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Miners have an opportunity to emerge as leaders in a critical transition

22 Jun 2022

Mining companies posted strong financial results for 2021, with revenues rising by 32% and net profits soaring by 127% on the back of high commodity prices and prudent cost management.

Mining companies posted strong financial results for 2021, with revenues rising by 32% and net profits soaring by 127% on the back of high commodity prices and prudent cost management.

According to PwC’s 19th annual review of the Top 40 mining companies - Mine 2022 - which examines global trends in the mining industry, future success will depend on whether or not the Top 40 can take a leading role in the world’s clean energy transition and continue to generate significant stakeholder value.

To do that, miners must use their strong current financial position to meet challenges including development timelines, price volatility, geopolitical risks, stakeholder expectations, economies of scale and economic resource scarcity.

In the UK, many companies, particularly material intensive manufacturing companies, are increasingly looking at ways to reduce the threat of rising raw material prices as part of the energy transition and other inflationary factors. Options to strategically secure supply of raw materials can include agreeing long term offtake agreements, direct financial investment in mines or purchase of equity stakes in mines, which can provide a partial offset against rising materials costs.

Drew Stevenson, PwC UK’s Energy, Utilities and Resources leader, commented:

“Demand for the range of critical minerals needed to power the energy transition journey is unlikely to diminish as countries such as the UK accelerate towards their Net Zero target dates. The mining industry has a key role to play not only in discovering and delivering essential commodities to drive this decarbonisation pathway, but in identifying and integrating cleaner, greener methods of extraction with electric or hydrogen powered engines and minimising waste.

“This will go a long way towards creating a much more sustainable supply chain in the longer term as well as supporting the sector and its clients’ ESG reporting requirements. Without this ambitious and forward looking approach by the industry, the prospects of energy transition at scale will be jeopardised.”

This year’s report suggests that the rewards for those miners that emerge as leaders in the clean energy transition could be immense. According to recent data, the need for “critical minerals”—such as lithium, copper, nickel and cobalt— is expected to grow over the next three decades, with some estimates suggesting that the annual demand from clean energy technologies will reach over US$400bn by 2050.

That’s because the world’s shift to net zero will require more mining (in particular for critical minerals), not less. The rapid scaling of the low-emission energy systems of the future—solar and wind power, electric vehicles and grid-scale batteries—will be highly material-intensive. The production of a solar farm, for example, requires three times more mineral resources than a similar-sized coal plant, and a wind farm needs 13 times as much as a comparable gas-fired plant.

But resourcing the energy transition is not simply a matter of mining more of the same materials in the same way. Instead, the world will need more critical minerals and raw materials to power the global economy of the future—and they will need to be mined sustainably.

So what should the world’s biggest miners do next? The report offers four key takeaways for miner:

  1. Consider carefully their position in the race to net zero and exposure to critical minerals.
  2. Take advantage of their financial strength.
  3. Revisit their deals strategy.
  4. Double down on ESG.

Paul Bendall, Global Leader, Mining & Metals, PwC Australia, said:

“Mining companies, particularly the Top 40 referred to in this report, must continue to develop strategies to enhance trust because it’s a precious commodity. Only by developing and maintaining trust with a broad range of stakeholders will miners’ social licence to operate be assured. The successful development and execution of environmental, social and governance (ESG) strategies will go a long way to securing that trust.”

ENDS

Notes to editors

About the report

Mine 2022 is PwC’s 19th annual report on the Top 40 mining companies. The analysis includes major companies from all parts of the world whose primary business is assessed to be mining. The results aggregated in this report have been sourced from the latest publicly available information, primarily annual reports and financial reports available to shareholders.

The report can be read at Mine 2022 - A critical transition.

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