Last week’s London Mines and Money (sub-titled Resourcing for Tomorrow) had a specific focus – given the huge drive towards the energy transition, where will the resourcing come from to drive new supplies of the required metals?
Below are the relevant points for Junior Miners that I thought came through in some panel discussions.
At first glance, politically driven, near-term targets for shifts to green energy, electric vehicles and onshoring of supply chains look unrealistic. This is because of long lead times for permitting new mines, a dearth of funding for junior miners and considerable uncertainty around which technologies will best unlock the processing of critical metals.
Within that framework, however, there appear to be a number of opportunities for juniors…
- Mining companies will have to go to more challenging jurisdictions to access deposits of many of the so-called critical metals. This is where junior miners have typically been able to move more nimbly and assume higher political risk than lumbering majors.
- There is a growing focus on new exploration, both in under-explored geographic regions and for new metals sometimes found in smaller-size deposits that can fall below the scale of interest to majors.
- In theory, as the scale of what is needed for new supplies of critical metals is starting to be understood, more financing is becoming available to fund new mines. Principal new sources on the scene are governments (state and provincial all competing with one another) and potential downstream customers seeking to secure future metal supplies (in particular, automotive manufacturers)
- In practice, government funding outside of China is currently in the early stages of policy formation. It will likely be constrained by taxpayers’ caution and stringent ESG requirements around entire supply chains for critical or strategic metals. In addition, the issue was raised of shifting policy and regulatory frameworks as regular elections change the parties in power (including the US).
- A growing source of new funding is coming from the KSA, which has launched very ambitious plans for diversifying away from its current reliance on oil. Interest is focussed not only on developing its own and neighbouring mining assets but also the mid-stream processing capability and securing metal supplies globally.
- One panel highlighted alternative funding sources available to development juniors, including streaming and royalty funds, debt funds, and mining private equity funds. In theory, they should mesh together at different stages of project development.
- However, all these funders ultimately will seek an exit, and they emphasised that heightened ESG considerations in mining have made M&A much more challenging and can push up the project’s cost. It was also underlined that project developers need to consider ESG considerations even before they have proved up a resource, e.g., community issues and energy sources, to ensure future funding.
- One strong positive is that as major mining companies look to the future, they are discussing the need for a change in approach to juniors. They have expressed the aim of becoming more flexible in partnerships and funding, both of mining assets and of new technologies that could best unlock those ore bodies but are relatively untested at an economic scale.
In conclusion, lots to be excited about as a Junior Miner (as well as all the usual challenges) on the path to Resourcing for Tomorrow.