Please review this transcript with important information on the nickel markets.

Chris Berry: Thanks very much to all the folks at O&M for the opportunity to chat with you all today for the next few minutes. And thank you all for taking the time -- I know there's always a lot on the go and I think that nickel, in particular with respect to batteries, is a really interesting and compelling story. That's really what I wanted to talk about today.

To start with the supply and demand and pricing -- all of that information I think is pretty accessible. Today, I'd like to provide some context around why nickel and batteries are starting to be referenced more and more in the same sentence.

To start off, I have been involved in the battery metal space for the last ten years as an investor, as an advisor, as a board member, and the entire industry is going through a huge hangover right now. It hasn't been a lot of fun for the most part. Certainly for the last couple of years. There is one bright spot, in particular.

If you take a look over the last two years at the price performance of a number of the battery metals or the energy metals, as I call them, then you can see a few things. Cobalt and lithium are trying to find a bottom and trying to find a reason to to rebound. Copper has been range-bound. Of course, nickel has really taken off this year. In 2019, I think it's up about 66%. There are a number of reasons for that and why I call nickel the "Belle of the Energy Metals Ball". I wanted to take the next few minutes to put some context around nickel in the battery business and how important it is to the health of the lithium-ion battery business going forward. Critical, even.

Why devote the time why focus on nickel with everything else going on out there? The nickel demand story really revolves around vehicle electrification and your views on EV. I've got some data here from BMO -- everybody has their own forecasts -- but to get to a point where you've got 8-10% electric vehicle penetration by 2025-2026, the BMO numbers are north of 300,000 tonnes of additional high-purity nickel sulphate. My views are a little bit more sanguine than that, maybe around 300,000 tonnes. There's a lot at play there but, nevertheless, this is an EV story. Robust nickel demand, in my opinion, really revolves around your views on EV uptake over the next 5-10-15 years. That's the demand shock, if you will.

On the supply side, the Black Swan, if you will, has been the government of Indonesia and what they're planning on doing -- I'll talk about this in a few minutes. They're instituting a nickel ore export ban. I think the Indonesian government can see the writing on the wall around the lithium-ion boom and the EV supply chain, and they want a bigger piece of it. Rather than exporting lower-value nickel, what they want to do is force the producers in-country to produce higher-quality material for export because there's more revenue there.

Why is nickel, in particular, important in the lithium-ion battery discussion? In the interest of time, I won't get into too much detail here but the name of the game with the lithium-ion battery is energy density. Whether it's your phone or an electric vehicle or what-have-you, the ability of a battery to hold an increasingly large and more powerful charge for a longer period of time is key. Think of it as getting in your EV and being able to drive 400 or 500 miles. And then charging in a shorter period of time, as opposed to longer charging times. Not being able to drive anywhere near as far in terms of distance is a problem and energy density is really the requirement. You need nickel and you need cobalt in that chemistry to really ensure not only the high energy density, but also the high temperature stability and the safety, which is something I think that gets overlooked when we talk about lithium-ion battery growth going forward.

For those of you on the call who aren't familiar with lithium-ion battery, you've got about 14 different lithium-ion chemistries. The one that I think is going to win, and win convincingly in the EV race for lack of a better phrase, is NCM. That's short for nickel-cobalt-manganese. They offer the highest energy density, and the highest stability and safety based on how they're used.

For those of you that have done a lot of research into how many giga-factories or mega-factories are being built, a mixture of technological leaps and scale mean that a lot more batteries are going to come on-stream in the next ten years. And because of that scale, the pricing will be pushed down, which implies in my opinion that we're going to need a lot more of these raw materials -- in particular, nickel -- to really enhance that energy density and get people over the barrier of not wanting an EV because they feel like they can't drive it without charging it all the time.

One of the interesting things about nickel in context of this energy density issue is that energy density and raw material purity or nickel purity are intertwined. You really can't have one without the other. It's the same story with cobalt chemicals and lithium chemicals -- nickel is no different.

