Mining firms preparing for energy transition – and era of critical minerals

The high-demand era of critical minerals is now, according to PwC’s 20th annual Mine report – and companies will have to reinvent themselves to capitalize on the global transition to clean energy.

The consulting firm’s report, which tracks trends among the world’s 40 largest mining companies, found that critical minerals dominated deal activity in 2022.

Although the total value of Top 40 M&A was steady in 2022, critical mineral deal value increased by 151% – making up two-thirds of total deal value. Gold deals fell by 50%, possibly signaling the end of its dominance of M&A the last several years.

Critical mineral exploration also grew significantly in 2022 amid increased demand and limited supply.

Minerals such as copper, lithium, nickel, cobalt, and rare earth elements are key components in energy transition technologies such as batteries, electric vehicles, and solar and wind generation. Critical minerals are also important to national defence, technologies, and weaponry.

The shift to clean energy tech and rising geopolitical uncertainty has driven governments to secure critical mineral supply – altering the playing field for mining firms.

“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,” said Lauren Bermack, national deals mining leader, PwC Canada.

China is the dominant player in processing critical minerals, which is problematic as relations cool with the West. Meanwhile, China, Europe, and the United States are racing to invest in access to raw materials in Africa and South America.

“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,” said Monica Banting, national mining leader, PwC Canada.

Despite the hype over energy transitions, coal was a huge player in 2022 – representing the largest contribution to Top 40 revenue at 28%.

Overall, mining revenue held steady at US$711 billion in 2022, though Ebitda margins were squeezed three points to 32% amid rising costs and economic uncertainty.