ESG Risks Top the List of Near-Term Concerns for Bank Executives

Yalman Onaran
Updated Mon, February 1, 2021

ESG Risks Top the List of Near-Term Concerns for Bank Executives

(Bloomberg) -- Risks related to climate change and social issues will intensify the most in the next two years, finance executives predicted in a survey, and firms will have to find ways to cope.

Environmental, social and governance issues topped the list of risk managers’ concerns in a Deloitte poll to be released on Monday, followed by cybersecurity and credit matters. More than half of the 57 firms surveyed were banks while the rest were in insurers, asset managers and other financial-services providers.

“For financial firms, it’s harder to adapt to changes in the ESG environment because it’s not only about their own carbon footprint or other impact, they also have to look at their clients’ footprint, social impact,” said J.H. Caldwell, head of the financial services risk advisory group at Deloitte.

Among the first things new U.S. President Joe Biden did was rejoin the Paris climate agreement. Last week, the main banking regulator froze a rule that would require firms to do business with companies such as oil drillers and gun manufacturers that they might avoid because of perceived reputational risk. The largest banks have committed billions of dollars to help racial minorities after nationwide protests last year rekindled awareness of systemic oppression.

Looking at the potential impact of regulatory and supervisory changes in the next two years, risk managers predicted cybersecurity rules are most concerning, with ESG coming in fourth. That probably indicates regulators are closer to coming up with stronger rules on cybersecurity than on environmental issues, especially in the U.S., said Caldwell.

U.K. and France supervisors are already including climate-change scenarios in their big-bank stress tests this year. The European Banking Authority is working on a dedicated climate-related test. The U.S. Federal Reserve has just formed a committee to supervise banks on climate matters.

A global financial crisis and further pandemics could emerge as macro trends affecting the industry in the next two years, risk managers also predicted in Deloitte’s survey, which was conducted between March and September last year. Credit-quality deterioration followed those two trends closely.

“Especially in the first half of last year, there was a lot of uncertainty about the economy, which still lingers somewhat,” said Caldwell. “And the pandemic has made people realize we might get other pandemics in the future.”

©2021 Bloomberg L.P.

Originally published Mon, February 1, 2021

Tesla, Charles Schwab — Stocks NYSRTS, One Of US' 10 Largest Pension Funds, Purchased In Q4

Shivdeep Dhaliwal
Updated Mon, February 1, 2021


The New York State Teachers’ Retirement System, one of the largest public pension funds in the United States, has piled on shares of Tesla Inc (NASDAQ: TSLA) and Charles Schwab Corporation (NYSE: SCHW), according to filings made with the U.S. Securities and Exchange Commission.

What Happened: The pension fund added 999,948 shares of the Elon Musk-led company in the fourth quarter, while it did not own any at the end of the third quarter.

The fund added 382,987 Schwab shares to bring its holdings up to approx. 1.82 million shares.


At the same time, the pension fund shed shares of Intel Corporation (NYSE: INTC) and Oracle Corporation (NYSE: ORCL).

The teacher’s pension held almost 5.68 million shares of Intel at the end of the fourth quarter, while it had nearly 6.08 million shares at the end of the preceding quarter, having sold 404,751 shares.

NYSTRS sold 289,217 shares of Oracle between the third and fourth quarters to bring its total holdings to nearly 2.6 million shares.

Why It Matters: Wedbush analyst Dan Ives maintained his ,250 bull case target on Tesla in January, ahead of the company’s fourth-quarter earnings.

See Also: Tesla Reports Record Quarterly Revenue Of .74B, Semi Deliveries Will Begin This Year

Charles Schwab reported Q4 earnings per share of 74 cents, which beat analyst expectations of 71 cents per share.

Schwab and TD Ameritrade merged in a billion all-stock deal in November last year.

Intel, which is facing stiff competition from Advanced Micro Devices Inc (NASDAQ: AMD) and Nvidia Corporation (NASDAQ: NVDA), reported fourth-quarter adjusted EPS of .52 beating a .10 cents estimate.

Price Action: On Friday in the regular session, Tesla shares closed nearly 5% lower at $793.53, Oracle shares closed almost 1.3% lower at $60.43, Intel shares closed almost 1% lower at $55.51, and Charles Schwab shares closed 4.09% lower at $51.54.

THAT'S BULLSHIT

Kroger says it must close two Long Beach stores due to hazard pay ordinance

Suhauna Hussain
Updated Mon, February 1, 2021,

Kroger blamed the pending closure of two Long Beach locations — a Ralphs on Los Coyotes Diagonal and a Food 4 Less store on South Street — on rules requiring extra pay for grocery workers during the coronavirus crisis. (Kroger)

As cities across the state look to require hazard pay for grocery workers, California's grocery industry is pushing back.

