Even though capital spending growth will moderate this year, it should reach the highest level in nearly 10 years
By Joe Govreau
Global mine project construction activity growth slowed in 2023 and looks to have plateaued as the first quarter of 2024 begins. This appears to be a near-term phenomenon, as the energy transition locomotive, which spawned a dizzying amount of battery metal project activity, has encountered constraining market drivers such as subpar China GDP growth post COVID, slowing adoption of electric vehicles (EVs) in some parts of the world, and project cost inflation, which have combined to delay activity in an otherwise robust project arena.
Mining project construction activity declined 2.2% over the past year, based on the value of projects, dropping from about $269 billion in 2022 to $263 billion worth of projects currently under construction. The level of activity is projected to be flat to moderately higher in 2024 when compared to 2023. For the most part, mining companies are moderating growth in capital expenditures in order to wait out erratic market drivers. However, eight of the largest global mining firms (Anglo American, Barrick, BHP, Freeport-McMoRan, Glencore, Newmont, Rio Tinto and Vale) are collectively planning to spend 8% more in 2024 than they did in 2023, with both BHP Group and Rio Tinto announcing plans to spend about $10 billion each. This follows a 6-year growth cycle, which has seen major mining firm project spending increase every year, since the bottom of the last cycle in 2017, except during the COVID-impacted 2020. Nevertheless, 2024 should see mining project spending reach the highest level since 2015.
There is $1.2 trillion worth of mining project activity worldwide (see map), according to Industrial Info’s Global Market Intelligence (GMI). This includes capital and maintenance projects such as grassroot mines, expansions, modernizations, and other in-plant capital and maintenance spending. Projects range from the early exploration stage through to those under construction. As can be seen from the map, the majority of the activity (74%) falls in the pre-approval stage, meaning those projects have not received financing or permit approval. These include projects in the exploration, scoping, feasibility, advanced planning, and permitting stages. Projects that have reached approval or are involved with detailed engineering total $118.8 billion, and there is $263 billion worth of projects currently under construction.
Mining companies are preparing for the expected long-term demand increase for energy transition metals and minerals like copper, cobalt, graphite, rare earths, lithium, manganese and nickel. Geopolitical issues, including the continuing war in Ukraine and China’s dominance over critical mineral processing, are forcing governments to seek energy and resource security, which will be a major driver for reshoring, near-shoring and friend-shoring activity in 2024. Australia, Canada, Chile, Colombia, Mexico, Morocco, Panama, Peru, Singapore and South Korea are set to benefit from this trend.
Government stimulus to spur domestic production of critical and strategic metals and minerals is dominating mining company investment decisions. Governments are also seeking to increase the benefit of domestic natural resources, often through measures such as increased royalties and taxation, stricter regulations or even nationalization of industries. Resource nationalism is impacting project activity in many parts of the world, namely Chile, Indonesia, Mexico, Namibia, Peru, and Zimbabwe.
Permitting remains a constraint to mining projects in the Americas. In the U.S., the federal government has blocked certain major critical minerals projects over environmental concerns, including the Resolution project in Arizona, and the Twin Metals project in Minnesota. At the same time, the federal government has also supported other projects. Most recently, the South32 Hermosa Project in Arizona has been put on the FAST-41 permitting process. FAST-41 was created in 2016 to speed up permitting for large infrastructure projects and was expanded in 2021 to include mining projects. Even with inclusion of FAST-41, the process is not necessarily “fast” as the current timeline takes the environmental impact statement (EIS) through 2026 and the final decision for approval is not scheduled until September 2026.
As a result of the long permitting process for new mines, there has been an increase in expansions and efficiency improvements at existing mines, which are easier to permit.
Environmental Social & Governance, or ESG, is becoming more prominent in corporate plans and is influencing financing and project activity in a big way. For mining, most companies are focusing on renewable energy projects, mainly solar or wind and sometimes combinations with battery storage to replace fossil fuel usage at mines. Industrial Info is tracking more than $18 billion worth of renewable energy projects globally at mining operations. For example, Anglo American plans to add 3 to 5 gigawatts (GW) of renewable energy projects at its operations. Greenhouse gas reduction makes up the majority of the remaining ESG-related projects, which include things like replacing diesel mining equipment with battery electric vehicles, hydrogen fuel cells, and other electrification projects like trolley assist projects for mine haul trucks.
U.S. & Canada
In the U.S., the Inflation Reduction Act, Infrastructure Bill and Critical Minerals Bill are driving project development throughout the supply chain from mining, processing to end-product production. The U.S. Department of Defense has funded more than $326.9 million to support projects, including: lithium mining and chemical production, graphite mining and processing, battery recycling, cobalt mining and processing, rare earth processing and magnet production, antimony mining, and nickel mining and processing. Similar stimuli are happening all over the world, including in Australia, Canada, China, the EU, and Japan, all of which have their own stimulus plans for critical minerals development.
