Critical Minerals

Is ethical vs. economic a false dichotomy?

Image source: Unsplash

As the world pushes towards achieving climate goals, there is an expected surge in demand for critical minerals that will support the development of clean technologies in the coming decades. This unprecedented demand will primarily be driven by the exponential growth of electric vehicles (EVs), with projections indicating that demand for some minerals could increase by up to 500-fold by 2050. Naturally, concerns have been raised about the reliability and security of global supply chains for these essential minerals.

It is well-established that certain regions of the world have a more significant abundance of critical mineral resources than others. Mining and processing operations are also concentrated in specific areas. For instance, the Democratic Republic of Congo (DRC) has half of the world's cobalt reserves, while Australia produces more than half of the world's lithium. Indonesia produces nearly 40% of the global nickel supply, and China produces 79% of the world's graphite.

China also holds a dominant position in the critical mineral value chain, from mining and processing to battery cells and EV production.

Adapted from: IEA, 2022

Relying on a few countries for critical minerals poses significant risks to global supply chains, particularly given the potential for geopolitical tensions and disruptions. The COVID-19 pandemic has highlighted the fragility of supply chains and the need for diversification and resilience. Governments and industry leaders worldwide have recognized the need for more investment in critical minerals mining and processing to ensure a stable and reliable supply of these essential resources.

At a recent high-level US-Canada Summit in Toronto that I was grateful to attend, Nigel Steward, Chief Scientist at Rio Tinto, emphasized that "we've got to find better ways to mine...with a better ESG footprint". He's right. The mining industry can be a dirty business, with child labor used to mine cobalt in the DRC, carbon-intensive conversion of Indonesian Class 2 nickel into battery-grade Class 1 nickel, and water-intensive lithium extraction in Chile causing arid conditions that harm the surrounding ecosystem.

As Jose Fernandez, US Under Secretary for Economic Growth, Energy, and the Environment, put it, "if we are to succeed, we are going to have to have a new value-added proposition". This value-added proposition must avoid forcing buyers and investors to choose between economic prosperity and poor ESG standards.

The Baptiste Nickel Project in British Columbia is expected to have the lowest carbon intensity in the global nickel industry due to the non-acid-generating awaruite nickel host rock, which eliminates the need for smelting. Furthermore, it is anticipated that the project's waste materials can trap carbon dioxide, indicating that the mine may not emit any carbon emissions at all—our team will be watching this very closely.

Adapted from: FPX Nickel

Other Canadian tech companies like Novamera and Summit Nanotech have also been pushing the dial towards a mining future that removes the choice between ethical and economic. While Novamera combines a lower CAPEX with reduced tailing costs, faster permitting, and increased production flexibility, Summit Nanotech uses nanotechnology to minimally impact the environment while working to improve the average industry rate of lithium production from 18 months to 1 day.

The Canadian Critical Mineral Strategy will broadly help to grow expertise along various points of the value chain with a focus on “responsible sourcing”, and the recent federal budget has made $11 billion worth of new refundable tax credits available to allow for a 30% break in the cost of investments in equipment for critical minerals. Even still, some believe that more needs to be done.

At the Summit, John Baird, former Canadian Minister of Foreign Affairs, noted that "when it comes to critical minerals, Canada says we have all these rules to stop things that are bad, but not to facilitate what's good". More carrots will be needed to balance out the sticks.

South of the border, the Inflation Reduction Act, the most significant climate change action undertaken by the US government, is an entire carrot buffet. The act aims to reduce emissions by investing in clean energy technologies like EVs through the $7,500 credit for qualifying clean vehicles, which is expected to drive demand. The new American Battery Materials Initiative also includes investments in research and development for new battery technologies in hope of reducing dependence on critical minerals that are in short supply.

To ensure the success of this transition, there will be a push to reduce reliance on critical minerals that are mined and processed in unethical and unsustainable methods. The expected explosive demand for certain minerals will not make it easy, but some of the aforementioned efforts will help. As demand and supply move further and further apart, we may just be in for a messy decade ahead as countries look to de-risk themselves from supply chain disruptions, price volatility, and geopolitical tensions.

The surge in demand for critical minerals to support clean technologies presents a huge challenge to global supply chains, but also an opportunity to mine and process these resources in more sustainable and ethical ways. Governments and industry leaders will have to work together to find new value-added propositions that balance economic prosperity with environmental and social responsibility. It's a tough challenge, but one we can't afford to ignore if we want a greener, more ethical battery-powered future.