Gianni Kovacevic: A Big Increase For Electric Cars Means Big Demand For Key Commodities

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Includes: CPER, CPPKF, CUPM, FCSMF, JJC, LIT, TMQ, TSLA
by: Palisade Radio

Summary

The future is now – electric car mass production becomes a reality.

Green technologies use large amounts of copper.

No competition yet for Tesla cars.

More electric cars means rising electricity demand.

Gianni Kovacevic is driving a Tesla (NASDAQ:TSLA) across the US and promoting his book "My Electrician Drives a Porche?" Contrary to popular belief the car only takes 30 minutes to charge, on long-term trips the Telsa takes no more time than a conventional car. The age of the electric car is finally upon us.

This particular Tesla has around 200lbs of copper, 75kgs of lithium, even more graphite and also cobalt. The projected penetration of electric cars is 7-10% globally over the next 5 to 7 years, this represents a massive increase in demand for these key commodities.

All these growing number of green technologies require large amounts of copper which increasingly looks like the commodity to watch for long-term growth. Technology in general is not the friend of the oil and gas industries.

Palisade Radio Host, Collin Kettell: Welcome back to another episode of Palisade Radio. This is your host, Collin Kettell. On the line with us today is a new guest to the program. His name is Gianni Kovacevic. He is an author and I just met him up at PDAC. The name of his book is My Electrician Drives a Porsche? Gianni, welcome to the program.

Author, Public Speaker, Realistic Environmentalist & Copper Expert, Gianni Kovacevic: Great to be here. Thanks for having me.

CK: Yeah, it is great to have you. You just shared some great news that your book is now in most, if not all, US airports. You have got major distribution and you are doing a really awesome launch or tour for the book as it comes out. You are driving a Tesla across the country for I guess it is about a month and a half, ending at Tesla headquarters, hitting twenty-five cities. Tell us a little bit about the book, its very catchy title, and the idea of driving across the country.

GK: Yeah, thanks. The book is doing very well. It is definitely in the retail system across America and Canada and it is at all major airports. Why has this book resonated with so many people? It is about a millennial electrician who enlightens his family doctor who is 58-years-old, baby boomer, lives in Seattle, about how the world turns: what are the changes demographically, technologically, the changing energy mix, and what makes it all possible? It is a page-turning adventure to absorb all of those facts and statistics.

The title - which is My Electrician Drives a Porsche? - it is a question mark and the doctor goes out of his mind to figure out how that is possible, has very little to do with fast cars and a lot to do with investing in the rise of three billion new spending class consumers in all categories. To amplify the important messages in the book, I am going to be driving an electric vehicle from the East Coast of the United States all the way down to Tesla headquarters, twenty-five cities, to do TV, print, radio media and engage with what really should be probably some millions of people about all these messages.

CK: Now, Gianni, obviously you are a proponent of the Tesla as a vehicle. I do not know if you own a Tesla or if you are borrowing one for this trip. Tell us a bit about an electric vehicle. Obviously, you see a bright future there. How you like driving the Tesla?

GK: Yeah. I like to tell everyone that the future is now. I was at Harvard, MIT and Yale just before I enter New York City here and I was talking with various students about how effective is this car? Is the future now? How long does it take to charge? Surprisingly, they were actually quite accurate on many of the things. The part where most people are wrong is how long does it take to top up this vehicle? It takes 30 minutes to top yourself up so you can continue going and the range is about 250 miles.

As an example, I drove the car from Toronto to Boston in one shot. It is about 600 miles, three stops, and it was not much more in time than it would have been to drive an internal combustion engine, maybe fifteen minutes longer. The future is definitely now.

CK: Well, Palisade Radio, we focus on the mining world and, of course, an electric vehicle has a lot of different components to go into it, different commodities. There has been a whole boom in the commodity sector around graphite particularly lithium right now, cobalt. Then there is also some other major metals and minerals that go into building an electric vehicle. Tell us a bit about the future for those different commodities.

GK: Yeah. I think the segue to that is the changing energy mix, understanding the winners and the losers. We talk about when you take fossil fuels out of the equation it requires more electricity, now whether it is to make electricity or to utilize that electricity. Yes, when you talk about an electric car, question number one is the future now? Are we ready to have major adoption? The answer is definitely yes.

CK: On Palisade Radio, Gianni, we focus mainly on the commodity sector. Of course, electric vehicles have a whole set of different commodities that go in to build them. It has actually set off a bit of a boom in certain of these commodities: graphite, lithium, cobalt, and even some other ones that you can mention. Talk to me about what goes into building an electric vehicle and how you see that changing the commodity sector over the coming years.

