Miners facing ‘grand innovation challenge’: Clareo’s Peter Bryant
- 10 September 2024
Peter Bryant says the world’s big miners face a “grand innovation challenge”. They need to become a lot more valuable in future, most likely without more of the mega-mines that have got them to where they are. “Therein lies the challenge,” he says.
The chair of US-based consultancy Clareo and Development Partner Institute co-founder says miners lack the clout to innovate like energy, manufacturing and tech giants.
“I do think we need companies of tremendously more scale to tackle the innovation challenge,” he says.
Innovation and new technology adoption in the sector has historically taken too long.
To build greater scale and become more valuable at a time when new, large-scale projects are problematic miners must effectively consolidate – Bryant was a fan of the recent, aborted, BHP-Anglo American merger bid – and they need to build new revenue streams.
“I think just being a company that explores, digs [rocks] out of the ground and ships a raw commodity with maybe some midstream processing will not be the valuable company in the future,” Bryant says.
“It could be five or 10 years away … [but] you will need to become a materials provider. Being more valuable will be where you are actually doing the recycling, you’re working with car companies, etc, to use less copper, less lithium, nickel, and ultimately working with new material companies to develop new materials.”
Bryant says some miners have invested in metal recycling, new materials and even waste reprocessing. They are investing in more so-called future-facing minerals and metals, but “no one has actually put it all together as a new vision”.
That probably won’t happen “unless one company appears to do it right and not only have a strategy, but actually invest and act upon it”.
But Bryant thinks it is inevitable.
While much higher energy-transition and transport and IT infrastructure demand could underpin explosive growth in consumption of copper, nickel, lithium, cobalt and other commodities, groups such as the International Energy Agency say the outlook for peak demand is unclear.
Bryant believes big miners are going to be reluctant to invest in 50-year, or even 20-year, greenfield projects – if they exist in company portfolios – with such uncertainty surrounding long-term demand and pricing. And where permitting and development timelines are lengthening.
Brownfield developments that can leverage existing infrastructure are going to become more valuable.
“There’s hesitancy in the industry to grow supply too quickly because of its past history of oversupply,” Bryant says.
“But how to capture the upside of the opportunity as well?
“That’s causing tremendous deep thinking in the industry about how to go about that.
“And then we have this innovation challenge [around] the difficulty of mining.
“The energy [and the] water intensity is exponentially growing; grade declines, increasing depth, etc. You can’t keep mining this way. I think the urgency of innovation is really starting to [increase] quite dramatically in companies.
“[Freeport-McMoRan CEO] Richard Adkerson said in The Economist – and he and I have talked about this … When is mining's unconventional moment?
“By unconventional I mean … what unconventional oil and gas did in the US. In less than 15 years it invented a way to unlock resources that were too small, technically unfeasible and non-economic to develop … and it made the US the largest oil and gas producer in the world.
“The key is that it’s totally flexible production. If oil is $50 a barrel the producers go, I don’t make money [and] turn it off. Then they turn it on again. There’s almost no cost for them.
“It allows them to develop, essentially, Saudi Arabian-level oil reserves like the Permian, but do it in small chunks.
“If we could use unconventional technology, or any technology, to do what unconventional and gas are doing, that changes the entire business model for mining because it allows more flexible production.
“Somebody is going to find this breakthrough.
“George Mitchell was the maverick [in US shale oil and gas].
“In mining I don’t know who’s going to do that. Is it a traditional mining company. Is it a new mining organisation? Where’s it coming from? I don't know.
“But I think it’s got to change because … you probably cannot affordably build a greenfield, massive project anymore.”
Bryant says while metal recycling should be part of the “new vision” for traditional miners and is already a moving piece for companies such as Alcoa, Rio Tinto, Glencore, scaling activity remains challenging and without scale economics also remain problematic.
“I think everybody wants to more responsibly produce metals,” he says.
“On the other hand I don’t think companies downstream want to pay more money because consumers don’t want to pay more for green. That’s just a fact.
“We’re seeing downstream companies still buying nickel that’s sourced out of Indonesian mines because downstream companies don't want to pay more.
“Plastic is always my proxy for this. All the food companies say we want to use recycled plastic but we're not going to pay more for it. So they still buy new plastic because it’s cheaper.
“So my view is that at some point in the future … the base price in the market [for metals] will be the green price because there’s enough green metal being produced.
“Anything that’s not is discounted.
“You might argue that’s a premium, but I think the green metal price becomes the market price and anything that’s not produced to a certain standard just gets discounted.”
Clareo chair Peter Bryant will discuss mining’s role in the energy transition and the future circular economy at IMARC in Sydney in October.
Clareo is a US-based firm that provides expert advice to the mining and energy sectors.
The Development Partner Institute is a non-profit focused on improved social, economic, and environmental outcomes for communities from resource development projects.
Bryant has advised many leading companies around the world, including Anglo American, BHP, Rio Tinto, Teck Resources, JCI, BP, GE O&G, Baker Hughes, Castrol, Edison International and Goldcorp. He is an invited participant in the joint Rockefeller Foundation and Brookings Institute 17 Rooms program, focused on accelerating the 17 UN-established Sustainable Development Goals (SDGs), and is also a regular advisor and participant at the Future Mineral Forum’s Ministerial Roundtable.
