Miners need to switch from acquisitions to opening more mines to meet net zero: EY
Consulting giant EY says more mines will need to be built in the next 30 years than at any stage in history if Australia wants to meet its ambitious net zero targets.
Miners need to switch from a focus on acquisitions to building new projects to provide additional capacity if Australia is to meet net zero goals as energy transition continues to disrupt the mining and metals sector.
Consulting firm EY says the resources sector is grappling with the challenge of meeting demand for minerals and metals while addressing a trifecta of pressures: maintaining capital discipline, achieving sustainable mining and meeting elevated stakeholder expectations.
A survey of senior leaders from all the key geographies across the sector shows the need to maintain capital discipline has elevated capital to the No 1 risk for 2025, while elevated environmental stewardship above a broader focus on ESG was also an issue.
EY Global and APAC mining and metals leader Paul Mitchell said mining companies were under increasing pressure to manage capital effectively while making strategic investments in future growth. “The huge demand from the energy transition means miners must increase output and grow. All minerals are essential for the transition to sustainable energy sources, with the sector facing the task of extracting more in the next three decades than it has in the past 70,000 years,” he said.
“However, the current economic landscape, geopolitical tensions, rising costs and low productivity, are making boards and CEOs nervous about reducing capital discipline.”
Mr Mitchell said to overcome this, miners would need to shift their focus from prioritising short-term returns to fostering long-term value creation, adding that this shift would ensure a continuous supply of materials needed for the energy transition.
It comes as commodity prices have been on an upwards trajectory in the past week after China’s Central Bank revealed the most comprehensive stimulus policy actions undertaken in recent years in a bid to drive growth. Singapore iron ore futures have rocketed 22 per cent in this period to be at $US109.20 per tonne.
A global desire to decarbonise by 2050 would require a significant increase in the number of mines and volumes produced, according to EY. Mr Mitchell said capital raised for exploration had declined by 4 per cent year on year, with budgets favouring gold over minerals like copper.
In Australia, total expenditure on nickel and cobalt exploration was down around 19 per cent in the 2024 fiscal year compared with the prior year, while expenditure on copper exploration in Australia was also relatively flat – growing from $626.1m in FY23 to $628m in FY24.
“Lack of new discoveries and long permitting times add further complexity to the situation and put the energy transition at real risk,” Mr Mitchell said.
“Over the last decade, there have been few new copper discoveries, and it is taking, on average, 15.7 years to bring a new mine online. The need for innovative approaches to exploration has never been higher.”
Higher taxes and royalties are an extra barrier such as in Queensland, where coal royalties range from 7 per cent to 40 per cent for prices that exceed $300 a tonne, in addition to direct and indirect taxes.
Goldminer Regis Resources said Australia had become less attractive to invest after the Albanese government blocked its flagship McPhillamys project in NSW in September following the use by Environment Minister Tanya Plibersek of section 10 of the Aboriginal and Torres Straight Islander Heritage Protection Act.
Mr Mitchell said part of the energy transition would require massive volumes of copper – about 41 million tonnes – necessitating the construction of about 40 new large copper mines globally.