Breakfast Chat: International Critical Mineral Supply Chains
Updated: Nov 15
On the 27th of October, our 4th breakfast chat, ‘International Critical Mineral Supply Chains’ involved a discussion on the global dynamics of the critical minerals industry. This is our first breakfast chat which brings an 'International Relations' perspective. Watch the recording and read highlights below!
Our speakers were:
Clovis Meath Baker CMG OBE, Former Director of Intelligence, GCHQ & Associate Fellow, RUSI
Jack Bedder BA (Hons) MA PhD FRGS MIMMM, Director, Roskill
Will Dawes CFA, Chief Executive Officer, Mkango Resources
With the event moderated by our very own Jeff Townsend.
Clovis Meath Baker, RUSI
Areas of Knowledge: International Relations, UK Government & Intelligence
When considering the hierarchy of critical minerals, the idea of ‘substitution’ is important. As the demand for these commodities stems from the growth of green technology such as electric vehicles, we should consider which alternative minerals can be used, even if they are more expensive.
The defining international security issue over the next decade is likely to be the evolving rivalry between the US and China, which could spill over into restrictions on access to critical minerals. Recent Chinese legislation enables the government to impose export controls on strategic materials to named companies as a counter-measure.
China’s market dominance and ability to restrict exports of critical minerals could be used for short-term political leverage, but substitutions will be made and this is less significant that the long-term threat to Western economies. If we allow China to become the dominant producer of high-tech goods and do not develop critical minerals capability in the West/UK this will weaken our economy.
Public opinion on the origin of raw materials is changing, and it is likely that higher ESG standards will be applied for materials imported into the UK to ensure ethical production. The willingness to pay more for an ESG compliant product could be a significant influence on strategic issues such as critical mineral supply chains. However, ESG standards must be clearly outlined – currently they are not legally binding.
In terms of UK's involvement in the critical minerals supply chain, we cannot contribute to all elements. However, specialisation should be developed in a few key sectors to allow contribution and involvement in the international critical minerals industry.
Jack Bedder, Roskill
Areas of Knowledge: Steel alloys and battery raw materials sector, critical materials supply chains, economics of natural resources
The definition of ‘critical’ is certainly subjective and is dependent on the context of today. In an EU-centric view, the division of critical materials into further sub-categories ‘critical’, ‘technical’ and ‘strategic’ is useful in providing insight into their end uses and level of demand. However, what it lacks from a global standpoint is the idea of ‘advantageous’ minerals, which is a term used by jurisdictions (e.g. China) who have potential resources or high productive capacity for critical materials, giving them a strategic position within a global market.
China plays a major role throughout the entire value chain of critical minerals. Favourable geology has allowed large resources of critical minerals (e.g. rare earths/antimony/tungsten) which can be extracted, creating dominance in an upstream capacity. However, China also maintains dominance in midstream (mineral processing) and downstream markets (largest producer of steel and alloys and developing technologies for recycling).
The unique nature of Chinese governmental support and the degree of central planning with regards to the critical minerals industry has made it difficult for companies outside of China to compete.
In terms of whether there are still untapped resources, there is certainly the potential for new resources on a global scale. However, these firstly need to be found and will have to be of a suitable economic viability to allow extraction to sufficient ESG standards. This is undoubtedly a challenging environment but there are certainly more resources to be found.
From a UK’s perspective there is a way to use our strengths to develop the sector over time. For example, research and development and the ability to maintain and support commonwealth relationships to encourage development.
Energy security is one of the main drivers for what we have been talking about. China especially is developing its electric vehicle infrastructure to reduce reliance on fossil fuels and to reduce CO2 emissions as well as to create internationally competitive firms. The rate of technological advance will cause a shift in the way energy supply chains are structured globally, possibly resulting in a number of geopolitical shifts as a result.
Will Dawes, Mkango Resources
Areas of Knowledge: Rare Earth Element Industry, Exploration, Downstream Applications
The niche applications and small markets of some critical minerals often means that there is not a wide coverage and knowledge base for these elements compared to larger markets such as copper. This introduces additional hurdles for investors and other market participants, which can be mitigated by strategies to increase market awareness and knowhow within the sector.
China is currently the dominant player when considering critical minerals and certainly rare earths - not only as primary producers but also at a midstream and downstream capacity such as magnet making.
The industry structure and degree of integration along the value chain within China are key factors in its domination of the rare earths market, as well as a low cost operating environment and economic incentives. For outside nations to compete more effectively in downstream markets, it would likely require both a greater degree of integration (for example companies involved in all stages from extraction to downstream applications) and new technological advances to maintain a competitive cost position.
One of the big competitive advantages of being a new mine developer in the rare earths sector is the opportunity to implement the highest ESG standards from project inception, thereby avoiding any legacy environmental issues which characterise some areas of historical rare earth production activities.
Future resources are out there but in terms of developing these it comes down to 4 key areas; access to capital, quality of project, position on cost curve and CapEx. Also, it will be critical to not only develop primary resources, but also to tap into the wealth of secondary resources, and develop new technologies for the recycling of critical metals.
Article written by Beth Donaghey, MSc Exploration Geology, Camborne School of Mines