Both the U.S. and Canada are in the top 10 for mining project activity in 2024 (see table). In the U.S., Highland Copper’s Copperwood project is a fully permitted project (the environmental impact statement began in 2008) in Michigan’s upper peninsula. Approximately $30 million had been acquired for starting early site works last year and the company hopes to acquire full funding in early 2024 to begin construction next year. But like many projects in the U.S., funding has been difficult to come by, and extensive regulatory requirements keep delaying this project.
Social unrest and resource nationalism have been on the rise in Latin America in recent years, and this has had a significant impact on mining activity in the region. In May 2023, Chile approved a new mining royalty and taxation plan, which increases mining royalties from the current 5%-14% up to 8%-26%, depending on the operation, and adds a 1% ad valorem tax on sales profit. The new royalty plan has caused companies to reassess projects such as Antofagasta’s $4.4 billion Centinela mine expansion, which has recently been approved. Freeport McMoRan has placed some projects on hold as a result.
In an ongoing saga in Panama, the government ordered the closure of First Quantum’s Cobre Panama copper mine by June 2024 after declaring its operating contract unconstitutional.
Like other parts of the world, project activity in the region is being driven by demand for metals necessary for the energy transition especially copper and lithium. There has been an increase in lithium investment projects in Argentina, Chile, and Bolivia, in addition to the discovery of new deposits in Peru, Brazil, and Mexico.
The ongoing war in Ukraine and energy transition continue to be major drivers for project activity in Europe. In the EU, the Critical Raw Materials Act is due to be enforced in early 2024. The act states that the EU should mine 10%, recycle 25% and process 40% of its annual needs of 17 strategic raw materials by 2030. These include base metals aluminum, copper and nickel, along with key battery material lithium and rare earth elements used in permanent magnets for wind turbines or in electric vehicles.
Russia is currently the third largest country in the world for mining project activity in 2024 after China and Canada. Construction is scheduled to begin in summer 2024 for the delayed $8 billion GDK Baimskaya copper-gold mine. And the United Kingdom has also risen up to the top 20 with projects like Anglo America’s Woodsmith polyhalite project under construction.
Africa’s mineral reserves are vast. According to the UN, Africa is home to 30% of the world’s mineral reserves, and it continues to receive resource and infrastructure investment from many countries interested in securing critical mineral supply, including Canada, China, Russia and U.S., not to mention many others. However, many challenges are constraining development, including regional geopolitical instability, resource nationalism, energy/infrastructure investment and security/safety concerns. Mali, Namibia, and Zimbabwe have all initiated new taxation/royalty programs or nationalized mining to some extent. Namibia and Zimbabwe have both recently banned lithium ore and other critical mineral exports with the goal of encouraging processing in-country. Safety and security are main concerns in many countries, especially those involved in armed conflicts, including Burkina Faso, Cameroon, Democratic Republic of Congo (DRC), Ethiopia, Mozambique, Niger, Nigeria, Mali, and South Sudan. In the DRC, armed conflict threatens more than 60% of the world’s cobalt production, an important energy transition metal for rechargeable batteries. All of these issues work to deter mining investment in these countries. As a result, countries such as Ghana, Morocco, Zambia, Ivory Coast and Guinea are getting more attention as comparatively friendly jurisdictions to do business in. Guinea is a rising producer of bauxite and the Simandou iron ore project in the country is moving through construction.
South Africa has the largest established mining industry and logistics infrastructure, with 324 major operational mines, and accounts for about 43% of all mines in Africa. South Africa is an important producer of platinum group metals (PGMs), including platinum, palladium, rhodium, etc., as well as gold, manganese, coal, zircon, vanadium and diamonds. However, South Africa’s electricity problems and common rolling blackouts are discouraging investments and causing existing operations to close. And other countries, such as Tanzania, Zimbabwe, Botswana, Namibia and Mozambique, have robust mining project activity.
Many countries in the Middle East have recognized the need to diversify their economies away from a heavy reliance on oil and gas exports along with incorporating decarbonization initiatives across industries. One avenue they are exploring is the expansion of metals and mining industries, with a focus on manufacturing and value-added production. Iran dominates mining activity in the Middle East and is the only country from the region on the global top 20 list. The National Iranian Copper Industries Co. is planning to start construction on a 320-megawatt solar farm at the Sarcheshmeh copper mine in 2024. In Saudi Arabia, the Saudi Vision 2030 aims to reduce the country’s dependency on oil by expanding non-oil industries, including mining and manufacturing. Oman has been focusing on the development of its mining sector with plans to process and export metals like copper and zinc.
