable.

"I think it's just incredibly important for Canadians that we find a way for this industry to be able to continue to thrive, and the way we're going to do that is by constantly improving our environmental leadership," Pourbaix said.

The announcement of the change came as the company reported a fourth-quarter profit of $784 million or 39 cents per diluted share for the quarter ended Dec. 31 compared with a loss of $408 million or 21 cents per diluted share a year earlier.

Revenue in the quarter was $14.1 billion, up from $13.7 billion in the last three months of 2021.

Cenovus reported total upstream production amounted to 806,900 barrels of oil equivalent per day for its most recent quarter, down from 825,300 a year earlier.

Total downstream throughput was 473,500 barrels per day, up from 469,900 in the fourth quarter or 2021.

On the call with analysts, McKenzie -- who joined Cenovus in 2018 from Husky Energy as chief financial officer, and was instrumental in Cenovus's merger with that company -- said he expects a smooth transition to the CEO role, with little change in corporate focus.

"Both Alex and I have our fingerprints all over the corporate strategy, and we developed this in a partnership together with the rest of our leadership team," McKenzie said.

Pathways Alliance president Kendall Dilling said in an emailed statement Thursday that he is grateful Pourbaix will continue to devote his energy to the group's ambitions.

"Alex's contributions to not only the creation of Pathways Alliance, but to our continued efforts to decarbonize our industry's production, have been monumental," Dilling said.

This report by The Canadian Press was first published Feb. 16, 2023.