As the global economy has started to recover from the pandemic, metals and mining prices have gone up. The breakthrough of pent-up spending, new government stimulus programs, and an accelerated global energy shift has prompted an increasing demand for most metals. However, there are also risks for miners in 2022.
Let’s look at the mining sector and considerations for improvement as we lay a foundation for tomorrow.
Opportunities for The Mining Industry In 2022— Volatile Global Electric Vehicle Adoption
Electric vehicle (EV) mass adoption is expected in the following years, driven mainly through regulatory incentives, growing salaries, and technology breakthroughs. The availability and affordability of the raw materials necessary to accomplish this change, on the other hand, is a prerequisite for broad acceptance.
Metals with limited markets (such as lithium, nickel, cobalt, and graphite) are expected to grow as EV demand grows. In a situation in which all cars are EVs, demand for metals such as lithium and cobalt is expected to be 20 times greater than it is now.
Steel, aluminium, and copper manufacturers are unlikely to face supply issues, but demand for green versions, especially aluminium, is expected to climb as worries about carbon emissions grow. Price premiums for low-carbon goods, as well as metal supply limits, will raise the cost of raw materials. Making it even more vital to boost production efficiency to optimise profitability and encourage a sector-wide move toward decarbonized processes.
Top Three Risks for Miners In 2022
While we talk about the opportunities for the mining industry in 2022, we certainly can’t ignore the challenges that the sector is facing right now.
According to the recent EY Top 10 Business Risks and Opportunities for Mining and Metals in 2022, global mining executives place environment, social and governance (ESG), decarbonization, and license to operate (LTO) as the top three risks confronting their business over the next 12 months.
While many market dialogues are presently focused on energy transition and the path to decarbonization, 25% of survey respondents place environmental and social concerns as the most significant risk to their organization, showing that biodiversity, social effect, and water management are top-of-mind. As a result, miners claim they are starting to include ESG concerns into business goals, decision-making, and stakeholder reporting.
“Navigating ESG is increasingly challenging given the breadth of issues the sector continues to face, coupled with the myriad of reporting standards they need to adhere to,” explains Theo Yameogo, Americas Mining & Metals Leader.
The change of administration in Peru is an excellent illustration of the most significant risk – Environmental and Social Issues. Peru is vital to Canadian mining businesses since it is the world’s second-largest copper producer. Peru’s new administration sparked a significant uproar in November 2021 when it rejected extensions to four miners in the country.
Although this posture was eventually softened, the Peruvian scenario emphasizes the significance of mining firms paying great attention to environmental and social concerns. “Mining firms may seek extensions and amendments to their licenses to explore and exploit in strict compliance with existing rules,” the ministry stated in a statement.
This year, two new risks emerged: “Uncertain demand” owing to energy transition and post-COVID-19 markets at number six, and “New business models” that must be addressed to capture value despite volatility at number nine.
Despite business dialogues in 2021 focusing on the energy transition and decarbonization, environmental and social concerns emerged as the top risk for 2022.
Conclusion: Challenges create opportunities!
While specific issues may seem to be beyond a company’s control, they are not. According to Robert Johnston, Managing Director and Executive Advisor for Energy, Climate, and Resources at the Eurasia Group, Canadian miners must be proactive to work through the challenges and uncertainties.
He emphasizes the growing importance of securing and maintaining social license for their projects, whether in Canada or abroad, as a way to pursue growth with confidence while navigating risk. This only emphasizes the importance of environmental, social, and governance (ESG) performance, which will be critical in winning and keeping that social license in the coming years.