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Mining tech shift: Look out below

  • 8 July 2024

The flow of financing and acquisitions in the global mining and metals technology domain may have slowed, but strong underlying structural drivers remain evident in deals such as UK-based Spectris’ US$260 million buyout of SciAps.

“On trend is investment activity in many of the next generation of mining technology companies along with a number of funds researching the … new energy minerals and climate tech landscape to establish a thesis for up to $1 billion dedicated funds,” said Jason Price, director of leading sector financial advisor, Atrico.

About $430 million of transactions occurred in the first six months of this year involving mineral exploration, operations, processing and infrastructure technology enterprises.

Add deals such as Spectris-SciAps in the early part of July and the value of financing and mergers and acquisitions in mining/metals tech has gone past $8.5 billion since the start of 2021. That year was a watershed period for the sector with more than $3 billion of transactions.

Over 200 significant deals have been executed since the beginning of 2021.

The latest total for 3.5 years eclipses anything seen in any historical period for investment activity connected to mining software, sensors, control and automation systems, and communications and mineral processing tech.

It is sans material deals such as AspenTech’s cancelled $623 million purchase of Australian mining software company, Micromine (still in play), and doesn’t include activity in the nascent metal recycling space. That sector is now seeing transactions such as last year’s $540 million venture capital backing of US-based Ascend Elements, which added a further $162 million of equity financing at the start of this year.

Some see a future for miners as materials companies turning waste – 100 gigatonnes of mine waste being produced annually around the world, through to circular-economy regeneration of materials – into profits to supplement traditional extraction-based businesses.

Technology advances, said the International Energy Agency in its Global Critical Minerals Outlook 2024 report, were vital to accelerating the waste-to-energy transition.

“Recent studies show that total GHG [greenhouse gas] emissions for manufacturing a nickel-rich lithium-ion battery cell can be around 28% lower if made from recycled materials rather than virgin minerals,” the IEA report said.

“Recycling could reduce primary mineral extraction and production requirements by 10-30%.

MetalRecyclingBoliden

“A strong example of the environmental benefits comes from the aluminium industry, where recycling of post-consumer scrap has been shown to reduce emissions by 90% compared with primary aluminium.”

Add minerals/metals recycling technology companies to the mining-tech financing and M&A conversation and well over $10 billion of transactions have been logged since 2021.

Early days

Significantly, mining is still seen as a laggard when it comes to digitalisation and even mobile autonomy. Despite having hubs of advanced heavy-equipment fleet automation, such as in Western Australia’s Pilbara region, overall market penetration of the technology is low. Automation of the systems behind mobile equipment, and mining value chains, is very much a work in progress.

“Smart mining” is being projected as a market that could be worth $40-to-$50 billion in 10 years. It’s probably now worth a quarter of that.

“We’ve got gigabytes of data coming in,” 30-year industry veteran, Jason Pearce, said at a recent Hexagon Mining event in Western Australia. “How do we get value out of it?”

Swedish software company Hexagon has been one of the most active investors in mining tech – through acquisitions – over the past decade.

“We [Hexagon Mining] are a conglomerate of acquisitions,” said Pearce, the division’s APAC region service and support director.

“We’ve got a lot of impetus [and] a lot of technology.

“We see technology transforming other industries [Industry 4.0].

“We’ve got all the technology now in mining, but we’re not using it yet.”

Hexagon and Canada’s Constellation Software (two deals in H1) continue to be among the busiest assemblers of mining/metals technology stacks, along with original equipment manufacturers such as Epiroc, Sandvik, Komatsu and Hitachi Construction Machinery, and Australia’s Orica and IMDEX.

Integration steps are formative.

“It’s evident that the major acquirers are consuming their prior large deals and therefore remain less aggressive [buyers] at this stage,” said Atrico’s Price.

“[But] acquirers remain interested in further acquisitions.”

It is still early days, too, for venture capital and private equity funding of metals and mining tech with the latter seen to be dipping a collective toe in the pond via deals such as Accel-KKR’s acquisition of Australia’s K2fly and even American Industrial Partners’ platform purchase of Boart Longyear. Boart has dominant mining services and product arms but also a budding “orebody knowledge” technology business.

Price says Atrico is seeing more interest in the space from buy and hold funds and more patient capital becoming engaged.

“Over the next five years we see the mining industry poised to further capitalise on digital innovations such as AI-driven predictive maintenance, autonomous mining systems, and advanced data analytics,” said Nadia Shaikh-Naeem, vice president of programs at Canadian government-backed investment agency, DIGITAL.

“Embracing these technologies offers a transformative opportunity to further accelerate the streamlining of operations, mitigate risks and meet evolving environmental and regulatory demands effectively.”

