Juggling Dynamite

The most valuable commodity on earth is fresh water. Depleting finite water supplies to extract less critical commodities is short-sighted and unsustainable. This reality will increasingly dictate our policies and procedures.  It’s quite literally adapt or die.

The future price of copper and the growth of companies that produce it could hinge on a single precious resource: water.

Mining the important industrial metal requires huge volumes of water to control dust and separate copper from the earth. But a seven-year drought enveloping Chile, the world’s largest producer, is forcing big miners to curb output and pitting them against small communities like this one high in the Andes.  Here is a direct video link.

Interim rallies notwithstanding, the Canadian stock market continues to come down from QE-inspired delusions.   The below chart since 2013 shows the story.  The black line is the TSX 60 market cap-weighted index (dominated by today’s most expensive companies so financials make up 40%) and the red line is the TSX 60 equally-weighted index (all 60 companies represented in equal weights so financials make up just 15%).

By stripping out the overweight in financials, we can see that the Canadian stock market has now round-tripped back to where it was in December 2013.  Some of the capital fleeing falling sectors like energy and materials rotated into the last standing ‘hot’ sectors over the past two years (dividend-paying, REITS and financials).  This only made these few still over-loved companies even more over-valued and dangerous for the capital bet there.

Beyond sector rotations, over the past year both foreign and domestic capital flows have been leaving the loonie and Canadian securities at the fastest pace of the 10 most developed markets.  The world’s love affair with Canada and our commodities is ending in a painful divorce. It is likely things will get a good deal worse in the months ahead.

Another day and more oil-funded terror coming out of the Middle East.  Even though the area and North Africa boast astronomical solar power, these petroleum-based economies have traditionally captured little of it in preference for the production of more expensive, dangerous and damaging fossil fuels.

One of the supreme ironies in all of this, is that accelerating climate change and rising temperatures are rapidly making the area itself uninhabitable: droughts, war and now a recent scientific study predicts the region will face heatwaves “beyond the limit of human survival” if climate change remains unchecked.

Fortunately many people and companies are seeing massive opportunity and rolling out smart solutions like never before.  For the first time ever, renewable energy solutions are taking center stage at the UN climate conference in Paris next month. See Renewables are changing the climate narrative from sacrifice to opportunity:

For oil-producing nations that use a substantial share for power generation, solar is increasingly the quickest, least-risk investment to add export capacity and revenue while satisfying rapid demand growth for electricity.

This shift is causing huge development and investment across the region. Morocco is building the world’s largest concentrated solar power plant, which will provide half the country’s energy by 2020. The UAE is building what could eventually be one of the world’s largest solar photovoltaic plants. Additional projects are in the works in Egypt, Jordan and Saudi Arabia.

The opportunity inherent in this shift is clear. A soon-to-be-released analysis from Irena finds that meeting renewable energy targets inBahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE would annually decrease fossil fuel consumption by 25% per cent in the water and power sector.

It would also cut water consumption by 20%, which is crucial in a region where fresh water is scarce, and likely to become even more so as a result of climate change. Generating solar power withdraws 200 times less water than a coal power plant to produce the same amount of electricity. Wind power requires no water at all.
The solar plant Shams 1 in the desert of Abu Dhabi, the United Arab Emirates. Dramatically falling solar PV costs and visionary commitments by governments in the Middle East and North Africa are changing the economic equation of renewables.