A look through the crystal ball: Mining in 2022
The past 12 months have seen record gold exploration, Chinese trade bans, rollercoaster iron ore prices, fly-in, fly-out (FIFO) lockouts, vaccine mandates, skilled labour shortages and more ‘green’ initiatives than you could poke a stick at. Environmental, social and governance (ESG) credentials began each annual report and the transition from coal to clean energy was highlighted brighter than ever at the United Nations climate conference, COP26.
Investors placed increasing pressure on mining companies to clean up their act in a shift that may change the way big business operates forever and through it all the industry just kept on keeping on. Looking forward, Austmine chairman emeritus Alan Broome tells Australian Mining he sees ESG as more than just a fad.
“The biggest single priority for every mining company now is ESG, it’s the big deal,” Broome says.
“I chair three smaller mining companies and all my boards are looking at this issue very carefully.
“It’s going to have an increasing impact on our mining industry for the next few years. Some people think it’s just going to be a short-term trend, but it’s here to stay because it’s an integral part in making sure we are responsible for how we access our mineral endowment.”
These credentials extend from emissions regulation to issues of cultural heritage, as both continued to make headlines in 2021.
The Western Australian Chamber of Minerals and Energy (CME) director for Policy and Advocacy, Rob Carruthers, says he sees companies taking real care in the way they manage interactions with Australia’s Traditional Owners.
“There’s been a lot of strong investment and support from industries to host communities wherever that may be,” Carruthers says. “That’s not only so that the communities benefit from the operations they host, but also to engage and consult with them on future plans to make sure they’re supportive and understanding of developments.
“We’re seeing a lifting of all boats on the tide in consultation with communities and Traditional Owners to make sure the benefits are spread from new mining activities.”
And while the mining industry has seen some self-inflicted blows to its ESG reputation, many mining companies have been putting in a significant effort to create lasting relationships with their investors and their host communities.
In 2021, PwC Australia released its 16th annual edition of the Aussie Mine report which details the progress of Australia’s mid-tier miners – categorised as the top 50 mining companies outside the top 50 companies (MT50) on the Australian Securities Exchange (ASX50).
Considering this report, PwC partner Marc Upcroft believes Australian mining companies have made a lot of progress in responsible operations.
“They were already pretty clear on their ESG credentials overall. But if you narrowly focus on energy and emissions reductions, they’ve come a long way in recent months and a really pleasing thing is we’re starting to see the same in the mid-tier space as well,” Upcroft says.
“There’s still a large group of mining companies that are yet to jump on board but there is still tremendous opportunity for the others to be fast followers.”
More importantly for mining companies, PwC has shown that it’s well in their interests to operate more responsibly going forward. For the first time in the Aussie Mine report’s history, the rise in mid-tier critical minerals companies stole the show from another strong performance in the gold sector.
“While gold companies still dominate (comprising 36 per cent of the MT50 by number and 33 per cent by value), critical minerals companies have soared, and now represent nearly a third of the aggregate MT50 value (34 per cent by number and 31 per cent by value),” the report stated.
Upcroft says it will be a bumpy ride for all sectors as supply chain and skills issues continue globally, but the critical minerals sector is set for an unheralded period of growth. And while greater access and production of these critical minerals like lithium, cobalt and vanadium can greatly benefit the development of clean energy technologies and miners’ bottom lines, not everyone has faith in the management of emissions policy.
Austmine chief executive officer Christine Gibbs Stewart has her own 30-year tenure throughout the mining industry and hopes those across the coal industry are supported rather than severed in the clean energy transition.
“It’s important for small to medium METS (mining, equipment, technology and services) companies who’ve worked in the coal industry aren’t caught in the crossfire between government and environmentalists,” Stewart said.
“We need to make sure they understand the important role they’re playing in helping us decarbonise the industry over a long period of time. ”
Upcroft agrees, there is little use in forcing the coal industry to shut prematurely, with nowhere to go and nothing to replace its usefulness on a national or global scale.
“We call energy transition a ‘transition’ for a reason and that’s because it’s going to take a while,” Upcroft says.
“When you look at the costs involved in that as well, it is quite significant, so coal still has a role to play in the Australian and the global economy.
“At some point, we will turn the corner into a different space but that’s not happening today or tomorrow.”
So, while coal’s long-term prospects remain uncertain, the short to mid-term are remarkably positive.
Australia is endowed with some of the highest quality coal in the world, allowing it to be burn much more efficiently and with fewer emissions than that of other coal-rich provinces like North America and Russia.
As such, the coal debate proves to be much more divisive than first thought, according to Broome.
“I can’t believe the prices we’re getting for energy coal in world markets, but there’s a good reason for it,” he says.
“The debate we’re going through right now about coal being a dirty word, you’ve got to be careful about that because our coal is the highest quality in the world.
“What I think will happen in 2022 is there will be an enormous amount of increasing pressure on the coal industry, in particular thermal coal.
“To start new thermal coal projects now is going to be quite challenging, while at the same time I know at least one hard coking coal project which is very well funded and has strong backing from financial institutions.”
Bumper coal prices are just the start of Australia’s strong economic outlook too, as iron ore, gold, copper and critical minerals all continue a strong run of form into 2022.
While some call it a supercycle, Broome isn’t so sure.
“We’re going through a very strong period for the mining industry in Australia, the demand for our resources is as strong as it has ever been,” he says.
“It’s not a supercycle, but it’s as strong as the last cycle which we had on the up and it’s got more sustainability this time around than previous.”
And while a mining industry of this strength sounds ideal, Carruthers explains how it will pose its own set of issues in 2022 and beyond.
“We’ve traditionally seen counter-cyclical cycles where some commodities do well while others experience a trough,” he says.
“In my 15 years in the sector, I haven’t seen this where multiple commodity groups have strong production outlooks as well as project opportunities.
“These are good problems to have, but it means several commodities are all seeking the same access to skills and capabilities at the same time as the construction sector is also having a very strong period as well.”
As is the basis of numerous industries in Australia, access to the international talent pool will be integral to the mining industry’s continued growth.