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Stewardship | ~ 4 min read

Raw deal? How to source critical metals sustainably

Kimon Demetriades

Certain raw materials are critical to the clean energy transition. Engaging with mining companies is essential to ensure a sustainable supply of these materials.

Copper, first discovered over 10,000 years ago, is now one of the top three most mined metals in the world. Demand is rising significantly for copper1, as well as lithium, graphite, nickel, cobalt and rare earth minerals2 driven by their essential role in clean energy solutions – from solar and wind power to electric vehicles – to support the global goal to achieve net zero by 2050.

Sustainable supply

These metals and minerals are known as critical raw materials (CRMs). With limited substitutes, they are at risk of potential supply chain weaknesses, further complicated by their concentration in just a few locations around the world.

Estimates for ramping up production of new primary supply of CRMs requires current capital investment to increase by over 50% reaching USD 85 billion annually until 2030.3 While copper leads demand in absolute terms, the chart below highlights relative increases in kilotons required for each metal.

Increase in production of metals required to reach Net Zero Emissions by 2050 Scenario
Increase in metals required to reach Net Zero Emissions by 2050 Scenario

Source: IEA 50, Global Critical Minerals Outlook 2024, May 2024

Digging deeper

Given the importance of this topic, we engaged our top mining holdings to understand how they:

  • Respond strategically to societal demand for CRMs and what the related challenges may be in extracting resources from undeveloped sites.
  • Deliver on expectations responsibly to mitigate potential environmental and social impacts.
  • Ensure their continued social license to operate.

We identified four key observations from this ongoing engagement activity:

  1. Stakeholder conflicts: for example, higher commodity prices benefit mining companies but may hinder the deployment of important technologies.
  2. Potential risks: investors may not have the risk tolerance for longer-term developments. Mining companies may choose the least risky option of acquiring assets instead of investing in undeveloped resources – which does little to increase overall supply.
  3. Wide-ranging challenges: the mining sector faces myriad issues, including lack of supportive policy, geopolitical and sovereign risk, gaining permits and social license, and scarcity of workforce skills and capabilities.
  4. Industry developments: appropriate incentives for new developments, implementation of best practices, and defining the optimal company size and structure to support the resource requirements of clean energy solutions is needed.

There will be substantial effort required across the mining industry to expand delivery of CRMs. However, the scale of the challenge is significant and we believe that all stakeholders will need to work together for a sustainable and resilient supply chain. Overcoming these issues will be important to seize the upcoming opportunities.

1 IEA - Global Critical Minerals Outlook 2024
2 Rare earth elements (REE) are a set of 17 nearly indistinguishable silvery-white soft metals. This IEA analysis refers only to four magnet rare earths: neodymium, praseodymium, dysprosium and terbium.
3 Wood Mackenzie - COP28: A mining and metals stocktake November 2023

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