A GLOBAL MINING SNAPSHOT

In recent years, a variety of factors and an ever-changing global landscape have exposed an urgent need for countries to secure new supply chains for critical minerals. Mining Magazine spoke to KPMG’s National Mining and Metals Leader, Nick Harridge, about Australia’s critical minerals landscape, as well as key issues concerning supply and demand, downstream processing, ESG and innovation.

Events on the global stage have had a significant impact on supply chains across the country, and around the world. The COVID-19 pandemic uncovered vulnerabilities in global supply chains, disrupting trade and underscoring the importance of self-sufficiency. Simultaneously, the changing geopolitical landscape has highlighted concern about the stability and reliability of existing mineral supply sources.

These developments have spurred nations into reevaluating their existing strategies – seeking resilient and diversified supply chains for critical minerals essential to technology, defence and economic advancement.

The recent AUKUS agreement – a strategic partnership between Australia, the UK, and the US – has highlighted the need and the value of establishing secure supply chains.

With the expected increase in global demand for critical minerals, some speculate that the sector may not be able to meet the growing requirements, leading to potential shortages.

In order to place this speculation in the right context, Mr Harridge said it was important to understand the broader mining outlook for the sector, before focusing on critical minerals.

“According to the KPMG Global Mining Outlook 2023 Report released on 22 May 2023, technological changes are the most important factor affecting the five-year demand projections of executives surveyed,” Mr Harridge said.

“The findings indicate the technologies that will have the most impact on mineral supplies are focused on advances in exploration and extraction technology, AI, 5G networks, and Internet of Things (IoT) and provide an important framework for thinking about the critical minerals sector.”

Referring to the report, Mr Harridge said 41 per cent of executives surveyed said their biggest opportunities over the next five years lay in operational cost efficiency through technology investments, while 43 per cent indicated transforming the carbon footprint through technology.

“54 per cent saw changes in technology as the most important factor affecting their company’s range of demand projections over the next five years. Transforming the cost-efficiency of operations through technology investments comes a close second.”

When assessing the technologies likely to have the most impact on increasing mineral supplies over the next five years, 26 per cent said 5G technologies while 24 per cent called out advances in exploration techniques and technology, IoT, and new extraction technology all in equal second place.

The report also asked participants about the two technologies likely to have the most impact on increasing metal supplies over the next five years, with 48 per cent saying artificial intelligence while 42 per cent identified data and analytics.

Findings of the report

Improving energy efficiency

The report showed that the rapid progress mining companies are already making to reduce carbon emissions is encouraging them to invest more in decarbonisation efforts. The survey showed that improving energy consumption efficiency is the highest priority for tackling the environmental challenges from mining and metals processing.

Achieving growth and net zero

Mining and metals executives are confident the industry can increase production without compromising its own objectives for a net zero future and respond to environmental, social and governance (ESG) concerns. The ratio of optimists to pessimists is nearly ten to one.

Focus on ESG goals

While mining and metals companies invest heavily in reducing their carbon footprint, they are also focusing on ESG goals. Executives consider that the highest priority for tackling the social impact of mining and metals processing is to provide its workforce with healthcare, paid leave and retirement benefits.

Critical minerals in the energy transition

When asked how Australia can provide critical minerals on a global scale to achieve a successful energy transition, Mr Harridge said the country needed funding.

“Announcement of the Inflation Reduction Act (IRA) by the US Federal Government in May 2023 is interesting and notable for mining and metals but it’s still early days in understanding its impact. We believe that broadly speaking the IRA will have a positive impact on the sector as will the Australian Government’s Northern Australia Infrastructure Facility (NAIF).”

Mr Harridge said funding sources through Australian investors can only help meet the critical mineral’s supply and processing challenges but that more funding sources will be needed from Europe, Asia and the US, together with debt financing and alternative investment funding.

“We will need the funds to deliver the enormous projects required to produce the critical minerals and manufacture the materials to meet demand.”

Mr Harridge said that Australia’s abundance of minerals to support the energy transition puts the country in an advantageous position, especially in four of the top five minerals: copper, lithium, nickel and cobalt.

“We also have strengths in technology solutions and knowhow. In addition, Australia is ESG savvy – we have labour and skills access to get things done. We’re also a good location for both mining and processing.”

Referring to the report, he said, “We continue to see minerals to support the energy transition as the centrepiece for the sector in 2023. We note that Australia has an abundance of lithium, nickel, aluminium, cobalt and copper – together with a number of rare earths and mineral sands. The key demand story is highlighted with lithium.”

The Federal Government’s announcement in May 2023 of $50 million to be invested into 13 projects, each with a downstream element, aims to build Australia’s ability to deliver great downstream opportunities.

“KPMG believes the funding will support the emergence of Australia as a critical minerals manufacturing hub. We’re looking forward to further government initiatives like this.

“The Western Australian Government is working on supporting the development of such a manufacturing hub for critical minerals in the state. In addition, the Safeguard Mechanism that came into effect on 1 July will place further focus on the energy transition and the solutions to get there – a key aspect being critical minerals.”

Australia’s rare earth potential

“Rare earth elements are 17 elements which, despite their name, are not actually all that rare in the earth’s crust. They are, however, rare in terms of accessibility, as in most places they are not found in sufficient concentrations to support commercial mining operations, meaning it is neither economically nor environmentally feasible to extract and process them.”

Mr Harridge said that while there are deposits around the world, they are costly to develop, and have long lead times, usually around a decade. Additional challenges also lie in the social licence to operate, and environmental, social and governance (ESG) concerns.

“Everyone uses rare earths, and demand is growing exponentially. REEs are used for everything from lighting, glass and magnets to hybrid and electric vehicles, wind turbines, and defence systems,” he said.

“REEs are essential for the transition to carbon neutral economies. As critical components of ‘Industrial Revolution 4.0’, they are essential for the production of high-tech applications that underpin, for example, the deployment of 5G, and the development of artificial intelligence.”

Mr Harridge said rapid technological advances, along with the trend towards the decarbonisation of the global economy and corresponding demand for renewable energy creation and storage, are driving a growing demand for REEs and critical minerals around the world.