Mining companies need to invest nearly $1.7 trillion
in the next 15 years to help supply enough copper, cobalt, nickel and other
metals needed for the shift to a low carbon world, according to consultancy Wood
Mackenzie.
The United States, Britain, Japan, Canada and others
raised their targets on cutting carbon emissions to halt global warming at a
summit in April hosted by US President Joe Biden.
Meeting those targets will need large-scale
deployment of electric vehicles, storage for power generated from renewables
and electricity transmission, all of which require industrial materials, such
as lightweight aluminium and metals used in batteries such as cobalt and
lithium.
Wood Mackenzie analyst Julian Kettle calculated
miners needed to invest about $1.7 trillion during the next 15 years to
“deliver a two-degree pathway — where the rise in global temperatures since
pre-industrial times is limited to 2°C”.
“At an industry level, there seems to be reticence
around investing sufficient capital to develop future supply at the pace and
scale demanded by the energy transition (ET),” he said.
Mining firms are wary of making heavy investments
after their experience of the last decade when they invested in new capacity
just as demand peaked, leading to a collapse in prices and revenues. They also
need to please investors, who are unlikely to want to see dividends diverted to
capital spending.
Rising demands of investors related environment, social
and governance (ESG) issues further add to the challenge.
Australia, Canada and Western Europe carry a low ESG
risk but some of the best resources are in high-risk areas, such as Democratic
Republic of Congo, which sits on about half the world’s cobalt reserves
according to the U.S. Geological Survey. “Given the need to meet tough
decarbonisation and ESG targets, Western governments, lenders, investors and
consumers will need to get comfortable operating in jurisdictions where ESG
issues are more complex,” Kettle said.
Kettle said government support was needed to help
miners comply with ESG issues to ensure production from high-risk areas was
conducted in an acceptable way to consumers.
“Then, and only then, will the West be able to secure
sufficient volumes of the raw materials needed to pursue the energy transition
in the timescales envisaged.”
Mining.com