PDAC 2024 - Our key takeaways

PDAC 2024 – Takeaways from the Dentons Global Mining Team?

1.???? We heard from several majors that their number one business issue to spend time on and get right is partnerships. This can mean several things, including (i) partnerships with respect to joint ventures that are too big to pursue on your own, (ii) local indigenous relationships that fully utilize the talent and knowledge your local partners have in exchange for value flowing the other way, and (iii) government research and collaboration partners. You can’t ignore a partner for 5 years and then expect them to drop everything and do you a favour when you need it.

2.???? Tied for first place was the idea of a premium to be paid for metals processed in a friendly place. If we are going to value the idea that where something comes from does matter, we should be prepared to pay more for it, and if we are not prepared to pay more, governments should force us to do so anyway. This one is very complicated.

3.???? One of the most controversial topics everyone was talking about, was the idea that Canadian pension plans should be forced, or at least “incentivized” to invest more in critical minerals and mining more generally. The idea is that these plans would develop these assets that we need so badly. Canada only recently unshackled its pension plans from similar restrictions, so this idea would take time to flush out.

4.???? Access to capital is top of mind as the last couple of years have seen little of it flow into mining. Unfortunately there doesn’t seem to be a significant amount of public markets activity coming in the short term, and M&A is too expensive due to the debt loads being carried and the higher costs of acquisition financing right now.

5.???? The role of China in the development of critical minerals supply was part of every discussion. I divide this topic into three parts: (a) the geopolitical risk of what could happen with one country controlling almost all of the global supply of a commodity stopping you from developing or maintaining your energy grid, (b) the economic risk of having a competitor with all of that supply you need being able to make competing products and flood your market. In other words, it isn’t just a risk of China hoarding all the lithium and not letting you have any and (c) how do we expect China to react when other parts of the world take their next steps because China has been planning for this moment a lot longer than we have (and been very open about it). Assuming we need 5-10 years to catch up, does that mean we have to be nice until then? Does that mean we continue to let brands like BYD get first mover advantage in some markets?

6.???? Of course the U.S. election was heavily discussed. While many people think the outcome is predetermined, the more astounding idea is that 49% of the countries in the world will have a federal political election in 2024. So half of the world will have a potential political shift to deal with.

7.???? Where are all the young people? We continue to struggle with attracting people into the industry.

8.???? The pressure to focus on ESG related issues is reducing. Whether that is because the issues are now being considered as part of regular business or because people have seen a lack of change is yet to be determined.

9.???? What discussion on any topic these days would not involved artificial intelligence. However, in the mining sector, being such a data processing heavy industry, it really would benefit from faster target identification and modelling.

10.? Every year, the PDAC Convention exposes new friendships between countries that people often are surprised by. One of them this year, was the open discussion between France and Canada on their relationship with respect to critical minerals. France and Canada share plans for gigafactories and critical mineral development. With the two countries shared history, this alliance should not be as much of a surprise as it was.

11.? Increased focus on a variation of the “mine is where the mine is” in that companies are now saying if there is a mine closer to home, it isn’t just a cost analysis anymore. Transportation costs, carbon footprint all mean something more now. Look at Rio Tinto’s announcement about looking for lithium mines close to home. This is no longer just a geopolitical risk discussion.

12.? As in the past, the definition of who your “stakeholders” are is an evolving area. In some parts of LatAm, organizations pop up as a local stakeholder to object to what you are doing, extract what they can and then disappear.

13.? Two years ago the buzz was about how quickly would we be driving around in EVs. Now with stories of graveyards of used EVs, failed attempts to roll out charging infrastructure and expensive input costs, there is a realization that the EV adoption rate has been significantly overestimated.

14.? Every country wants to increase the value added or beneficiation down in country. But that can’t work for everyone. The majority of production will be in certain countries (again the mine is where the mine is), so not everyone can process, and more countries will start to sell finished product. For example, Indonesia said several years ago it was going to increase beneficiation (a fancy word for forced domestica content) and now it dominates the global processed nickel supply. In contract, Canada which has somewhere around 3-4%of the world’s lithium assets won’t have much to demand in the area, but it can do so with respect to material produced for domestic consumption.

15.? For several years now we have been concerned as an industry about transportation emissions. But that was mainly around we are still going to ship things around the world, just how do we do it with fewer emissions generated. Now with the geopolitical threats being what they are, the idea that you reduce the amount of shipping between extraction from the ground (Canada) to the processing centre (Canada instead of Indonesia) to the final market where will it be consumed (Canada instead of Canada) makes the value chain simpler and less emissions intensive. A side (or primary benefit) is that it reduces the likelihood that portions of your value chain are controlled by less than friendly suppliers.

16.? Of course the U.S. election was heavily discussed. While many people think the outcome is predetermined, the more astounding idea is that 49% of the countries in the world will have a federal political election in 2024. So half of the world will have a potential political shift to deal with.

17.? There is now significant political risk around the world that falls into three categories that can impact the mining business: (i) political violence – the likelihood of violent to hostile acts aimed at changing or overthrowing governments, (ii) expropriation or government interference – likelihood of government intervention into commercial activities and (iii) transfer and conversion – the risk of new government imposed foreign exchange restrictions.

18.? The Canadian capital markets have always had a portion that was comfortable with mining risk capital allocation. The part of the market that historically was ok with the volatility of mining is now older and less inclined to take those risks. Hence there are fewer young investors ready to be in this part of the market.