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Reducing permitting obstacles will be key to critical minerals revival in US

Energy

Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Every Industry Is Now A Technology Industry

Online Video Bolstering Consumer Home Video Spend, Spearheaded By Subscription Streaming


Reducing permitting obstacles will be key to critical minerals revival in US

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American Rock Salt Co. worker Bob Jaggard operates a face drill to create blast holes in a wall at the mine in Hampton Corners, N.Y.
Source: Associated Press

This is part two of a two-part series on critical minerals. Part one looks at the United States' reliance on other countries for materials that are scarcely mined domestically, while this installment examines possible solutions.

Resuscitating U.S. production of critical minerals is beyond any one quick fix, but several mining experts and leaders said reducing permitting timelines will be crucial to any U.S. effort to reboot the industry. President Donald Trump and the Republican-controlled Congress are pursuing policies that would achieve that.

"I think the Trump administration is probably bucking the trend," said Chris Hinde, who recently retired from S&P Global Market Intelligence as director of metals and mining research. "For the first time in ages, there's an administration that's looking more kindly on the mining side."

Some Republicans are pushing for tighter permitting timelines through H.R. 520, the National Strategic and Critical Minerals Production Act, but that legislation has stalled as language similar to the bill was stripped out of the final conference report of the National Defense Authorization Act. "Implementing more efficient permitting and review processes for mineral discovery, production and refining is the first step toward strengthening our nation's security and future," Sen. Dean Heller, R-Nevada, one of the authors of the bill, said in a statement to S&P Global Market Intelligence.

A pro-mining policy focus has also been part of the Trump administration's push for broader deregulation and protectionist trade measures. In late 2017, the president issued an executive order directing the Department of the Interior to identify a list of critical minerals, which it has done, and instructing the Commerce Department to consider ways to speed up permitting and boost domestic supply.

Under the executive order, Interior published a final list of 35 critical minerals and metals, which ranged from bulky fertilizers such as potash to the more esoteric rare earths that are important ingredients in advanced electronics and other applications. The list is a stepping-stone to a report expected to outline U.S. strategies to boost domestic supply.

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The Aug. 16 deadline for the report's release has come and gone. It is not clear what is causing the delay, but one source with knowledge of the report-making process said it may have been held back due to extra review in assessing the "defense industrial base" related to the metals and minerals.

The report is supposed to define a U.S. strategy to reduce reliance on critical minerals, find ways to streamline permitting, consider alternatives to critical minerals, look at access to metal supplies from trading partners, improve U.S. mineral resource mapping and weigh how to boost U.S. domestic supply of critical minerals, from discovery to refining.

"The U.S. is underperforming globally given its vast mineral resources," National Mining Association spokeswoman Ashley Burke said. "In 2017, the estimated value of total nonfuel minerals was $75.2 billion. Modernizing our broken permitting process would allow the U.S. mining industry to live up to its resource potential and increase its already significant (15%) contribution to the GDP."

Hinde and other experts flagged permitting as a core concern the U.S. must tackle if it wants to boost production of critical minerals and metals. They said it takes as little as a couple of years to permit major projects in Canada and Australia, whereas the process averages about a decade in the U.S. With similar environmental laws, both of those countries have stricter timelines and, in some cases, greater coordination between different levels of government.

Delays cost investors money, cutting or deferring returns substantially or even killing projects entirely. Korey Christensen, a senior associate with Hogan Lovells who works with clients in the resource sector, said cash can be flighty in those circumstances. With the prospect of a longer permitting timeline, investors may avoid the U.S. or parts of it and instead fund projects abroad.

"I think the low-hanging fruit there is the permitting process — streamlining and speeding it up where possible," Christensen said.

US policy push

Permitting timelines in the U.S. have long been decried by industry, with some in Washington advocating efforts to shorten them. Sen. Lisa Murkowski, R-Alaska, raised concerns at an early 2017 committee hearing about the issue.

"When you look at the list of what it is that we import, where we import it from, and what it is used for, it quickly becomes clear that we have a problem on our hands," Murkowski said. "When it comes to permitting delays for new mines, our nation is among the worst in the world, so fixing our broken system is one of the single most important steps we can take."

Some have a skeptical view of the recent flurry of activity to try to boost mining and critical minerals.

"When it comes to the resource sector in the United States, we tend to have a knee-jerk philosophy," said Corby Anderson, a professor at the Colorado School of Mines. Anderson said the lack of U.S. domestic production of some metals such as rare earths has caused periodic cries for something to be done over the decades, but that anxiety over critical metals has not resulted in serious action.

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"I would say that in the Western world, in the United States, we take a short-term view of resources and investments, whereas the Chinese don't," Anderson said.

