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Breakfast Chat: International Critical Mineral Supply Chains

Updated: Nov 15, 2020

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

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