Canada & Australia: The Critical Minerals Opportunity
Written by Rob Foster, CEO at Geminum
Canada and Australia have enjoyed a long and fruitful relationship across many industries and geopolitical events. Our mining and exploration industries are particularly close, and Aussies and Canucks run into each other in the furthest reaches of the planet on a daily basis. Both of our countries have long, proud, and strong mining industries and we are world leaders in mining operations, technology, and safety. At the beginning of 2023, we also both stand in the prime positions to lead the world into the energy transition.
The challenge
The energy transition is presenting in different ways. Net zero, the reduction of greenhouse gases (GHG) to a net zero state (i.e. reduce most emissions and remaining are offset by other ‘real’ activities) is a target that has been set for 2050. On the way to this, many major companies are setting interim targets such as significant decreases by 2030.
In parallel to this, the transition away from fossil fuels is creating a massive forecast demand of so called ‘critical minerals’ – copper, nickel and lithium are the poster children, but numerous other elements such as aluminium, zinc, lead and manganese are required. Forecasts vary, but the recent IFC report on achieving net zero suggested a 230 per cent increase on today’s production for copper and 300 per cent for nickel.
The magnitude of this dual challenge is best described by the International Finance Corporation (IFC) report (page 9):
- 17 minerals and metals will require significantly expanded production to meet global net zero emissions goals by 2050.
- But without massive, transformative change, GHG emissions from scaled-up production will increase exponentially.
- Mining value chains will need to reduce absolute emissions by approximately 90 per cent from 2020 levels, and remove remaining emissions, to achieve net zero by 2050.
To summarise: massive expansion AND massive decrease in emissions, simultaneously.
For the miners in the room, we love CAPEX and we love new production; but we also know how long it takes to find and bring online. There is not a ready pool of high-quality assets ready to develop and bring into production, nor is there the commodity price pull to justify such large increases. For those with long enough memories, the phrase ‘pure play nickel’ is enough to give most of us shivers about massive and sudden price swings.
The other complicating factor is that many of these metals are not found inside the borders of the traditional mining giants. While modern, mechanised mining has been a global enterprise for decades now, the reality is that many countries have not historically enforced strict environmental standards, and thus a sudden influx of capital, with demands for very quick development, are the very antithesis of massive reductions in emissions.
To further summarise: massive and rapid expansion AND massive decrease in emissions INSIDE countries without strong environmental laws.
This is a real set of challenges. In fact, it’s almost certainly the biggest challenge ever thrown down to mining.
The opportunities
With great challenges, of course, come great opportunities. The opportunity presented by the energy transition is not just the market wanting more metal; it’s the market demanding change. That’s good for mining, because we are uncomfortable with change, and the way we are working is unsustainable and will not deliver the outcomes. Thus the opportunity for mining is to use external capital and demand to transform the way we work, and for those with the appetite, to transform what our industry even is.
Transformation requires many factors, but key amongst them, and the catalyst for many others, is leadership.
Leadership and governance
Canada and Australia have the mining powered economies and mining leadership to lead this transformation. Our countries have extensive domestic infrastructure and supporting METS (Mining Equipment, Technology, and Services) industries. Our governments receive very significant revenues from the entire value chain and have some of the most demanding legal and environmental standards in the world. Our labour costs are some of the highest in the world, and our productivity… is not the best. We also have indigenous populations that we must partner with and create long term value with, and we have not acted in the best interests of them on many occasions. We have all the drivers and challenges right here to transform ourselves and provide visible and tangible leadership to the world.
We also have perhaps the deepest expertise in global mining development. Between our two countries, we have developed and operated mines in nearly every country on earth. We are also, it must be said, friends of the US and China, or at the very least, not enemies of either. We are also small and not a threat to either. We are, in fact, ‘safe’ to partner with in most of the world.
Most importantly, we like working with each other, we like doing things ‘better’ than they’ve ever been done and we both want to create impact that is far beyond our GDP.
Together
Australia and Canada have a unique opportunity – we, as small (GDP) countries, could lead the world into a fundamental change in nearly every value chain on Earth. We, as small countries, could lead mining into a new way of thinking and acting, not out of altruism, but because between us we have a huge block of the smarts and experience, and because we want to punch far above our weight. The energy transition is our opportunity to set ourselves and the world up for the second half of the 21st century. The 2050 goals are laudable and without doubt beneficial for everyone on Earth. They are not drivers though. They are not positives or additionals to work backwards from. They are not things to invest for, they are things to act decisively on in order to avoid. We must collaborate to think about the things we’re going to achieve with this unprecedented transformation. 27 years is NOT a long time in mine investment planning. For the quantum of change required, it’s actually incredibly close and scary. If horizon 1 is 2030, then horizon 2 is 2050. We need a horizon 3. A horizon 3 that should be impossible to achieve with today’s ways of working and unlocked by the transformation of our industry and ecosystem. We need a moon shot. In fact, that’s probably the best horizon 3 we could have: Extra-terrestrial, offset impact, value chain creation. Or in simpler words: exploring, developing, and producing raw and processed materials for human expansion off world, without repeating the mistakes we’ve made here. Some companies will pivot to energy (e.g. hydrogen), some will vertically integrate across mining and manufacturing (e.g. automotive) and many will ride short term share market waves and virtue signal #energytransition.
History has taught us that massive macroeconomic transformations like this usually change industries, not just companies. Mining is more than just an industry, it’s literally the pulling apart of the Earth / Sea /asteroid we live on, and it’s inextricably linked to the economies of countries that rely on it. Thus, the energy transition is likely to cause a mining transition and country transitions.
Canada & Australia
For Australia and Canada, this is our opportunity to set ourselves up for the post GHG world by delivering on the energy transition. This is our opportunity to create meaningful change in how humans work in order to change how we live.
Challenge: massive and rapid expansion AND massive decrease in emissions INSIDE countries without strong environmental laws. We probably won’t get there by doing anything the way we do it now.
Opportunity: the world is willing to invest massive capital to drive fundamental changes to the industry that initiates nearly every product value chain in existence. Australia and Canada are in the unique positions of possessing a great deal of the expertise and not being bound by the US-China dynamic. This is our time if we choose to take it.