KPMG Provides Mining Industry Demand and Risk Insights
The current developments in the mining industry are focused on clean energy usage and net-zero production. But how will other factors affect the industry’s success? KPMG has released its ‘Risks and Opportunities for Canadian miners’ report to provide mining insights as the country nears the end of the global pandemic.
Supporting Clean Energy Industries
With demands high for the component materials used in battery production, the mining industry continues to provide a significant portion of clean-energy-related materials. Canadian operations will benefit from the necessary change to renewable energy storage in vehicles as it provides an alternative operational focus, which will be directed towards the production of crucial minerals like lithium, cobalt, and nickel. Demand for battery-grade lithium is set to increase drastically by 2030.
The production of metals also supports renewable energy deployments of wind, solar, and geothermal energy generation. The supply of metals for net-zero applications is set to grow exponentially, which the World Bank predicts will experience a near 500% increase in mineral mining processes by the year 2050.
"The outlook for the mining industry is extremely positive," says Heather Cheeseman, Partner and Toronto Mining Leader, KPMG in Canada. "The year-long rally in commodity prices, even with the recent volatility sparked by inflationary concerns, is driven not only by pandemic-induced supply chain issues but also climate-action demand for green metals and the massive spending expected on infrastructure." On the other hand, Cheeseman warns that companies’ ESG risks could affect the potential for growth, as well as the rate of digital transformation.
The ‘S’ In ESG
The report, carried out by KPMG, highlights the concerns of some 225 global companies around the social aspect of ESG. The survey suggested that the majority of Canadian miners were more conscious of ESG criteria. 42% of them ranked community relations and social licence to operate as the top ESG risk. 90% of respondents agreed they required a clear, measurable ESG strategy, and only 19% of Canadian mines would include environmental risk as a top priority for their organisation.
"The days of considering ESG factors as 'soft' secondary risks are long gone," says Cheeseman. "Investors are demanding miners have clear and measurable strategies in place. ESG now dominate boardroom conversations in every mining company, and mining leaders overwhelmingly agree this is a top priority."
Competition Risks
Digital transformation is an important tool for various business processes. However, according to the KPMG report, only a third of Canadian mining companies see innovation and technology development as a driving force in future growth, while nearly half expect major technology disruption in the next few years. "There is a distinct need to find ways to better manage costs and mitigate risks whether that's through consolidation or embracing innovation," says Cheeseman.
The report also shows that the majority of Canadian miners view organic growth as an important way to expand over the coming year, and over 44% believe in acquisitions and mergers as the best expansion strategies. "The results may not be surprising given the numerous small- and medium-sized miners in Canada that may not have the ability to scale up or access capital to meet rising demand, embrace innovation or address growing ESG expectations," says Cheeseman. "Consolidation may provide the opportunity for many players to address these as well as drive efficiencies and lower costs."