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KPMG and the necessity of a circular economy for renewables metals

Summary:
We have, some time ago, addressed the mistakes people generally make when considering the availability of metals and minerals. Mass confusion over what is a mineral reserve - the correct answer being something created by spending the resources to do so - leads to the usual insistence that a circular economy must be created. We have no problem with recycling of metals or anything else, we just keep pointing out that it’s justified only when a profit is made by doing so. KPMG is the latest producer of one of these reports and, to be fair, it’s better than many. It does point out that the demand for interesting metals for the renewables revolution can indeed be found in them thar hills. There are still the mistakes though: Not all theoretical reserves are technically or economically

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We have, some time ago, addressed the mistakes people generally make when considering the availability of metals and minerals. Mass confusion over what is a mineral reserve - the correct answer being something created by spending the resources to do so - leads to the usual insistence that a circular economy must be created. We have no problem with recycling of metals or anything else, we just keep pointing out that it’s justified only when a profit is made by doing so.

KPMG is the latest producer of one of these reports and, to be fair, it’s better than many. It does point out that the demand for interesting metals for the renewables revolution can indeed be found in them thar hills. There are still the mistakes though:

Not all theoretical reserves are technically or economically extractable

Nonsense. The definition of a mineral reserve is that it is technically and economically extractable using current technology, at current prices, and to make a profit while doing so. If we can’t do that then it’s not a reserve.

They also fall prey to a piece of environmentalist misinformation:

There are also ESG concerns associated with extraction. In Chile, lithium uses approximately 500,000 gallons of water per tonne extracted, which diverts away 65% of available water in some regions, causing adverse impacts on local farmers growing produce and rearing livestock

No, really, just no. The lithium is contained in brines. The extraction method is to evaporate the water away from the contained salts - once that’s done the lithium is extracted from the remaining sludge or powder. To say this “uses” 500k gallons of water is nonsense - we’re extracting from the water by extracting the water. Such brines would, if drunk, kill the cattle and ruin, through salinity, any farmland they were used to water. A much more realistic statement would be that we’re liberating the water into the clouds using the locally abundant sunshine to do so.

Once these sorts of misunderstandings are cleared up the base complaint left is that Johnny Foreigner might be beastly to us as we ask if we may have some more of their lovely minerals. At which point we get back to that insistence that we must have a circular economy and recycle everything.

Well, yes and no. As we’ve said, nothing wrong with a bit of recycling as long as a profit is being made. Those offshore wind turbines might have 4 tonnes or more of rare earth metals in them (more likely an overcount, as FeNdB magnets do contain that iron as well but still) and with neodymium at $40 a kg when reprocessed there’s a decent margin in there. So, as and when these are replaced we’d expect that concentrated store of value to be recycled. The gramme or two of the same magnet material in your hard disk drive (for those who have not graduated to SSDs as yet) is markedly less profitable to collect, extract and process. So much so that landfill is the useful destination.

The important underlying point to grasp here is that no policy decisions are required. The difficulty of extraction, geopolitical worries, resource availability, recycling or reprocessing possibilities, value in end us and all are already incorporated into market prices. We can thus leave greed and capitalism - in the Prime Minister’s words - or eye for the main chance if we prefer to deal with this. There is no need for a grand plan or a redesign of the system, enlightened self-interest, as so often, is already dealing with this for us.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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