Watch the webcast replay for an insightful discussion on the release of the annual EY Top 10 risks and opportunities, which offers a detailed look at the ongoing and upcoming trends in the mining and metals sector.
During the session, EY Global Mining and Metals Leader Paul Mitchell and a select panel of senior global mining executives discussed the most pressing challenges and opportunities in the mining and metals sector for the year ahead.
Topics discussed include:
- The top 10 risks and opportunities in 2024
- Macroeconomic factors impacting the sector
- The role of geopolitics
- The evolution of the focus on ESG
- The skills shortage and rising costs
- Technology and innovation developments.
Please note: The transcript reflects the language spoken during the webcast. This is an automatically generated transcript and there could be sections where the quality of the transcript is impacted.
Paul Mitchell: [00:00:02] Welcome, everyone, to those here in person in Toronto and to those joining us on the Web. Thank you very much for your time. My name is Paul Mitchell. I lead the global mining and metals team at EY, and today we're very pleased to launch the 2024 Business Risks and Opportunities Survey. This is the 18th year we've done the survey. It seems to grow each year, both in size and popularity. It's getting harder to get the team to edit it and get it in time. So, thank you to my team that sort of helped in preparing this and it's great to be able to launch it with everyone here today. We can do a little short presentation to take you through what's in the report, and then I'm going to hand over to Theo, who's going to chair a panel discussion. The actual report will be released next week, but we've got some little sneak previews out there. So, hoping everyone enjoys going through it this year. Look, I always start these by doing a little bit of a review of where the industry is, and we're going to do a very short one today. But we remain extremely positive about the state of the industry. If you look at economics around the globe, commodity prices should be depressed, capital markets should be depressed, and mining should be struggling. But we're not. We're in a period of growth and the prospects look fantastic. The amount of money that needs to be spent on energy transition and the investment that requires in what we define as critical minerals is significant. So, if you look at the money spent in the first 20 years of this century in China on urbanization, an equivalent amount has to be spent every five years for energy transition. And you think what China's growth did for commodity prices and the super cycle and what it drove, we should look forward to a continued period of success as we move forward. Now, people who forecast commodity prices usually do that with a little bit of risk. So, always a bit anxious when you say those things, but the fundamentals are there. Just two months ago, people were calling the, you know, the iron ore price was going to drop to 70-80 dollars. It's back up around 115 dollars. You know, nickel continues to do extremely well. We still can't quite work out why the price of copper doesn't increase. And lithium continues to be volatile, but prices are extremely positive, and we should be able to make money and we should be confident that they will remain there for a significant period of time. So, good opportunity to invest. Good opportunity to move forward in terms of what we do. So, we remain extremely positive. There's work to do. But best of all, when you look at each of these risks that we'll talk about today, the opportunities are significant in terms of what we did. As I mentioned previously, this is the 18th year that we've done the report. If you look at the first few years of the report, it was the risks that we reported tracked commodity prices and general factors in the business community. So, the first five years we ran it, we're in the super cycle. So, we had one set of risks that kept coming through, you know, where we don't have enough people to do jobs. It's costing too much to build projects. Prices are on the increase. The next five years it was commodity prices started to fall down and we got another set of risks. You know, cost reduction was big. We've got to look at what we're understanding. And risks generally tended to follow commodity prices. We then had digital revolution, and everyone said, you know, we're going to disrupt industries and we're going to change things. And lots of industries did get disrupted. I got asked constantly when we did this presentation, who’s going to be the Uber of the mining industry? Thankfully, I said no-one. I don't think we'll have one. And we didn't see digital disrupt mining in the same way that we saw it with other industries. And I think most B2B industries felt that. But mining in particular. The last three, four years we've seen the emergence of social factors and the impact of social factors on mining and metals, and that is seen a significant and a huge change. And this year, if we just move to the next slide, ESG tops the list again for the third year. So, we had licensed to operate four years ago. We've got ESG this year. I'll explain how we split them when we sort of talk about it a little bit later. But you'll see we've now had ESG as the top risk for three years. I like the fact that it's ESG. I'll talk about what that means in a minute, but you'll see that we've got social factors as three of the top five, and we've had that for each of those three years. And what that says to me is we're being disrupted from outside and we're reacting to it in terms of the way we operate. What's great to see this year is capital has come to number two because I think that impact on capital markets has been the most significant in terms of what we do. And so, social factors are disrupting us. So, where digital didn't because it focused on a very small part of the value chain, it tended to focus on operations. Social factors impact everything they do. They impact where and what we explore for. They impact the way we operate. They impact the way we close. They impact the way that we rehabilitate sites afterwards. End to end on that value chain. These social factors are impacting us and that is causing disruptions. It's causing changes not just to the way we manage those factors. It's changing capital markets. It's changing the way that we think about productivity in the way that we operate sites. It's changing business models. It's getting us to change the way we think about a mining company. And it's impacting workforce. Continues to impact workforce, and it continues to have an impact on people that think. I think one of the reasons we've got those factors so high is because we haven't spent the time in the last 20, 30 years thinking about our brand as an industry. The world cannot go through an energy transition and our lifestyle cannot be maintained without mining and metals. And the world is just starting to realize that. And that to me is one of the other reasons why we should be excited about the next few years, is we have this opportunity to take