Kroger, which owns several supermarket chains, said Monday it would close two stores in Long Beach in response to city rules mandating an extra $4 an hour in “hero pay” for grocery workers during the COVID-19 pandemic. The stores slated for closure are a Ralphs on Los Coyotes Diagonal and a Food 4 Less store on South Street, affecting 200 workers.

“This misguided action by the Long Beach City Council oversteps the traditional bargaining process and applies to some, but not all, grocery workers in the city," Kroger said in a statement. “The irreparable harm that will come to employees and local citizens as a direct result of the City of Long Beach’s attempt to pick winners and losers, is deeply unfortunate. We are truly saddened that our associates and customers will ultimately be the real victims of the city council’s actions.”

The announcement comes just as the Los Angeles City Council plans to vote Tuesday on whether to pursue a similar ordinance requiring a $5 an hour boost for workers at grocery stores.

Long Beach has served as a sort of test case for hazard pay, as several cities in California, including San Jose and Oakland, consider boosts for front-line workers as well. Santa Monica's City Council voted last month to require “hero pay” for grocery workers, and the Los Angeles County Board of Supervisors has moved forward with a similar proposal.

Kroger spokeswoman Vanessa Rosales said in an email the approval of hazard pay mandates for grocery workers in other cities could lead to more store closures. Rosales said she couldn't share specifics about how additional pay affected profit margins at the two stores but said both were already "underperforming" even before the Long Beach ordinance went into effect Jan. 19.

The Ohio chain said it has spent $1.3 billion to reward workers and to implement safety measures throughout the pandemic.

"Kroger’s decision is unfortunate for workers, shoppers and the company," Long Beach spokesman Kevin Lee said in a statement. Lee acknowledged that the two stores were "long-struggling" and said the city's workforce arm would assist affected employees in accessing unemployment insurance benefits, emergency healthcare coverage, funding for retraining, skill development and job placement.

The California Grocers Assn., which represents about 6,000 grocery stores across the state, has opposed Long Beach's efforts to boost wages, filing a lawsuit against the city in federal court last month. Last week, U.S. District Judge Dolly M. Gee denied the trade group's request for a temporary restraining order to stop enforcement of the ordinance before a court could hear the case, and set a hearing for Feb. 19 on the association's request for a preliminary injunction to halt the law while the case is pending.

The ordinance, which will last at least 120 days, applies to chain stores with 300 or more workers nationally and with 15 employees per store within the city, that devote 70% or more of its business to retailing food products.

Ronald Fong, president of the California Grocers Assn., has argued the measure is selective, singling out grocery workers for a pay increase even as others — including nurses, EMTs, restaurant workers and public safety officers — work on the front lines. Fong also said the ordinance failed to mandate that the largest grocery retailers, including Target and Walmart, pay the extra $4. Target confirmed that based on its grocery sales, the Long Beach proposal does not include its three stores in the area.

"You are mandating a 30% raise essentially, putting grocers in a position to make some difficult decisions," Fong said. "Every single company is worried about this."

Fong said the association would pursue legal action against the city of Los Angeles and other local governments, should they enact similar rules.

Long Beach Councilwoman Mary Zendejas, who sponsored the Long Beach hazard pay ordinance, said in a statement Monday that she was "incredibly disappointed" to learn Kroger planned to close two Long Beach stores, particularly given that the Food 4 Less store serves low-income residents.

"It is unconscionable that, instead of doing the right thing, Ralphs and Food 4 Less would respond with litigation and retaliation against Long Beach heroes," she said in the statement.

It's "especially jarring," Zendejas said, that Kroger is insisting it cannot afford Long Beach's temporary hazard pay ordinance considering the company's third quarter revenue jumped nearly $2 billion from 2019 to 2020.

Zendejas said she had been encouraged at the onset of the pandemic when grocery stores provided hero pay to employees. Many have since ended these programs, even as the health crisis has gotten worse, she said.

"Grocery workers are going in every single day and risking their life being exposed to the virus," Zendejas said in an interview last week. "Grocery businesses are experiencing a boom in their industry, they are making profits, record profits, on the shoulders of their employees, and they are not willing to share the profits with them."

Neil Saunders, an analyst at GlobalData Retail, said that locations performing well should be able to absorb an extra $4 in pay for its workers, but for weak stores, a company like Kroger could easily point to hazard pay as the "final nail in the coffin." Because the grocery industry operates on thin margins, a significant pay increase is "certainly something that's going to erode profitability," he said.

"Businesses resent being told what they have to pay, and that can easily lead to conflict between politicians who make these rules and the companies who have to pay," Saunders said.

