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ESG, critical materials shape mining success

Thursday, June 16th, 2022

Future success for the top 40 mining companies in the world will depend on how much of a leading role they can take in the move towards clean energy, and whether they can continue to generate significant stakeholder value.

 The findings are revealed in PwC’s (PricewaterhouseCooper) 19th annual review – Mine 2022 – which examines global trends in the mining industry.

Amid an accelerating industry-wide transformation, the world’s Top 40 miners posted stellar financial results for 2021.

Combined with their strong performance in 2020, the Top 40 face the future in excellent financial shape. But how long the big miners can continue their record run is less clear.

This year’s report suggests that the rewards for those miners that emerge as leaders in the clean energy transition could be immense. According to recent data, the need for “critical minerals” such as copper, nickel and cobalt is expected to grow over the next three decades, with some estimates suggesting that the annual demand from clean energy technologies will reach over US$400 billion by 2050.

Australia’s competitive advantages include:

  • Critical minerals – The shift to clean energy will require more mining and Australia can be a major player in the decarbonised global economy due to the endowment of natural reserves in critical minerals.
    For example, demand for copper, lithium, nickel, graphite, and cobalt is expected to increase by up to six times by 2040. There is a tremendous opportunity to develop new exports and deepen processing capabilities.
    Mine 2022 found that revenues rose by 32 per cent among the top 40 miners globally, and net profit soared by 127 per cent on the back of high commodity prices and prudent cost management.
  • ESG credentials – At the same time, the future looks rosy due to Australia’s very strong ESG credentials. The country’s mining sector demonstrates strong workplace relations, and Australia’s miners have a reputation internationally for acting ethically and with integrity.
    The sector’s environmental record continues to keep improving as is consultation and coordination with First Nations peoples.

The report said miners face challenges on several fronts. Prices for critical minerals can be volatile; new projects take time to permit, finance and construct; economic deposits are being depleted; global geopolitics continue to present a range of risks.

What it means to be a miner is changing, and the Top 40 must keep up with the pace of that change. There’s no single answer to the complex task of transformation.

The report said the world’s big miners should be focusing on four key areas:

  • Evaluating their exposure to critical minerals and working out where they need to be.
  • Revisiting deal strategy and identifying opportunities to own more of the supply chain or to partner with end users and original equipment manufacturers (OEMs).
  • Deploying capital and cash flow strategically and at sufficient pace to meet the needs of the transition to net zero.
  • Building trust with stakeholders and strengthening mining’s social licence to operate by increasing the focus on ESG.

The miners that can successfully address these challenges will be best positioned not only to navigate the changing market dynamics but also to create value and to benefit from the rapidly increasing demand for critical minerals and the energy transition.

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