India has a growing mining industry with coal and iron ore leading the way. Coal accounts for 80% of power generation capacity in India. Coal India is on track to dispatch 1 billion metric tons (mt) of coal this fiscal year, with annual coal demand expected to remain in the range of 1.2 billion mt through 2030. As the second-largest steel producer in the world, India has a large iron ore demand. In 2023, iron ore production was stable at around 250 million mt, with a 6% increase in domestic steel production. Indian iron ore production is expected to increase to 260 million mt by 2025. In 2024, steel demand in India is expected to be robust. In Pakistan, Saudi Arabia has shown interest in investing in the world class Reko Diq gold-copper project.
Indonesia, Vietnam and Philippines are all on the global Top 20 list. Indonesia has risen as a pivotal player in the nickel domain, as the demand for nickel, a crucial battery component for electric vehicles (EVs) and renewable energy storage systems like lithium-ion batteries, continues to surge globally. Indonesia’s prominence in the global nickel industry is partly due to its ban on nickel ore exports, which has stimulated the growth of nickel mining, metal smelting, and processing facilities within the country. Indonesia is pushing forward with multiple high-pressure acid leaching (HPAL) projects and
plans to broaden its scope by encompassing nickel sulfate, hydroxide, cathode active materials (CAM), and their precursors (pCam), processing directly at the production sites. While Indonesia’s role in the nickel industry is substantial, it remains subject to global market dynamics, with China playing a significant role as the primary source of foreign direct investment for projects, and market fluctuations influenced by EV demand and advancements in battery technology.
Resource nationalism has impacted nickel direct shipping ore (DSO) operations, primarily in Indonesia, leading to a shortage of laterite and saprolite ores required for smelting and HPAL processing. Consequently, the Philippines has expedited several grassroot nickel DSO projects and is in the planning stages for constructing two additional HPAL facilities within the country, spearheaded by the mining company Nickel Asia Corp. This highlights the region’s response to the challenges posed by resource nationalism, demonstrating its determination to secure a stable supply of nickel to meet the growing demands of the clean energy and electric vehicle industries.
China’s economic recovery has been slower than expected following the pandemic lockdowns, and continued friction with its main trading partner, the U.S., will significantly impact China in 2024. As a consumer of more than half of the world’s resources, any slowdown in the economy has a significant impact on global mining project activity. Still, China remains the largest country for mining project development, especially for coal, gold, copper, and iron ore mining projects. Lithium and potash project activity is also very robust. China’s share of the global market for lithium batteries has reached more than 80%.
As a result of frequent accidents in the mining industry, the Chinese government will conduct strict safety inspections on the mining industry in 2024, closing small and medium-sized coal mines to reduce production overcapacity, increasing investment in non-ferrous metal mining, focusing on 5G+ intelligence, digitalization, and automation construction in mines.
Australia is well positioned to support the energy transition as the world’s largest miner of lithium, the third-largest producer of cobalt and fourth-largest producer of rare earths elements. Not to mention a leading exporter of iron ore and coal as well as other resources, including nickel, manganese ore, tungsten, and vanadium.
Globally, coal remains the number one commodity for mining project activity (see table). Coal producers are facing growing constraints on the availability of finance because banks have increasingly sought to pivot away from coal in favor of renewables. Nevertheless, Australia is a major exporter of metallurgical and thermal coal to India, Japan, South Korea, China, and Taiwan, all of which are continuing to add coal-fired power plant capacity.
In Australia, the rapid growth of global battery demand will drive mining and downstream processing project activity for battery chemicals like lithium hydroxide, nickel sulphate, cobalt sulphate, high purity alumina, and vanadium pentoxide. The first lithium hydroxide refinery, owned by Tianqi Lithium Corp and IGO, is now undergoing major work to fix production bottlenecks. The second lithium hydroxide refinery, owned by Wesfarmers and SQM, is under construction, with first production expected in 2024. Pilbara Minerals and Calix are planning to construct a lithium phosphate refinery with a patented electric kiln technology that can reduce emission intensity and is powered by renewable energy.
In conclusion, with construction activity plateauing and major mining firm capital spending growth moderating, 2024 should see flat to modest growth in project activity in 2024. The energy transition, ESG goals and government stimuli to enhance domestic critical mineral development will be the main drivers of project activity in 2024.
Govreau is Vice President Research – Metals & Minerals for Industrial Info Resources headquartered in Sugar Land, Texas.