On 20 May, the Mining 2030 Investor Agenda – the investor coalition focused on engagement with the global mining sector and led by the Church of England Pensions Board – hosted its second roundtable exploring the role of mining in the low-carbon transition.
Representatives of prominent asset owners and fund managers as well as the banking and insurance sector heard from Darryn Quayle, former UK Government Mining Engineer and current VP Resources at Worley, and Aidan Davy, COO of the International Council on Mining & Metals, in a knowledge-building session exploring whether critical mineral supply can meet the demands of the low-carbon transition and the global development agenda.
The roundtable built on the key takeaways and questions raised during the first roundtable, which can be accessed here.
Key takeaways from the second roundtable include:
Speakers signalled a looming mismatch between climate ambition and investment in mining capacity, echoing warnings made during the first expert roundtable. Copper, lithium and cobalt are among a host of minerals needed for low-carbon technologies that are expected to see supply struggle to keep up with demand, with $42bn investment required in lithium alone. A failure to secure supply of these critical minerals will risk delaying the energy transition, jeopardising climate targets and global climate stability.
Source: The International Energy Agency
However, mineral market characteristics often work to disincentivise significant investments in mining capacity, with the sector therefore demonstrating limited willingness to increase production at pace, investors heard. Industry concerns are rooted in sustained signals from investors that investing in increased capacity is not something that investors are supportive of. These signals have been driven by historical evidence showing that increased production causes mineral price depression, with potentially crippling impacts for projects in development, intermediaries like refineries and smelters, and mining sector market capitalisation. In this context, roundtable attendees suggested the need to identify potential long-term actors and capital in a diverse investor community.
Source: Benchmark Mineral Intelligence data
There are furthermore mismatches of investment along mineral supply chains, investors heard. According to Benchmark Mineral Intelligence data there are 309 battery gigafactories in the pipeline. Speakers indicated many will face a lack of raw material feedstock – with Western assets likely to face more supply chain risk than Chinese assets – which could threaten operations as well as carbon reduction capacity. European megafactory investments are predicated on a secure, long-term low-carbon supply chain with integrated ESG safeguards throughout – which speakers indicated is unlikely to be realised in reality.
Speakers indicated that protracted mine asset lifecycles could contribute to delays in mineral supply coming online. Greenfield mines can take several years to reach production, with the International Energy Agency (IEA) citing an average of 16 years, and McKinsey putting it at seven to 10 years. Some jurisdictions require up to 500 individual permits, many of which relate to essential ESG protections. Miners and other stakeholders are tasked with compressing timeframes, not only without compromising environmental and social safeguards but also while ensuring enhanced developmental opportunities for resource-rich nations.
Source: KPMG International
Speakers furthermore indicated that a lack of progress in developing new, scaleable engineering methods could exacerbate mineral supply delays. Among key challenges cited were rare earth separation (extracting the elements needed for electric motor magnets from a rare earth mix), which is currently an energy-intensive, 970-step process, and EV battery anode production, for which current processing equipment is unable to meet a projected 900,000 tonnes of anode demand by Europe by 2030.
Speakers indicated that, while many mining companies and downstream users like the automotive and electronics sectors are directly negotiating and entering into long-term supply contracts, these bilateral conversations are rooted in commercial self-interest. By contrast, sectoral efforts to coordinate on responsible raw material supply at the macro level are limited. One rare example of such efforts is the Drive Sustainability initiative, backed by a host of major automakers, which focuses on improving the social, ethical and environmental performance of automotive supply chains.
Individual governments are increasingly becoming exercised by the need to secure critical mineral supplies. For example, Canada is making provincial and federal investments in critical mineral production and processing, and in the US, the Biden administration has announced investment in domestic raw mineral production and ordered a review of critical mineral supply chain vulnerabilities, focusing on the potential for overreliance on foreign sources and “adversarial nations” to pose national and economic security threats. The UK is also set to publish its Critical Mineral Strategy this summer.
However, speakers expressed concern that, with the exception of the EU, governments are adopting competitive rather than collaborative approaches on critical mineral security and neglecting to discuss the issue in international climate negotiations. For example, the COP26 agenda failed to address mineral supply chains despite considerable pressure from the mining community to be involved in the conversation, and indications from COP27 organisers indicate that critical mineral security and mining’s role in mitigating climate change will not be discussed at the event. Speakers therefore called for connected intergovernmental efforts to integrate and optimise raw material supply chains.