Green Metals or Green Shoots

Spencer Eckstein – Director, Ukwazi Mining Studies Pty Ltd

The race is on amongst major mining companies to secure green metal deposits and to bring them into production as quickly as possible. Although the focus has been on lithium, cobalt, rare earths, and nickel, the smart money has been directed towards copper.

Rio Tinto announced in March 2023 that it will invest $7 billion to transition its Oyu Tolgoi mine in Mongolia from an open pit mine to an underground operation, using block caving as one of the preferred mining methods. The copper concentrator used in this operation will adhere to international environmental, social and governance (ESG) standards and the Mongolian Government will hold a 34% stake in the mine.

So, what exactly is interesting about this? Well, it falls in line with major battery metal trends: the commodity, the mining method, the transition from open pit to underground and the integration of ESG, particularly for the concentrator design and operations.

Old school may still be better than new school

In addition to its various industrial and construction applications, copper is also recognized as a battery metal due to its distinctive ability to conduct electricity and be recharged. According to research carried out in October 2022 by the International Copper Association, a standard petrol/ diesel combustion engine vehicle requires approximately 23kg of copper; a plug- in hybrid electric vehicle 40kg of copper and a plug-in battery electric vehicle 72kg of copper. This excludes battery charging infrastructure.

Some analysts believe copper prices are an indication of the underlying economic health of the global economy. Like all commodities, copper prices are subject to geopolitical factors, supply, and demand issues as well as the regional dynamics in markets where copper is mined e.g., Zambia, DRC, and South America e.g., Peru.

During an interview with CNBC, a business news television station, on February 6, 2023, Robin Griffin, Vice President of Metals and Mining at Wood Mackenzie, stated that they are already predicting significant copper deficits until 2030. The undersupply of copper may have a material impact from a cost perspective on renewables and electric vehicle (EV) production. Costs my increase from about $6500 to $9500 per tonne. The supply deficit was confirmed and may be as much as 50 million tonnes between 2022 and 2030 according to the CEO of Glencore, Gary Nagle in an interview with Bloomberg on 6 December 2022.

Mining methods and processing

In the spirit of the circular economy, copper producers like Glencore in the DRC are reprocessing tailings.

As mines reach maturity, they often undergo a transition from open pit to underground mining due to physical surface constraints such as infrastructure, community settlements, environmentally sensitive areas, or it becomes more cost-effective to mine underground.

Most underground mining methods struggle to compete with open pit mining methods in terms of production rate and economies of scale. High production caving mining methods such as block caving could be favoured if the mineralized zones are amenable to caving. These are capital intensive and highly specialized developments with risks that are very different from the risks of open pit mining. Mining companies do not only have to transition in terms of the mining method, but also in terms of the skills to design and develop cave mines, but also the skills to operate the infrastructure and equipment and support services for theses specialized mining methods.

Shareholders vs stakeholders

Mining companies have had to alter their perspective on inclusivity, moving away from solely prioritising shareholders to also encompassing stakeholders. As mentioned, the Rio Tinto mine in Mongolia includes the Mongolian Government as a shareholder and also accepts that a contribution to local economic development is essential to the overall project’s success. Closer to home, Orion Minerals, which is developing the copper-zinc deposit near Prieska in the Northern Cape, won the prestigious Emerging ESG Leader award at the 2020 Australian-Africa Minerals & Energy Group. The accolade was received in recognition of the company’s community engagement model, which focuses on local community engagement, procurement, employment, and subcontracting.

So what?

For the purposes of green metals in particular and mining in general, we believe the following trends are important: decarbonization; the circular economy; the manner in which EGS is being integrated into projects; how AI and cloud-based technologies are likely to drive innovation; how systems thinking and inclusive collaboration of multiple stakeholders in the mining and metal production ecosystems will improve project valuations, operational efficiency, and safety. The Rio Tinto and Orion projects above illustrate the point.

In a World Bank report on Africa’s Resource Future published earlier this year, it indicated that: ‘…the transition from fossil fuels to clean energy is likely to create demand for 3 billion tonnes of minerals and metals needed to deploy solar, wind, and geothermal energy by 2050. Lithium, cobalt, and vanadium are critical for energy storage, and copper, indium, selenium, and neodymium are essential for manufacturing wind and solar power generators.’

So, from a strategic perspective, it suggests that South Africa, in particular, and Africa, in general, have a significant comparative competitive advantage when it comes to supplying green metals and contributing to the energy transition, both locally and globally. Having said this, the question remains whether political short sightedness, poor government policy and weak institutions will conspire against the mining industry benefiting from the current commodity boom.