This story originally appeared in Los Angeles Times.
Originally published Mon, February 1, 2021, 7:16 PM

Africa's pandemic-hit mining sector faces exploration challenge

By Tanisha Heiberg and Helen Reid

JOHANNESBURG, Feb 2 - Travel restrictions, supply chain disruptions and risk aversion since the start of the COVID-19 pandemic have slammed the brakes on mining exploration in Africa, jeopardising the minerals supply pipeline.

Inward investment will be a key focus at the annual Investing in African Mining Indaba virtual conference to be held on Tuesday and Wednesday, with companies looking to capitalise on higher metals prices and the transition to green energy.


Without exploration, the continent's rich mineral resources are at risk of being unutilised as older mines become unviable.

Mining companies' exploration budgets for Africa fell 10% to a four-year low in 2020, according to S&P Global Market Intelligence.

"COVID-19 has had an impact on all aspects of the mining value chain, and exploration is no exception," said Alex Khumalo, head of social performance at the Minerals Council, South Africa, an industry trade group.

While Africa did not fare as badly as Latin America, where budgets fell by 21%, the sharp decline was in marked contrast to the 1.5% dip in the United States and Canada.

In many cases companies have been turning more towards their home jurisdictions and what they see as their safe-haven investments, said Chris Galbraith, senior metals and mining analyst at S&P Global.

"With many of these companies based in Canada, the U.S. and Australia, more of their exploration has been focused on domestic exploration ... and oftentimes that has come at the expense of African development," he said.

For junior explorers and miners, raising capital on public markets has been a challenge while the pandemic has made it even more difficult to access private equity capital.

SOUTH AFRICAN GLOOM

South Africa - a leading producer of platinum, palladium, chrome and gold - was the worst-hit African nation, with overall mining exploration budgets at a 17-year low. The Democratic Republic of Congo, Burkina Faso and Ghana also had sharp falls.

"I've seen 20 or 30 projects that have probably collectively cut 200 million to 300 million rand (about $13 million to $20 million) worth of exploration spending this year," said Errol Smart, CEO of Orion Minerals.

Investors have been unable to visit projects during the pandemic while restrictions on borders have delayed equipment deliveries.

"Nobody invests in something unless they can go there and see it, touch it, kick the tyres. They want to visit the site," said Smart.

Orion, which last month said it had discovered further significant copper, zinc and nickel deposits around its flagship Prieska Project in South Africa's Northern Cape province, has been waiting for equipment from Australia to conduct geophysical surveys.

"We still have uncertainty over when they can get to site to be used," said Smart.

With less exploration activity, African mineral resources might not be developed fast enough to replace older mines as they become depleted.

There is hope, however, that COVID-19 vaccination programmes will speed the world's recovery from the pandemic and boost the mining sector. Post-pandemic economic recovery could drive higher metals demand and prices, potentially encouraging increased exploration spending this year, particularly in gold.

Exploration budget increases in Ivory Coast, Guinea and Senegal have indicated continued interest in gold-rich West African countries despite the pandemic.

(Reporting by Tanisha Heiberg and Helen Reid Editing by David Goodman)
Originally published Mon, February 1, 2021

Sudden price surge linked to social media posts helps boost Canadian mining stocks

Updated Mon., February 1, 2021




CALGARY — Shares in some Canadian silver mining companies posted double-digit increases on Monday as the price of the shiny white metal surged to eight-year highs with some crediting promotional discussions on social media sites like Reddit.

Mining company CEOs said they don't expect the price rally over the past few days to last long -- but they're OK with that because prices have been increasing for more than a year due to rising demand and limited new supply.

"It's nice to see this brief rally — I think it's going to be brief because squeezing shorts is not really an investment strategy, it's speculation and I don't see it having much legs," said Brad Cooke, CEO of Vancouver-based Endeavour Silver Corp., whose shares rose almost 21 per cent on Monday.

"The good news is that, if I'm right, silver simply reverts to its long-term trend, which is up."

Michael Steinmann, CEO of Pan American Silver Corp., said commodity price volatility is something silver miners have become accustomed to over the years because the market is much smaller than it is for gold. His Vancouver-based company's shares rose more than 13 per cent on Monday.

Industrial demand for silver is expected to increase as the COVID-19 pandemic wanes and thanks to the its use in solar panels, electric cars and electronic communications, he said.

Demand for silver as a precious metal and hedge against inflation, meanwhile, is also strengthening.

"There's a lot of pressure on the industrial demand at the same time that people are really worried about the loose monetary policies all across the world so there's a lot of investment demand as well. So it's kind of the perfect storm for silver right now," said Steinmann.

Silver rose above US$30 per ounce on Monday morning, the highest level since 2013. The March contract increased US$2.50 or 9.3 per cent to settle at US$29.42 an ounce by day's end.

For comparison, Pan American uses a silver price assumption of about US18.50 an ounce for long-term planning, said Steinmann. It's current all-in sustaining cost per ounce is about US$11.

