Miners are most worried about geopolitics and ESG, survey says

Risks related to politics have become the biggest worry for miners, as Russia’s invasion of Ukraine and new government policies in mining regions have had a “substantial” impact on the industry, according to an updated ranking by Ernst & Young Global Ltd., the international accounting and consulting firm.

Geopolitics jumped two spots and now comes second on EY’s list of the 10 biggest threats identified by miners. Scrutiny related to environment, social and corporate governance (ESG) issues topped the ranking for the second consecutive year, while impacts due to climate change dropped a spot to third place.

“Global uncertainty is putting pressure on companies to quickly assess the impact of different alliances, trade flows, governments and taxes on business decisions,” Theo Yameogo, EY’s mining and metals leader for the Americas, said in a press release. “These external factors combined with inflation will continue to shift the sector’s risks.”

The mood in the mining industry has turned dark as the excitement that followed surging commodity prices last year begins to fade. Increased costs related to stresses on on supply chains and resource-rich Russia’s war against Ukraine, coupled with rising interest rates, led to a number of miners posting relatively weaker financial results in the latest quarter, painting a bleak picture for the sector.

Last week, credit rating agency Moody’s changed its global outlook to negative from stable due to the slowing economy.

Seventy-two per cent of the miners interviewed said they were worried governments would attempt to plug the budget deficits they incurred during the pandemic by claiming higher royalties or creating new ones. On the ESG front, 76 per cent of respondents cited access to water as their top risk, as impacts of climate change and water scarcity escalate.

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“Access to clean water is a human right. We need to allow local communities access to clean water and make sure that we don’t contaminate the water sources around our operations,” stated the report, quoting a mining executive.

More than half the miners interviewed also expect to be scrutinized by investors on their plans to decarbonize. Many mining companies have committed to “highly ambitious” climate targets, but 2023 will reveal whether the sector is on the right path to net zero, the report said.

“We probably waited too long to get started … if we haven’t done enough, there’s a reputational and an investor risk,” the report said, quoting another mining leader.

Other expected risks on the list include the “licence to operate,” which relates to gaining the trust of communities that live close to mining projects and obtaining permits; improving productivity and containing costs; raising capital; and digital innovation.

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