· 6 min read
The critical minerals story is being written right now and will continue to be written for several decades. Copper, cobalt, nickel, rare earths, and many other minerals are fundamental for the energy transition, for AI/tech that is needed in everything from cell phones to data centers, and for the general needs of a growing global population. There is a significant shortfall in supply when looking out over the next 25 years, which puts the energy transition at risk, along with broader economic and even military security.
It is estimated that $2.4 trillion in mining investment is needed to bridge supply gaps, but investors have been hesitant to deploy capital into a sector that is sometimes seen as dirty and abusive of communities. Geopolitical risk is also central to dynamics of the sector, with China holding dominant mining and refining positions even as the US, UK and Europe play catch-up. Responsible practices may be a key differentiator in the geopolitical chase for critical minerals, where those who are adept at engaging communities and respecting the ecological hygiene of mining regions having a potential advantage.
Where will artisanal miners fit into this story? Are they zeroes, only adding a dimension of risk that will make supply harder to produce, or are they more aptly heroes, a clear opportunity area for changing the dynamics of the supply game?
Artisanal mining context
ASM produces a broad variety of critical minerals. The largely informal sector is responsible for 10-15% of global cobalt, 5% of copper, and meaningful portions of most other critical minerals as well. The sector operates in dozens of countries spread across Africa, Latin America, and Asia, including mineral rich countries like the DRC, copper belt countries like Zambia, and countries that are dominant in specific minerals like Indonesia is with nickel.
These miners are often part of the local social ecosystem, extending from communities that neighbor mining. ASM has been seen by many as traditional work, something that has been there for decades or longer.
Given the fact that ASM has been in many places for a long time while being part of regional community contexts:
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These miners are often early indicators for large-scale exploration, where their very presence alerts large remote companies to the potential of mineral wealth
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These miners often share land concessions that are operated by large-scale mines – ASM was actually there first in many cases, and they continue to operate even as large shops are set up
Why do some see artisanal miners as zeroes:
A variety of narratives start with the fact that 85% of ASM is informal.
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Informal artisanal miners often share land concessions with large-scale mines, making conflict risk all too real. From a large mining perspective, ASM may be seen as a nuisance more than anything
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Informality breeds smuggling, making ASM an underground economy to a real degree that concerns governments and involves money laundering
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Practices in ASM are often sad, involving human rights concerns that include child labor and environmental devastation that harms broad ecosystems
Maybe most fundamentally, artisanal miners only produce a small portion of most minerals, making it easy to ignore. The fact that the sector is devoid of access to non-predatory capital means that informality becomes self-sustaining, resulting in ongoing negative externalities combined with low ongoing production rates.
On the other hand:
There are millions of artisanal miners who work in dozens of countries. These miners are facts on the ground. Professionalization of ASM increases production – financial value – while improving lives.
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Professionalization of artisanal miners multiplies productivity – supply gaps are bridged in commercially realistic ways
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As professionalization increases supply, the lives of miners are improved, and sustainable development is catalyzed – stable, predictable, equitable business relationships within ASM can broaden the circle of growth. Similarly, environmental outcomes from the sector are improved as miners transition to Forest Smart practices
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Large-scale mining in the context of shared land concessions is de-risked when ASM-LSM collaboration fosters professionalization
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End customers ranging from Apple to Tesla and beyond gain a significant brand advantage when ASM professionalization supports responsible sourcing protocols – the notion of ‘responsible ASM inside’, combining supply with responsibility that improves lives, respects ecology, and fosters growth, is potentially compelling
This very different narrative, starting with the fact that artisanal miners are facts on the ground, lands on the potential for significant value add. Put differently, ASM can be the heroes of the critical minerals story when looked at in these terms.
How do we go from zeroes to heroes?
Access to non-predatory capital is a key enabler for ASM professionalization.
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Should we be thinking about exclusionary policies for mining in investor, or should we think about policies that deliver the value and impact potential of the sector? This basic question may open the door to different approaches to capital
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Are there non-traditional approaches to capital that may change paradigms in the sub-sector? The Blended Capital Group, Capitals Hub Canada, and Veridicor are standing up a digital marketplace that democratizes access to capital for ASM. Combining concepts around tokenized assets, sustainability bonds, integrated asset classes, blended investment segments that include public money with traditional mining investment and impact investment, and large capital raises that finance large professionalization programs, this work has the potential of being game-changing
Success also requires a laser focus on responsible practices, both in terms of ASM professionalization itself and more broadly around LSM-ASM relationships. There is a strong opportunity for ensuring that good, responsible practices around artisanal mining are embedded into broader responsible standards. This opportunity is especially true today, given the important standards convergence work of ICMM, The World Gold Council, Copper Mark, and Mining Association of Canada along with the work of the UN Mining2030 Investor Commission.
In summary
We need more critical minerals, and we aren’t on a path to delivering the needed supply. This problem puts the energy transition at risk, along with broader economic and military security. Secure supply is geopolitically relevant, central to China-vs-US/EU/UK strategies.
Artisanal mining is a strategic option for increasing and funneling supply. A focus on responsible professionalization and ASM-LSM collaboration can be game-changing on the productivity of the sector, increasing the dignity of work, catalyzing development, and achieving important gains in social outcomes. This focus can also drive important peripheral benefits that include branding advantages for downstream customers and de-risking of large scale mining operations.
Looking at mining investment in this context opens the door for new approaches for delivering the capital that growth requires. The digital marketplace described above in this article is one example of how aligned responsible investment can deliver financial value along with social and environmental impact, all while bridging supply gaps in a strategic manner.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
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