The Moment for Mining

The Biden presidency in the U.S. was expected to bring about enthusiasm for the green revolution and the metals to fuel it. But faced with a decision to permit one of the most valuable mining projects in the country, the new administration sided with environmentalists and Indigenous rights activists.

The U.S. Agriculture Department's decision to withdraw approval for the proposed Resolution copper mine in Arizona was the Biden administration's first politically contentious action on mining. With other U.S. mines in development also expected to test the Biden administration, mining companies should anticipate new hurdles for their projects if the Resolution decision is any indicator of the administration's direction.

Nearly real-time satellite imagery analysis has been spotting and stymying illegal gold mining activity in the Amazon rainforeest.

The mining sector is a substantial contributor to forest ecosystem destruction, and a recent report suggests the world is behind on international goals to end global deforestation by 2030. The Amazon Conservation Association's Monitoring of the Andean Amazon Project, or MAAP, uses satellite imagery to flag potential deforestation sites and alert authorities to illegal activities across the Amazon rainforest in Peru, Bolivia, Ecuador, Brazil and Colombia.

Much like the last time Democrats took control of the White House, President Joe Biden may find himself needing to support increased access to a controversial resource to achieve key policy goals.

For former President Barack Obama, that resource was natural gas — a pivotal part of shifting the U.S. power sector away from coal-fired generation and to curb the sector's greenhouse gas emissions. For Biden, mined battery metals will likely be needed to accomplish signature climate policies, such as mass deployment of electric vehicles.

Federal mineral mining financing has already been freed up by the outgoing Trump administration, the prospects of green stimulus appear poised to ratchet up demand for mined materials, and environmental permitting for mining looks unlikely to change.

With that setup, the Biden administration could take a leaf out of Obama's book, presiding over the blossoming of a policy-critical sector in part by simply not restricting it.

Biden already signaled Jan. 25 that mining will be key to his "Build Back Better" initiative when an executive order mandating government agencies to "buy American" included a call to maximize purchases of materials mined in the U.S.

Despite the challenges posed by COVID-19 in the first half of 2020, the mining sector managed to navigate through by capitalizing on the rebound of commodity prices and easing of restrictions.

According to S&P Global Market Intelligence's 31st annual Corporate Exploration Strategies study, the global exploration budget for nonferrous metals decreased only 11% to an estimated US$8.7 billion in 2020 from US$9.8 billion in 2019. In 2021, most commodity prices began much higher than they started 2020. This coupled with a persistent lack of pipeline investment—which is leading many base metals toward market deficits over the next several years—should stimulate additional exploration.

The owner of the second-largest coal mine in the U.S. by production volume is planning for the asset's closure as retirement dates approach for several plants that burn much of the mine's fuel.

Coal demand in the U.S. has been declining for years, and Arch Resources Inc. announced Feb. 9 that it would be winding down its thermal coal operations, including those at Black Thunder, a Wyoming mine that produced 12.7 million tons of coal in the fourth quarter of 2020. Black Thunder production represented about 9.7% of the coal mined in the country in that period, according to an S&P Global Market Intelligence analysis.

After floating the idea of a megamerger between three South African gold producers in early March, Sibanye Stillwater Ltd. CEO Neal Froneman told S&P Global Market Intelligence that such a combination is just one approach to growth the company is considering as it seeks to throw more weight around the market.

The impact of the COVID-19 pandemic could continue to weigh on copper production into 2023 after companies reduces activities to protect staff, a top analyst warned April 13.

Speaking at the World Copper Conference, CRU's director of copper research Vanessa Davidson said that government-imposed lockdown reduced copper production by around 500,000 mt last year, particularly at mines in the Americas. Worst affected was Peru, the world's second largest producer of the metal, where production fell by around 15%

However, a rapid recovery in mine production after the second quarter meant that the loss of production was much less than the 900,000 mt originally anticipated.

Although copper mine production is expected to increase 2.5% this year, the decision by many mining companies to delay key activities including stripping and maintenance to protect workers, could mean the impact of the pandemic will continue to be felt in the coming years, Davidson noted.

Meanwhile, the growing interest to reduce carbon emissions is likely to drive copper demand globally faster than producers can expand, said Erik Heimlich, CRU's senior copper analyst.

"Demand caused by the greening economy will lead to a significant supply gap opening up by the mid-2020s, providing strong price support," he said.

With production from existing mines set to peak in 2023, the gap between supply and demand is set to reach 5.9 million mt by 2031 if no new operations are developed.

There are plenty of mine projects in development, enough to increase production by almost 11 million mt.

But just building enough to fill the supply gap is expected to require more than $100 billion of investment, Heimlich noted.

In particular, the growing demands from stakeholders that the mining industry collaborate with local communities, reduce their carbon emissions, and limit their environment impact are pushing up costs.