The last embers of failed battery start-up Britishvolt have been scattered, with the news that the site of its planned gigafactory in Nothumberland will be sold off to US private equity firm Blackstone. The kicker is that Blackstone plans to use the site for a data centre.

Britishvolt was once heralded as a British green energy pioneer, with its plans to build a £3.8bn car battery factory, creating 3,000 jobs.

But the company blew up spectacularly, collapsing in January 2023, due to overspending, or lack of government support, depending on whom you ask.

Now Blackstone reportedly plans to build a hypserscale data centre campus on the site, taking advantage of access to cheap renewable energy from offshore wind.

You could hardly imagine a better metaphor. More battery capacity is urgently needed in the western world, but attention has already shifted to AI.

Booming demand

The overall effects of artificial intelligence, and its increasing integration into every aspect of everyday, are anyone's guess. But one certainty is that AI is a power and data hungry exercise. Commodity traders are already looking at a huge increase in demand for copper.

Saad Rahim, chief economist at commodity trader Trafigura, has said the AI revolution could increase the global copper deficit by 1Mtpa.

But data centres need more than copper. They need chips. Global chip production capacity was already set to boom thanks the 2022 US CHIPS and Science Act, which authorised about US$280 billion in new funding for domestic semiconductor production.

The act has already spurred investment by Taiwanese chips giant TSMC as well as Texas Instruments, Bosch, and others.

The current surge in chip demand is shining the spotlight on range of niche minerals, many of which are currently produced almost entirely in China. This includes gallium and germanium, by-products of aluminium smelting, upon which China recently imposed export curbs.

Tin is an underrated beneficiary of the chip boom. Almost 50% of tin is used as solder in circuit boards.

The global supply of tin is concentrated, and production is trending down. About half of all tin is smelted in China, and around 20% in Indonesia. Indonesia has repeatedly halted tin exports in an attempt to encourage domestic industry.

About 10% of the world's tin ore is mined in Myanmar, before being exported to China for processing. The tin producing region of Myanmar is controlled by the United Wa State, a de-facto regional government in conflict with the ruling junta.

Datacentres also need tantalum capacitors. Tantalum, the original conflict mineral, is exported from East Africa though opaque trade routes that can often be traced back to artisanal mines controlled by rebels in the eastern DRC.

Rare earths also find their way into datacentres, with magnet minerals such as neodymium used in drive boards, and yttrium which is used in superconductors.

And that is not to mention ultra-high purity silica and graphite, which has to be sourced from specific resources, and undergo complex and costly processing.

Renewables demand to go even higher

AI is also extremely energy intensive. Datacentres already consume about 1-1.5% of global electricity production, and that demand will rise sharply as capacity is rapidly built out.

Increased electricity demand only adds to the well developed bull case for minerals from the energy transition. Higher electricity prices will support the buildout of renewable energy, with wind farms consuming copper and rare earths, and solar panels needing silver, cadmium, and selenium.

And any increased power demand, whether it is met by renewables or fossil fuels, will drive demand for copper and aluminium for transmission.

The end of stranded power

But an under-discussed effect of the AI boom could also be a new use for stranded electricity. Metal smelting is energy intensive, with aluminium particularly dependent on cheap electricity. This has historically meant that aluminium production has moved to jurisdictions with low electricity prices, particularly those remote areas where transmission is difficult. The classic case of this is Iceland, which used aluminium smelting as a way to effectively export its abundant geothermal electricity to the rest of the world. The same pattern has been seen in Norway, Saudi Arabia, Bahrain, and remote regions of Russia with access to hydroelectric power.

In recent decades, the global aluminium market has become ever more dependent on supply from China, supported by industrial policy and underpinned by cheap electricity from coal power, as well as hydroelectric power in the southwest of the country.

Demand for datacentres fundamentally shifts this dynamic. High speed fibre optic cables can link a datacentre in a remote region of the world with cheap electricity, allowing it to export data rather power. If AI demand continues to rise, stranded power could be a thing of the past, pushing up electricity prices in remote locations around the world, potentially slashing margins for a host of aluminium producers, even as demand for the metal increases.

A boon for miners?

There is a final wrinkle in the AI demand puzzle: it's potential effect on supply.

As Dutch bank ING wrote early this year, artificial intelligence could help feed booming critical mineral demand.

"AI could aid the mining industry in the search for new deposits at a time when governments around the world are looking to secure supplies of critical raw materials that are essential in the green energy shift," ING said.

"Technologies like AI, machine learning and data analytics could be used in the discovery and extraction processes to help meet the increasing demand for the metal," ING said. "That is if investment in the sector grows and mining companies are willing to embrace new technology."

Flighty capital

While the prospect of increased mineral demand, even as AI helps increase discoveries and shave processing margins, might seem like unmitigated good news for miners, a degree of caution is necessary.

The story of the old Britishvolt site in Northumbria should remind investors that capital is flighty. A huge buildout of datacentres will also need capital, draining funding away from a mining industry that is desperately in need of it.

 Repeated cycles have shown that mining is a Cinderella industry, often having to make do with whatever capital is left over after the tech sector has had its fill.

The new energy boom of recent years has shown that ultra-bullish mineral demand projections are not enough to get more mines built.