GK: Yeah, that is a great question because if we can acknowledge that the future is now and as we de-carbonize the energy mix: how we create energy, how we transfer it, and how we utilize it, there are going to be winners and there is going to be losers. We are talking now about electric cars and how we utilize this green energy. If you look at a Tesla it has about just over 200 pounds of copper. My 85 has about 75 kilograms of lithium. There is even more graphite and there is cobalt. These are all things that if you ask yourself are we going to have more and more penetration of electric vehicles? I think the answer is definitely yes especially in the next sort of five to seven years.

My research tells me that we are going to be between 7% and 10% penetration on a global scale with electric and plug-in hybrids in the next five to seven years. There is a tremendous amount of new supply. As a recap, in 2015, there were about 88 million light vehicles sold. We are talking about a lot of vehicles. If you look at some of the opportunities that investors have, I mean everyone is well aware of the lithium boom that has taken place and there are opportunities there.

One of my sponsors which is Focus Graphite (OTCQX:FCSMF) have a project in Quebec which is one of the highest grade graphite projects anywhere in the world. They look to also have a different type of chemistry within the creation of batteries in a company that they have which is called Braille Battery. Then the amplitude of copper in these vehicles, this is something that is totally missed in all of green energy. It takes, Collin, typically four to six times more copper per megawatt of utility when you create, transfer, or utilize greener and cleaner energy.

In my opinion copper is going to decouple from oil which it has been following for about forty years price wise, uptick for uptick and downtick for downtick. There should be, in the medium term, medium to long term, a disproportionate benefit in copper. I think copper is one of these commodities that in the end might even win the marathon.

CK: Yeah, that is a really interesting point that you bring up. We actually did an interview on BNN a few days ago at the PDAC conference and one of the main points you are talking about is how much copper is used in green technology, electric vehicles, a point that is missed by many investors. One question that I want to ask and this is a good way to lead into it, with more copper being needed or with solar panels you need a lot of silver, earth, wind, heavy, rare earths. People do not oftentimes think about the amount of CO2 that is emitted from mining these things or the amount of disruption in terms of mining these minerals. Do you see a net benefit coming out of these green technologies? Is it actually better for the earth or is it simply going to be cheaper ultimately than burning through fossil fuels?

GK: Well, there are many things that you have to discuss there. First of all is the cost. There is also the convenience. We are way beyond breathing diesel fumes in cities and such. Even if the cost is the same, for me it is the prehistoric way of doing mobile transportation. The other question of what people are saying is about CO2 emissions. When you drive a car what will create these greener and cleaner cars it takes a lot more CO2 emissions just to make them as you note to mine the products.

We have to qualify that because if you are going to go continue exploring for oil, transporting it, refining it, and transporting a refined product to a station and repeat every single week in perpetuity, what is the CO2 emissions in that? I would rather have something that is sustainable, build it once and it is going to have a useful life of, say, five to fifteen years depending on the application, and at the same time you live in comfort; you are not breathing these nauseous fumes. It is just the way of progress. By the way, in my opinion, and I am someone who has experience, it is a superior product. The consumer at the end of the day is going to dictate what he wants to buy and then you have to simply provide the building blocks to make those vehicles possible.

CK: That is a great point. In terms of superior product, you obviously like the Tesla. We talked about this at the beginning of the interview. At this point, Tesla has really been the only major entrant into the market that has had any success. I think a lot of that is focused around Elon Musk and his ability to raise billions of dollars of capital. Tesla is not profitable yet in a sustainable way. Do you see other companies coming in to compete? Do you think Tesla is going to continue to lead this forward?

GK: Yeah, they do not have a choice. I think that because the consumer, as I noted, is going to dictate what they want. They have forces from two sides. One they got this whole CO2 emissions brigade around the world where people are wanting to go away from fossil fuel burning. On the second side of it you have got companies like Apple and Google that are entering the field. I can assure you many of these legacy incumbent automotive makers they do not want to go the way of Kodak Film company or Blockbuster video. They have to adopt. They are forced to adopt. Otherwise, they are going to get gobbled up.

You look at the market caps of the major technology companies against the incumbent automotive manufacturers and there is a big discrepancy there. It is going to happen a lot faster than people think, a lot faster. I would like to tell people the future is now. We are at the adoption point. Things are happening very quickly and we will see all the things that feed into these technologies I think are going to surprise a lot of people.

CK: Are you seeing a lot of the traditional companies entering into the space? I know that your book is titled My Electrician Drives a Porsche? Porsche (POHAY) has been at least putting some concept vehicles out that will compete with Tesla in the coming years. Obviously, GM (NYSE:GM) and Ford (NYSE:F) had been putting hybrids out over the last few years, but nothing seems to compare at this point to what Tesla has done. Were are you seeing kind of competition coming into the space? Is it going to be from Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) before Tesla really gets a good run for their money?