For those of you who don't know, you've got different weights of nickel-cobalt-manganese in the NCM battery. It could be known as NCM 111, 623, or 811. That chemistry is really going to drive the energy density. We're going to go to more nickel-intensive cathodes from 111 to 811 as NCM cathode technology evolves. You're not going to do that again without an ample and secure supply of what's known as high-purity, class 1 nickel. That is really going to drive this NCM evolution, for lack of a better phrase.

In the current nickel market, first of all, I think it's important to remember that all nickel is not created equal. You have different types of deposits that I'll reference here. The different types of nickel that are produced and divided into class 1 and class 2 nickel. As you can see here, class 1 nickel is effectively required for lithium-ion batteries. It has everything to do with purity. In other words, just because someone could flood the market or add nickel pig-iron to the market, that would not mean that a cathode producer, for example, in Japan or South Korea could use it as is. They would need to be purified and that can become a capital-intensive and costly process.

Nickel sulphate is derived from class 1 nickel. You're probably asking where does class 1 nickel come from, in terms of those deposits? In the interest of time, I'm gonna simplify this but you've really got two types of nickel deposits -- sulphides and laterites. As you can see, the market has traditionally produced class 1 nickel from sulphides and that is starting to change, partially because most of what's left or un-mined out there is in laterites. The fact is, quite frankly, that laterites are much more expensive to mine and produce high-purity nickel. Ultimately, we're moving from a market of predominantly sulphide-based deposits, where the ore is sent to a smelter and then turned into nickel sulphate to one where we're gonna have to use a high-pressure acid leach process to mine and produce nickel sulphate from these laterites. Again, that comes at an additional cost, which is going to -- in my opinion -- push nickel pricing up.

What are the barriers to nickel growth? I think that there are a couple. Again we could go into a lot more detail here, but I think the name of the game, initially, is all about resource nationalism. The fact that the Indonesian government has pulled forward this nickel or export ban by two years -- that's really the reason why nickels up 66% year-to-date. You can also see it in LME stocks, which are actually at a seven-year low right now.

Resource nationalism is probably the biggest issue, but another interesting thing to keep in mind is the incentive price to bring on a new tonne of class 1 nickel. I've got the $20,000/tonne number here partially because I'm assuming that it's produced through high-pressure acid leaching. That may be a little bit high. When you speak with folks that Norilsk or some of the other majors, they'll tell you that it's at least $18,000. It's not a stretch to think that twenty thousand dollars is potentially a floor for class 1 nickel. Supposing, again, EV penetration continues to grow at its current rate.

Finally, out of the scope of our presentation today is the fact that NCM cathode development is subject to a lot of debate in the battery business. What is the optimal chemistry if you have to balance energy density, safety, and a whole host of other issues. I think, generally speaking, the market believes that we're moving from NCM 111 to 811, which is about 80% nickel by mass. The question is "When?" It's probably going to be a slower progression than a lot of people think. My own view is that by 2025 or 2026, the majority of NCM usage in automotive will be 622, which is still really strong growth in the nickel market no matter how you look at it.

To get out of the mining business for one brief second, a lot of times people will say that beyond what the miners are telling me about supply and demand for cathodes, who can I look at and who can I talk to? Who I should I trust, for lack of a better phrase. Here are six of the largest cathode or battery players in the world. There are some names like LG Chem that aren't on here, but they're more downstream than anything else. Looking at what a company like UMICORE or BASF is doing in terms of investing and ramping-up their NCM cathode capacity is instructive, in terms of where we're going to go and what we're gonna need with respect to a lot more class nickel in the relatively near future.

With that, I think the good news is that demand story out over the next number of years is very strong. Very positive. Nickel is plentiful, I think it's maybe the fifth most common element in the Earth's crust. It's not that we can't find this stuff, it's just that between export bans and capital-intensive mining processes like HPAL are indicative of a shift in longer-term nickel pricing higher. Again, where we ultimately end up really depends on electric vehicle and energy storage uptake, which is probably a separate conversation for a separate day.

Thanks to all of you for your time and attention. Thank you to the folks at O&M. I'm happy to continue this conversation offline. You can see here how to can contact me on Twitter and also by email. Thank you all very much.