In trading on the Toronto Stock Exchange on Monday, First Majestic Silver Corp. closed up 23.5 per cent, Silvercorp Metals Inc. was up 25.7 per cent and Fortuna Silver Mines Inc. closed 18.7 per cent higher.

The jump in silver's fortunes follows intense interest over the weekend in the media and on Reddit over whether it will become the next active market in the wake of GameStop’s big move last week, said Colin Cieszynski, chief market strategist for SIA Wealth Management.

Reddit traders banded together for the past week to snap up thousands of shares of GameStop, AMC and other struggling chains, stocks that have been heavily shorted (bets that the stock will fall) by a number of hedge funds, thus causing heavy damage to those funds.

But the rush into silver futures created confusion, with some retail traders on Reddit calling the surge in commodity prices a "false flag.''

"IT'S A TRAP!'' one Redditor warned.

Some accused the hedge funds that were pillaged last week of joining Reddit anonymously to drive them out of GameStop bets and into silver, but only after hedge funds had taken huge positions.

RBC Capital Markets analysts in a report pointed out that silver prices have increased over the past few days with no "normal" reason to justify the action.

"The potential for a sharp move to cause tumult in various markets including options markets should not be discounted, similar to some of the knock-on effects from GameStop," they warned.

"World precious metals markets have developed over millennia which makes this market more robust in our view than a small cap company with deteriorating prospects. (The) gold/silver ratio gives room for silver to run."

-- With a file from The Associated Press

This report by The Canadian Press was first published Feb. 1, 2021.

Companies in this story: (TSX:EDR, TSX:FR, TSX:SVM, TSX:FVI, TSX:PAAS)

Dan Healing, The Canadian Press
Originally published Mon., February 1, 2021, 2:51 p.m.



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Air Canada, Rogers and Suncor part of consortium piloting rapid COVID-19 testing




TORONTO — Canadian space technology and robotics giant MDA will begin offering its workers rapid COVID-19 testing at its Brampton, Ont., headquarters starting Tuesday, the latest company in a consortium of some of the country's biggest firms testing workplace screening.

The pilot is being run by the University of Toronto's Creative Destruction Lab, which has partnered with 12 companies including some of Canada's top airlines, banks and sports teams to experiment with antigen tests that take about 15 minutes to deliver results.

Those behind the project believe it could give Canada's corporate world a road map to quelling the spread of COVID-19 in workplaces that have had to close or have struggled to contain outbreaks.

"It's a tool to be able to reopen parts of the economy and not have these broad range closures," Holly Johnson, MDA's director of business operations, said in an interview.

"The advantage of this kind of screening – if you can roll it out at scale and get mass screening across a wide range of workplaces and facilities – is that you can imagine wide areas of the economy being able to be opened up again."

The company's Brampton facility – which normally has a complement of about 450 employees – currently has between 85 to 100 workers on-site daily. So far, about 60 of those workers have signed up for the testing, she said.

The rapid testing at MDA is a voluntary program and is offered on top of mandatory COVID-19 protocols that are already in place, such as symptom screening, temperature testing, physical distancing and masks, Johnson said.

Workers at the space technology company register for the rapid test pilot program and sign a consent form using an app developed by Microsoft Canada Inc.

The app is also used to schedule the COVID-19 appointment and to check in when they arrive.

The test itself is a nasal swab – not the "deep brain tickler" of the polymerase chain reaction (PCR) test, Johnson said.

After the test, employees return to the workplace and are notified of the results within about 15 minutes through the app, she said.

If the worker tests positive, the employee is asked to leave the workplace to obtain a PCR test from a provincial testing site, a deep cleaning occurs and contact tracing takes place, Johnson said.

If the PCR test is positive, the worker is required to complete the necessary quarantine and can transition to working from home.

"The employee will still get paid," Johnson said.

She added that she's hopeful more workers will sign up in the coming days.

"What we are trying to do is break the chain of transmission," said Ajay Agrawal, the founder of the Creative Destruction Lab, a non-profit helping science and tech firms.

"We are using screening to stop one infected person from infecting other people in the workplace."

Rogers Communications Inc. and Air Canada were the first two companies to begin the testing and in late January were joined by Suncor Energy Inc. and Maple Leaf Sports and Entertainment, Agrawal said.

Bank of Nova Scotia, Loblaw Companies Ltd., Shoppers Drug Mart, Magna International Inc., Nutrien Ltd. and Canada Pension Plan Investments are expected to begin testing soon.

It wasn't hard to get the companies on board, said Agrawal, because everyone is eager to reduce the spread of the virus and lift severe lockdown measures that have closed businesses across Canada and forced others into bankruptcy.

"I think they look across the country and all they see is carnage. Economic carnage," said Agrawal.

