THE mining industry is critical to the world’s transition to a low carbon future but it is highly under-capitalised because of a “deficit of trust” with general investors and faces the risk of not being able to meet future demand for critical “green minerals”.
Those are some of the findings of the 2021 edition of Deloitte’s ‘Tracking the Trends’ report on the global mining industry which said the industry was at an important juncture.
The report singled out “poorly performing transactions” resulting from “richly priced M&A (merger and acquisition) transactions that failed to deliver” during the last mining boom as one of the key issues.
It said “small and mid-sized miners on the hunt for capital have often struggled. This is doing more than obstructing market activity; it’s also leading to a limited pipeline of new projects being developed and put into production”.
Turning to the likely demand for the various green metals, the report said that ramping up renewable energy generation was bound to increase demand for nickel, cobalt, lithium, heavy rare earths, and copper.
“That list would further include graphite and manganese if lithium-ion batteries win the race for supremacy of the EV (electric vehicle) market,” it said. “Redox flow batteries – just one proposed alternative to lithium-ion batteries in stationary energy storage applications – would require a greater supply of vanadium and zinc.
“Conversely, if hydrogen fuel cells gain greater traction, demand for platinum seems likely to spike”.
According to Deloitte Consulting MD, Richard Longstaff, “… while there could potentially be dozens of minerals considered critical for the future, no one wants to take the risk of losing access to the commodities they deem essential. We’re already seeing a worldwide scramble by governments, state entities, and original equipment manufacturers to lock in supply”.
He cited agreements between Tesla and battery maker Samsung SDI to secure cobalt supply from Glencore and Tesla’s move to secure lithium mining rights in Nevada as examples.
The report highlighted a potential supply shortage in nickel because most nickel produced by the mining industry is destined for steel production and does not have the quality or correct chemical form to be used in batteries. Global demand for battery-grade nickel could rise 10 to 20 fold by 2030.
It pointed out that “… the production process is sufficiently different that miners cannot simply switch from producing lower-quality class two nickel to the higher quality class one nickel required for battery applications. There is currently little incentive to switch as battery makers now consume only 5% of global nickel output.
“While the industry could arguably meet this demand few mining companies may be prepared to assume the investment risk associated with building up significant capacity before it becomes clearer that the demand will materialise.”
