We’ve written at length about raw material supply, strategy – and vulnerability and how the mining sector is at the forefront of the clean energy transition. What we haven’t yet explored in detail is the gargantuan challenges facing mining companies, as their role continues to ramp up. As we investigate large deposits of three EU Critical Raw Materials in south-west Norway (vanadium, titanium and phosphate), these challenges are intrinsically our challenges. We have the desire and drive to become a substantial and strategic mineral exploration company in the future. And we are cognisant of the great responsibility that is coming our way – with such a huge need for the metals and mineral deposits we have at our sites.
Here we explore three important considerations made by a recent McKinsey & Company article on this topic – and our thoughts on each point.
McKinsey analysis 1: “Because metals and mining is a long lead-time, highly capital-intensive sector, price fly-ups and bottlenecks will be unavoidable as demand outstrips supply and price volatility creates uncertainty around the large up-front capital investments needed for production. Supply, demand, and pricing interplays will emerge across different commodities, leading to feedback loops followed by a combination of technology shifts, demand destruction, and materials substitution. Metals and mining companies will be expected to grow faster—and more cleanly—than ever before. Net-zero commitments are outpacing the formation of supply chains, market mechanisms, financing models, and other solutions and structures.”
NM thoughts: This is already happening. And, McKinsey is right to highlight this very real and demanding challenge. Industries and end consumers in the UK, for example, have experienced a great number of raw material supply chain shortages in the past year alone. In the construction sector, dwindling supplies of key building materials such as roof tiles, cement and steel impacted the industry throughout 2021, and prices rocketed up across several materials.
Although this was caused primarily by the pandemic, it does illustrate the kind of scenario Europe’s rapid decarbonisation might trigger. And if we take lithium as a metal example (needed for rechargeable batteries – iPhones, laptops and EVs), the global deficits in supplies could surge more than 60-fold to 950,000 tons by 2030. There is clearly a great weight on the shoulders of lithium miners to plug these holes.
McKinsey analysis 2: This is a possible trajectory for commodities facing an upside in demand from the energy transition: “Demand accelerates, prices react strongly, and materials substitution kicks in. The industry is unable to bring in new supply fast enough and technological innovation leads to materials substitution within that application (for instance, cobalt after a price spike). Today, battery producers and OEMs speak about optionality, with a tiered approach to battery technology. LFP batteries have started gaining share again, while high-manganese-content batteries are also expected to be developed.”
NM thoughts: Optionality is the key word here – and the ability to diversify, as demand for certain materials surges. Tesla is an obvious example. In July 2021, Tesla CEO Elon Musk gave indications that he wanted the company’s batteries to eventually be roughly two-thirds iron-based (LFP: lithium iron phosphate) and one-third nickel-based across its products. In his words: “This is actually good because there’s plenty of iron in the world.” In this way, he has changed tack to avoid relying on ultra-scarce (and arguably controversial) raw materials like cobalt and nickel. Of course, we are watching this development very carefully and seeing what other car companies might do. Not least because we have large deposits of phosphate-rich apatite among our 1.55 billion tonnes mineral resource at Øygrei and Hoyland in south-west Norway – a vital ingredient of an LFP battery.
McKinsey analysis 3: “As the raw-materials supplier to the economy, the mining sector will need to grow at an unprecedented pace in order to enable the required technological shifts. As metals will undoubtedly play a crucial role in keeping the planet within a 1.5°C warming scenario, producers of metals commodities will need to undertake the following: (Re)build a growth agenda; Innovate for productivity and decarbonization of operations; Embed themselves into supply chains.”
NM thoughts: This point perfectly encapsulates the sheer enormity of the challenge ahead for mining companies – and the aspects that are at the forefront of our minds as we transition from our investigation phases into potential future exploration. Norge Mining is perhaps fortunate in that we can start our operations as we mean to go on; we have a clean slate, unlike established mining companies. Our business is being built with a growth agenda in mind. We know the demand for our EU Critical Raw Materials is great. Our Scoping Study this year will reveal the economic viability of our deposits of vanadium, titanium and phosphate. And innovation will be at the core of all our future endeavours, to ensure our operations are as ‘clean and green’ as possible. We are already partnering with alliances (ERMA, for example), talking to governments (Norwegian and European) and educating ourselves on supply chain trends, demands and geopolitics. As the McKinsey article aptly puts it: “As the move toward cleaner technologies progresses, the metals and mining sector will be put to the test.” At Norge Mining, we feel this future responsibility greatly – and we are ready for the challenge, in all its enormity.