advantage of the fact that people recognize we're critical. When most people think about critical minerals, they think it means lithium. They think it means cobalt. It doesn't. It means iron ore. It means metallurgical coal. It means copper. The infrastructure we need, the systems we need to get that energy to populations, to industry, are more significant than just the storage needs. And we always need to remember that. Every time I meet with people, I tell them iron ore and coal are critical minerals. We need to remember that as we go forward. I'm just going to jump quickly into a couple of the risks to give you a feel, but we're going to leave some of them to be able to discuss with the panel. Sorry, I clicked at the same time then, so I thought I'd group together the social factors. So, as I said, we've got ESG, we've got license to operate, and we've got climate change all within our top three. We initially had licensed to operate on there. It was the risk that first presented itself four years ago and was the top of our list. When we then started to see broader ESG factors coming in, I didn't want to lose license to operate and lose that focus because it is such a critical issue for us. You think about not just the right to be able to operate on land, but that ability to be able to hire people. That ability to be able to continue to raise money is all about license to operate. So, we think about it in a very broad way, but we tend to talk about it in a local way. So, we think about that as not just communities, but society as a whole and our right to operate as an industry in terms of what we do. Climate change is obvious. It's a critical point that's facing the industry, and the energy transition we're going through is not the first energy transition the world's gone through, but it is going to be one of the most fundamental when we think about it. So, we have to think about not just the energy transition we have to do, but our role in the energy transition. ESG was then meant to be the broader factors that we thought we'd pick up. We put it on our long list for the first time three years ago, and it surprised us that it came out number one. But to me, that was fantastic because what it said was people weren't thinking about the risks and the social risks that are facing them today. They're thinking about what they have to prepare for in the future. That's what we want people to do when they're filling out the survey and when we interview [INAUDIBLE], for that, is to think about what the risks are that you're going to face in the next few years and start positioning yourself for the opportunities that are there. One might think that it's a little bit boring to have the same risk for the last three years, but I think it's quite evident that that risk is changing and it's evolving as each of the reports gets published. And we see this in some of the underlying survey data that we get there. So, the risks that come out top are water, biodiversity and the highest rising one this year is human rights. And that says to me, we're thinking about where we operate, we're thinking about how we're operating, but we're also thinking about the legacy that we will leave and how we have to continue as we go forward. So, it's a really interesting reflection on the business of mining and how it's changed. We've had significant generational change in leadership, both at the executive and the board level of mining companies in the last few years. And I think that's being reflected in the way we're thinking, but it's also reflecting the way that pressures are mounting on these businesses in the way they operate. So, it's a really interesting one when you look at. It's going to continue to be with us. I struggle to see how it will fall out of the top ten. You know, we're going to have to think of some inventive ways to talk about it in future years. But mining companies are going to be thinking about it as we go forward, and understanding that breadth, depth, and complexity of each of these issues is going to be really critical as we go forward. The second risk we've got this year is capital. I was really pleased to see this one come up. So, I think when you think about those social issues, the first indication we got that things were changing was when capital markets started to say to us, you have to do better, you have to change. As a mining industry, we were a little bit slow to do that. You know, we sat back, and we sort of said, look, you know, the people who are telling us to change are all these left-wing employer funds and we don't have to bother about them because what do they know? The reality is capital markets these days reflect society. If you went back 30 years ago, Capital Markets was some wealthy investors, some fund managers, people like that who did what they thought was aligned with their ethics and invested just for return, n terms of what's there. Today, when you look at capital markets, close to 50% of funds, it's now at about 46-47% globally are from pensions. 20% of funds, up from sovereign wealth funds. So, 65-70% of global capital markets is from society, in terms of the way we think about it. And the boards that are managing those funds, the investors that are looking at those are reflecting what their shareholders are thinking. So, where we haven't been impacted very quickly and very closely, that's now come, but we weren't we weren't initially impacted by consumers because we're a business-to-business industry. Our capital, our lifeblood, what makes us grow, what makes us sustain, was coming from society. Fund managers have learned if they don't, if they apply investments to things that their members do not agree with, they're going to be challenged. Sovereign wealth funds have realized if they don't do it, they're going to change as a government. And mining industries came to the realization as things developed that these, you know, left wing organizations and pension funds were actually just reflecting what society was telling us and that we had to be aligned in terms of what's there. So, it's a really interesting development in terms of what's there. I think as we sort of further look, what's happened as well is we've started to see alternative sources of capital come into mining and metals. So, private capital is back in a big way in terms of what's there. And particularly as we look to other continents, we're starting to see direct investment by customers and we're starting to see direct investment by governments in terms of what we're doing. And that will continue. Every country in the world has, you know, critical mineral strategies. They tend to not include everything they should include, but they've all got them in terms of what they understand. Everyone is thinking about how do we make sure we secure enough to maintain our lifestyle and to maintain our transition when we need to do it. So, we're going to continue to see that increased investment as we sort of move along. The next one I wanted to talk about. Sorry, I'll have to stop pushing this button. Next one I want to talk about was costs and productivity. Yeah, look, this