Having spoken of the strange disconnect between gold prices and the value of gold miners’ stocks, it should be noted the mining industry at large suffers from the retreat of major investors. In short, big money is hard to find nowadays. The deficit is most notable for companies at the stage of exploration and development. “A few years ago, if you had predicted a gold price of over $2,000 an ounce and a copper price of over $4 a pound, you would expect junior explorers to raise money easily, but that has not been the case,” says the CEO of Faraday Copper, Paul Harbidge. This is a pressing issue not just for miners themselves, but for all of us, since the world needs way more primary materials in the context of the green transition.
SilverCrest Metals’ president, Christopher Ritchie, summarizes the problem: “Mining requires a significant upfront investment with an unknown outcome and a finite resource. Investors are reluctant due to high initial costs, ESG concerns and the long timeline to bring new mines online. The lack of capital investment critically impacts supply.” ESG considerations, in particular, seem to be at the heart of the retreat of institutional investors from the sector. Yet, for the green transition to happen we will need more silver, more copper, more rare earths, more lithium, etc. For this, new mines need to be opened or older ones expanded—activities which come with bulky capital expenditures. In addition, the withdrawal of big financial institutions from the sector may have an extra counterproductive layer to it: “Banks with high ESG standards for mining projects ensure maintenance of tailings dams and proper social practices. With their withdrawal, new investors who may not uphold these high standards are stepping in, which could lead to a decline in industry practices,” observes Rodrigo Barbosa, the CEO of Aura Minerals, a mid-tier gold and copper producer in the Americas.
Not all is bleak, however, as the sustained high prices of many metals are beginning to draw attention to mining. “It is only in the last year or two that metal markets have started to rebound, and people are beginning to realize the underinvestment in an industry needed to support ongoing urbanization and the energy transition to address climate issues,” says McEwen Mining’s CEO, Robert McEwen. Moreover, the industry is turning increasingly to third-party consultants who can help it streamline its sustainability efforts to regain attractiveness to investors. Bradley Andrews, the CEO of one such company, SLR Consulting, highlights the need for transparency: “For example, when we track the supply chain of a material like cobalt, we trace its journey from a mine in the Democratic Republic of Congo through the refinery process, all the way to an electric vehicle in California. This level of transparency and traceability builds trust, allowing our clients to present clear evidence of their responsible practices.”