KPMG’s latest global report, Sustainability on the horizon – the prospects of a net-zero future for metals and mining companies, has identified metals and mining companies as vital for the world to reduce its reliance on fossil fuels.
The report showcases the views of global mining leaders with a call to accelerate the production of minerals needed to help reduce the carbon footprint – and sets the scene for Australia’s critical minerals to play a vital role in a decarbonised future.
Sustainability on the horizon: The prospects of a net-zero future for metals and mining companies report is based on a survey of 322 metals and mining executives around the world, more than half of whom work at companies with annual revenue of more than $10 billion.
Global Mining Leader KPMG, Trevor Hart, said the latest report details the challenges and opportunities for the global mining sector in getting to net zero.
“Notably, 29 per cent of the 322 global mining executives surveyed said they planned to achieve a goal of net zero emissions by 2025, whilst a further 40 per cent said by 2030.
“A total of 87 per cent of the miners surveyed said they will have delivered net zero emissions by 2035.”
Mr Hart said that at the same time, miners have to transform their own operations to conform with increasingly important ESG considerations, while reducing their carbon emissions to net zero – involving clear decarbonisation pathways.
“The industry realises that leading by example in decarbonising and reducing environmental impact is fundamental to trust of the sector,” Mr Hart said.
“Over half of the companies we surveyed are large with $10 billion-plus in market capitalisation.
“More than 40 per cent of the survey cohort said they will accelerate investment, opening the prospect of transforming the industry in ways that help the global economy meet its ESG goals.
“Yet only 30 per cent said they have integrated ESG goals into enterprise strategy. Others admit they have a long way to go.
“We see a picture of an industry that has challenges and is undergoing rapid transformation but which is responding quickly – and has bright prospects.”
Critical minerals focus for 2023
KPMG Australia’s National Mining and Metals Leader, Nick Harridge, said the economic shift toward a low-carbon future was being seen by mining executives as an opportunity for metals and mining companies.
“The Australian experience reflects the KPMG report where more than one third of respondents predicted they will significantly change their portfolio of products toward commodities and metals used to accelerate the transition to cleaner energy.
“Locally, we continue to see critical minerals as the centrepiece for the sector in 2023.
“Australia has an abundance of the five key critical minerals: lithium, nickel, aluminium, cobalt and copper, together with a number of rare earths and mineral sands. The key demand story is highlighted with lithium,” Mr Harridge said.
Battery minerals and electric vehicles (EV)
KPMG said that given the current transition away from fossil fuels, considerable minerals will be needed, driving demand for mining output. In considering electric vehicles as just one of the key users of lithium for batteries, estimates show there are around 1.4 billion cars in the world, of which only around 15 million, or approximately one per cent, are electric vehicles.
KPMG estimates that more than two billion EVs will need to be manufactured to accommodate world demand and fully transition away from internal combustion engine vehicles by 2050.
The pace of EV sales is increasing with nearly half of the current stock of EVs sold in the last year. But the transition away from fossil fuels will continue to require a rapid increase in the number of EVs manufactured. On that basis the production of critical minerals used in battery technologies will also need to increase substantially.
Demand for lithium
Global production of lithium was around 550kt of lithium carbonate equivalent and that is forecast to rise to 1,000kt by 2024. At that level it would take around 100 years to produce enough lithium to have two billion lithium-ion EVs in service, ignoring other uses of lithium and not considering the potential to meet some of this demand through circular minerals.
“Lithium investment is really just beginning to meaningfully increase in Australia,” Mr Harridge said.
“Mining investment is increasingly turning towards it and other critical minerals. Given that the price of lithium has surged in the last year, the incentive to invest further in lithium production and circularity remains very high.”
Mr Harridge said it is estimated that lithium production would need to grow by around 12 per cent per year every year until 2050 to produce enough of that mineral to have two billion EVs on the roads.
“Given that lithium production is expected to grow at nearly double that pace in the near term, and that lithium investment is likely to accelerate, rather than slow, that pace of growth over time is reasonable.
“If we assume that lithium production continues to increase by 20 per cent per year until 2030, then production would need to rise by around seven per cent per year thereafter to meet EV demand – with other producers coming online, the pace of growth in Australia could slow to this and the world would still be able to meet total demand for lithium,” Mr Harridge said.
Innovative technology
KPMG also said there are likely to be improvements in technology that will reduce the volume of lithium required in car batteries and other technologies which will provide a partial offset to the level of lithium required.
KPMG’s view is that alternative technologies – whilst not yet of commercial scale – highlight a counter to lithium demand, but overall, lithium demand will remain very high in the near term and strong investment will be needed to ensure that production of new and circular minerals keeps up with demand, but the required level of production is attainable.
Australia as a lithium refining hub
Mr Harridge said Australia currently produces just under half of the global supply of lithium, a share that is expected to remain broadly stable in the near term.
“What’s more, the significant volume of investment that is set to take place should support supply in Australia over the next decade. We see the incentive to increase lithium mining is set to rise and that means not just production but also refining.”
Mr Harridge emphasised that it is not just about Australia increasing refining capacity – but also conducting its refining activities with greener credentials – using renewable energy for instance. Australia has historically exported unrefined lithium to China which refines the lithium for use in batteries but now Australia is investing into lithium refineries.
KPMG said that by 2024 Australia should have about ten per cent of global lithium hydroxide refining capacity, rising to about 20 per cent of global lithium refining by 2027.
Given the higher price for refined lithium – even more for refined lithium with sustainability credentials – the increase in lithium refineries in Australia should help support investment in lithium mining in the years ahead.
A net zero outlook for mining
KPMG’s report finds that more than three quarters have set net zero targets for carbon emissions and at the same time, 69 per cent say they aim to achieve them by 2030.
Integrating ESG goals into corporate strategy entails ensuring C-level executives lead the effort. The heavy lifting on sustainability will be delivered by an organisation’s culture, on which a sustained focus can deliver the best outcomes.
National Leader Decarbonisation Transformation at KPMG Australia, Dr Cle-Anne Gabriel, said that metals and mining companies are ambitious about their net zero targets.
“Our global report shows that more than three quarters have set a net zero objective at their companies and of those who have done so, 29 per cent expect to achieve it by 2025 and another 40 per cent by 2030.
“Executives say the most effective measures that will help their companies meet net zero targets are, first, to ensure their company communicates clearly and fully to stakeholders and, second, to see to it that net zero objectives are incorporated into overall corporate strategy.”
Dr Gabriel said this is about setting clear decarbonisation pathways both in the scope of what a company is producing and also for the operation of the business itself. As with ESG objectives, miners face a number of obstacles to reaching their net zero goals, the largest of which are the difficulty in measuring progress and a lack of resources to bring them about.
Investment in new technologies to help companies reach net zero holds promise, but 58 per cent admit they either have a long way to go in using these technologies or haven’t even started to plan ahead.
Dr Gabriel said that demand for critical minerals for decarbonisation was already outstripping supply.
“The supply of minerals essential for decarbonisation, and for energy sustainability and security, is already an area of geopolitical rivalry, and will continue to be, creating unpredictability in markets,” she said.
“Looking to the future, partner countries are likely to be prepared to pay a premium for ‘friend-sourcing’ their supply of these minerals to ensure reliability, and sustainability.
“That means there is potential for Australia – a country regarded internationally as a safe democracy with a stable financial market and strong trade credentials – to move into the supply of critical minerals essential for decarbonisation.”
Dr Gabriel said highlighting that balance will be necessary, but at the same time, Australia will need to ensure any delivery is environmentally and socially sustainable.