one's, it's a really interesting this one. It's always on the list. It generally is down about number 9 or 10, in terms of where we look at it. I hate to push it in a couple of times because it sort of went out and ranked 13-14. And I thought, nah, it's got to be in there. And the reason it has to be in there are the fundamentals of our industry. If you stop thinking about costs, you die in this game. Mining gets more expensive every day. We do it. And you sort of think that through, the minerals we're extracting today are deeper, they're more complex to extract, they're harder to get to, in terms of what we're doing. The regulations and the requirements on top of us grow and will continue to grow in terms of what we do. So, if we do nothing, our cost base goes up as an industry. Not many industries can say that, but ours, it absolutely happens. And we've volatile prices that we receive that are not driven so much by what our customers are thinking. We see that we've got to keep on top of this in terms of what we do. 15-20 years ago, too many people focused on just the cost bit and didn't think about the productivity bit. And we still operate at very low levels of productivity. And fundamentally we always will because we will always have waste. So, you go and talk to manufacturing people, you go and talk to, you know, fancy people that write papers about this at universities, productivity is about eliminating waste, but we will always have waste because you can't be specific in mining. In 40-50 years, we'll have a direct extraction of minerals and we'll be much easier. But for now, we extract in bulk, we process, and we reduce. Most industries add. We reduce, in terms of the way we do things. So, staying on top of that productivity is really critical in terms of what we do. And what's become more critical is maintaining that productivity while we're thinking about all these social factors. So, how do you maintain productivity while you're also ensuring that your community is being engaged and being allowed a license as we work through. How do you maintain productivity while you're thinking about eliminating scope one emissions? How do you maintain this while you're worried about impacting the water table in the area you operate in? It gets really complex as you work on. And so, running a cost reduction program, running a productivity program, has become so much more complex because of all these factors that you've got to think about. The people have started to do things differently. They've started to think about the way they do it. But elimination of waste does become key and starting to blend this into what we're doing around digital. And innovation has become one of the keys to managing this. And so, we're starting to see that digital and innovation point come through in these risks. That segues us nicely to the next slide, which is around digital innovation. I think, you know, whereas I said at the start, we didn't see digital impact us and disruptors to the way that it did other industries. We saw it change the way we operate. What we're now seeing is it's impacting the way we think about social factors and it's impacting the way that we think about health and safety in terms of what we do. So we've seen a broadening of the digital agenda, but more importantly, we've started to see a broadening of the innovation agenda. Mining companies have realized that for themselves to hit net zero, they need technology, and they need innovation. We've done a fantastic job at investing in renewables, but to get that last 20-30% of our own scope one emissions, we're going to have to do some things differently. And the final point I want to talk about was business models, in terms of what's there. Look, it does rank down the bottom, but I think this is the one that reflects the way that things have changed in terms of the business. So, for many, many years we've focused on extracting minerals. So, we've focused on getting them out of the ground, processing them into a raw state and then letting someone else deal with them. The majors have stepped away from exploration. They stepped away, in some cases from development, but we're seeing a rush back to that. So, the level of investment increase from the majors in terms of exploration and finding new things. The early-stage joint ventures and acquisitions have just increased in terms of what they're doing. But the big change has been the transition from mineral companies to material companies. So, you never see a mine started as a lithium producer. You're seeing a lithium hydroxide producer. The nickel industry has changed in a way that we'll never see. You know, everyone now wants to produce nickel sulfate and be tied to customers and be closer. We're seeing the same thing in a range of minerals as we go on. Iron ore producers will be iron producers within a very short period. And so that transition to say that we're going to extend our value chain and start manufacturing materials has been really significant, but it's also made us think, hey, if we can do this maybe we can generate power. Maybe we can invest in technology. Maybe we can do all the things. And that started to happen as well. So, a really interesting list, really insightful. I think you'll enjoy reading it. It is getting longer, as I said, but, you know, take the time. There's some great stuff in there in terms of what we're doing. I'm now going to invite Theo up to introduce our panel and to chair us from here. So thank you very much.
Theo Yameogo: [00:21:39] All right. Thank you. Thank you, Paul, for the presentation. So, we now turning to the panel side of the breakfast this morning. And with me is Jennifer Maki. She's a board member of Pan American Silver, Baytex Energy and also Franco-Nevada. And then next is Beatriz Orrantia. She's a board member of Fission Uranium, Sierra Metals, Life Zone Metals and Star Royalties. Interesting to note that you both in energy, metals, and something to do with silver. So yeah. So, thank you for joining us today. And of course Paul is also part of the panel but, you know, that's my colleague. So, after reading the report, what are your initial thoughts on where the industry is headed? We start with you, Jennifer.
Jennifer Maki: [00:22:40] Well, I think when I look at the report, what strikes me is that the next years ahead will be very challenging for the mining industry. But I think as an industry, we're up for that challenge. And I think in the past we've shown that we can meet the challenges that are in front of us. And I think, you know, continued cultural change and technology will be really key to meeting those challenges.
Theo Yameogo: [00:23:03] Okay, Beatriz.
Beatriz Orrantia: [00:23:05] Well, I think that it will be another ESG centric year, so we will probably see next year ESG heading the risk. Now, companies are more familiar with reporting, so that is kind of not being a focus. There's a light at the end of the tunnel with consolidation of reporting standards. So, now the focus will be, as the report suggests, on water and biodiversity and also on the social impact of operations.
