For the world to hit net zero, global mining industry needs to ramp up capex

The global mining industry may need to nearly double its annual capital expenditure (capex) if the world is to cut its climate-changing carbon pollution to net zero by 2050, according to a new study released by BofA Global Research, a unit of the Bank of America.

To meet the demand and prevent bottlenecks to net zero, the global mining sector needs to spend an additional US$72 billion annually till 2030 to boost its capacity. This excludes its current average annual capex of US$99.5 billion, which includes spending on iron ore and coal and does not necessarily include investment to support de-carbonization.

“As such, operators are underspending massively,” the study says.

“Working some of the IEA’s (International Energy Agency) Net Zero assumptions into our metals demand models, we calculate CAGR (compound annual growth rate) in consumption of 3.6%, 24.6%, 7.6%, 18%, 2.5% and 3.3% for copper, lithium, nickel, cobalt, silver and platinum respectively,” it added.

The annual demand for lithium, used in the lithium-ion batteries that drive electric cars, for instance, could grow by nearly 25% by 2030, from about 390 kilotons to 3 megatons, according to the report.

The global mining industry faces the unique challenge of producing more metals while reducing its carbon emissions. Currently the sector is responsible for 4-7% of greenhouse-gas emissions globally, according to McKinsey.

Activists though are worried that if left unmonitored, the large-scale increase in production could hurt the environment and worsen carbon emissions.

But the paper’s authors don’t see an easy way out.

“To some extent, there is one bullet the world has to bite. If consumers want a modern lifestyle, some emissions will come through,” Michael Widmer, Head of Metals Research at Bank of America and one of the report’s authors, told the Northern Miner.

 “Those emissions can be lowered,” Widmer added. “Even if metals are beneficial to implementing lower emission technologies, miners can still improve their carbon footprint.”

 Last month, the world’s top miners from the International Council on Mining and Metals, which includes Canadian companies Barrick Gold (TSX: ABX; NYSE: GOLD), Teck Resources (TSX: TECK.A/B; NYSE: TECK) and Newcrest Mining (TSX: NCM; ASX: NCM ) committed to a goal of net zero by 2050.

The announcement was made ahead of the United Nations’ COP26, where more than 200 countries gathered to work on strategies to reduce carbon emissions and keep global temperatures within 2 degrees Celsius above preindustrial times.

 The BofA study further states that based on the IEA’s scenarios “electrified vehicles should account for 64% of car sales by 2030.”

“This is well above our assumption of a 31% penetration rate that we currently factor into our supply and demand models,” reported the study.

 When asked about the inclusion of recycled materials to meet this rising demand, Widmer said it will be challenging.

 “It is going to be hard because demand will grow exponentially initially and all products have a lifetime, so it will take time before they feed back into the economy,” he said.

 “By 2050, some of the markets, e.g. electric vehicles, (will be) mature enough for recycling to be meaningful.”