The Great New Game – Critical minerals-related geopolitical rivalries

China is winning the Great New Game.

David Livingston coined the 'Great New Game' phrase as a description of geopolitical rivalries around securing stable critical minerals supply access. We are seeing these rivalries play out in many ways around different parts of the world as China, the US, EU/UK and others strive for stable predictable supply.  

The twin context that is driving geopolitical rivalries in this area:

1. Criticality of end uses - energy, economic and military security all depend on critical minerals access, recognising that end uses range from solar cells through to AI and data centres all the way to F-15 fighter aircraft.

2. Supply shortages - demand projections point to significant supply shortages in the medium and longer terms given the global capacity of the mining industry.  Looking at copper as an example, estimates suggest that the world needs to mine as much copper in the next 50 years as we have in the last 5,000 years, a fundamental challenge that seems insurmountable.  

Wood MacKenzie has estimated that $2.3 Trillion of net new mining investment is required in order to build out the capacity that the world requires.  It is important to remember that different minerals come with differing profiles - where they are mined and refined, and what supply-demand reconciles look like over time, but the commonality across most minerals that are deemed to be critical is that supply gaps are both looming and significant.

China has been winning the Great New Game for multiple reasons:

1. The country understands that critical minerals are about value chains, combining the need for integrated flows that straddle mining, refining and infrastructure. The country has been working toward multi-dimensional dominance for the last 25 years. For instance, China controls 60% of the world's rare earths mining and 87% of its refining, 64% of graphite mining along with 100% of its refining, 65% of cobalt refining, 40% of copper refining.  The list goes on across many other minerals (The Geopolitical Impact of China's Critical Mineral Control | EVBoosters).

2. The country understands that integration between critical mineral and industrial strategies creates compelling value, which has led to dominance in areas such as solar power and EV production.

3. Until the last several years, potential rivals of China were happy with Chinese production and processing, as they had not truly appreciated the strategic implications of supply gaps.  This reality has now changed, but it meant that China had a playing field without significant competition until relatively recently.

China's approach has been comprehensive, combining state owned investments, a focus on processing, subsidies, export controls and predatory pricing at times.  For the US, Europe or others, challenging China's dominance will require long-term strategy and a likely hybrid approach to public and private investment along with strategies that differentiate their approach from what China has been doing so successfully.  Put simply, writing checks won't be enough to change the critical minerals balance that China has earned.

The Importance of Responsible Mining Practices

Excellence in responsible mining practices is a potential differentiator when it comes to critical minerals.  Recognising that mining is often found in remote relatively underdeveloped areas, stakeholders in mining regions are fundamental for conflict-free operations.  

1. Responsible practices can accelerate the permitting of land concessions when communities, Indigenous nations and other stakeholders align with the value of projects.  Earning trust is the catalyst for accelerating the permitting process. 

2. Looking more broadly, aligning stakeholders through the earning of trust reduces conflict risk, increasing the stability and predictability of mineral flows from operational mines.

3. Artisanal miners (ASM) are a particularly noteworthy stakeholder in this process.  These miners are often locals, part of the work of earning social license and they are also frequently early indicators for exploration.  Collaboration between large mines and artisanal miners directly increases productivity as ASM is professionalised.  Along with this increased productivity, offtake agreements with ASM can funnel product flows in desired directions.  Finally, collaboration decreases conflict risk, improving the stability of supply from large projects.  With millions of artisanal miners producing a variety of critical minerals, this area represents a largely untapped opportunity when it comes to critical minerals strategies.

How to Pay for It

Responsible mining practices have often been seen as a cost centre, something that requires spend without delivering value, but the reality is quite the opposite.  When practices are deployed in integrated world class ways, incremental value – bankable value – results from responsible mining.

Stakeholder Prosperity Bonds, a subset of the $1Trillion sustainability bond market that Veridicor has developed, is an example of how this work can be financed with an eye on value.  These bonds deliver a regional scope that combines:

1. Artisanal mining professionalisation.

2. Improvements to large mines – offtake from ASM and strengthened tailings are examples.

3. Infrastructure development – road, water and power systems.

4. Small scale processing facility development.

5. Regional capacity building.

The regional approach to scope delivers value through increased productivity as artisanal miners are professionalised, reduced risk as LSM/ASM relationships mature, increased regional development through the development of infrastructure, processing facilities and capacity. Cross-stakeholder integration is key to value in this context, and makes sense given the goals of critical mineral strategies that centre around the acquisition of stable secure supply.

In summary

China is winning the Great New Game, having locked in dominant mining and refining positions in the context of industrial strategy integration.  For the US, Europe or others to challenge this dominance, long term disciplined strategy and execution is required.  The question, given China’s strong lead, centers on how these countries can differentiate themselves from China’s approach, so that they aren’t simply catching up based on a ‘more of the same’ strategy.  This is where responsible mining practices are a crucial differentiator, and where the financing of this work in bankable ways through Stakeholder Prosperity Bonds becomes a compelling approach that combines value, strategy and improved lives in mining regions.