Suncor joined the consortium with the aim of developing “a cost-effective system for reopening the economy during the COVID-19 pandemic in the absence of widely available vaccines or treatments,” spokesman Paul Newmarch said in an email.

The company has started piloting rapid testing with a targeted group of essential workers at Suncor’s base plant in the Wood Buffalo region of northeastern Alberta, he said.

“Our focus right now is to pilot rapid screening for our essential workers,” Newmarch said, adding that the company is working towards getting additional pilots up and running in other areas across the country.

Loblaw spokeswoman Catherine Thomas said a handful of Shoppers Drug Mart locations and one of the pharmacy’s distribution centres in the Toronto area are participating in the rapid testing program.

“We’ve already been conducting asymptomatic PCR tests at pharmacies in Ontario and Alberta, and believe expanding to rapid tests will complement the ongoing testing work and help reopen our country safely,” she said in an email.

Meanwhile, the lab got executives from the companies together at the start of the pandemic when he realized that a "novel" health crisis would also need novel solutions.

They formed a "vision council" and convinced Mark Little from Suncor, Galen G. Weston of Loblaw and Shoppers Drug Mart and Don Walker from Magna to join.

Former Bank of Canada governor Mark Carney and author Margaret Atwood took part as "thought leaders."

After presentations and poring over plenty of numbers, they decided to put up their money and time and agree to share data as they experiment with rapid testing.

Two retired military generals with experience in Afghanistan were called in, and they began rehearsing how to make the testing as efficient as possible.

They reduced the entire screening process from seven minutes per person to 90 seconds.

"They keep trying to chisel down the time and expense," Agrawal said.

"For example they had a medical professional doing Step 1, 2 and 3 and they realized we don't need a medical professional doing step two and that brings the cost down."

The pilot tests workers twice a week and makes use of millions of rapid tests obtained by the federal government and dispersed across provinces, who were allowed to allocate them for businesses.

Agrawal considers the PCR tests the "gold standard" because they're considered to be more accurate than rapid tests and are being used by most provincial COVID-19 assessment centers.

He expects the rapid tests will generate some false positives, but not many.

"So far, there's only been a few cases and they've all been confirmed by the PCRs," he said.

Once the kinks are all worked out, Agrawal hopes to scale the system quickly, but he warns rapid antigen tests can't work alone.

"They're not going to solve (COVID) alone, but when we combine them with other things like PCRs and rolling out the vaccines, they're just one piece of the puzzle, but a critical one."

This report by The Canadian Press was first published Feb. 1, 2021.

Companies in this story: (TSX:AC, TSX:L, TSX:BNS, TSX:RCI, TSX:MG, TSX:SU, TSX:NTR)

Tara Deschamps and Brett Bundale, The Canadian Press
Originally published Mon., February 1, 20

Pandemic Watchdog Is Probing Mnuchin, Cruz Roles in Fed Lending

Laura Davison
Updated Mon., February 1, 2021,

(Bloomberg) -- A federal watchdog is looking into former Treasury Secretary Steven Mnuchin’s decision to roll back the U.S. Federal Reserve’s emergency lending programs at the end of 2020, an issue that has become a point of partisan tension in Congress.

The Special Inspector General for Pandemic Recovery is also inquiring into Texas Republican Senator Ted Cruz’s role in persuading the central bank to expand the eligibility rules for the Main Street Lending Program to make it easier for oil and gas companies to apply for the low interest rate loans.

The probes were revealed in the watchdog’s quarterly report released Monday.

The investigations, led by Brian Miller -- the special Inspector General in charge of overseeing the Treasury Department and Federal Reserve’s response to the pandemic -- could shed more light on Mnuchin’s decision and legal basis for winding down the programs, which Democrats say was politically motivated.

The probes mark some of the biggest moves yet for Miller, a Trump appointee, who has said he struggled to begin his oversight work since he was confirmed by the Senate in June because of technical challenges and the time needed to hire experienced staff.

Sarah Breen, a spokeswoman for SIGPR, said that Treasury responded to the inquiry about the Fed facilities on Jan. 19, the final full day of Trump’s administration. She said that any concerns abut the discontinuation of the Fed facilities was rendered moot because of the compromise lawmakers reached in the December stimulus legislation, though that position may not reflect the views of the current administration. Breen also said that they have not received a reply to the Jan. 6 letter about Cruz’s influence on the Main Street Lending Program.

Cruz’s office didn’t have an immediate response.

Stimulus Debate

The future of the Fed’s emergency lending powers was a key point of debate leading up to passage of pandemic relief legislation in December. Republicans pushed to make it more difficult to revive the programs and Democrats wanted to preserve the emergency lending structures. The two parties eventually reached a compromise allowing Congress to approve similar facilities in the future after stalling the stimulus bill for days.

