Geopolitics has become a major mining disruptor in the wake of several government changes and the Russia–Ukraine war.
Ernst & Young (EY) found geopolitics to be the second biggest risk/opportunity facing the mining and metals companies in 2023, with environmental, social and governance (ESG) issues considered the most pressing risk/opportunity.
Climate change, license to operate, and costs and productivity rounded out the top five in EY’s just-released report, ‘Top 10 business risks and opportunities for mining and metals in 2023’.
The report suggests global geopolitical conflict and disruption are driving miners to reconsider traditional operating and business models.
This is not only driven by war and the global side effects that come with it, but also changing governments in key markets and growing resource nationalism.
“We see evidence that governments are trying to fill revenue gaps created through the COVID-19 pandemic with new or increased mining royalties,” EY Global mining and metals leader Paul Mitchell said.
“For example, Chile plans to introduce copper royalties, and in Australia the Queensland state government has already increased royalties on coal.
“For mining and metals companies, the ability to quickly assess the impact of these changes, as well as different alliances, trade flows and governments on business decisions, will be critical.”
The report, which surveyed global mining and metals executives between June and August 2022, found rising resource nationalism to be the biggest geopolitical risk factor for mining companies. Almost three-quarters (72 per cent) of respondents said this would affect their operations.
This is demonstrated by Queensland increasing coal royalties in June in response to booming coal prices. Under the state’s three-tiered system, the royalty rates are 20 per cent for coal prices above $175 per tonne, 30 per cent for prices above $225 per tonne, and a 40 per cent tier that would apply when prices exceed $300 tonne.
EY said Chile’s government also plans to increase copper royalties on companies that produce more than 50,000 tonnes annually.
The remaining risks/opportunities outlined in EY’s report were (from six to 10): supply chain disruption, workforce, capital, digital and innovation, and new business models.
The read is available on the EY website.