Industry also shoulders responsibility for getting mired in mine permitting, a CEO who has permitted a mine in the U.S. said. "Yes, I think there needs to be tighter timelines," said Diane Garrett, president and CEO of Nickel Creek Platinum Corp. But long timelines in the regulatory process in the U.S. are not a given, and a project may drag on in permitting due to "self-inflicted wounds."

Garrett previously served as head of Romarco Minerals and oversaw the permitting of the Haile gold mine in South Carolina, which has since gone into production and is now owned by OceanaGold Corp.

"When you look at companies that are going on seven, 10 years of permitting, oftentimes you see that they didn't have a very comprehensive permit application," Garrett said. "Rule No. 1 is you've got to deliver a very fulsome report."

Opponents of Trump's deregulation have also said permitting in the U.S. is not as onerous as industry experts claim. In response to Trump's critical minerals executive order, Earthworks said the U.S. was competitive with other developed countries, and permitting at the federal level averaged three years. It has advocated that the U.S. should continue to source some critical minerals from abroad.

Trump holds a few other tools at his disposal as well. Several laws already on the books, including the Defense Production Act, give the president broad powers to stockpile materials or otherwise make it easier for companies to profitably produce materials deemed vital to national defense.

Rare earths

Another problem for the U.S. is that it has lost expertise in some critical areas, certain experts said.

As a case in point, MP Materials, a private U.S. miner of rare earths, depends on Chinese minority shareholder Leshan Shenghe Rare Earth Co. Ltd. for some technical expertise.

"They actually have a lot of knowledge on rare earths that, quite frankly, over the years the U.S. has unfortunately lost," MP Materials CEO Colin Nexhip said.

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The private company mines rare earths in the U.S. at Mountain Pass in California but ships concentrate to China for processing.

Herein lies a trade-war twist for the U.S. in its pursuit of domestic supply. MP Materials started mining rare earths at Mountain Pass in January, with plans to produce at least 20,000 tonnes of rare earth oxides each year. Beyond that, it aims to expand and build a processing plant to refine its concentrate in the U.S., not China, according to Nexhip.

MP Materials had planned to use cash flows from operations to fund the expansion. But amid the trade war between the U.S. and China, its concentrate is now exposed to a 10% tariff in China that could jump to 25% if Trump goes ahead with harsher tariffs in early 2019. The tariff undercuts profits and could force MP Materials to shelve the expansion that, if completed, would bring back refined rare earths production to U.S. shores, Nexhip said.

MP Materials' conundrum exposes the sensitivity and complex nature of the global metal production and supply chain. Mining an ore that contains rare earths is relatively easy, Anderson said. Processing it into myriad final products that can be used in manufacturing is hard. Here the Chinese have an advantage with both ample capacity to process rare earths and technical expertise.

"They have a built-in economic and technical advantage that's hard to beat," Anderson said.


Watch: Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Steve Piper shares Power Forecast insights and a recap of recent events in the US power markets in Q4 of 2017. Watch our video for power generation trends and forecasts for utilities in 2018.


Technology, Media & Telecom
Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Oct. 08 2018 — Both buyers and sellers of traditional linear TV advertising, not including connected TV or over-the-top video, are moving toward the adoption of programmatic trading. In 2017, Kagan estimates that $690 million or 0.9% of total linear TV spend was traded programmatically. Within the next five years, that figure is expected to climb to $9.76 billion or nearly 12% of total linear TV advertising revenue. MVPDs are forecast to trade the greatest percentage of their ad inventory programmatically in 2022 with 30% of ad revenue from programmatic trading.

Kagan defines programmatic trading as being automated and data-enhanced, not just one or the other. Trading may be through a private or open marketplace and does not have to be through an auction, which is more common in digital video advertising.

There are several issues holding participants back from programmatic trading. Unlike digital programmatic marketplaces, where there is a seemingly unending supply of ad inventory, linear TV has a finite supply. Demand for TV inventory exceeds the supply, so there is still an attitude of "If it isn't broken, don't fix it." TV ads are also bought well in advance, not immediately.

While many agencies have experimented with the programmatic trading of linear TV, not all are on board. Many of the advertisers and agencies are interacting directly with the supplier platform rather than going through a demand-side platform, or DSP, today. In their experiments, the agency needs to use separate platforms to aggregate inventory and tie it together, which is a lot of work.

The lack of inventory is one factor holding back programmatic trading. The only way it takes off is to make linear TV inventory available in some type of buyer platform that can combine the various supply platforms. It is even more complicated when the buyer wants to bring in connected TV (OTT).

