Commentary: Mining’s unlikely heroines — Greta Thunberg and AOC

Left-wing darling Alexandria Ocasio-Cortez’s proposed Green New Deal, despite its flimsy 14 pages, is nothing if not all-encompassing and vaulting in its ambition. The bill was also crucial to Ocasio-Cortez’s rapid ascent to acronym status, and anointing as the queen of green.

Thanks to her How Dare You tour, 16-year old Greta Thunberg is now the undisputed leader of the growing ranks of school-bunking, climate crisis warriors all over the world.

The Greta show arrived in MINING.COM’s hometown of Vancouver in October to take “Make love, not CO₂” youth (and second-life hippies) on yet another march and bridge-blockade. The footslogging Greta groupies are beginning to resemble the disastrous 1212 children’s crusade — with higher ground now doing service for holy land.

On the right, much of the response to AOC and Thunberg (who seem to get on like a house on fire, if the Guardian is to be believed) has been mocking and dismissive, accusing the pair of swapping hamburgers for pie in the sky.

This is a mistake.

Red turns green

Some estimates put the green economy in the U.S. at US$1.3 trillion in annual revenue already — that’s 7% of gross domestic product — with a workforce of 9.5 million Americans.

Within the Green New Deal is a goal of “meeting 100% of the power demand in the U.S. through clean, renewable and zero-emission energy sources.” AOC has no deadline, but no doubt Thunberg wants this for the world before she hits drinking age.

A seminal paper by Bernstein’s European mining and metals team, led by Paul Gait, outlines just how much restructuring the global industrial economy needs to bring this about.

And all of it to the great benefit of mining.

“Copper and the green economy — Thoughts from [Bernstein’s] decarbonization conference” has only been passed around in mining circles for a few weeks, but the “Greta scenario” outlined in the research has already become shorthand for what a brave new world of mining may look like.

The required copper price of US$20,000 a tonne (US$9 per lb., or more than three times today’s level) under Bernstein’s Greta scenario of full decarbonization by 2025 certainly grabs headlines.

Equally eye-popping is another scenario sketched in the report: when the target date pushes out to 2070, it would require investment in copper equal to the total known reserve base of 647 million tonnes.

Keep in mind that the tonnes for renewable energy networks and electric cars come on top of the 20 million tonnes of annual copper consumption in other industrial sectors.

If the first industrial revolution was powered by dark satanic mills, copper’s red-hot smelters will drive the green revolution.

This is still your great-great-grandfather’s copper mine

The Green New Deal is full of big numbers.

Here’s another one: producing that amount of copper would require blasting, crushing and grinding 130 billion tonnes of rock at current ore grades.

And those grades will only continue to fall over the next 50 years, not least because the average weighted age of the world’s 20 largest copper mines is 91 years.

Climate change is pitting generations against each other (google “OK, boomer” for more). Aging copper mines put a whole new spin on it.

How soon is now?

Even Bernstein’s base case of gradual decarbonization under the 2015 Paris targets (more honoured in the breach than the observance, particularly in North America) requires a 50% lift in the copper price to incentivize new mines.

But at press time, copper languished not far off two-year lows, despite Chile doing a Hong Kong (Chile is not the Saudi Arabia of copper, it’s the Saudi-Iran-Iraq-Emirates of copper), deepening deficits, dwindling explorer ranks and a dearth of major projects.

A tenth of the world’s copper mines are already underwater, and that in no small part owes to weak copper by-product prices crucial to any green deal like cobalt, still two-thirds off its peak, despite closure of the world’s biggest copper-cobalt mine.

It’s not going well for other essential green energy raw materials, either. Inventors of the lithium-ion battery won a Nobel Prize in October. Lithium prices are down 58% in the last 18 months. If you’re picking up flake graphite, it’s down 20% from last year. Nickel nerds are happy, but for how long?

The powder is staying dry

Unsurprisingly, AOC and the Green New Deal does not once mention mining. AOC accepted an invitation from a congressman to visit a working Kentucky coal mine, but the stunt fell through — because there are no coal mines left in the district.

Thunberg’s only mining pronouncements have supported German coal and Turkish gold protests.

It’s not just the green lobby — and wittingly or unwittingly their donors — that have a blind spot when it comes to mining.

Investors shun the sector, too. And overwhelmingly in favour of fossil fuel.

Private capital dedicated to natural resource investment have assets under management of US$689 billion, according to a Preqin report. Mining’s share? US$19.9 billion.

