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Miners Adapting to Changing Times But What Does Future Hold?

By Adrián Juárez - CTA Consultoría y Tecnología Ambiental


By Adrián Juárez | CEO & founder - Fri, 03/03/2023 - 13:00

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During colonial times, mining was promoted by the colonizing governments, who subjected the colonized lands to their rules. Now, it is the colonized lands that are imposing their rules on a new mining industry, in some cases still supported by their governments. Modern mining is now mainly in private hands (shareholder capitalism moving into stakeholder capitalism) and continues to adapt to what humanity demands, both focused on the metals that have become a priority, and on the techniques that must be used to extract them.

We are currently seeing examples of this: in Colombia, the new government prefers to promote community mining rather than mining operated by international companies; in Guatemala mining cannot advance without the consultation of Indigenous people, in compliance with an international treaty of the International Labor Organization (ILO 169); in Panama, the government wants to unilaterally modify the most relevant mining contract in Latin America, moving the whole thing to international arbitration. Many of these restrictions have to do with minimizing environmental impacts, maximizing social and economic benefits, a bit of ignorance or resentment, and the push from eco-hysterical NGOs. 

Some countries, such as Mexico and Honduras, do not want to give the green light to open-pit mining projects. The governments are opposed considering the damage that is generated to the environment, to the communities and obviously because the landscape is altered. It is a matter of lack of imagination because if the governments can prohibit this type of mining, they could also impose restrictions, such as demanding that open pits be filled back in at the end of the exploitation with waste rock and/or filtered tailings, but possibly they just want to show that there is a new sheriff in town.  

Others look for pretexts to stop and ban mining, even though they claim to be leaders who want to help solve the climate change crisis. Recently, it has been reported that several mining projects have been halted under different pretexts: the Pebble mine in Alaska under the pretext to protect salmon, the Twin Metals copper and nickel project in Minnesota was banned under the pretext of the risk to the ecology, and the Quebradona project in Colombia to protect water sources. 

However, when the state (Mexico and Chile) is in the mining business, then there are no objections, they can do mining as well as anybody else. Mexico is implementing the nationalization of lithium as an objective to obtain higher income for the state. In Chile, an iron ore mining project (Dominga) was recently banned, due to possible environmental considerations, and other projects (El Soldado, Los Bronces and other smaller projects) have been unable to obtain approvals to expand or continue their operations. In Colombia,the administration wants to change the mining code, to involve the government in some way in the mining industry. 

Other countries have started to ban the export of raw ore, to attract more investment to their countries and create more jobs. This has been seen in Indonesia with nickel ore and in Zimbabwe with lithium ore.

On the other hand, interested investors, in addition to the obvious, are demanding that mining companies implement sustainability standards that aim to reduce environmental, social and governance (ESG) risks.  Mining is associated with large investments and various types of risks, risks of equipment or structures not performing as expected, collapsing metal prices, and regulatory changes, all of these adding to the changes in the specific jurisdictions, and environmental and social risks that present a reputational risk for the companies and their  investors. 

The philosophy of the climate change crisis aims to achieve the decarbonization of the world economy by replacing energy sources based on oil, natural gas and mineral coal by the use of renewable energies, such as wind and solar energy, and replacing the use of gasoline and diesel in transportation through the use of electric vehicles. At the recent meeting of the World Economic Forum in Davos, many participants pushed the climate crisis as the greatest threat to humanity.

Recently, in Europe, it has been accepted that nuclear energy is part of green energy, and I agree. There is also promotion of the exploration and exploitation of uranium, because the supply of natural gas from Russia has been cut off and replaced with liquefied gas imported mainly from the US at much higher prices, and the forced return to the use of mineral coal for power generation, which has also encouraged coal mining.  The German Green Party, along with other political forces in the Western world, have been the promoters of this favorable situation for coal and uranium mining, and of the rise in oil prices; however, to save face, they say that it is just temporary, while a balance is achieved.  

To achieve the energy transition, some metals have gained relevance, such as lithium, copper, nickel, and cobalt, which are essential for the manufacturing of batteries, and metals, such as iron, aluminum, and silica, which are relevant for the manufacturing of wind turbines and solar panels. The mining industry has had to adapt, targeting exploration at transition-critical deposits of these metals. Greater interest from the mining industries in lithium exploration has been observed in the triangle of Argentina, Chile and Bolivia. Mexico has nationalized the use of this mineral and Chile is considering it and has commissioned CODELCO, the Chilean copper mining company, to include lithium in its exploration portfolio. Some mining companies that were traditionally focused on gold have now included copper in their portfolio.

For the mining industry, adapting to the objectives demanded by investors and financial institutions, both in terms of decarbonization and in adhering to certain environmental and social sustainability standards, is a challenge, part of the business, which in principle does not significantly affect the bottom line, but how companies work. The requirements that countries and their governments impose are a bit different, but, at the end of the day, they are also manageable. The industry has enough flexibility to be able to adapt to these challenges, which helps create a stronger industry.

The leaders of the colonized lands are testing their authority and power, some within the constitutional framework of their lands and others on the fringes, taking up the banner of the climate crisis, in some cases. If these governments were legitimately elected, and represent the will of their people, this would be an important message for the industry.  An interesting example is a mining company doing business in Pakistan. It  had agreed to have as shareholders of its gold and copper project three federal state-owned enterprises (25%), 15% by a province on a fully funded basis, and 10% by the same province on a free carried basis. What does this type of arrangement tell us for the future of mining? 

Photo by:   Adrián Juárez

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