Fossil fuels have been ingrained through the industrial fabric of our society for more than 100 years.
It’s the driving force behind everything we do, from global conflicts to putting humans in space.
Giving up our reliance on this economic lifeblood will NOT be an easy task.
The costs will be extreme.
And I don’t mean economically.
Paradoxically, the biggest harm from this major energy transition will be the environment.
In a twisted fate of irony, mining the vast supplies of raw material needed to ‘clean-up’ the way we generate energy might just turn out to be far worse than the impact of global warming itself.
It’s something environmentalists pushing ‘carbon zero’ haven’t fully digested.
I doubt they’ve ever stepped foot on a mine to see first-hand the change these operations have on the landscape.
What makes this issue pertinent is that the world’s largest rainforests host some of the richest mineral deposits on the planet.
South America’s Amazon is endowed with gold, potash and iron ore.
The vast Central African rainforests are home to endangered mountain gorillas but they also host some of the highest grade copper and cobalt deposits in the world.
Meanwhile, Indonesia’s rainforests are destined to become giant wastelands as authorities step-up mining efforts to exploit the region’s vast nickel laterite deposits.
The battery anode material that’s set to feed EV batteries and ‘save the planet.’
The scale of mining that’s needed in the years ahead is difficult to comprehend.
But to get some idea…
According to Associate Professor Simon Micheaux, based on current output for lithium, we’ll need more than 9,000 years’ worth of production condensed into just 20–30 years!
That’s so we can have enough lithium material to shift away from conventional vehicles.
The ‘green energy revolution’ could be about to drive the planet towards an environmental catastrophe!
But whether you or I like it, this megatrend is in motion.
So why does this matter for resource investors?
If you think the environment is irrelevant to your bottom line, think again…
Large, shallow, high grade deposits are no longer a ticket to guaranteed riches.
If the community is not on board, a miner potentially risks losing everything.
Just take the latest example from Panama.
First Quantum, holding one of the world’s largest copper mines shut-down operations last month after officials declared its contract with the miner ‘unconstitutional’.
It was the government’s response to the country’s mass protests over the potential environmental impact posed by the mine.
First Quantum’s operation is situated in the biodiverse Panamanian jungle, a wildlife corridor that connects seven countries across Central America and southern Mexico.
As the green energy transition pushes more mining into frontier locations, expect to see hostilities ramp up.
But the ESG trend is another important factor…
A recent survey conducted by PwC showed 8 out of 10 US investors plan to increase their allocation to ESG products.
PwC expects the trend to exceed $1 trillion over the next two years.
Given mining is an inherently destructive industry, miners could miss out on an enormous pool of capital, critical for development.
Operators located in rich biodiverse regions may become un-investable in the years ahead.
But that also opens the door to opportunity…
A mining hub ideally suited to an ESG future
There’s many reasons mining investors should be focused on Australia…
A skilled labour force, established infrastructure and stable governance are the obvious reasons.
But Australia is also a destination that has far less environmental impact from mining.
It’s inevitable…pulling ore from the ground will always involve some level of damage.
But some places are BETTER than others when it comes to ‘sustainable’ extraction.
With its vast outback, mining has a relatively small effect on communities or the environment.
Populations are sparce, meaning social impacts are minimal.
In fact, large mining projects often deliver windfalls for remote communities…employment, the construction of schools, housing, and hospitals.
And while Australia does contain unique flora and fauna, the biodiversity is dispersed over many hundreds of kilometres and holds nowhere near the same DENSITY as a tropical forest.
Limited rainfall across the outback also means tailings dams can be controlled easily with little potential for leakage or failure.
A problem wreaking havoc in high rainfall areas where mining contaminants impact rivers and downstream communities.
Just take the Fundao Dam collapse from 2015.
Ranked as Brazil’s worst ever environmental disaster, BHP and Vale now face litigation from more than 700,000 Brazilians seeking claims for the deaths and illnesses that resulted from the disaster.
This is set to cost the miner up to $9 billion…
A sum larger than BHP’s acquisition of OZ Minerals last year.
Given the entire premise behind future demand for commodities rests on helping the environment, ESG will be a mammoth consideration in the years ahead.
That’s why investors should be focusing on projects set to command a premium…
Not just high quality assets, but those located in regions unlikely to pose significant environmental harm.
With its high rates of evaporation, reducing the potential of tailings contamination in the vast outback…Australian-based operators have a clear advantage in the years ahead.
If you’re looking for ways to try and find opportunities on this, my resource newsletter Diggers & Drillers aims to do just that. In fact, I’ve just gone through the entire portfolio with members to try to optimise it for 2024 — a year I think will be crucial for commodities.
Right now, we’re running a special 70%-discount offer for new members — likely the best deal we’ll ever have on offer. And it’s backed by a 30-day money-back guarantee. Definitely worth checking out!
Until next time,
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James Cooper,
Editor, Diggers & Drillers and Mining: Phase One
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