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ENSight

natural resources and environment

Junior Indaba 2021 | Day 2 key take aways

Commodities outlook

  • Steel and iron ore are leading the pack in terms of prices. The world is entering a period of price volatility in respect of commodities.
  • Carbon emissions are the number one ESG topic at the moment, the drive behind this is coming from customers, who are asking about the greenness of products, from the regulator and investors and shareholders who want to know how companies are taking into account ESG considerations relative to other people in the industry.
  • Value must not be neglected in the transition to a low carbon economy. For example, the value of battery storage has changed completely and commodity tracking is lacking/failing to keep up.
  • There is often a major time lag before capital catches up with pivoted value, often due to the time that it takes to get a project from starting phase to operational phase. Investment has a lead time.
  • The ability to be flexible is a crucial ingredient for success as a junior mining company.
  • Many governments’ low carbon economy goals are aspirational, but not possible for various reasons, including a lack of resources required to meet these goals.
  • Junior miners must focus on tackling niche markets and control their costs at the same time.
  • In deriving value from green metals, the challenge is that they require primary processing infrastructure. The old paradigm of sending metals offshore for processing must not be resorted to. The challenge is for policy makers and government to capture a local beneficiation market in respect of green metals. This will create opportunities for junior miners.
  • Investment in quality chemical engineers is essential as the metals and minerals required for a low carbon economy require treatment, refining or processing away from their raw form. Conversations regarding the specific grades and types of minerals required for EVs and batteries need to start taking place.
  • Demand for vanadium is increasing. There are opportunities for partnerships between major mining companies, who have the balance sheet to develop processing abilities, and junior mining companies, who have the deposits.
  • Tin is a forgotten critical mineral.
  • Many junior miners that are doing well on the African continent are disrupting markets through their investment in technology.
  • As demand increases for metals of the future, capital will become available (including capital for the required infrastructure).

The future of coal

  • Emerging miners who produce coal are facing funding challenges: commercial banks are in trouble with shareholders who would like to reduce the funding of coal projects. The sentiment towards coal makes it difficult for junior miners to join this space.
  • Demand for coal is stable, at least until 2040. Demand in Asian countries is growing.
  • Coal remains affordable.
  • Coal will remain a critical part of South Africa’s energy mix in the years to come, especially with respect to baseload capacity as there are challenges in the intermittency of renewable energy.
  • South Africa must develop a clear strategy on its energy transition and articulate the role of coal in clear terms.
  • Coal mining employs 86 000 people.
  • Compensation mechanisms must be budgeted for by government in respect of displacement of the allocation of coal to the energy mix.
  • There is a lack of a common narrative amongst players in the coal industry regarding the transition and opportunities for meaningful and sustainable jobs.
  • The transition is creating a disparity in supply; demand is increasing.
  • Coal companies that are diversifying and investing in renewable energy are attracting funding.
  • Every continent has developed and industrialised on the back of coal; Africa must take care to manage the role of coal in its industrial development, but the rest of the world must be conscious that Africa is not getting a raw deal on the transition.
  • To survive, coal miners must comply with legal requirements in their jurisdiction and take ESG considerations seriously.
  • Investment in cleaner coal technology is critical for both junior coal miners and major coal mining companies.
  • Where international funding is drying up, self-funding, private investment and creative funding projects within South African institutions will need to come up with solutions.

 

Dalit Anstey
Natural Resources and Environment | Associate
danstey@ENSafrica.com
+27 66 474 4466

Zinzi Lawrence
Natural Resources and Environment | Associate
zlawrence@ENSafrica.com
+27 66 476 0776