As world-class deposits become harder to find and end users increasingly demand ethically-sourced products, both governments and the private sector are creating new strategies to assure access to minerals in the long term. Japan, for example, has reported a consumption of oil, natural gas and mineral resources that is considerably more than can be domestically produced. “The extent and rapidness of change in the global resources and energy sector has been further aggravated by uncertainties associated with geopolitical risks and the rising tide of resource nationalism,” said Hideki Morimoto, General Manager of JOGMEC Mexico in an exclusive interview with Mexico Mining Review. “This underlines the ongoing need for a comprehensive and multi-faceted resources and energy strategy.”
Demand versus Supply
The need for a strategy to guarantee mineral supply is being caused by the lack of new projects and an estimated rise in demand fueled by a growing population. The UN estimates that by 2050, world population will reach 9.8, and this will further increase to 11.2 billion by 2100, implying a strong need for infrastructure and appliances.
The issue is that the recent bear market created a steep drop in exploration investment in 2016 and operators are struggling to find high grade projects. According to S&P Global Market Intelligence report, World Exploration Trends (WET), global spending on exploration dropped 21 percent in comparison to 2015. “The potential to discover new ore bodies and acquire new mining projects is still strong in Mexico, but with rising costs and rising risks, new mining projects have to be higher and higher quality to be economical for development,” said Bradford Cooke, CEO of Endeavour Silver. “Silver supply has fallen to due to the few mines built during the recent five-year bear market of low metal prices.” However, S&P’s 2018 report found a 14 percent rise between 2016 and 2017, from US$6.95 billion to US$7.95 billion, for the first time in four consecutive years.
According to PwC’s report, “Minerals and Metals Scarcity in Manufacturing: The Ticking Timebomb,” policymakers are starting to pursue initiatives that “mitigate the risks of minerals and metals scarcity by using scarce minerals and metals more efficiently in applications, by recycling and by developing substitutes.” The report also mentions that authorities are starting to promote trade policies that favor international and open markets for minerals and metals.
Along with the drop of supply, companies are worried about the global outrage that was sparked in 2016 when Amnesty International released a report that connects industry giants such as Apple and Samsung to operations in the Democratic Republic of Congo. This report included allegations of child labor and adults working under life-threatening situations. According to the Enough Project, which supports peace and the end of atrocities in Africa’s conflict zones, conflict minerals “have fueled and continue to help sustain armed violence in eastern DRC, linking them to the deadliest conflict globally since WWII.” Technology companies reacted fast and publicly announced their commitment to ethically source their materials. Apple became the first company to publish the names of its cobalt suppliers.
“The DRC has raised concerns about the way cobalt is extracted and its human costs,” said Tony Rovira, Managing Director of Azure Minerals, a company that is currently moving its Sara Alicia gold-cobalt project in Sonora into the development stage. “Having another source of high-grade cobalt is important, so we are really excited about the advantages of mining cobalt in Mexico.”
New Partnerships on the Rise
A higher demand for minerals and ethically-sourced materials are leading technological companies and automotive manufacturers to seek projects that can become a future source of supply for their projects. In response to the growing concern over mineral supply and demand for transparency in the supply chain, mining companies are taking advantage of the momentum by promoting their sustainable and social responsibility practices along with their new major discoveries to attract partnerships.
A successful example is the partnership between Avino Silver & Gold Mines and Samsung C&T. The agreement gives Samsung exclusive access to Avino mine concentrates until Dec. 31, 2021 and includes a US$10 million advanced prepayment for concentrates to Avino.
Azure Minerals is equally starting to catch the attention of the industry. The Sara Alicia project has the potential to become the highest-grade cobalt exploration project in the world. “It is especially appealing given the increased demand for cobalt, so a German investment bank and an investment fund from New York have invested in Azure because of this project,” stated Tony Rovira. “We are convinced that cobalt is going to experience high demand over the next couple of years. The price has rose from US$30,000/t in early 2017 to more than US$90,000/t in early 2018, an indicator of the expectations for this metal.”