The global energy transition offered the mining world one gigantic promise: demand for certain commodities will skyrocket. 

That lit a fire under the sector's feet. 

The guarantee, however, came with a serious lack of fine print. 

Now, in the wake of buckled Western nickel and lithium projects, market players are shining a light on the opaqueness of critical minerals markets, licking their wounds, cautiously looking ahead, and ruminating on what could have been. 

On the first day of the MiningNews Select conference in Sydney, Australia, on April 18, there was an introspective tone. 

A recurring theme throughout the event was the question: What even are critical minerals, anyway?

And this is where the complications begin: with the term itself. 

Orion Resources investment manager John Dorian summed it up in probably the most generally accepted way, saying, "Obviously everyone's very excited and interested in the energy transition, so [critical minerals are] anything that touches that, touches EVs, touches the transition of the grid."

Denham Capital managing director Bert Koth viewed it as broader than that, saying commodities that fit the description are those in high demand while facing significant supply challenges or are controlled by a political rival. 

EY global mining and metals lead analyst Angie Beifus said, "If you think back to 2022 in Europe, coal could probably have been considered a critical mineral." 

Whatever the definition, it was widely agreed that the goalposts are often moved. 

‘A moving feast'

"I wonder if it's a moving feast. When there are geopolitical pressures or a country puts constraints on particular commodities, that shifts the balance in terms of what the critical commodities are that we've got to focus on," 29Metals CEO and managing director Peter Albert said. 

Resource Capital Funds Australian managing director Brett Beatty said the shifting of the goalposts presented challenges for investors. 

"A critical minerals designation is really just a point in time, usually allocated by a government. And we've seen multiple governments have different lists at different points in time," he said. 

"The reality is it can come and go quite quickly. So, I think it's important to recognise, as investors, that while there's an emphasis [on a commodity] right now, that may not be there in three, or four, years."

Add to the mix the fractious geopolitical landscape and technologically uncertain downstream sectors, and you've got yourself a long and winding road. 

‘It's not easy'

Far East Capital chairman Warwick Grigor pointed to the collapse in rare earths and lithium prices over the past 12 months. 

If you try to figure out why this happened, he said, "it's not easy". 

"The Chinese, in particular in rare earths, use a complex array of subsidies and sponsoring of projects around the world with political objectives. 

"And for the ordinary stock market investor, they've got no chance of really understanding what is happening, and why it's happening. They just see it moving. And they'll move money in and out of shares on the basis of that without really understanding what's going on," he said. 

It's foggy downstream

Denham's Koth, meanwhile, said the complexities around the downstream sectors for battery metals is a complication that is not the job of metals mining investors to understand, as it has "nothing to do with mining".

And, he said, some of the pursued solutions to downstream technological challenges are bound to fail. 

Question marks over downstream technologies cause uncertainty around commodity demand. 

Petra commodities founder and CEO Alberto Migliucci posed the rhetorical question, "Who can tell me what the [EV] battery configuration will be for commodities in the next five years?"

"That's a tough one — is it more manganese? Is it less cobalt? Is it more nickel? Is it more aluminium?"

For Koth, such downstream unknowns can be avoided by investing in more easily understandable and transparent markets.   

"For us, it's back to first principles. Avoid any unnecessary complexity," he said. 

The dog that caught the car

There are, of course, great opportunities in the energy transition — even in projects smashed by falling commodity prices. 

To seize on these, Far East Capital's Grigor suggests another first principle: "Buy low and sell high."

"Anyone who's got any money left, who hasn't been destroyed already by the market, should be accumulating high-quality projects," he said. 

"There are so many rare earths projects out there, people don't know what to do with them. They don't know the route to market. Management has no experience. It's a bit like the dog that caught the car: what do I do with it now?

"There needs to be more work in coming to grips with finding which are the good projects, and which aren't. And getting away from the rhetoric," he said. 

Watching the West

Beatty suggested watching which sectors Western governments try to reduce China's influence. 

"They'll be successful in some areas, and they'll probably fail in others. So, I think it's worth watching where capital is being allocated and where certain industries can compete."

When it comes to Australia's struggling nickel sector, however, Beatty doesn't think calls for a green premium will be answered.

"We're not believers in green premiums or the ability to get the middle of the supply chain to pay more. That has to be done by the end customer. 

"So, unless you can convince someone to pay five grand more for a Tesla, you're not going to get a green premium on lithium and nickel and other commodities," he said.

‘Love hate'

Despite nickel's woes, the buy low/sell high maxim has president and CEO of Rule Investment Media Rick Rule finding the commodity particularly attractive. 

"The nickel price is depressed for three reasons," he said. 

"The whole battery theme drove nickel crazy. And people, let's just say, they bought the narrative, not the arithmetic.

"The second thing that happened is that the Indonesians came to market with a whole bunch of laterite nickels," he said.

Before getting to the third point, he shared with the audience his thoughts following a recent flight over Sulawesi, Indonesia. 

"I am not what one would describe as a bleeding-heart environmentalist. And what I saw scared the hell out of me. 

"And I believe that the Indonesian people will react against the environmental degradation that's happening around laterites, and at least the rates of Indonesian growth will slow — and slow dramatically," he said. 

Rule said the third reason, one that "people aren't paying attention to", is that the Russians, in need of money, are selling everything they have on the shelf, including nickel, copper, platinum, and palladium. 

Rule said he expects the prices for those commodities to continue to "be in the toilet" for the next year and a half, meaning the "shopping season in front of us is wonderful". 

"The perception of nickel looks set to get worse over the next year. It'll go from gloomy to hostile. 

"There is no investment team in the world that has made me as much money as hate. I love hate. I think nickel becomes a four-letter word. You're seeing the shutdown of nickel sulphide production worldwide, which is always the first sign of price recovery," he said. 

We coulda been a contender 

Migliucci said it was evident from at least 2015 that Australia had the potential to lead the world as an EV centre of excellence, which was an opportunity missed because "someone fell asleep at the wheel".

"We have the world's largest deposits of lithium, we have nickel cobalt associated with that. We have manganese, we have bauxite, alumina. So, there is no excuse whatsoever.

"I'll let you decide what happened between then and now. But it's pretty bad management. I mean, someone's fallen asleep at the wheel. And now they're trying to catch up," he said. 

He said whoever got the EV paradigm right first would see global dominance over industry, energy, and the car industry for the next century — and Australia's now missed that boat. 

The energy transition's guarantee 

The task ahead is gigantic, the rewards are massive, the risks are abundant, and the details remain scarce. The one guiding light is the promise of huge demand. 

"The fabric of our society has to change," Migliucci said. 

"In the last 200 years, humankind has relied on one source of energy: fossil fuel. And in the next few decades, we've got to turn all of that on its head."

29Metals' Albert said that while consensus forecasts for commodity demand can vary widely, the fact is that in order to support the world's drive to net zero and decarbonisation technologies, "You've just got to have more of everything in our space."

EY's Beifus said, "There really isn't a consensus on demand, that's for sure. But I think there's consensus on, it'll be a lot.

"Ultimately, even in our most muted trajectory, which is really a business-as-usual-type scenario, there is a huge increase in demand."