Mnuchin in mid-November said at year’s end he would pull unused money authorized by the Cares Act in March to back Federal Reserve emergency-lending facilities. The Treasury also unveiled plans to park those funds, along with other left-over lending authorization -- some $455 billion in all -- into the department’s general fund, over which Congress has authority, rather than the Exchange Stabilization Fund, over which the secretary has greater discretion.

Lawmakers including House Speaker Nancy Pelosi argued that the actions amounted to a misreading of the law and were politically motivated to hamstring the incoming Biden administration.

The probe also looks into changes made to the Main Street lending process, which Senate Democrats have said allowed indebted oil and gas companies to qualify for loans that should have gone to other companies hampered by the pandemic.

Energy companies accounted for 13% of all loans made through the Main Street program as of the end of November, according to BailoutWatch, a climate advocacy group tracking government stimulus spending.

Several Trump administration officials, including Energy Secretary Dan Brouillette and Mnuchin, worked with the Fed when the program was first being designed to allow for more mid-size companies, and therefore also energy companies, to access the facilities, Brouillette said in May.

The Fed said at the time that it didn’t make modifications to the program to specifically accommodate energy companies. By law, its emergency facilities can’t target specific sectors.

In total, SIGPR says it has five preliminary investigations underway and that it received and vetted 27 complaints during the most recent quarter. The report did not say when it plans to publish any of its findings.

“SIGPR’s aggressive preparation --while investigations and audits are by necessity and design conducted behind the scenes -- will remain largely invisible to the public until charges or complaints are filed or audits are announced,” the report said. “Ferreting out financial fraud is complex and takes time.”


©2021 Bloomberg L.P.
Originally published Mon., February 1

Battery metals shortage threatens EV boom: 

Sherritt CEO

Jeff Lagerquist
Updated Mon., February 1, 202
Yahoo Finance Canada

Sherritt International (S.TO) is finally in the right place at the right time, according to the company’s departing CEO. The Canadian miner is counting on strong demand for electric vehicles to boost nickel prices as a global supply crunch looms for the key battery ingredient.

With automakers pouring billions into EV development, governments championing lofty climate goals, and more drivers looking to go electric, Sherritt is pinning its future on its open-pit Moa mine in Cuba. The joint-venture, half-owned by the Cuban government, sends mixed sulphides to Sherritt’s facility in Alberta to be refined into finished nickel and cobalt products.

“Things are all coming into alignment for us all at once after five, six, seven years of slogging in the wilderness of low nickel prices and dealing with debt,” David Pathe told Yahoo Finance Canada in an interview.

Board chair Richard Lapthorne called Pathe’s nine-years stint in the top job “as difficult to manage as any the company has faced in its over 90-year history” when Sherritt announced it was looking for new leadership last November.

He wasn’t kidding. Sherritt bought a mine in Madagascar in 2007 for $1.6 billion, just as nickel prices hit all-time highs. When Pathe took over as CEO in 2012, nickel consistently sold for about a third of peak prices, saddling the company with a money-losing project on top of hefty debts.

Pathe also led Sherritt as U.S. President Barack Obama took historic steps to normalize American-Cuban relations beginning in 2015. When Donald Trump took office in 2017, the U.S. reimposed restrictions, leaving the island nation without enough foreign currency to pay Sherritt’s utility arm. Trump recently put Cuba back on America’s list of state sponsors of terror, blocking newly-elected President Joe Biden from quickly reverting to Obama-era policies.

With Biden in the White House, a major balance sheet overhaul completed in August, and the costly Madagascar mine off the books, Sherritt is hunting for a successor to run the company as a tech-driven, low-cost nickel producer for the growing EV market.

EV batteries are expected to command as much as 37 per cent of global nickel production by 2040, according to the consulting firm Wood Mackenzie. (Photo by Brendon Thorne/Getty Images)

Lithium ‘supply crunch’ looms

While Sherritt’s total nickel output is a fraction of mining giants like Vale (VALE), Russia's Norilsk Nickel and BHP’s (BHP) operations in Western Australia, Pathe said the focus among its larger peers has been producing cheaper grades of the metal for making stainless steel.

EV batteries are expected to command as much as 37 per cent of global nickel production by 2040, according to the consulting firm Wood Mackenzie, up from just seven per cent in 2020. However, Sherritt estimates more than 70 per cent of the total nickel supply in 2025 will be lower quality, and therefore useless to the EV battery market.

“For some metals, the energy transition could be like the Chinese economic boom on steroids,” Wood Mackenzie analysts said in a report released in September, predicting nickel demand will increase by two-thirds by 2040.

Pathe points to years of weak prices to explain why no new significant class one nickel capacity has been added since the financial crisis. His shortage prediction follows a public plea from the highest-profile executive in the automotive world.

In July, Tesla (TSLA) boss Elon Musk said he would offer miners “a giant contract for a long period of time” if they can produce nickel in an environmentally sensitive way.

