6. Supply Implications for Mining and Metals Companies in a Sustainable World
Not limited to existing material processes and sources, mining and metals companies in a sustainable world benefit from technological advances that have replaced many manual, repetitive processes with automated ones. In addition, operations exist in new frontiers such as deep sea and asteroids. Operations are managed under diverse ownership models and integrate cutting-edge equipment to maximize energy and water efficiency while reducing waste. Section 6 outlines some of the supply implications for mining and metals companies.
Traditional sources of minerals and commodities continue to meet the majority of demand in a sustainable world. The extraction and manufacturing of minerals and metals are more efficient than ever, through automated mining processes and the introduction of technologies such as 3D manufacturing.
While a growing, more affluent population increases the overall demand for materials in a sustainable world, demand per capita has decreased, making it unlikely that physical scarcity will be an issue for mineral resources. Mining companies have become efficient resource suppliers. Technology advances help operations to extract lower-grade ores than just a few decades ago (i.e. copper grades from 4% in 1900 to 1.07% in 2010).7
Successful mining operations in a sustainable world maximize automation technologies across the mining life cycle to improve safety, increase productivity and reduce costs. While some companies began to launch automated mining programmes in the early 2000s, they have since been adopted across the sector as both the technologies and the business case have improved after the development of open industry standards. During exploration, operations are able to put together comprehensive geometric and geophysical data profiles of a region using sensing and fusion technologies. In planning, automated robotics can be used to help design the safest, most cost-effective processes for extracting ore. Drilling is significantly improved using automated systems to reduce variation, improve quality and reduce maintenance costs. Finally, ore is transported from the site using driverless fleets or railway operations that make use of object-avoidance sensors, the Global Positioning System and wireless technology, creating a safer operating environment. Companies have access to a wealth of live data that helps them to improve decision-making and proactively manage site operations, leading to increased mineral yields, optimized energy use and reduced wear and tear.
Advances in 3D printing have had profound implications for the efficiency of mining and metals operations. Maintenance downtime is shorter because spare parts can be made on site, and time-saving approaches are multiplied for operations in remote regions. Cost savings are realized, and environmental benefits accrue. Use of 3D printing leads to lighter, smaller and more efficient designs that may last longer and work more efficiently, reducing the environmental impact of operations. Broken-down or redundant equipment can be easily recycled for new parts. For terrestrial mines, 3D printing has helped to reduce costs by 50-80% compared with standard manufacturing methods.8 In the metals industry, specialist companies have applied 3D printing technology to print liquid metal that is conductive and can be printed at room temperature.9 Since this technology’s introduction in the early 21st century, mining and metals companies have fully adopted it as initial barriers to its use have been rectified. In particular, safety and quality standards are unparalleled; the technology has a critical presence internationally and is supported with the appropriate skills; and the production cost of using 3D printing is lower than relying on external supply chains.10
Due to these shifts in technology, the following trends are anticipated to prevail in a sustainable world:11
- Employment profile: Jobs are less physical and are located in more urban areas, with a predominantly professional and diverse workforce.
- Knowledge and skills: Specialized skills are required in areas such as data management, communications technology and mechatronics. Higher education is a prerequisite for a greater number of positions.
- Diverse communities: Historical “mining communities” are transformed into diverse economic communities supported by a range of services and industries.
To position themselves to succeed in a sustainable world, mining and metals companies need to develop new skills and invest in R&D to effectively apply new technologies in their operations.
Discussions on mineral rights and ownership, particularly resource nationalism and the appropriate allocation of resource rents, dominated the mining and metals agenda in the pre-sustainable world. In the transition to a sustainable world, the debate became more constructive, and mining and metals companies adopted a commitment to shared value creation rather than cyclical profitability.
No single perfect ownership model or financing arrangement exists for mining and metals companies in a sustainable world, but seven elements should be considered:
- Project development: Mining and metals companies act as project developers rather than mineral-rights owners. This management shift enables mining and metals companies to focus on their strengths, for example building and operating projects, while offering governments and communities the option of owning the mineral assets and utilizing resource rents to meet the region’s social and economic objectives.12
- Long-term value: Ownership models are designed to mitigate the risk of commodity price fluctuations and support corporate and economic diversification. Resource rents are managed to effectively balance current versus future investment requirements and to drive economic diversification for the region. Environmental and social stewardship is a key determinant of the overall value proposition.
- Equitable division of profits: Profits are distributed based on pre-agreed, reasonable levels to a wider variety of stakeholders, including governments, communities and investors. Payments may be made on commodity value at the point of extraction/production; or, commodity owners can elect to receive a portion of the commodity to use or sell at their discretion. The understanding that all stakeholders are equally exposed to operational performance and commodity price volatility is critical for this approach.
- Inclusivity: All players, including miners from artisanal and small-scale mining (ASM), junior players and multinational organizations, are held accountable to the same standards and policies, creating a consistent, level playing field for the sector. This drives convergence and fosters greater collaboration and partnership among the different players, with a potential scenario in which ASM miners work under the auspices of larger mining companies.
- Shared knowledge: Public-private bodies are created to develop geological knowledge that facilitates exploration and operation of mining and metals projects. Mining and metals companies share geological data to support wider mineral development and provide opportunities to effectively work together to rapidly deliver value.
- Leasing minerals: Notwithstanding the clear difficulties facing the enterprise, some companies and governments implement models to trace the use of mineral commodities throughout the value chain and lease, rather than sell, materials to customers. This requires sophisticated tracing mechanisms; for example, companies receive a credit note against a future purchase for the reuse of mineral commodities. Under these arrangements, customers compensate companies for performance rather than for commodities ownership.