Theo Yameogo: [00:23:42] Okay. So, I don't want you guys to criticize our report, because Paul is watching. Are there any risks that stand out or do you feel like maybe something that we didn't put in the top ten, but you could have seen coming up in the top ten? I'll start with you, Beatriz.
Beatriz Orrantia: [00:24:03] I would have liked to see just transition on that report. It is a movement that we cannot deny and that we cannot turn a blind eye on, a blind eye to. So, just transition is when companies do their energy transition in a socially responsible way without leaving anyone behind. So, it is basically just looking after their communities, looking after their workers, after their supply chain, while they do their energy transition.
Theo Yameogo: [00:24:38] Paul, you want to answer that first?
Paul Mitchell: [00:24:41] Yeah. Look, I think it's in there, but it's not highlighted as much as what's there, but I think, yeah, I agree. It's one of those things that if we don't start to think about how we're going to address it could become a real flashpoint for us. Yeah, it'll be one of those things that continues to damage brand when we do it poorly. And we all get some that we do poorly, without a doubt. But I think, you know, one of the things that we need to do is focus on who's doing a good job and who's thinking ahead of this. And the example I've seen, we're working with Rio Tinto and then two universities; the University of British Columbia, which has got the Keevil School, and then Curtin University, which has got Kalgoorlie School of Mines, on a mine closure course. So, we're setting up a graduate certificate program in mine closure and we're doing three pilots. And just transition is big in one of those. So, training future generations of people who are involved in the industry to think about just transition, not when a mine closes and when you've got issues, but to think about it during exploration, to think about it during operations, and then think about it during closure and how you do it. So, you know, I like to say we're part of thinking about that in the change, but we'd like to see more.
Theo Yameogo: [00:26:07] And Jennifer, what stood out or what is it that you think we could have emphasized more?
Jennifer Maki: [00:26:13] Well, I think what stood out for me and I was quite happy to see that access to capital and capital was number two. I think that's an issue that's going to hit the industry sooner than people think. And if there was one that I thought would be higher than it was, would be workforce, I think every time in a room with people from the industry is we're all talking about the lack of being able to attract talent to the industry and fill positions at our company, so that one I'm surprised it's not higher.
Theo Yameogo: [00:26:46] Okay. And Paul, on workforce, just in case we don't get to it, did you see in the report that it's a regional differentiation, like are there some regions that have workforce higher than others?
Paul Mitchell: [00:27:02] Look, everyone's got a problem with it, but particularly what you call the advanced mining economy. So, you know, Canada, the US and Australia have particular issues with it. It links to brand. It links to license to operate. Kids do not want to go into the mining industry. People who are mining engineers don't want to do it anymore or don't want to be on site anymore. And so, we're starting to get this aging population at the experienced end that understand what they're doing and then we're struggling to replace it. So, you know, I sit on the council at Colorado School of Mines and the number of mining engineering graduates every year just makes you sad. It's numbers that would just shock you in terms of what we need. I think the reason it goes low is because while people flag it as a risk, we don't really know what the answer is to fix it. And I think we're sort of, we're happy to call things risks when we've got a plan and we've got a strategy to address them, but we don't think about them that much when we're worried about what we're actually going to do so I think it's one of those strange ones that what actually makes it a bigger risk is what keeps it low in the risk. But we're starting to see people thinking differently about who can operate on a mine site, how we can take advantage of technology to be able to reduce what you have to do that would be dangerous or uncomfortable or just inconvenient in terms of lifestyle and those sorts of things. I think digital is playing a big role in bringing it to other people. And I think too, mining companies have become more realistic that a mining company employee does not have to be someone who works in the industry for 50 years and whose father and grandfather worked in the industry. You know, diversity's been great for us. So, we're slowly starting to see it tick up, which is a good thing. But also, we've realized people can come and go and they don't have to stay in it for their entire career, that they can try other things and we've got to do a better job at bringing them back. So yeah, hopefully we'll start to see it addressed.
Theo Yameogo: [00:29:20] Yeah, I've heard you talk about me. This is a geologist and mining engineer and I sit here today, but maybe I'll go back and do some mine planning at some point. Beatriz, on the ESG, the license to operate and the climate change. You, as a board member, what are the key areas you see mining companies should be focusing on that can actually have an impact?
Beatriz Orrantia: [00:29:48] Well, I as I said earlier, I think water.
Theo Yameogo: [00:29:53] I Want to add something to you also know Latin America really well so it can provide some colour to how you.
Beatriz Orrantia: [00:30:00] Yeah. Still water.
Theo Yameogo: [00:30:02] Exactly.
Beatriz Orrantia: [00:30:02] Still. Yeah. And water is such a big topic because it's not only the quality of water, it's the quantity of water and the limitations on the use of water. So, it becomes, it becomes a license to operate issue. It becomes an operational issue. It becomes a social impact issue. It becomes also a waste management issue. So, water is very broad, and if companies do water well and we are seeing that some companies are starting to report and monitor and just to be more mindful of their role as water stewards. It is something very good. I would also mention the social impact. For companies in addition to focusing on water, to focus on having a net positive social impact. That is something that that I would like to see more of.
Theo Yameogo: [00:31:09] So, Jennifer, when you, you know, you have this variety of boards you're sitting on, and everybody's been talking about nature positive solutions. What's your, what are the other factors that they should think about and what's your take on this?