“We think there is a coming supply crunch, particularly on the class one nickel side,” Pathe said. “We’re now well positioned to take advantage of that. If battery demand comes anywhere close to meeting some of the projections for the next five, 10, 15 years, there simply isn’t enough class one nickel production to meet demand.”
Automakers wary of upstream investment

The long-awaited shift to electric vehicles is gaining traction as governments in Canada and the United States build EV adoption into their respective plans for net zero emissions by 2050.

In Canada, General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) each announced billion dollar investments to produce electric vehicles in Ontario in the last six months. Last week, GM said it plans to make all of its global operations and vehicles carbon neutral by 2040, and sell only zero-emissions vehicles by 2035.

The cash price for nickel on the London Metal Exchange pushed above US$18,300 per tonne in January, its highest level since February 2019, before retreating below US$18,000 to end the month. According to Wood Mackenzie, that’s too low to incentivize miners to produce enough battery metals for “a large number of EVs in a short space of time.”

Pathe expects automakers will forge closer ties with miners, either through long-term off-take contracts or financial stakes in companies, in order to lock in high-quality supply at a consistent price.

Wood Mackenzie notes Tesla, GM, Volkawagen (VOW.DE), Toyota (TM) and Honda (HMC) already have partnerships with battery producers. However, they said the auto industry is wary of investing too far “upstream” in mining assets.

“We have noted OEMs like Tesla and BMW signing off-take deals for metals directly with mining companies. However, with the exception of a few small examples, OEMs are yet to take the plunge in terms of investing in mining,” Wood Mackenzie analysts wrote in a report. “The relative scarcity of battery raw materials, and the potential scramble for them, may warrant a change in attitude.”

Don DeMarco, an analyst at National Bank who covers Sherritt, said it’s “certainly possible” that miners and automakers will team up to maintain a steady supply of battery metals and hedge against volatile commodity prices. Pathe said Sherritt does not name its customers publicly for competitive reasons.

“What I will say is we’ve seen an uptick in investor interest, and the number of meeting requests,” he said. “I think you’ll see the automakers generally doing interesting things in the next two to three years.”

Sherritt’s Toronto-listed stock has climbed more than 150 per cent in the past six months, against a backdrop of improving nickel prices. However, shares remains more than 95 per cent below their all-time peak in 2007, around the time of the company’s ill-fated foray in Madagascar.

Editor's Edition: Biden is surrounded by 'climate hawks'

Joe Biden has not wasted any time in advancing his clean energy agenda. The 46th American president nixed the Keystone XL pipeline and rejoined the Paris Climate Accord on his first day in office. He also appointed a number climate hawks to key positions in his administration, signalling that green thinking will guide key departments such as treasury and transportation for the next four years. Tom Rand, managing partner at ArcTern Ventures, tells Yahoo Finance Canada that's it's hard to overstate how bullish a Biden White House is for clean tech investment. That sentiment has fuelled a stock market rally for companies in the electric vehicle and renewable energy sectors since the election, as well as warnings about a second clean technology bubble. In Canada, Rand expects lawmakers to be more willing to embrace climate-focused policies and support the clean tech sector with financial incentives as their counterparts south of the border increasingly link climate and the economy. He said investors would be wise to follow developments at the U.S. Federal Energy Regulatory Commission for hints about how America plans to modernize its electricity grid, and which companies stand to benefit. Those developments, he said, often carry over to Canada.

EV PRODUCTION IN CANADA

Ford Motor Co. of Canada names veteran executive Bev Goodman as CEO

THE SOUND OF ANOTHER GLASS CEILING BREAKING

Updated Mon., February 1, 2021, 


OAKVILLE, Ont. — Ford Motor Co. of Canada Ltd. has promoted executive Bev Goodman, a 25-year veteran of the Oakville automaker, to the job of president and CEO.

The company said she replaces Dean Stoneley, who will be appointed to the newly created position of general manager, North America truck, at Ford Motor Co.

Goodman began her career at Ford of Canada as a finance intern and she had experience in a variety of roles at the automaker including finance, parts and service, and sales and marketing.

She most recently was Ford of Canada’s director of marketing communications.

“At this time of rapid change in the auto industry, Bev demonstrates a deep understanding of what matters most to our customers now, and in the future," Kumar Galhotra, Ford's president of the Americas and International Markets Group, said in a statement.

"She also has a proven track record of working collaboratively with our dealer partners and a commitment to innovation as Ford accelerates its efforts to deliver high-quality, high-value vehicles and services.”

Goodman said she looks forward to "embracing new ways to serve our customers across the country" as the company introduces vehicles like the Mustang Mach-E, Bronco and F-150 hybrid.

