Energy transition could lead to smaller mines

June 9, 2021

A new report accountancy firm PwC suggests that as the world begins to transfer to cleaner energy production the world's biggest miners should consider developing smaller deposits to make the most of the commodities expected to be in demand in the future.

Large mining companies have tended to seek the biggest, low-cost, long-life deposits, such as top global miner BHP Group's iron ore operations in Western Australia that have already been running for more than half a century.

In the report, PwC writes the global energy transition has opened up opportunities as power grids decarbonize and as demand grows for battery raw materials like nickel, cobalt, lithium as well as copper from electric vehicles.

“The way battery minerals present themselves geologically doesn't necessarily lend themselves to a multi-decade horizon,” PwC Australia Global Mining leader Paul Bendall told Reuters. “That might mean the top miners need to recalibrate their investment criteria.”

Battery minerals represented less than 3 percent of the top 40 miners’ total revenue in 2020, the PWC report showed, but there are ample opportunities for that to share to increase, including through buyouts.

Miners have developed significant warchests as governments around the world invested heavily in infrastructure to overcome the disruption caused by COVID-19, sending prices sky high.

As well as investing in renewable power generation alongside their mines, some firms may move into processing, Bendall said.

Tesla’s chair told an Australian mining conference that environmental, social governance (ESG) would be a major consideration in how new energy supply chains develop.

Tesla plans to spend $1 billion a year on Australian minerals thanks to its reliable mining industry and responsible production practices.

However, mining companies need to take the safety mindset they have spent the last few years instilling into their work culture and apply that to integrating ESG, the PwC report said.

According to MSCI ratings, only four of the Top 40 are considered leaders in managing the most significant ESG risks and opportunities, PwC noted.

 

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