7 ways the mining sector can prepare for the coming economic era

The mining and metals industry is facing an unprecedented paradigm shift as it begins to implement new technologies while also managing climate and social challenges. Through raising awareness of these issues, and by focusing on new digital solutions, growing material demand, and investor pressures, the industry can strengthen its foundational role in a rapidly evolving global economy.

In light of the COVID-19 pandemic, and to successfully implement this approach, there are seven key areas through which the mining industry needs to grow and remain focused.

1. Building on ESG standards

Greater transparency and fostering of environmental, social and governance (ESG) principles have become necessary for mining and metals firms to successfully operate in the global marketplace. Awareness of these principles has come a long way since the world’s largest mining companies created the International Council on Mining and Metals (ICMM) to help the industry maintain its social license to operate (SLO). ESG reporting has developed through a galaxy of different methods and frameworks, all looking to help the industry relay key metrics. The concept of an SLO has evolved beyond local approval and cooperation; the multinational nature of extraction, transportation and production means that firms must now abide by global standards.

2. Ramping up data analytics, AI and innovation

The mining industry is often seen as relatively dated, but the implementation of new technologies can create exciting advances. The use of automated trucks, LHDs (load, haul, dump), and drilling machines are not necessarily new, but companies have shown increased interest as the technology becomes more familiar, and the competitive advantages become clear. The advent of COVID-19 has also accelerated the adoption of automated mining equipment, as companies have begun to look into maintaining production levels in the face of the pandemic and declining ore grades. With an increasing number of trucks, LHD equipment and machinery now outfitted with sensors and tracking equipment, the general digitalization and evaluation of mining data has become the technical foundation for more complex applications. Using gathered data, general mine efficiency will increase and benefit operational models, risk assessment, mining planning, the integration of new technologies, and virtually every aspect of mining and metals processes.

3. Change from within: a new workforce

New technologies require an adapted workforce to operate increasingly complex machinery and evaluate data. Finding the best people to fill these roles might be relatively difficult for the mining and metals industry, as they have often struggled to replace their ageing workforce and will now have to compete with disruptive technology firms. Negative public perception and concerns about the industry’s future are especially prominent during mining’s bust cycles, and with COVID-19 slowing down the global economy, only a few commodities – such as gold and iron – are seeing positive price changes. With the pandemic also potentially fuelling the adoption of renewable technologies, and these technologies becoming much more material-intensive than our current energy system, the mining industry needs to consider its approach towards building an interdisciplinary, technical workforce.

4. Supply chain security and geopolitics

COVID-19 has forced many countries to realize the full extent of their reliance on metal and mineral imports, and this has changed the way that some of them look at mining and metals projects. Critical mineral strategies and building up local industry have always been important subjects for those involved with industrial policy, but shortages, economic crises and the fragility of supply chains have brought many of these issues into the mainstream.

5. Mining, metals and the energy transition

Increasing demand for energy and low-carbon technologies will boost mineral and metal demand, and the sector needs to be prepared to meet these needs. Models examining future energy demand and composition through the year 2040 show renewables as the fastest-growing energy source. Three of the most common renewable energy technologies – electric vehicles, solar photovoltaics and wind turbines – all have significant and diverse material needs. An unprepared extractive industry could struggle to meet rapid increases in demand – and possibly slow the integration of renewable technology. It is therefore important to remember that the key factors limiting mineral extraction are not physical limitations, but rather social, environmental and economic challenges.

6. Mining assets and climate risk

As the world transitions towards a low-carbon economy and the effects of global warming become more pronounced, mining assets need to be viewed in the context of climate risk. Falling ore grades pushing mining projects into more remote locations, water stress in active mining regions and natural disasters can all create new challenges for the mining and metals industry as it recovers from COVID-19, and as it faces the impending increase in mineral demand from industrialization and renewable technologies.

The mining and metals industry is also a natural target for emission-reduction efforts and legislation; projects can be inhibited by carbon taxes, required supply chain restructuring, and a lack of lending from investors looking to minimize their own climate risk. Many of the world’s largest investment management companies have already announced their aversion to high-carbon projects, and this trend is likely to continue.

7. Mining and metals investments and COVID-19

The pandemic has wreaked havoc on the mining and metals industry, but also presents an opportunity for companies to reevaluate their strategies and build back better. There is no denying that the pandemic has stalled necessary expansion projects, and hindered efforts to achieve long-term development goals, but it is important to maximize the opportunity to reset.

From an economic perspective, investment in mining operations was not particularly strong even before the crash. Exploration budgets are expected to stay low, as companies brace for volatility. Revenue over the last few years may have generally increased thanks to operational improvements, and merger and acquisition activity has shown healthy signs, but share prices have not reflected these strengths. When combined with the energy transition, supply chain concerns, technical innovations and the other trends shaping the mining industry, companies should internalize their needs and think about what the future of mining really looks like for themselves.