Jennifer Maki: [00:31:27] So, I think the boards that I'm involved with, you know, ESG is a constant conversation at the meetings. And we have a scorecard set up and we monitor things, like water for sure is on there for sure. Reforestation, revegetation, site closure, depending on where you are in the life cycle of the mine, as well, I don't think all the companies are quite, Paul, where you mentioned it, thinking of it at the very beginning. So, as a closure approaches, I think there's a lot of work being done both on the physical rehab but also on the socio-economic rehab, leaving a legacy there that's positive and a future beyond the mine. So, and all those are really going into a scorecard and management's being measured on their ability to meet that. I think the other thing that I would take away is what we're learning with time is that things like water and reforestation, vegetation, when you're looking at those metrics, they're not 12-month goals. These ones are 3-to-5-year goals and you're getting richer results when you're thinking longer term on some of these.
Theo Yameogo: [00:32:36] Yeah, yeah, that's definitely the biggest difference is how long you look at it. And I like the social, the net positive impact for social because ultimately people want to have a good history to talk about later on. We don't want to have these orphan mines. Paul, you talk a lot about Net Positive, and I'll let you explain that, because this is something you and I talk a lot on rather than Net Zero. Can you elaborate on that?
Paul Mitchell: [00:33:06] Yeah, sure. I guess I. The word Net Zero makes me cringe a bit. Not because it's not a good goal, but because you think about life, and you think about when people have spoken to you, and you've had mentors and you've had people inspire you. No one's ever told you to aim for zero. And it's just this concept, just like is ridiculous that we're just thinking, yeah, we're going to get to zero. Number one, when you aim for something like that, you tend to miss it. So, there's number one issue, but also, why not aim to be positive? Like, why not say let's actually, let's not just be net nothing. Let's aim to actually be positive in what we do. And I think when you look at the companies that are making a difference and those that are getting recognized, so those that have a value that is better than what they should have in the market, that are getting access to land, that are being given opportunities in different places. They are the ones that can demonstrate they can do something different. And for different countries that means different things. In in Chile and Peru, it's those companies that can provide water, you know you look at the incredible development and the continuity of operations that Anglo-Americans had at Colavecchio because of their over-investment in water. Without a doubt that small over-investment, and it wasn't small, in additional water has had huge benefits for them in terms of what they do. You know, people who've started to think about actually, let's not just build renewable energy just for our mine site. Let's think about how we provide that to the communities around us, to the rest of the businesses that are operating in this area and the way we work. They're going to be the ones that have a positive impact. You know, the added advantage of over-investing in renewable energy is typically mining companies are really bad at small projects and running small things. So, we have that added advantage that we build these nice big scale things. We're actually pretty good at that. Like we're better than any other industry in the world, in my view, but I'll say that people will argue with me. So, thinking those positive things through is really worthwhile, but also thinking through and publicizing and telling people what we do from an economic perspective, we should never lose that. And that's maybe the, you know, I think the ESG often gets forgotten because when we develop and we operate mines, our economic contribution is not just, you know, the jobs we pay, the royalties we pay, the taxes we pay in terms of what we do, it's all of those things and it's the multiplier on those things that really add to where we're operating. Yeah. Covid, I think, showed people that natural resources really contributes to economies. So, you look at, you compare the performance of countries that have got, you know, that have got minerals to those that haven't. So, you compare, you know, the way that those economies were sustained and lasted during that period is sort of shown people have this multiplier that we've got. So, yeah, I'll continue to talk about it and try not to be too harsh on Net Zero as we go. Yeah.
Theo Yameogo: [00:36:44] Jennifer, on capital, I mean, you know, you have those like Franco Royalties and stuff like that. And then, you know, Paul talks about the 70%, close 70% being under socially empowered funds. How do you view the capital markets evolving in the next two, three years?
Jennifer Maki: [00:37:05] I think from maybe, Paul talked about the pension funds, I'll focus on bank capital, and I think the access to bank capital is only going to be tougher and tougher as the banks are facing increased pressure from the shareholders, you know, for supporting and lending to bad industry. I want to say. But, you know, there was a headline earlier, I guess, in September about a number of large, of the larger US banks being sued in a class action suit for financing the pollution by a mining company of the Amazon. You know, and that's just the start. And that gets banks and their shareholders very nervous. We see it in oil and gas. We see banks pulling out of reserve-based lending agreements. So, I think, you know, that a self-funding model is going to become more common in the future for mining companies, for sure. And I think those companies, with the strongest ESG performance, will be the companies that get funded so, well, there's a hundred good reasons to do strong ESG if you're a mining company. Access to capital is also one of them as well, because those are the ones that will get funding. And I do think the battery metals will probably get a little bit of an easier ride than some of the other metals that might not be so dominant in the transition.
Theo Yameogo: [00:38:28] Okay. So, this year we saw a lot of M&A, that money, that capital that went to copper, gold and steel. So, you just mentioned battery metals. Anything, Beatriz, that you you've seen in terms of how capital is flowing?
Beatriz Orrantia: [00:38:49] I think copper will continue to be a player. And lithium, the star of the moment. Uranium as well. Well, critical minerals are very, are on everyone's agenda right now.
Theo Yameogo: [00:39:09] Paul, I remember back in December [INAUDIBLE] we talked about nuclear and uranium. Do you want to comment on how you see that one because, you know, Beatriz just happened to be on the uranium exploration company.
