The fine art of exploring mineral deposits
The accelerating transition to green energy is driving huge demand for many minerals, including the strategically essential minerals facing high risks of supply shortages.
In the meantime, as the world electrifies, it needs vast amounts of lithium, graphite, cobalt, copper, fluorspar and other rare earth minerals for batteries, solar panels, and wind turbines to provide the necessary green infrastructure and help meet the net-zero goals.
According to the World Bank, demand for these minerals could increase by nearly 500 percent by 2050. It is no exaggeration to say that this is shaping to be the biggest minerals bonanza in history. The transition to cleaner energy will likely require an overall investment in mining of around $1.7 trillion.
The industry is focused on prospecting new sources of these minerals to meet the demand, often in countries in the developing world that have yet to attract much investment in mining. These countries enjoy or potentially enjoy mineral endowments, the income from which could improve their economic prospects radically.
However, any country wishing to capitalize on its mineral endowment must put the basic conditions in place to attract investment. Given the sums involved in finding and commissioning mineral deposits, mining houses meticulously analyze the conditions in the potential host countries before committing their resources.
Indeed, this aspect is so vital that the Fraser Institute publishes an annual Investment Attractiveness Index that ranks worldwide jurisdictions for their attractiveness to mining investors.
Attracting mining investment
Based on our company’s experience and extensive discussions with other mining role-players, it is clear that a country’s attractiveness for mining investment is greatly enhanced when many relatively simple things are put in place.
Many are related to reducing the time it takes for a mining company to decide to invest and to resolve problems that inevitably arise, including the long lead times to develop new projects, a common pitfall in this industry.
One of the factors that will establish a country as a prime candidate for mining investment is a digitally up-to-date cadastre. Therefore, it is absolutely vital that mining companies can identify exploration and development targets easily and accurately.
The cadastre should also indicate which licenses have already been issued. A good cadastre shortens the decision process and makes it easy for the mining house to identify landholders with whom to partner.
Next on the cards is the readily accessible geographic information system data. While the cadastre records the properties and titles of a country’s land, the GIS data provides information on geology.
This data is invaluable in helping mining houses identify land parcels that merit exploration. There is immense value to all in sharing this data.
Open-door policy across the public sector is equally important. For instance, government departments and entities regulating the mining value chain should operate an open-door policy to ensure that investors can have questions and issues addressed.
The ecosystem should also make provisions for key account managers in relevant ministries. Once investors commit, they should be allocated a key account manager to help navigate complex regulatory environments and local laws and help the investor as needed.
There also needs to be a forum for regular networking events. The local Chamber of Mines is the perfect entity to institute events to promote public-private partnerships and encourage cooperation between companies. This arrangement is crucial because finding, mining and transporting minerals in the quantities required is beyond the capacity of even the largest companies.
Mining houses will have to develop effective means of collaborating if they are to succeed, and it is in the best interests of the host country to help them do so.
The Kingdom’s way forward
Although it is synonymous with the oil industry, Saudi Arabia has developed a comprehensive strategy aimed at repositioning itself as an investment hub and a leader in environmental sustainability. As part of this Vision 2030, it is actively seeking to map and then exploit the other minerals it possesses, and in that regard, it has made enormous progress in creating a supportive environment for mining investment.
One noteworthy initiative is how the Saudi Geological Survey has created the country’s National Geological Database in record time and the new investor-friendly Mining Investment Law.
To conclude, the whole energy transition is at risk unless capital is directed toward urgently needed mining projects. Still, we must recognize that several significant issues need to be resolved. Chiefly, this relates to a fairer split along the product value chain in terms of financial and other benefits, but the first step should be to ensure a local environment that ticks all the boxes for investors. Once it can demonstrate that it is genuinely open for business, the host country comes to the bargaining table with a stronger hand.
• Jonathan Cordero is head of corporate development at Eurasian Resources Group.