The massive shake-up coming for the mining industry
PwC’s Mine 2023 report says the entire trajectory of mining’s future has changed and companies are struggling to catch up.
The entire trajectory of mining’s future has changed, and mining companies are struggling to catch up to the reality.
That’s the prognosis of the analysts at PwC, who recently released their annual Mine 2023 report.
The report opens with a stark warning: “The world’s big mining companies must find a new formula for success. The era of critical minerals has arrived, and it’s the most momentous change the industry has seen in decades. Miners can no longer depend on yesterday’s portfolios and practices to create value in this newly dynamic and fiercely competitive landscape.”
PwC said 41% of mining company CEOs don’t think their companies will be economically viable in ten years if they continue on their current path.
“The era of critical minerals must therefore be an era of reinvention,” the report authors argue.
The mining landscape, they explain, has changed in a couple of key ways.
Governments getting more involved in mining
Firstly, governments have become much more closely involved in the minerals markets, particularly for critical minerals.
“After seeing rapid demand growth and risky levels of supply chain concentration, governments have formed alliances, instituted new policies and mobilised funding to secure access to critical minerals,” the report states.
“These moves will change the mining business. The inflow of public funds, for example, means that miners must rethink the rates of return they can expect on mining or supply chain assets.
“Miners will also need to contend with heightened investment risk and greater competition as governments alter the playing field with incentives and interventions.”
One example of government intervention is Australia’s export credit agency, Export Finance Australia, setting up the Critical Minerals Facility to fill gaps in private financing for critical minerals projects.
“In 2022, the agency agreed to lend Australia miner Iluka Resources US$1.05 billion to build a fully integrated rare-earths separation facility in Western Australia,” PwC’s analysts point out.
“The Australian Government is also directing a portion of its US$15 billion National Reconstruction Fund to critical minerals companies that build processing, refining or manufacturing capacity in the country.”
Decarbonisation is the future
Secondly, there’s the move towards the decarbonisation of the global economy.
“Miners will have to ramp up production to meet rising demand for the critical minerals and other commodities that are required for the energy transition,” PwC’s analysts said.
“But they also know they must reduce their carbon emissions. More than one-third of mining CEOs see their company as highly or extremely exposed to climate-related risks.”
Many mining operations are in hot, dry, remote environments, and 35% of mining CEOs told PwC their companies were highly or extremely exposed to climate risks arising in the next five years.
“The good news is that decarbonisation can help miners create value at all points along the value chain,” the report authors said. “More and more, we’re seeing miners boost efficiency with low-carbon technologies and methods, partner with processors to produce the ‘green metals’ that customers increasingly want, and access sustainability-linked financing.”
PwC’s analysts warn this transition will not be straightforward, either for the mining industry or the wider economy, and will require changes to the mining industry’s make-up.
“It’s clear that mining and metals production, as practised today, results in substantial carbon emissions,” they said.
“At the same time, leaders recognise that mining plays a crucial role in the energy transition by providing commodities for renewable-energy and climate technologies. “Indeed, achieving global emissions-reduction targets will require more mining products, according to the International Energy Agency: more steel for wind turbines, more copper for transmission lines and electrical components, more lithium for batteries, more rare-earth materials for electronics.
“As a result, mining companies face a dual imperative: to increase output of conventional and critical minerals while decarbonising mining, refining and production processes.”
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