“We’ll focus on delivering the benefits of electrification and connectivity to consumers, including plans for the C$1.8-billion transformation of our Oakville Assembly Complex to a battery electric vehicle manufacturing facility and continuing to grow our advanced connectivity and innovation centres,” she said in a statement.

Ford employs 7,000 people in Canada, while an additional 18,000 work in more than 400 Ford and Ford-Lincoln dealerships.

The automaker announced in September that it would spend $1.95 billion in its Canadian plants, including $1.8 billion toward the production of electric vehicles in Oakville, Ont.

In September, Unifor members working at Ford of Canada voted 81 per cent in favour of a new three-year collective agreement.

Goodman's promotion to president and CEO is effective immediately, the company said.

This report by The Canadian Press was first published Feb. 1, 2021.

RECESSION

'It's gonna be ugly:' Newfoundland and Labrador's billion-dollar elephant in the room

Updated Mon., February 1, 2021



ST. JOHN'S, N.L. — When Saskatchewan nearly went bankrupt in the 1990s, there was a joke told repeatedly in the province, according to economist Jason Childs: "What do you get your kids for graduation? Luggage."

The financial problems of the prairie province in the early 1990s are playing out today in Newfoundland and Labrador, but experts say the issue is not getting enough attention during the election campaign, which is almost halfway done.

Ottawa eventually bailed out Saskatchewan — after that province dropped an austerity budget that included rural hospital closures and service cuts, leading to some small towns emptying out and disappearing. Newfoundland and Labrador will likely have to take similar measures, Childs, professor at University of Regina, said in an interview Monday.

The Atlantic province of about 520,000 people is on the brink of insolvency, with a net debt of $16.4 billion. The province spends more on debt servicing than on any government service other than health care.

"It is going to hurt a lot," Childs said, about the sacrifices the province will have to make to course correct. "Is it doable? Yes. Is it pleasant? Absolutely not." The government should begin by shoring up mental health services because people are going to need them, Childs added.

Saskatchewan's brush with insolvency comes up frequently in discussions about Newfoundland and Labrador's finances, but there are stark differences between the two provinces' situations, say both Childs and Russell Williams, a political scientist at Memorial University in St. John's.

Saskatchewan's economy began to rebound shortly after Ottawa stepped in. Newfoundland and Labrador's economy, by contrast, shows no signs of rebounding, Williams said in an interview Monday. The province's offshore oil industry is still in trouble, he added, despite recent cash injections from the federal government.

Any decision to further support the oil and gas industry would need Ottawa's backing because Newfoundland and Labrador doesn't have any more money to distribute. "We don't have the ability to make direct policy interventions without help from the federal government on a case-by-case basis," he said.

Williams said he likens Newfoundland and Labrador's situation to a kind of receivership, where the lenders are the ones with the real power to make decisions. And with voting day on Feb. 13, only Progressive Conservative Leader Ches Crosbie has brought up in any significant way the possibility the province is going bankrupt, he added.

Though Williams doesn't agree with Crosbie's claims he'd be able to strong-arm Ottawa into an arrangement that suits the province, he said he's glad at least someone is talking about it.

Williams said he doesn't think Ottawa would let the province go bankrupt. Instead, he said, the province will have to ask the federal government to pay off its creditors. "What kind of system is going to be in place to help give Newfoundland and Labrador some debt relief? What requirements is the federal government going to attach to that debt relief? And how much debt relief is coming?"

Williams said he worries that discussion and answers to those questions will be kept behind closed doors. Liberal Leader and incumbent Premier Andrew Furey assembled an economic recovery team in the fall, but after a dramatic resignation by a provincial labour leader, it was revealed that members had to sign a non-disclosure agreement. Voters will not see a first draft of the team's findings or its recommendations before the election.

As for Ottawa, Childs said there's likely not much appetite to provide the same type of relief given to Saskatchewan. There are a few provinces in trouble because of the COVID-19 pandemic, Childs said, noting that Ontario's debt-to-GDP ratio is only slightly lower than Newfoundland and Labrador's. "Is there going to be a lot of support for bailing out Newfoundland (and Labrador) at the federal level, when Ontario is in arguably as much trouble?" he asked.

That reality leaves Newfoundland and Labrador in a difficult place, Childs said, adding, "It's gonna be ugly." But there are some lessons to take from Saskatchewan's experience, he said.

Childs said that In 1993, then-Saskatchewan NDP premier Roy Romanow identified a few key services government wanted to protect: kindergarten to grade 12 education as well as health care and social services. Romanow put everything else on the chopping block and did his best to communicate with citizens, Childs said.

"He said: 'Here are the books. What do we do?' and had that conversation in a meaningful way," Childs said. "And he got re-elected."

This report by The Canadian Press was first published Feb. 1, 2021.

Sarah Smellie, The Canadian Press
Originally published Mon., February 1, 2021, 3:39 p.m.