By Nicki Ivory, National Lead Partner for Mining & Metals, Deloitte
The green energy transition, in Australia and around the world, will be a mineral-intensive one.
The world is at a critical point in time – socially, environmentally and economically. We are confronted by undeniable climate change that requires the strongest action. And we know that the green energy transition, in Australia and around the world, will be a mineral-intensive one. In fact, mineral demand for clean-energy technologies alone is expected to quadruple by 2050.
But there is often a disconnect between public perceptions of the industry and resistance to projects, and the very clear environmental and economic benefits that those projects can deliver.
And so, while the need for mined products has never been greater, public opposition to mining activities – and particularly in the context of global warming – has also never been higher.
It is time for the industry to really stand up and tell its story – centred on the critical role it is playing, and will continue to play, in addressing our very real climate change challenges.
From civil infrastructure to transport, technology to agriculture, and medicine to science, the products of mining have always supported our modern way of life. Put simply, without mining and metals, our energy transition and global climate change mitigation efforts will not be possible.
Under this broad theme of being – and being seen to be – as a catalyst for positive change, Deloitte’s 2023 Tracking the Trends report identifies the key trends that will impact the mining industry over the next 12 to 18 months – each of which has a role to play in guiding companies to success as they seek to both capture and convey the value that the industry generates.
Four trends are especially relevant to operators in Australia.
Generating strategic advantage through natural capital
Mining and metals operations are a long-term investment. In today’s fast-paced, unpredictable and ever-changing environment, it’s more important than ever for companies to be looking ahead and paving the way for sustainable, adaptable growth.
Access to capital is an important factor in this, and the metrics upon which mining and metals investors – both stalwarts and new entrants – base their decisions are rapidly changing. Traditional net present value calculations no longer provide a sufficient picture of the risks and opportunities presented over a project’s life cycle. A more holistic approach may be needed and, subsequently, a rapidly growing area of focus is how companies interact with nature and reflect an accurate valuation of natural capital in their financial disclosures.
In the future, mining and metals companies may find that they have a significant advantage in accessing funding, insurance, talent, and obtaining permits and a social licence to operate if they take an integrated and systematic approach to nature as part of their larger environmental, social and governance (ESG) strategy.
The role of mining in a circular economy
The way value is defined is changing to support a bid for greater sustainability, as evidenced by the introduction of carbon pricing, ESG measures and the evaluation of biodiversity risk. Driven by this change, mining and metals companies are beginning to reconsider their traditional roles as metal producers, finding ways to capitalise on previously untapped sources of value and exploring new avenues for value creation.
Change on this scale is daunting, but necessary. The intensification of climate change, environmental degradation and widespread pollution are products of a linear economic model – one that has reached peak maturity and is starting to fail under the weight of a rapidly expanding population.
A circular economy presents a more sustainable alternative. It can provide a framework for an economy decoupled from finite materials, while minimising negative impacts to people and the planet. A circular economy is underpinned by the move to renewable energy and, as the providers of the raw materials needed to create these technologies, no industry is better positioned than mining and metals to lead this change.
Supporting the decarbonisation of economies
The creation of low-carbon, future-fit building materials, vehicles, energy technologies, and more is reliant on the minerals and metals from which their key components are produced. Although the mining and metals industry does contribute to global carbon emissions, the sector’s foundational role as a provider of raw materials means that its handprint, or potential to lower carbon emissions across the broader economy, outweighs its footprint.
Across the industry, efforts are well advanced to lower Scope 1 and 2 greenhouse gas (GHG) emissions. Research from The University of British Columbia has shown that 90 per cent of total emissions from mining and metals globally originate from the manufacturing of iron and steel. Scope 3, or avoided emissions produced by activities up and down the value chain – including smelting and refining – can constitute up to 98 per cent of an individual company’s total GHG emissions.
Value chain decarbonisation is one of the biggest challenges that miners and metal producers face; however, by assembling the different players, embracing their potential as influencers, and helping other organisations to lower their footprints, there are also opportunities to create exciting new roles, speak to younger generations who are keen to work in a purposeful sector, and invite new ways of thinking and working.
Futureproofing mining and metal supply chains
In today’s interconnected world, mining and metals organisations depend heavily on their supply chains to provide the minerals and metals to build, power, and tech-enable the modern world or feed the growing population.
Concerns including high transportation and logistical costs, labour and material shortages, and increased prices that were triggered by the COVID-19 pandemic are being compounded by the Russia–Ukraine conflict. Metal provenance is now a key concern. China, for example, is the world’s largest producer of rare earth metals, dominating 80 per cent of global supply. The realisation of this has prompted governments, including the United States, to declare their supply a matter of national security.
As the energy crisis unfolds, metals manufacturing companies that rely on gas and electricity have also announced belt-tightening measures, with some furloughing workers and cutting production. For example, half of Europe’s aluminium and zinc production was taken offline during 2022.
Despite these challenges, mining and metals companies can do their part to help safeguard global raw material and metals supplies by taking a fresh look at risk, and fortifying their own supply chains.
It is clear that meeting the critical and growing demand for the metals and minerals that will underpin a decarbonised future is a story worth telling.
For the mining and metals industry, it needs to be a case of both words and actions.