Navigating the Changing Landscape of Mining and Metals in the Energy Transition

Demand for essential commodities such as copper, lithium and nickel are increasing as the global energy transition accelerates. The mining and metals sector is investing more in research and development to meet these growing needs. But bridging the potential gap requires a much larger investment.

Cash raised through debt and equity in the first seven months of 2023 has been relatively flat compared to last year, even though finance markets recognize the important role of minerals in the energy transition. It is estimated that this trend will continue till 2024.

Coal, gold, iron and steel see significant capital sector investment from 2022 onwards. However, there has been a significant increase in investment in lithium and nickel, with major nickel miners generating significant capital through initial public offerings (IPOs) and further equity offerings in 2023.

It is anticipated that the current surge in early-stage development initiatives will significantly increase the number of new businesses. Capital cost announcements for greenfield projects in copper, gold, lithium and nickel point to a potential increase in investment over the coming ten years, with many projects in the pre-feasibility or feasibility stage.

Consolidation in the industry is expected to increase as junior miners move forward for lithium and nickel. Major mergers, such as the US$10.6 billion deal between Livent and Allkem, demonstrate the vibrancy of the industry.

Companies are investigating several strategies in response to future copper demand, such as expanding brownfield operations, purchasing copper assets and spinning off Energy Transition Metals into separate entities. The copper market outlook points to further shortages, which is forcing businesses to think strategically about securing supplies.

Tesla's development of a lithium refinery and General Motors' equity participation in Lithium Americas are two examples of cross-sector investments that highlight the integration of value chains to guarantee a stable supply of essential minerals. It is anticipated that the US Inflation Reduction Act will increase investment, especially in battery manufacturing facilities.

The issuance of green bonds and sustainability-linked bonds by mining corporations is indicative of the increasing influence of environmental, social and governance (ESG) factors in financing decisions. ESG bonds are more closely associated with particular projects, indicating a larger trend in responsible lending.

Funding for exploration is increasing, with the US, Canada and Australia being the top choices, especially for lithium and nickel. Mining companies will have to balance their responsibilities and earnings, emphasizing the need to keep new mines carbon-neutral from the start.

While major miners are continuing to benefit from capital discipline, they face the ongoing challenge of aligning growth with ESG goals. As the industry adapts to emerging business models, maintaining a balance between sustainable options and economic returns remains important. As interest rates show no signs of falling, companies must actively engage investors in the journey to a more sustainable future.