Paul Mitchell: [00:39:22] Oh, look, I think, in terms of reliable base power, it is very hard to see why nuclear power won't be part of the mix going forward. You know, I think people from the southern hemisphere, like me, often forget that there are parts of the world where the sun doesn't shine for a big part of the year. And we think, you know, solar will be all of it. But issues continue in terms of getting acceptance. And, you know, Fukushima and other incidents continue to worry people. I think, you know, as technology continues to develop and, you know, smaller modular equipment can demonstrate how safe it is, I think we'll continue to see it grow. I think, I mean, one of the big issues that small modular reactors will have its license to operate. You know, you think about how hard it is to get someone to approve, you know, you got a [INAUDIBLE] copper mine on land. Imagine going out and negotiating with a community and say, hey, we're going to put this new small modular reactor on your site and it's really safe. Don't worry about it. We've got a long way to go till we get to that. But we know how efficient it is in terms of emissions. I mean, it is incredibly efficient as a low carbon source of power. And done right, it is incredibly safe. So, I think, you know, as we can convince people of that, as 2050 targets become harder and harder, which they will, you know, we'll get 70 to 80% of the way really easily. But then people are going to realize just how much land we need for utility solar. Just, you know, how much land we need for thermal and then how much copper we need to actually get it to population bases and get it to industrial centers. It's going to be really hard. So, I think, you know, as those things become reality, we're going to have to think about, you know, okay, this can be safe if it's close to population and it can be an answer for safe, reliable, low carbon baseload. So, I'm personally a fan.
Theo Yameogo: [00:41:40] Yeah. I know that this is a global webcast for people online, but Ontario is doing the tests on the SMR, small modular reactors, and there's a social advertising that actually aired on the radio yesterday driving. And it was interesting, what you're saying is basically we have to explain it to the population what this is. Before we get out of capital, Paul, what are the type of strategies that you're seeing mining companies taking to address the uncertainty around raising capital?
Paul Mitchell: [00:42:17] Look, I think, like Jennifer said, I think self-funding has been a model that we've used for a number of years, particularly the majors. I mean, I think when you look at the majors, the amount of capital they've returned to shareholders over the last couple of years has been really significant. You know, particularly sort of your Rio Tinto's and your BHP's. You know, it's been, you know, 30, 40% in terms of returning and businesses like that can afford to continue to fund. And I think, you know, if we can continue to maintain commodity prices, that will work. Look, I think you just need to continue to tell your story. That is what works well. And we continue to need to explain what a critical mineral is, you know, why it is not just lithium and cobalt, but it is a lot more than that in terms of what's there. The one area where I think we could do more work, it's really good to see ICSM with new leadership has kicked up a level in terms of what they're doing, is we need to collaborate more in that explanation of what we do. I think we, you know, we've tended to be quite poor at collaboration on a number of areas and explaining the role of our industry to markets and to broader people has been one where we're bad. So, I think I think that's one area we do need to work on. I've noticed a slight switch in the last six months. I think it is coming. I think I agree with Jennifer, Banks will struggle to ever get there, but I've started to notice a slight switch in the last six months.
Theo Yameogo: [00:44:01] Okay, now let's switch to workforce. You know, Jennifer wanted it higher in the totem pole. So, what are the strategies that you think would work for attracting and retaining young and diverse talent in mining overall?
Jennifer Maki: [00:44:23] So, I don't think it's a company solution. I think it has to be an industry solution. And if I look at some of the other industries out there, I think they've done a better job of banding together as an industry and doing campaigns and attracting. And I think time will tell how successful they are. But I think it needs to be at grassroots. You need to start to get into the public schools and the high schools work with the guidance counselor, the Trades Association. And you need to tell a story. It's a different value proposition than brought us and our parents to mining. I think it's one about being part of mining is being part of changing the world. You know, and enabling the transition. And, you know, as Paul mentioned, mining doesn't tell its own story very well. And this is an area in terms of workforce attraction and attracting talent that we really need to up our story and tell. You know, it's also, you know, you're changing the world by mining the metals. But the technology involved, you know, this generation likes high tech jobs. And, you know, it's all there for the taking if we can attract the people but we don't do a good job of telling our story. And I think we don't work together as an industry. It's a very siloed approach to company, to company. And I don't think that gets you results.
Theo Yameogo: [00:45:40] Yeah, I think now that you actually mention it that way, I don't think we have an event in this country for young people to show up. We have an event for, you know, like more like adults to show up to like PDAC or the CIM but we don't really have a thing like technology where just a bunch of colleges and universities, students just show up and learn something. But then again, is it something MAC should do? Is it something CIM should do? Is it or is it.
Jennifer Maki: [00:46:11] They can all be doing it. There's a number of industries that are supported by the mining companies and I think it's not just MAC, it's not just CIM. You know, each of the industries, you know, could do their part on this because it's going to take that effort to attract the amount of talent, we need to mine the metals that we're going to need to mine in the future.
Theo Yameogo: [00:46:32] Okay. Well, if they wait too long, EY will do it for them. On technology and innovation. So, Paul, the Gen AI, what do you have to say about Gen AI for mining in general that I'm sure everybody here would ask you the question after the session, might as well start now.