DIGITAL is a co-investor in Novamera, Ideon and a University of British Columbia Mining Microbiome Analytics Platform (M-MAP) backed by the likes of Teck Resources and Rio Tinto. Mining/metals tech has attracted about 2% of the plus-C$630 million deployed by DIGITAL over the past five years or so.

“The majority of DIGITAL’s investment history and focus is actually on healthcare, which offers interesting comparisons to our emerging mining portfolio,” Shaikh-Naeem said.

“The mining sector and healthcare have both advanced digitally yet their perceived maturity and opportunities differ.

“The mining sector has effectively implemented advancements in AI, IoT and automation, resulting in significant improvements in operational efficiency, predictive maintenance, and environmental sustainability, signalling a shift towards digital maturity.

“The mining sector is more digitally mature than it was five years ago, due not only to the advancements in digital technologies but also the increased adoption of digital platforms, enhanced data analytics capabilities and a shift towards remote operations that have all contributed to this maturity by optimising processes and reducing operational risks.

“This maturing digital landscape and ongoing innovation promises long-term growth, making the mining sector an ongoing appealing and exciting opportunity for DIGITAL co-investments.

“We see a significant role for DIGITAL in spurring this transformation in the mining sector.”

In its report outlining an estimated $800 billion base-case investment in mines needed over the next 10 years or so to supply critical minerals for world energy, transport and urban transition, the IEA said technology required to re-energise mining and metals operations, increase efficiency, cut operating footprints and produce more critical minerals was ultimately pivotal to the broader Earth mission.

‘Old mining’ was challenged: mines were getting deeper and more energy intensive; too much harmful waste was being produced; technical expertise was disappearing; and new mines were taking too long to develop. ‘New mining’ would be more agile; more flexible; more appealing. Technology would be part of its DNA.

But VC investment in the “critical mineral sector” is emergent.

It had grown from virtually zero in 2017/2018 to more than $1.4 billion in 2023, “with significant growth in battery recycling offsetting reductions in mining and refining start-ups”, the IEA said.

“Recovering minerals from mine waste is a growing area of interest,” it said.

“As ore grades decline, larger amounts of wastes are generated during mining, increasing the economic and environmental cost of tailings management.

“Advancements in processing technologies mean that some tailings have grades comparable to currently economical ore deposits. Thus reprocessing can have various benefits: revenue opportunities, water recovery and environmental impact mitigation.

“Novel technologies offer promise for extracting greater amounts of copper from lower-grade plays and materials currently considered waste.

“Advanced separation techniques can also concentrate and upgrade low quality ore.

“Machine learning has been used not only to optimise processing operations but also in identifying new resources.

“Despite their promise, many of these technologies are still emergent and have to be proven at scale.”

Erik Belz, president and chief operating officer at San Francisco hedge fund, Engine No. 1, says technological innovation is key to drawing some of the “mountains of [private equity] money raised for, quote, unquote, energy transition funds” back to traditional natural resource value chains (including oil, gas and mining).

“In 2015 $50 billion was raised for traditional energy capital funds,” he said on an Energy Council podcast earlier this year.

“It was more or less at that pace for years.

“By 2020 that amount basically dropped to zero … in terms of new private capital being raised for the traditional energy or natural resource value chain.

“At the same time capital raised for renewable or energy transition funds has basically filled the void.”

Belz said significantly more of the energy transition capital “that has left the [traditional] stage” needed to be drawn back into energy and mining where clearing bottlenecks in critical supply chains and “operating what we have better” are seen as vital – and potentially lucrative – transition themes, and a range of possibly game-changing technologies need to be proven.

“People are trying to figure out things like green hydrogen, green ammonia, different kinds of technologies … such as direct lithium extraction, and software that can be used and applied across the value chain.

“All of these super important ideas that can really change the arc of where we are going all need to be proven,” Belz said.

“We’re always going to need energy. The forms may shift and that shift will come by driving technology.

“People in colleges are not going to energy or mining. They’re going into tech and career paths with what are perceived to be longer-term time horizons.

“But if you think about the technology innovations driven by energy and natural resources companies it’s astounding. I’d put it up against what Silicon Valley tech companies are doing any day.

“Think about the technology that is being used to extract oil and gas from the Permian Basin in an effective manner. Look at the technology to keep in place an offshore oil rig. Think about the technology that mining companies are developing to extract copper, or refine copper, in a cost-effective, economic manner. The technology behind this is astonishing.

“The [consumer] tech industry has led [capital markets] growth over the past 10 years.

“I think the industries that will lead over the next 10 years will be fundamentally different.”

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