(Reuters) – If the global energy transition is to be delivered in the coming decades, the mining industry believes there is one certainty. They will need to massively boost output of metals.
But they are also convinced that the current model for doing this is largely broken, and miners will, even with the best of intentions, struggle to produce enough copper and lithium and other metals essential to ending the dominance of fossil fuels.
The old model of bringing mines to production was largely driven by small, junior mining companies raising capital, proving up a resource, and then raising more capital to move through permitting and feasibility.
Finally, they would either raise more money to build a mine, or be swallowed up by a larger miner with the resources to build and operate a mine.
But junior miners and private equity investors at this week’s Mining Investment Asia conference in Singapore said that this method of taking a resource to metal production is increasingly difficult to achieve.
The junior miners struggle to attract experienced leaders who can drive a process, and the larger miners are pulling back from supporting the small players develop reserves.
There are several other issues that concern the industry.
The first is a lack of incentive pricing.
One thing most mining and energy transition analysts agree on is that there is currently insufficient copper production to meet anticipated demand as the world moves to electric vehicles and renewable energy technologies.
If this is the case, the question is then why the future price of copper is relatively flat relative to the current price.
Benchmark London three-month contracts ended at $8,475 a tonne on Wednesday. The price for the contract expiring in August 2026 was $8,542.88.
This flat-as-a-pancake structure probably doesn’t reflect what the actual price is likely to be in coming years, but it is the price that consultants and bankers will use when deciding whether to finance a copper mining project.
The flat forward curve thus becomes an impediment to securing financing and advancing any mining project.
NIMBYS TO BANANAS
Speakers and delegates at the conference also lambasted the blowout in the time taken for governments to approve new mines, saying it is now a major obstacle in both developed countries such as Australia and Canada, and increasingly so in more risky jurisdictions in Africa and parts of Asia and South America.
It now takes an average of 23 years from discovery of a copper resource to a producing mine, according to data shown at the conference by Michael Langford, the executive director of consultants Airguide.
Major copper discoveries have also plunged in recent years, with data showing a slump from 15 in 2007 to just two since 2015.
And even if a miner does make a discovery, the battle then becomes to secure official approvals and a social licence from not only the local communities, but also broad range of environmental and traditional landowner groups.
People opposed to building new projects near where they live or farm have been referred to as Nimbys, standing for Not in My Backyard.
But a new term is coming up. Banana, which stands for Build Absolutely Nothing Anywhere Near Anybody.
For the mining industry, a Banana is far worse than a Nimby as the opposition is against any project being built, no matter where it is and what impact it may or may not have on the environment or the community.
The industry view is that many of the people demanding an energy transition the loudest are the very same people working hardest to make it virtually impossible to produce the necessary metals.
The question then becomes how do these issues get resolved?
Governments could work to speed up approvals once they recognise the need for expanded mineral production, but history suggests government action really only happens when the point of crisis is already reached.
The mining industry can get better at messaging and trying to win a public relations battle it has largely lost, but again this is a hard mountain to climb and the industry is fractured and lacks convincing voices.
This leaves the price signal as the best bet, but the problem with this is that by the time prices rise high enough to incentivise new production and speed up developments times, it’s already too late.
The opinions expressed here are those of the author, a columnist for Reuters.
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