- Service contract mining: Commodity owners contract production responsibility out to the most effective and efficient service provider, even if it is not a traditional mining company. The transition from miner to service provider encourages competition, drives cost efficiencies and rewards organizations with the best performance standards.
Sufficient flexibility in the principles of ownership models in a sustainable world enable mining and metals companies, in collaboration with governments and civil society, to develop mutually beneficial ownership agreements. Clearly, ownership models are not opportunistic, and seek to deliver shared value for governments, companies and civil society.
Environmental Conditions Influencing Operations
The environmental conditions in a sustainable world affect mining and metals companies in two ways. First, the companies need to consider how to adapt to changing conditions such as higher temperatures and more extreme weather events. Second, they need to adjust operational processes to minimize environmental impacts associated with atmospheric emissions, water, waste and biodiversity. These principles are relevant across each of the following stages of the project life cycle:
- Licence to operate: Access to resources, in particular water, energy and arable land, are limited, and “true cost internalization” in the late 2020s made them more expensive. To secure and maintain their licence to operate, mining and metals companies collaborate with local governments and communities to develop and manage mutually beneficial adaptation strategies and operating standards.
- Exploration: Areas of high biodiversity are strictly off-limits to new operations, but opportunities for exploration exist in newly accessible Arctic regions.
- Construction: Energy and transport infrastructure is designed to be more durable to resist more frequent and intense weather patterns. Operations in areas where more rain is predicted have invested in more robust storm-water control systems to minimize mixing clean- and dirty-water sources. More stringent requirements exist for water reuse within operations and post-use treatment. In addition, companies with the most energy-efficient technologies hold a competitive advantage and, in some cases, secure new revenue streams by licensing the technology to peers.
- Production: Environmentally efficient operations are recognized by the market as more valuable. Operations are meeting tighter environmental requirements for lower emissions, energy, waste and water use. Processes are adjusted to maximize off-peak energy supply and incorporate renewable energy resources. Alternative fuel sources are widely adopted, and water management technologies ensure the watershed’s balance is maintained within acceptable tolerances.
- Distribution: Port infrastructure has been retrofitted due to higher sea levels, and new regulations exist on efficient haulage capacity.
- Closure/post-closure: Rehabilitation standards are higher and more costly to meet, and management responsibility has longer terms.
Mining and metals companies, and all players across the value chain, will be held accountable to stricter environmental standards in a sustainable world. Companies therefore need to actively plan how to reduce the environmental impact of their operations to guarantee their mining licences in the future.
New Sources – Entering New Frontiers
In a sustainable world, mining and metals operations are active in new frontiers. The gold, copper, zinc and rare earth elements abundant in the ocean floor make deep-sea mining an appealing prospect, and one that has been viable since 2015. Advanced robotic technology facilitated the exploration of the ocean floor, and some tests show that undersea deposits can contain more than 10 times the concentration of minerals than deposits on land.13 While the business case is affected by metal prices and capital requirements, a single deep-sea mine operation initially cost US$ 1.95 billion in capital expenditure and US$ 9 billion to operate.14 These costs have decreased over time. At first, concerns still existed that the environmental impact of offshore mining was insufficiently understood to pursue projects at pace. However, as the number of exploration licences more than doubled, from 8 in 2010 to 17 in 2013,15 it became clear that the challenge would be addressed in parallel with the exploration rather than resolved in advance – similar to the development of offshore drilling in the oil and gas sector.
Asteroid mining is also an area for the industry to explore in a sustainable world. The abundance and quality of materials, combined with a phenomenal rate of technological development and strong capital support, mean that mining on asteroids is a reality, and has been for a few decades. Testing from meteorites in the early 21st century demonstrated that asteroid mining is especially relevant for the platinum group metals, nickel and iron. Some estimates suggested that a single platinum-rich, 500-metre asteroid contains 174 times the annual global output of platinum and 1.5 times the known world reserves of platinum group metals.16 However, it is not only about quantity. The quality of resources in asteroids is unprecedented, as the grades of iron ore, nickel and cobalt, for example, are significantly superior to those on earth.
The combination of exceptional quality and the quantity of untapped demand makes asteroid mining an attractive value proposition. The business case is further improved by the presence of non-ore commodities such as water. In terrestrial mining, while only one in 1,000 prospects identified at stage four actually becomes a mine, the proportion for asteroids is likely to be higher, as 50% of them may be water-bearing and they are 10% more accessible than the moon.17
Mining in space does not replace terrestrial mining, but complements it. The costs of shipping materials to and from earth are prohibitive, at least for now, as launch costs can range between US$ 10,000/kilogram (kg) and US$ 40,000/kg.18 It is more cost effective to travel from the inner solar system to somewhere else in space than to travel from earth to space. Nevertheless, some estimates suggest that low earth orbit launch costs need to drop to US$ 200/kg for space raw-material discovery to be a viable competitor against earth launch costs.19 In 2012, NASA estimated that it would cost US$ 2.6 billion for the government agency to capture a seven-metre asteroid and bring it into orbit so it could be mined.[fn20]Keck Institute for Space Studies, California Institute of Technology, April 2012. Asteroid Retrieval Feasibility Study.[/fn] The US Office of Management and Budget has estimated that commercial entities can conduct operations at one-tenth the estimated government cost. But billions of dollars more would be required to extract the actual minerals. A crucial method for controlling operational costs is 3D printing, since rather than transporting materials back to earth, mine stations can be fully equipped and operated in space. As such, space mining largely meets demand for materials in space. However, extensive knowledge sharing across asteroid and terrestrial mining helps both operate at the leading edge, especially with technologies.
Once perceived as long shots pursued by small, disruptive enterprises, asteroid and deep-sea mining are recognized by major mining and metals companies as having value; these companies in turn have developed or acquired the skills and capabilities to run their own “new frontier” departments.