Agencies do like the automation capabilities of programmatic, particularly where the process takes a lot of time. An algorithm may do better in areas such as weighting estimation, the first pass at scheduling and the negotiation process as well as postings and billings. The process of buying inventory is not difficult, but computing where a buyer will be able to find its preferred audience is. Therefore, interest in automating the planning and analysis to find an optimal audience is high.

We forecast a gradual uptake for programmatic trading with continued testing in 2018. Broadcast stations and networks, cable programmers, and MVPDs need to add more inventory to programmatic platforms before agencies begin using it in earnest. It will take time for all parties to feel comfortable transacting in a new way.

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Technology
Every Industry Is Now A Technology Industry

Highlights

And every company is now a technology company.

Sep. 28 2018 — As machine learning (ML), artificial intelligence (AI), and robotics become commonplace and enter the operations of mainstream organizations, leadership teams are finding that failure to harness and leverage AI puts them behind the competition. Repeatable tasks are carried out by bots in a fraction of the time and employees are more focused on adding value, which means companies on the forefront of technology can be more reliable, more user-friendly, and faster to market.

In this highly disruptive environment, one traditional truth of business has withstood, or has perhaps even guided, these technological advances: above all, the customer experience is king. More than ever before, businesses have effective technologies at their fingertips to quickly and effectively address customer pain points, while at the same time dramatically improving their internal operations.

At S&P Global Market Intelligence, we strive to get beyond the buzzwords and truly deliver essential insight. And second to this, we strive to adopt real operational efficiencies into our delivery that are paralleled by the workflow efficiencies we promise to our customers. To that end, we are committed to remaining on the cutting edge of emerging technologies, first through optimization, then automation.

Download a recent analysis of how we’re applying new technology like natural language processing to structure data, robotic process automation to deliver insights faster, and predictive analytics to stay ahead of the market.

You can also view this analysis in Spanish, Portuguese, Mandarin, and Japanese.

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Natural Language Processing – Part II: Stock Selection

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Natural Language Processing, Part I: Primer

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Technology, Media & Telecom
Online Video Bolstering Consumer Home Video Spend, Spearheaded By Subscription Streaming

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Sep. 20 2018 — Spending on home entertainment is rising toward levels not seen since 2004, when consumers spent $24.37 billion building massive home-video libraries of DVDs and VHS cassettes. Since then, the optical-disc market saw more than a decade of significant declines as consumers shifted to digital entertainment. By 2012, total spending on home entertainment was down to $20.13 billion, with $4.13 billion coming from online video while DVDs and Blu-ray discs accounted for $12.88 billion and multichannel PPV/VOD contributed the remaining $3.13 billion.

Fast forward to 2017 and the mix of consumer spending has changed significantly. Consumers spent a total of $22.62 billion on home entertainment from multichannel, online and disc retail/rental sources. Online spending accounted for $13.00 billion of that total while spending on discs dropped to $6.84 billion and multichannel PPV/VOD shrank to $2.79 billion.

While the data might seem like good news for traditional providers of home entertainment, a key component of the growth in digital spending is the rise of subscription video on demand. The majority of online spending is going to over-the-top services like Netflix, Hulu and Amazon Prime, which increasingly have focused on creating original programming (mainly episodic TV) rather than licensing content from Hollywood studios.

Removing subscription streaming from the consumer spending pool paints a less favorable picture for traditional content providers. In 2012, consumers spent just $1.43 billion on non-subscription online video purchase/rental, and a total of $17.44 billion excluding the SVOD component. By 2017, while consumer spending on online video overall had risen to $13.00 billion, some $10.47 of that came from streaming subscriptions versus $2.53 billion from online video purchase/rental, and total home-entertainment spending was just $12.16 billion excluding SVOD.

Spending on sell-through home video peaked in 2006 when consumers shelled out $16.53 billion for DVDs and VHS cassettes. Since then spending has declined by hundreds of millions (sometimes billions) each year. In 2017, consumers spent $6.50 billion on DVD and Blu-ray sell-through and electronic sell-through. This seems to suggest that people are becoming less and less interested in adding to their home-video libraries and are turning to the more affordable streaming options. The story is similar for the home-video rental segment, which saw consumer spending peak in 2001 at nearly $8.45 billion before dropping to $2.87 billion by the end of 2017.

This has to be a somewhat unsettling trend for the major film studios, and is likely a key factor in shifting their strategy to focus on major franchise films and low-cost genre fare. The former tend to have broad worldwide appeal and can still move enough video units to help offset their high production and distribution costs. The low-cost genre fare, on the other hand, may be more risky and not sell as well internationally, but has a fair chance to break even. If the latter films lose money, the successful franchise films typically cover the losses.

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US Online Video Outlook To Eclipse $15B In 2018

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DVD, Blu-ray Spending Down $1B-plus For 11th Year In A Row

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