According to the private capital tracker, the 216 funds that raise money for investment in energy assets — almost all of it destined for North American oil and gas — bagged US$7.9 billion during the third quarter to add to the US$191 billion on hand.

The 15 funds looking for mining and metals investors could not raise a cent in the third quarter, and dry powder (money ready to be invested) is less than US$5 billion, which would not cover the outlay for a single large-scale copper mine.

TikTok, time’s up

Public markets are hardly more accommodating.

In an earlier report, Bernstein applied a measure — the cyclically adjusted price-to-earnings multiple — to the mining sector going back a century to establish the relative valuation to equities.

The report shows that the much admired mining industry rerating since the end of 2015 is more akin to a death rattle than a recovery. Four years into recovery, the mining sector still trades at a massive discount to the market at 1.4 standard deviation beyond the long-run average.

We live in a world where TikTok (ask your tween) is valued at twice as much as Glencore, the world’s largest commodities trader, with annual revenues of US$220 billion.

And we’ve been here before, Gait laments. “Of course, the misallocation of capital to non-productive, pseudo-economic activities also occurred during the previous period of blatant relative undervaluation — the dot-com bubble — and is parallel to what we are seeing today.”

Cutting emissions doesn’t cut it

Virtue signalling by touting desalination plants, solar-powered operations and electric dump trucks does not provide green credentials anymore. To be frank, projects like these are most often undertaken because it’s cheaper, or there’s no alternative.

Sprinkling protect-the-planet messaging in marketing and making (often tenuous) claims about the cleantech properties of products doesn’t cut it, either.

If this was a successful strategy, platinum miners would stock the Sierra Club’s board, and environmentally sensitive investors would line up to give uranium explorers money.

(Climate activists’ opposition to nuclear power leads to cognitive dissonance on the left and popular shows like HBO’s Chernobyl, which remained mostly unmolested by science over its five episodes.)

I feel the earth move

Every tonne of copper embedded in the global economy has the potential to remove 500 tonnes of CO₂ per year, according to Bernstein.

The message cannot be simpler.

There is no green economy without copper (and nickel, cobalt, vanadium, praseodymium — go down the periodic table if you must).

Big Mining has failed to grasp the opportunity presented by climate change.

At the moment, mining is lumped together with oil and gas as just another “extractive” industry “exploiting” natural resources.

Going all in on the green economy and decarbonization requires siding with the greens against fossil fuels.

It means selling global mining as the solution to climate change, because mining metals is the only path to green energy and green transport.

(Big Mining’s biggest blunders usually have to do with oil, anyway. Ask BHP and Freeport).

There are other ways mining will benefit from a wholehearted embrace of climate change goals.

Attracting young workers to the industry is a serious and growing problem for miners. But what Gen Z or Millennial would say no to travelling the planet (by sailboat or solar plane, of course) and fighting global warming at the same time?

Mining monopsony

A concerted and concentrated effort to decarbonize the planet rapidly will also lower the mining industry’s reliance on China as the main driver of global metal demand, and spread it more evenly across the world.

The first signs of a more diverse demand base can be seen in the shift to electric vehicles (itself the biggest change in the auto industry in 100 years), as battery megafactories spring up in Europe, and giant solar farms and storage centres spread across South America and Africa.

And given rising tensions, there is probably greater willingness in the West to ensure that during the upheaval, developed economies do not cede yet another sector of the global industrial economy to China, or large swathes of mining rights, such as in central Africa.

But can we afford it?

Even those who admire the ideals of the climate change kids say the new deals and wish lists are unaffordable.

It is not surprising that a report on mining that opens with a quote from Thomas Hobbes would possess a deep moral core, and towards the end, Gait tackles the issue:

“When we highlight the impact of decarbonization on copper prices there is absolutely no sense in which this can be taken to imply that we ‘cannot afford’ to deliver a ‘green economy’ (and the resulting transformation of industrial and economic processes).

“The market capitalization of such entities as Facebook or Netflix imply that there is more than enough money, more than enough capital to deliver whatever economic transformation is required. The fact that our revealed preference (amusing cat videos) is at variance with our stated preference (a sustainable economic future for our children) should not be erroneously taken to infer that there is some financial constraint on the ends we choose to pursue.”

— This article first appeared on Oct. 30 in The Northern Miner’s sister publication, MINING.COM, where Frik Els is executive editor.