Trust key to mining success: PwC

The world’s top 40 mining companies are in a battle to develop and maintain trust with stakeholders to ensure project success, according to new PwC research.

PwC’s 2022 Global Mine report reveals that effectively executing environmental, social and governance (ESG) strategies is a key element to assuring the social license to operate.

“ESG is no longer optional or a point of differentiation; it’s now the minimum operating standard. Stakeholders are increasing the pressure, and strong social licences, responsible divestitures and tax transparency will be important for success,” the report said.

The biggest challenges facing miners exist across multiple fronts: Critical mineral price volatility, time to permit, finance and construct new projects, depleted economic deposits, geopolitical risks and rising ESG expectations.

According to the report, the crucial actions that world’s biggest miners need to take in response to these challenges are:

• Evaluate critical mineral exposure
• Seek opportunities to own supply chain or partner with original equipment manufacturers (OEMs)
• Deploy capital at a pace commensurate with net zero transition
• Focus on ESG to build trust with stakeholders and strengthen social license

Critical minerals key to net zero transition

The global transition to net zero is expected to drive demand for critical materials and rare earths, including nickel, lithium, and copper. According to the International Energy Agency, the annual demand for critical minerals from clean energy will surpass US$400B by 2050, equivalent to current coal market revenues.

“The shift to net zero will require more mining, not less. The rapid scaling of the low emission energy systems of the future—solar and wind power, electric vehicles (EVs) and grid-scale batteries—will be highly material-intensive. The production of a solar farm requires three times more mineral resources than a similar-sized coal plant, and constructing a wind farm needs 13 times as much as a comparable gas-fired plant,” the report said.

While gold was the largest deal driver in the top 40, the report reveals that miners of critical minerals outperformed the market average by up to 147 percent.

Providing resources for the energy transition will depend on mining critical minerals sustainably, as the mining sector works to meet growing demand.

“Some of the leading Top 40 are well down the path of re-orientating their portfolios towards forward-looking strategies. In August 2021, BHP announced divestiture of its oil and gas operations to focus on its potash mine development, a rebalancing that reflects the company’s pivot to future-facing commodities. Glencore announced in December 2021 that it intends to simplify its portfolio and accelerate its shift towards the commodities of the future,” the authors said.

“This strategic mindset is likely to lead to greater diversification among the Top 40 as they move into different commodities and situate themselves at new points in the value chain.”