The mining industry is struggling to effectively execute extraction projects needed to meet huge demand for critical minerals, after years of project delays, cost overruns, local opposition to mining and concerns about environmental, social and governance (ESG) issues. 

Industry leaders speaking at the UK Critical Minerals Association (CMA) event in London on December 2 underlined the urgent need to rejuvenate the mining sector and raise the financing needed to deliver the vast amount of metals and minerals required to electrify the global economy.

Jamie Strauss, CEO of Digbee, a data provider for the mining industry, said that “execution risk is one of the greatest challenges to encourage new money into the sector” after 25 years when the mining industry “has not covered itself in glory” in sticking to budget and project delivery timelines. 

More than 80% of recent major mining and metals projects have faced cost and scheduling challenges, according to McKinsey estimates published on November 27, with capital expenditure overruns of more than 40% and scheduling delays of between 20% and 30%. For mega projects with a value of $1bn or more, cost overruns were on average at least 79% higher than initial budget estimates.

Greater scrutiny from investors in miners has meant they must balance more disciplined capital spending with stewardship of the environment and meeting stakeholder needs, according to a survey of industry leaders by EY published in October. This comes alongside rising costs of exploration and extraction due to declining concentrations of metals in ores and fewer discoveries being made.

Global exploration budgets for non-ferrous metals are expected to fall this year by 3% to $12.5bn, down from $12.9bn a year earlier, according to S&P Global Market Intelligence. This was mainly driven by lower financing for junior miners, which are new companies that explore and develop new natural resource deposits.

“The industry has really struggled, particularly in the junior space, to access capital, not only in recent years, but in recent past history as well,” said Philipa Varris, a non-executive director at Mkango Resources, a London-listed mineral exploration company that is developing a rare earth metal project in Malawi. “Without access to capital, we can’t fund exploration. The minerals are out there, but someone has to prove that they’re mineable, and that takes money,” she added.

At the same time, capital expenditure of the world’s top 19 mining companies is expected to reach as much as $71bn in 2024, a 10.6% increase from a year earlier and the highest level since 2014, according to Global Data. 

Mining majors Rio Tinto and BHP are expected to invest $10bn each this year, with the majority of BHP’s capex being used to upgrade and expand its Jansen Potash, Copper South Australia and Pilbara projects. But preliminary data from fDi Markets in 2024, which only covers new or expanded extraction projects, suggests less capital is being deployed to develop new mineral deposits. 

In the first nine months of 2024, global greenfield FDI in metal and mineral extractive projects was just $12.5bn, a decrease by 38% from the same period of 2023, according to fDi Markets. However, this was still above the average of $8.4bn tracked in the first three quarters between 2015 and 2019.

The rampant cost overruns and delays has affected confidence in the mining sector, said Ms Varris, who added the industry will need different types of financial tools to get over this. “Otherwise, globally, we’re not going to make our transition plans and we’re not going to meet our Paris [climate] targets,” she added.

A major contributor to the struggles in mining for critical minerals like nickel, cobalt and lithium is the volatility in prices. For example, global weighted average prices of lithium hydroxide and lithium carbonate, which are refined metals used in types of electric vehicle (EV) batteries, are currently down by more than 50% compared with last year, according to data from Benchmark Mineral Intelligence.

Simon Gardner-Bond, chief technical officer at TechMet, a Dublin-based mining investment fund, said the greater volatility of prices for critical minerals compared with other commodities makes it almost impossible to finance. “It requires a level of investment over a time period that often equity investors are not comfortable with and so that falls to government bodies to provide some financing,” he said. 

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.