Paul Mitchell: [00:46:56] Look, I think. Yeah. It's going it's going to play an increasing role in terms of what we do. I think one of the really interesting things about mining and what we explain to people is the complexity is only increasing and the data sets are becoming really tough to understand and manage. So, I think when you sort of think of how many factors we've got to take into account, so, you know, you sort of think back to when we designed the mine 20, 30 years ago. Yes, we had to take into account mineral content and mineralogy and, you know, had to understand, you know, rock fractures and all those sorts of things. You know, now we've got to understand water impact. Now we've got to understand impact on, you know, maybe indigenous rights and what indigenous people think about it. We've got to understand what the impact will be on a community. We've got to understand, you know, the complexity of what's there and the data sets is starting to get beyond the ability of simple algorithms to be able to do, which they have in the past. So, I think, you know, things like GEN AI that are going to be able to understand trends, think forward in a different way, are going to be really important in terms of helping us to solve that complexity as we go. I think too the other bit we're starting to see is blending of alternative energies into mining solutions. So, you know, the use of biology within mining, it's becoming increasingly important. And where we're going to apply that and how we're going to apply it, I can see GI in these advanced, particularly the advanced models and the self-learning models as being really critical to help us think through how we apply that efficiently and effectively and what it's going to do. So yeah, look, I think it's one of those things that will undoubtedly apply. We're already seeing AI, you know, you look at the big integrated operations centers and you look at the guidance that's giving people in terms of decisions where we're using AI. So, you know, moving to Gen AI, I think is just going to happen, particularly as we add these broader, more complex factors into the decision making.
Theo Yameogo: [00:49:24] Okay. And Jennifer, what examples do you foresee we'll use it in?
Jennifer Maki: [00:49:30] So, we were talking about this last week. I was visiting a mine, and we were in the control room in the mill. And, you know, all the statistics were coming up on screen and they had lots of cameras. And you were looking at the size of the bubbles in terms of all the tanks. And, you know, today, you know, you have the control room operator monitoring it and then making a phone call down, add some more reagents to get the bubbles to the right size. But, you know, we were talking about the next step in terms of machine learning would be, you know, from the cameras to be measuring the size of the bubbles and then the programed to add the reagents. So, we were talking about what could be in the future in terms of increasing your automation and your technology. And that was one that came to mind.
Theo Yameogo: [00:50:15] You know, as you're explaining this process control thing, it looks like a movie as a guy finishing bubble sizes and calling other people. Yeah, no, that’s interesting. Now, like, so beyond the solutions. Beatriz, you know, we worked with you on some interesting stuff, so I'd like you to tell us more about the tools that you've seen in the industry that fosters innovation and technology adoption.
Beatriz Orrantia: [00:50:43] Oh, I think one of the most powerful tools that companies are starting to use to promote innovation and to promote that access to other industries is to have an advisory board at the C level, not at the board level, because that's something that companies have done with mixed reviews, but an advisory board at the C level. And when I say, it's a group of experts from academia, from super brainy people that provide a safe space to the CTO or the CIO to explore and to, and they are giving the CTO the access to information that otherwise he or she would not have. And so we are seeing that the majors are starting to implement them. And just this past summer one company, can I?
Paul Mitchell: [00:51:45] Sure.
Beatriz Orrantia: [00:51:47] A company. A company. No, Rio Tinto. It's public information, but Rio Tinto announced the first advisory board and if you see the composition of that advisory board, it is a group of very talented people at the service of the C suite. So, it is something that is already giving very good fruit and it's and it's something that companies we know that other companies are considering it and I think it's very powerful.
Theo Yameogo: [00:52:28] Why do I feel like Paul is a member of that thing? So, let’s talk about cyber security. You know, something that I remember, we were at an event 2016 and somebody said it will never happen in mining. So, Paul, you want to go first on, you know, the increase of cyber-attacks, but also the posture that mining companies take. And what have you seen have changed? Because I remember when we had cybersecurity in the top ten, then it dropped off, then it came back.
Paul Mitchell: [00:53:01] Yeah. Look, cybersecurity is the new risk we've got on the list this year. I thought it had been off for 20 years the way that my cyber colleagues had complained to me about not giving them enough kudos, but it had only been off for 4. I think the reason it dropped off is because people don't realize the impact of a cyber incident. So, they think of it as an annoyance. They don't think of it as an instrument that could disrupt operations. And quite frankly, for some of the economies we operate in, you know, have a significant impact on the economy in terms of what you do. So, I think they've now realized, yeah, actually a cyber incident could, you know, you could cripple the Atacama Desert with a couple of well-placed cyber-attacks on some of those transport routes that you've got in there. You could cripple the Pilbara for iron ore. You could cripple Sudbury for nickel if you just if you attack the power source, that sort of coming down from pretty singular sites. So, I think people have suddenly realized, yeah, actually you could significantly impact operations and you could significantly impact commodity prices as well with something like this. And the commodity price bit gives the incentive. You know, if cyber is a corporate game and you say that with inverted commas, people have a profit motive. If they think about futures and commodity prices and those sorts of things. So, you know, people sitting in a room in certain parts of the world thinking cyber is a good thing, have an incentive to do it. But also, our investment in digital and our investment in data has meant the attack surface has just opened up incredibly. You know, the number of access points, in the past it was probably, you know, there was a laptop in the control room and there might have been one running dispatch in a shed somewhere on the mine site. But, you know, these days, you know, every single point across, you know, your supply chain, every single point across your operation is a node that could be attacked and could give access. So, I think, you know, we've got this double whammy of, you know, more options to get in and bigger impact as we do it. So, I think people have started to realize that and we've started to sort of also see people publicize them. I think in the past, people probably hid the little ones and didn't talk about them, whereas now they're starting to talk about them more. So, only a positive thing.
