If the mining industry does not rapidly scale up its discovery and delivery of critical minerals, the prospects of achieving a large-scale energy transition will be jeopardised, said a report released by PwC on Wednesday.
According to the report, the energy transition from high- to low-carbon energy sources and generation methods, and the race to reach net-zero emissions, are creating a surge in demand for “critical minerals”.
PwC’s 19th annual review of the top 40 mining companies, which examines global trends in the industry, says that future success will depend on whether the top 40 can take a leading role in the world’s clean energy transition.
Demand for critical minerals is expected to grow over the next three decades and already the supply of minerals such as copper (which is used for energy transmission), and lithium and cobalt (that are used for energy storage) is failing to meet near-term demand.
“The demand for minerals needed to make the energy transition a reality means that this is a critical time for miners and the shift to net zero will mean that we need much more mining and not less,” said Andries Rossouw, PwC’s Africa energy, utilities and resources leader, during a presentation on the report.
The production of a solar farm, for example, 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.
“If we don’t get huge investment into the critical minerals for the future, unfortunately the energy transition will be held back because we just won’t have the minerals to make it happen. The demand for transition minerals will grow at a phenomenal pace and delivering [the required volumes] will be a real challenge for the mining industry,” Rossouw said.
The world will be able to meet its net-zero targets only if the mining industry can substantially ramp up production. But the reality was, he said, that at the moment there was a significant underinvestment in these critical minerals, which will worsen the supply-demand situation over the near to medium term.
The report references data from the International Energy Agency which estimates that the annual demand for critical minerals from clean energy technologies will surpass $400bn by 2050, which is equivalent to the annual revenues of the current coal market.
Financial performance in 2021 indicated that the top 40 mining companies were now in a position to invest in new opportunities. The report showed that mining companies posted “phenomenal” financial results for 2021, with revenues rising 32% and net profits soaring by 127% on the back of high commodity prices. There were, however, several risks associated with exposure to critical minerals.
Prices for critical minerals can be volatile and new projects take time to permit, finance and construct. While it was clear that the drive to net zero and the energy transition would drive demand for metals the report suggested that mining companies had to “carefully consider their position in the race to net zero”.
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