Mining leaders see bigger spread of risks

LAW firm White & Case’s annual survey of mining decision-makers has shown there are multiple issues seen as key risks for the sector in 2022.
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Last year's survey was dominated by environmental, social and governance (ESG), which was seen by 46% of respondents as the key risk, followed by COVID-19 (21%).

ESG remained the top risk for 2022, but only for 24% of respondents.

"The mining industry has found itself caught between two competing themes when it comes to ESG," White & Case said.

"On one side comes the continued pressure from mining fossil fuels and the recent disasters that have done considerable damage to the entire industry's reputation, such as the fatal dam collapse in Brazil and the destruction of ancient aboriginal heritage sites in Australia.

"More positively, however, is how the industry has become increasingly adept at making the argument that it is becoming a far cleaner—and more sustainable sector, and with this improved ESG performance—it can be a reliable and trusted partner to mine the materials that will enable the green transition.

"This shift opens up opportunities for the industry going forward, provided individual players can demonstrate their ESG credentials in all respects."

Resource nationalism, which was only the top risk for 7% in 2021, jumped to second place this year (18%), with 39% expecting Latin America to be the region most affected.

Climate change regulation and shareholder activism and supply chain disruption/labour shortages were new entries and the key concern for 16% and 15% of respondents, respectively.

The Chinese slowdown was concerning to 11% of those surveyed, with energy costs and inflation the biggest risk for 9%.

Respondents were asked what was most likely to keep non-specialist institutional capital invested in the mining sector.

One fifth said exposure to energy transition minerals, up from just 12% last year, while shareholder returns was the answer from 17% of respondents, down from 22% in 2021.

When asked how the mining industry would respond to climate change and associated investor pressures, 37% said by reducing emissions, while 31% said by increasing the focus and spending on energy transition materials.

The reduction of emissions was expected to be the biggest structural change, according to 46% of respondents, followed by a greater emphasis on green metal, including recycling (38%).

Survey respondents expect battery minerals to dominate deal-making in 2022.

"There was a small window at the start of the pandemic, when equity values plummeted, but now with many of the miners trading near record highs, transformational M&A looks to be an unlikely prospect," White & Case said.

"According to our survey, that means opportunistic deals remain the most likely, especially as portfolios continue to shift toward more ESG-friendly commodities."

Some 42% of respondents expect consolidation in the battery minerals space this year, up from only 13% a year ago, while only 22% expect gold deals, down from 42% last year.

For the third straight year, the survey tipped copper to be the best-performing metal of the year, with 31% saying it's set for another year of outperformance.

"Our respondents' enthusiasm for the metal is matched by the wider mining industry," White & Case said.

"The biggest miners remain universally bullish on its prospects, with demand expected to surge this decade and new supplies looking increasingly scarce."

Despite a 400% rise in 2021, 18% expect lithium to be the top performer in 2022, followed by uranium (16%) and gold and nickel (11% each).