PwC’s 20th annual Mine report

The high-demand era of critical minerals is now: Miners will have to reinvent themselves for long-term growth and prepare for global transition to clean energy – PwC’s 20th annual Mine report

• As demand for more mined critical minerals increases in a net-zero world, the flow of industry dealmaking clearly reflects this, with critical-mineral deals making up 66% of total Top 40 M&A in 2022
• Governments increasing roles to secure critical mineral supply, swift uptick in last 12 months
• 2022 revenue of the top 40 mining companies remained stable at US$711bn
• Coal, largest contributor to total revenues (28%) – the first time since 2010

TORONTO, Monday, July, 10 2023  — The world’s biggest mining companies will have to find a new formula for success as they face the most momentous change the industry has seen in decades. 41% of the mining CEOs who were polled in PwC’s 26th Annual Global CEO Survey acknowledge that their companies will not be economically viable in ten years if they continue on their current path. 

In its 20th edition, PwC’s 2023 Mine: The era of reinvention, an annual review of the Top 40 mining companies globally, examined trends in the mining industry. In this report, PwC found market capitalization of the Top 40 miners tripled from US$400bn in 2003 to US$1.2trn in 2022. 

Mining revenue held steady at US$711bn in 2022, in another year of strong financial performance, but rising costs and economic uncertainty squeezed EBITDA¹ margins from 32% to 29%, new PwC analysis into the sector has revealed.

The findings of this year’s report capture major themes and developments impacting the industry,  especially the impact of the energy transition, which will shape the industry over the coming two decades. Miners will have to navigate the increasing role governments--and new players like automobile companies--are playing in the sector, while simultaneously ensuring they are well-positioned for the clean energy transition - which requires access to resources.

Given ongoing geopolitical uncertainty, the rapid shift to clean-energy technologies and the importance of both these issues to national security and economic stability, governments around the world have taken swift action over the course of 2022 to secure critical mineral supply and, in doing so, changed the playing field significantly. 

“Mining is playing a fundamental role in underpinning the global transition to clean energy, but the path ahead is rocky. A net zero world requires more mined critical minerals, not less, and the flow of industry dealmaking clearly reflects this. But the increasing rise of geopolitics as an influencing factor in global mining may complicate operations in an increasingly complex world with new actors,” says Lauren Bermack, National Deals Mining Leader, Partner, PwC Canada

Critical minerals will be vital for society and the mining industry over the next 20 years.

Critical minerals dominated deal activity in 2022 as miners raced to capitalize on the global transition towards clean energy, driven by two forces. First, the role many of these minerals play in the clean energy transition technologies, such as batteries, electric vehicles, and solar and wind generation. Second, the role of critical minerals in national defence, technologies and weaponry.

In 2022, gold, copper, lithium, and cobalt exploration grew significantly. With increased demand, and limited supply for critical minerals, continued exploration investment for these minerals will be essential to the energy transition.

“Looking forward, the next 20 years have the potential to be as positive for the industry as the last 20 years. Demand for critical minerals—which fuels a growing boom in sustainability requirements like electric vehicles—requires miners to reinvent and reimagine how they will best support their stakeholders globally. The high-demand era of critical minerals is now. It’s full of opportunity; but for those miners who do not reimagine and reinvent their operations by finding the right value-chain partners, they will likely miss out on the opportunity ,” says Monica Banting, National Mining Leader, Partner, PwC Canada

Decarbonization
According to PwC’s 2022 survey of more than 4,000 CEOs globally, over one-third of mining CEOs (35%) see their company as highly or extremely exposed to climate-related risks within the next five years. Despite the global goal to reduce carbon emissions, this year’s Mine report found that the geopolitical instability of 2022 saw demand for coal surge, making coal the largest contributor to Top 40 revenue at 28%. 

Among the most cost-efficient options for decarbonization in the industry include direct electrification, efficiency improvement, and renewable energy, followed by hydrogen power for applications that cannot be electrified. Decarbonization will drive business decisions for decades. For miners to capture the decarbonisation opportunity over the next five years, they need to continue to:

• Set and communicate targets for reducing Scope 1 & 2 emissions and engage stakeholders to reduce Scope 3 emissions
• Implement renewable-energy technology at sites and pilot new, lower-carbon solutions for processing
• Evaluate emissions-reductions partnerships with customers and engage them

And in the coming decades, miners should consider:

• Partnering with processors to cut downstream value chain emissions
• Scale up renewable technologies at mine sites
• Scale new mine operations as well as low-carbon refining processes
• Commission full-scale co-located mining and refining plants
• Integrate renewables in power and transport applications and phase out fossil fuel equipment

Recruiting the future
The mining industry needs skilled employees and faces an existential talent shortage, but to attract talent it must change perceptions about the industry. In a survey by the Mining Industry Human Resources Council (MiHR) of Canada, a majority of Canadians aged 15 to 30 said they would definitely or probably not consider a career in mining. 

Mergers and Acquisitions
While the total value of Top 40 M&A was steady in 2022 compared to 2021, the composition of those deals changed significantly. Critical-mineral deal value increased by 151% compared to 2021, making up 66% of total deal value over the year. Gold deals, on the other hand, fell by 50%, possibly signalling the end of the precious metal’s dominance of M&A over the past several years.

Miners will also need to work with other industries, such as car companies and battery manufacturers as original equipment manufacturers (OEMs), through joint ventures, partnerships and offtake agreements to secure supply. As governments incentivise the production and processing of critical minerals, we expect OEMs to make more direct investments in mining and processing assets, increasing the competitive landscape for growth assets and M&A.

To read more about the future of mining and why miners have to reckon with a whole new set of industry dynamics, click here.

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