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The global community must invest in exploration, mining and development of critical minerals if it is to meet the demands of the green transition. Otherwise, political instability and funding shortages will stop this push in its tracks.  

The rush to secure critical minerals should be a significant opportunity to redesign the relationships between producing nations, the extractives industry, manufacturers, the tech sector and consumers. However, a year on from the flurry of national policy initiatives aimed at stimulating the global clean energy markets, we are not much closer to securing the minerals.  

To some extent, the decades-long underinvestment in critical minerals exploration and the recent urgency to secure supply chains are two sides of the same coin. The Western world shied away from mining in the 1980s and 1990s as it sought to distance itself from an embattled extractives sector and the polluting consequences of refining and production. In exchange for access to Organisation for Economic Co-operation and Development (OECD) markets, it handed over production and manufacturing of most goods, including metals and minerals, to China, leaving the Red Dragon to march ahead.  

Now the West is scrambling to catch up, with varying degrees of success. Rising geopolitical tensions with China and the undeniable effects of climate change have propelled governments and communities into action, with multiple incentive packages, “friend-shoring” agreements and new industrial policies.  

It may therefore come as a surprise that critical minerals experts and mining companies are shaking their heads in despair. It should be an open market for critical minerals. The supply and demand are well-documented and yet few believe the mines, supply chains and technical expertise needed to extract and produce materials such as copper, cobalt, lithium, nickel and rare earths will be set up in time.

Not all initiatives are backed by serious intent or knowledge to create a coherent industrial and mineral policy. Experts cast doubt over the affordability and efficacy of policy initiatives, especially the US’s Inflation Reduction Act and the EU’s Critical Raw Materials Act.  

Exploration is a risky business, with long investment horizons from exploration to commercially viable production, often in politically unstable regions. Once the minerals are discovered, mining companies must often contend with political, economic and regulatory instability, which make their investments uncommercial or impossible to manage.  

The cyclical boom-and-bust narrative of the extractives sector has scarred many investors, alongside the ever-increasing geopolitical volatility that has affected prices. Mining is a high-risk waiting game. And with the industry’s social and environmental past record, which needed major correction, investors and governments have looked to more lucrative investments.  

Since the arrival of a more disciplined approach to understanding, managing and sharing above-ground risks through the environmental, social & governance (ESG) framework, the industry has been cleaning up its act. Whether it is sustainable mining, domestic beneficiation, supply chain governance or decarbonisation, most mining companies now place ESG at the top of their priority lists.  

However, the industry’s reputation remains poor. Resource-rich countries, sitting on huge deposits of critical minerals, do not see mining companies as true commercial partners. Fuelled by popular anger that the benefits of the resources have not reached communities, mining companies are often targeted by governments. They are also convenient punching bags when politicians seek to deflect from their own failures to deliver for their people.  

Political risk guarantees are insufficient to protect against political interference or resource nationalism. International arbitration typically takes eight to 10 years to resolve disputes. The World Trade Organisation regime has lost its clout. And the convergence of the green transition agenda with national security has complicated the investment and upstream operating environment.  

Over the past few years we have seen an uptick in investment from private equity and industrial companies such as carmakers and battery cell producers. But our analysis suggests that we will need investment in mining, refining and smelting to rise by up to $4-trillion by 2030 to meet demand. And payback time on a mining venture can be up to a decade — a time frame most investors and shareholders are less enthusiastic about.  

As critical minerals become a strategic priority for countries all over the world there needs to be greater alignment between private and public partners. Without serious fiscal commitments to upstream critical minerals exploration and development there are insufficient incentives for investors to move away from more secure investments such as oil and gas. The political rhetoric needs to match reality. If investment fails to flow to exploration and development there might not be enough minerals to go around. 

• Wolfe is managing partner at Marlow Global, which has just published a new report, ‘Green Ambitions & Raw Realities’. 

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