Theo Yameogo: [00:55:37] Yeah. And so, Jennifer, as board members, what's your advice to other board members on like how to treat cyber?
Jennifer Maki: [00:55:44] So, I think boards have kind of got around their head, it's not if we're going to be attacked, it's when we're going to be attacked. And so, it's really focusing on that playbook that once you get attacked, how do I come back up? I think there's a lot of focus on that. You're making sure your teams are doing the mock drills, you know, and learning from those. I think the report points out; I think we're still weaker on the OT than the IT side of it. And so, I think, you know, people are trying to close the gaps, especially as it relates to the OT side versus the IT side.
Theo Yameogo: [00:56:18] Okay, Beatriz?
Beatriz Orrantia: [00:56:20] Yeah. I think as Jennifer said, now boards are more familiar with the fact that it is a risk and it's not just IT Issue. And now it is a standing item on the agenda and people discuss it. I don't think there's a good understanding of the quantification. So, there is still space there to work on the quantification of the risk and what is being done to manage that risk? And what is the residual risk? And are we comfortable with that residual risk and how can we transfer it So, boards are not at the level of sophistication yet that we need this risk to have but it's going there and their best practices and all the NACD and ICD, they have best practices on cyber risk and how boards should deal with it.
Theo Yameogo: [00:57:19] Yeah, like my colleague Juan will say, he runs our cybersecurity practice nationally, you can never pay enough to basically stop it. It's about quantifying the risk and picking how you, your comfort level. Now we only have three minutes left. So, we'll close on geopolitics because, you know, it's important, but in a minute or less, you know, let's think about deglobalization and how these new geopolitical shapes are happening in the world and how it's going to impact mining. Is it a good thing? Is it a bad thing? And also, you know, closing your remark overall on the top ten risk. Let's start with you, Jennifer. Okay.
Jennifer Maki: [00:58:06] Well.
Theo Yameogo: [00:58:07] I close with Paul because if we run out of time, he [INAUDIBLE].
Jennifer Maki: [00:58:11] I think whether it's globalization or deglobalization, I think the industry struggles and always with, you know, how much in processing to do in a country where the raw material is. And that's a debate that's gone on for years. And you can tie it to deglobalization, but I think it was there in globalization and you have a discussion around, you know, in terms of how much of the economics should be shared and taxed. So, those discussions we're not going to ever, I think, get rid of. And for me, you know, it's challenging for the company because governments change in each cycle. You feel you got a new agreement and then three, four years later, you're back at the table, renegotiating a new agreement. So, that's tough. And it's also tough if you're a multi-location company to balance that. And as I said, this isn't new. I go back to, you know, I was involved with Voisey's Bay and we couldn't get a mining license unless we agreed to build a smelter in Newfoundland, but, we had a smelter in Manitoba, we had a smelter in Ontario. We didn't need a new one, but we built it, right? So, it's hard to balance those economies and the economics of that. So, I think whether it's globalization or deglobalization that exists because wherever the raw materials are, they're going to want to get the most from the value stream.
Theo Yameogo: [00:59:34] And it doesn't really matter if it's Africa or South America or Canada, because.
Jennifer Maki: [00:59:38] I think it just took longer for some of the countries to, you know, become more vocal in asking for their share.
Theo Yameogo: [00:59:45] Yeah, okay.Beatriz?
Beatriz Orrantia: [00:59:47] Just quickly, it is deglobalization is difficult for companies to wrap their head around and the impact it has on supply chains. So, it is a supply chain issue and it's a big risk. I'm going to leave it at that. So, Paul has some space.
Paul Mitchell: [01:00:06] Look, I think just be aware of the opportunities I think is what they're, you know, if you sort of look through, you know, IRA is the most obvious one but it has created significant opportunities, not just in the US, but for materials you can ship to the US in terms of what's there. So, I think I think that's really interesting one. I think, you know, Nearshoring will become more and more popular. I think, you know, Canada's going to be a great example of nearshoring for the commodities, and I think that can only be a good thing. Australia suffered when China put restrictions on us and, you know, some of those restrictions still apply. They never put restrictions on iron ore, but the ones on coal still exist. We found new markets, and we were successful. Nothing's near sure for Australia. So, we've, you know, we've sort of moved to other parts of Asia and to India. I think, you know, Canada really, and particularly given some of the positions it's taking globally on things, needs to look to nearshore for all the positives and the negatives that that brings. But I think the positives do outweigh.
Theo Yameogo: [01:01:17] Okay. Well, we at the end of our session, thanks to everybody online and thanks to the panelists. So, a big round of applause for our panelists. And then everybody in presence in Toronto can get to mingle and network after this one. Thank you very much.
- Theo Yameogo, EY Americas and Canada Mining & Metals Leader