The mining industry is facing significant challenges in executing extraction projects needed to meet the soaring demand for critical minerals. Years of project delays, cost overruns, local opposition, and rising concerns about environmental, social and governance (ESG) issues have hindered progress, despite the growing need to electrify the global economy.
Industry leaders gathered at the UK Critical Minerals Association (CMA) event in London on December 2 emphasized the urgent need to rejuvenate the mining sector and secure the financing necessary to deliver the vast quantities of metals and minerals essential for energy transition.
Jamie Strauss, CEO of Digbee, a data provider for the mining industry, stressed that “execution risk is one of the greatest challenges to encourage new investment into the sector.” He pointed out that after 25 years of failures in sticking to budget and project delivery timelines, the mining industry has struggled to regain the trust of investors.
A recent study by McKinsey, published on November 27, highlighted that more than 80% of recent major mining and metals projects have encountered cost and scheduling problems. Capital expenditures on these projects have exceeded budgets by more than 40%, and delays in project timelines range between 20% and 30%. For large-scale projects valued at $1 billion or more, costs have typically been at least 79% higher than initial estimates.
This has led to increased scrutiny from investors, who now require mining companies to balance disciplined capital spending with environmental stewardship and meeting stakeholder needs. According to an October survey by EY, rising exploration and extraction costs, coupled with declining concentrations of metals in ores and fewer new discoveries, have further compounded the industry’s challenges.
Global exploration budgets for non-ferrous metals are expected to decline by 3% in 2024, reaching $12.5 billion, down from $12.9 billion in 2023, according to S&P Global Market Intelligence. A key factor driving this decrease is lower financing for junior miners—smaller companies that explore and develop new natural resource deposits.
Philipa Varris, a non-executive director at Mkango Resources, a London-listed exploration company, noted, “The industry has really struggled, particularly in the junior space, to access capital. Without access to capital, we can’t fund exploration. The minerals are out there, but someone has to prove that they’re mineable, and that takes money.”
At the same time, capital expenditure for the world’s top 19 mining companies is expected to rise to $71 billion in 2024, a 10.6% increase from the previous year, according to Global Data. This would mark the highest level of investment since 2014. Mining giants like Rio Tinto and BHP are set to invest $10 billion each, with BHP allocating a large portion of this towards projects such as the Jansen Potash, Copper South Australia, and Pilbara developments. However, preliminary data from fDi Markets suggests less capital is being directed toward new mineral deposits. In the first nine months of 2024, global greenfield foreign direct investment (FDI) in metal and mineral extraction projects dropped by 38% compared to the same period in 2023, falling to $12.5 billion. Despite the decrease, this figure is still above the average of $8.4 billion tracked between 2015 and 2019.
The impact of cost overruns and delays has eroded confidence in the mining sector. Ms. Varris added that the industry needs new financial tools to overcome these challenges. “Otherwise, globally, we’re not going to make our transition plans, and we’re not going to meet our Paris [climate] targets,” she warned.
A key factor contributing to the mining industry’s struggles is the price volatility of critical minerals such as nickel, cobalt, and lithium. For example, the global prices for lithium hydroxide and lithium carbonate, essential for electric vehicle (EV) batteries, have dropped by more than 50% compared to last year, according to Benchmark Mineral Intelligence.
Simon Gardner-Bond, Chief Technical Officer at mining investment fund TechMet, explained that the volatility in prices for critical minerals, compared to other commodities, makes financing particularly difficult. “It requires a level of investment over a time period that often equity investors are not comfortable with,” he said, adding that this burden often falls on government bodies to provide financing.
As the mining industry grapples with these significant challenges, the pressure to secure the minerals required for the global shift to clean energy intensifies. Industry leaders are calling for greater investment, new financial strategies, and better project execution to overcome the barriers hindering progress in this crucial sector.
