The impact of the coronavirus pandemic on the mining sector has been like many other industries. Operations stymied through on-site outbreaks. Lockdowns, rightfully ordered by governments to protect public health, made operations profoundly difficult. Match this with competitive commodity prices and it would seem like a depressing cocktail for the mining industry across the board.
The resilience shown by companies and operators should be applauded. Running sites with social distancing measures is not easy. Neither is maintaining equipment. And supply chains are clearly straining. Luckily remote mines have fared well, sparing themselves from dense Covid-19 outbreaks. Certainly, the industry is no stranger to health epidemics, where Ebola proved a testing period for sites in West Africa. That experience has demonstrated its value this year – the industry should be proud of how it implemented social distancing, PPE and rapid testing to great effect. It has also proved how engrained support between private operators and surrounding communities is vital in a time of crisis.
Yet the events of 2020 do beg one question. Where does this leave investor confidence in the sector? It’s only natural many are spooked, and the increasingly gloomy macroeconomic outlook will lead to conservative positions and even paralysis for some. But as with all change, big opportunities exist. There are long term investments out there that remain enticing and ultimately will lead to equally attractive returns.
Nowhere could this be truer than in Zambia, Africa’s second-largest producer of copper. It’s a country that my family have lived and worked in for almost half a century. I’m convinced that both the country, and the copper sector especially, present real opportunity.
My confidence is Zambia must be seen through the lens of wider trends. The demand for copper is growing. Estimates are that in two decades’ consumption will be up by 50 percent. The World Bank noting that the drive towards a low-carbon future could mean copper, along with other precious metals, could see 10 fold increases by 2050.
It’s this historic shift in consumer behaviour that will ensure deep resilience within the market. The meteoric rise of Tesla, followed by an arms race amongst the giant car manufacturers towards the total electrification of their product lines, ensures that demand will continue to remain strong and consistent.
Of course the transition towards the green energy goes beyond futuristic looking cars on our roads. According to McKinsey, 73% of global power generation will come from renewable energy sources by 2050. With an average 6 tonnes of copper in every wind turbine, we are seeing clear industrial uses, backed by major public-private projects. The transition to more sustainable forms of energy will be built on a foundation of copper, and the demand for which is rising quickly as more and more countries are adopting policies targeted at achieving a net zero economy by the middle of this century.
The need for precious metal therefore seems a sure bet. And at just shy of $8,000 a tonne, the markets seem to agree. An impressive feat if you consider how other commodities have suffered this cycle. And the price is here to stay given the impending supply shortfall forecasted by industry insiders/analysts.
This brings us back to Zambia. My deep affiliation with this beautiful country and its people goes back to my childhood. But that emotional connection is paired with an ingrained confidence about what can be achieved: to steer the country to a more prosperous and stable economic future. It is why we have been working hard on securing mining licenses, cementing our belief that in both copper and beyond, the resources sector can lead the country to brighter days, and proving an attractive destination for investors.
What was interesting during our recent process is that I expected to be one of many mining companies capitalising on a copper powerhouse. Yet the reaction of investors was muted. Of course, news stories around a potential default have been unhelpful for the country, and dented investor confidence.
Clearly trust needs to be rebuilt. This must and will happen. The country must be allowed to finish what it has started. Namely, to develop the roads and other forms of infrastructure that will create not only the optimal conditions for a world-class copper industry – but the development of the schools, hospitals, roads and other critical foundations that resource-blessed developing nations require.
None of this will be achieved if we have predatory operators and investors that see Zambia’s future as exclusive to their own fortunes. One of the few positive outcomes of the recent pandemic has been the acceleration of ESG, the increased pressure by both retail and institutional investors for companies to behave in the right way. And so it is in Zambia. Companies like my own have clear and accountable targets towards carbon-neutrality. We understand how technology can play a role in boosting productivity and believe ESG is not a nice to have, but central to the purpose of any successful business, especially in the mining sector. We want others to follow suit.
Clearly the demand is there. But to meet that demand, there will need to be more investment, more exploration and more local, sustainable mining sites. But this will require extra vision and bravery from investors. Ones who are willing to look past the headlines and see the clear opportunities that lie ahead. For the country of my childhood and whose fortunes I root for every day, I know that Zambia’s journey since independence has been fraught with difficulty. But its people are educated and its institutions strong. For those of us committing to the country, there are rays of light through the dark mists of the year 2020. We’ll stay the course and hope that others do, too.
By Karan Rathi, Board Director, Chillerton Group