The World is Serious about Electrification
Mostly Issue Update
On September 28, 2023, the International Energy Agency (IEA) will hold the first ever summit on critical minerals in Paris. Called the IEA Critical Minerals and Clean Energy Summit, it will focus on ways to “promote the secure, sustainable, and responsible supply of raw materials that have a central role in clean energy transitions around the world.”
This is a critical topic for the world leadership. It comes at a time when Chile announced plans to nationalize its lithium industry. And Mexico overhauled its mining conventions, making it more difficult to operate there. In 2022, Finland changed its mining laws in an attempt to make mining more sustainable.
What’s important to keep in mind is that mining is a difficult, expensive, and risky business. It requires companies (and investors) to spend substantial amounts of money up front. Then they recover that capital and the profits over time…hopefully.
But mining is fraught with risk.
Every mine is a balancing act between commodity prices. You spend money on the cost of iron, concrete, diesel fuel, etc. You get paid back from the amount of metal you recover. But all those prices change on a daily basis. And when the value of the metal you mine falls below the cost of mining it, there’s nothing you can do.
Take Newmont Mining (NYSE: NEM), for example. It’s a giant mining company that produces gold, copper, and other metals from its many mines. The chart below shows its annual net profit:
As you can see, even the biggest mining companies suffer from these issues. Add to that the reality that you can’t pick up and relocate a mine if the politics change. That’s the reality and difficulty of mining.
On the other hand, mining companies haven’t done themselves any favors. High profile, preventable mining accidents gives the industry a bad reputation. Add to that the legacy damage from mining practices in the past 100 years and there is a considerable reputation issue.
That’s why mining needs responsible leadership. The industry needs help balancing the desire for responsible mining with the economic reality. It needs both the stick of regulations with the carrot of economic benefits. And mining companies need to be empowered as valuable community partners.
If they can achieve those goals, then our brand of New Mining will spread.