GK: Yeah, at the same time I think the Porsche thing is more of a Volkswagen (OTCPK:VLKAY) initiative. The redemption of Volkswagen because of this "Dieselgate" will come in some part with their acceleration of the electric vehicle program. I have been told that they will have some 30 vehicles on offer by about 2020 within the platform, the various Volkswagen platforms, and so that is a difficult transition for them to make. It does not appease their service network. It does not appease their dealer network. It does not appease the army of people within the companies that feed into them that make mufflers, radiators, cranks, pistons, valves, all those things that go into an internal combustion engine. But it is happening.

Just a note on my book, the title it is My Electrician Drives a Porsche? but as noted it has nothing to do with fast cars. All that title does is make you pick the book up and be curious, and then you go down a path of enlightenment to realize that all these things with their army of new consumers everything you buy comes with a cord plugged in the back of it. As we electrify the energy mix the more there is demanded of copper. When people pick the book up they will realize that it has this beautiful copper foil as the background. Once you have read the book that resonates forever. You will become a quasi mini-expert on all these things and the common bond that puts it all together which is copper. I think it probably would not hurt to talk about a couple of ideas within the copper space since we are on that theme.

CK: Yeah, let us do that. Let us talk about some of your favorite ways for investors to get into copper and as an extension to that if any of the other energy metals are interesting to you aside from Focus Graphite you already mentioned. Be happy to hear those as well.

GK: Yeah, well, first thing we recognize is technology is not the friend of the oil and gas industry. There are many reasons that the price of oil will go up or down and oil will have its day in the sun again for sure. But if we talk about a fifteen year horizon there is adoption, innovation, things use less fuel. We are going to adopt things that do not use any fuel, so technology is not the friend of the oil and gas industry. Also the way we extract oil. Technology makes it possible to take oil from more complicated, tighter formations. That is a two-way street.

On the other side if it is copper. Technology is definitely the friend of copper because when you de-carbonize the energy mix it takes three, four, five units more copper per megawatt. As you know copper extraction has not had a fracking moment. I think copper is going to have this disproportionate benefit that all the companies are still in the tank. The industry was very short. Some weeks ago the inflation adjusted all time lows. The global exchanges had around 3.5 million tons of physical copper pledged short and you saw what happened to all the senior miners. There has been a rebound.

Three parts of the food chain, on the top part of the food chain I like Lundin Mining. I think they got a strong balance sheet. I think they have weathered the storm. They have been able to pick up assets. I like Imperial Mining. I think they have the crown jewel of the Canadian mining industry with the Red Chris Mine. Going down into the juniors there is NovaCopper (NCQ), Rick Van Nieuwenhuyse's company which is a prolific high grade project in Alaska. It is trading at about a third of a penny a pound in the ground.

Then, of course, I have to speak my own book with a selfish interest, my CopperBank (OTCPK:CPPKF), a company I created. It was created by shareholders for shareholders to capture the pain in the streets where we take projects, buy them, hold them on 100% basis, and then we are going to weather the storm. We want to vehemently protect the value per share, so it is an anti-dilution strategy to just have as many bulk pounds in the ground. These are not producing assets, of course, and the company is called CopperBank. Just for disclosure I am the largest shareholder in that company and the founder and the chairman so just that people know.

But that is what I like as a basket. I think if people will simply follow those names for education I think they will not be unaware. You can also look at different companies that have fantastic information on their websites, educational stuff. If you really want to learn about these metals like lithium and graphite and cobalt, you can go to various sources and one such source, as I mentioned, is Focus Graphite. I think they have done a lot of outreach and they have done a ton of great work to educate markets.

CK: Great! Okay, well, Gianni, let us leave it there. For all of our listeners, the book can be found on Amazon and a host of other places called My Electrician Drives a Porsche? Investing in the Rise of the New Spending Class. Gianni, thanks so much for coming on the show and I wish you the best of luck on your Tesla tour through the United States.

GK: Thank you and everyone can follow me on my Twitter handle with @RealisticEnviro. Thanks for having me.

Gianni Kovacevic is a Canadian-Croatian investor in natural resources and an established author. He has been a speaker at industry-related conferences around the world on the themes of natural resources, demographics and green energy. Having spent the past fifteen years investing in natural resources, he documents his interests into a unique business model that caters to both businesses and investors. Over the past decade he has provided valuable assistance in negotiated financings well in excess of $250 million from a large pool of global investors. Kovacevic's new book titled, "My Electrician Drives a Porsche?" was released in the summer of 2014 and complements over a decade of blogging about his interests and adventures.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.