“Teslas don’t grow on trees”, Reuters journalist Ernest Scheyder wrote in The War Below, highlighting conflict between government mandates on electric vehicles and public policies hampering new metal flows into EV supply chains. The conundrum at the heart of American author Scheyder’s book is the same one executives at the world’s major miners, and many investors in the industry, are grappling with.
These are conversations that seem to become more nuanced with each passing month.
Bryant says miners need to innovate and find ways to become integral parts of circular economic systems. They need to “lean into” recycling and evolve into materials solution providers. They also have to advance traditional project development models.
In that context, the “20-year nightmare” of resource discovery, permitting and development, to production, is “just not sustainable anymore”.
Bell says bigger miners harvesting robust cash flows from iron ore, gold and copper assets, and sitting on strong cash reserves, can pivot capital towards copper and other energy transition metals.
He says: “All miners now deploy capital with appropriate rigor. The middle speed, however, is made up of mostly mid-tier miners who will be obliged to adopt a particularly cautious approach to capital deployment. This may delay their pivot, widening the gap to the mining majors.”
Bell believes all operators will need to demonstrate the “integrity of their approach” from an environmental, social and governance (ESG) standpoint. He says miners of all sizes face common ESG challenges.
Global sustainability advisory firm ERM’s analysis of more than 100 critical minerals projects indicated that between 2017 and 2023 nearly 60% of operators reported pre-production delays ranging from a few months to several years. Permitting issues (39% of projects), technical challenges (36%) and commercial issues (26%) topped the list of headwinds, but ERM found environmental concerns (24%) and stakeholder opposition (17%) contributed to delays.
Impacts and benefits in different places
Hall, who heads the firm’s EMEA socio-political team, says mining companies are “struggling to decide what commodities to prioritise, what capital investments will derisk their operating assets from an ESG perspective, and which of their investors’, customers’ and stakeholders’ preferences to pay most attention to”.
Rohitesh Dhawan, CEO of the International Council on Mining and Metals ICMM, picked up this theme while in Australia this month.
International private equity investor in emerging mining companies, Resource Capital Funds (RCF), says heightened investor and societal ESG expectations plus the proliferation of ESG frameworks and standards mean navigating the ESG landscape is increasingly complex.
While a new $1 billion gold mine in Australia is not going to add to the world’s critical mineral stocks, this month’s bizarre federal intervention in the McPhillamys project approval process on ESG grounds has added to industry concerns about political interference in otherwise transparent mine development paths.
Sam Berridge, portfolio manager at small-company investment firm Perennial Partners, says access to land and permitting are becoming more significant hurdles for the industry.
He says even though large mines such as Cobre Panama, Kamoa-Kakula and Oyu Tolgoi have begun production in recent years, “it has been a rocky road characterised by multiple delays, capex overruns and fractious negotiations with governments”.
Galloway says the capital intensity of new projects continues to escalate.
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