Energy Transition Bringing New Faces to Mining, but Challenges Remain

Discussions around the energy transition are bringing a new crop of investors into mining.

As the biggest event in the resource space returned in full force, an expert from EY told the Investing News Network (INN) he’s encouraged by the changing face of the mining investment storyline.

On the sidelines of year’s instalment of the annual Prospectors & Developers Association of Canada convention, known as PDAC, the mining sector expert also shared his thoughts on current challenges in the market.

Changing face of the mining industry

Theo Yameogo, mining and metals leader at EY Americas and Canada, told INN that a younger and more diverse class of investors has a real recognition of the importance of new sources of energy.

The expert said he’s curious to see the relationship develop between these fresh mining investors and established faces in the space who have long been banging on the drum of support for the industry.

“This is going to be quite an interesting dynamic going forward,” Yameogo said. “Because mining always felt that it was a misunderstood sector for the value it was bringing to society.”

Yameogo said the resource sector could end up seeing a change to its public image thanks to the emergence of new members of the industry, both at the company level and among investors.

Costs rising, new talent tough to find

Yameogo told INN the team at EY has also been closely monitoring the cost of operations in the sector.

“We’re going into a supercycle,” he said. “We know that when we go into a supercycle, people spend a lot and then they don’t pay attention to the volume of the profit.” A supercycle is marked by a “prolonged period of rising prices and investment in supply by commodity producers” after strong rises in demand.

Aside from that, rising inflation has ballooned costs for virtually every industry, leaving mining companies facing challenges when it comes to the cost of doing business.

“You can anticipate that inflation may actually drive cost overruns of major capital projects, which is a problem and may impact profitability of projects that we’re building right now,” the expert said.

Yameogo also said regions that are struggling with economic pressures may start to ask more of mining companies. “With inflation comes a discussion around geopolitics,” he said, noting that this is already starting to happen.

At the same time, mining companies are dealing with the problem of an aging pool of talent; they need to attract new workers to the space while continuing to monitor their costs.

When asked about other challenges affecting mining corporations, the EY expert told INN that commodity price uncertainty is a significant struggle for the space, and can affect company plans moving forward.

“You’re changing your cost base, and trying to make sure that you can still operate profitably,” he said.

Investor takeaway

Critical minerals and battery metals saw significant interest at PDAC, and Yameogo told INN it may seem as though these segments are the new children in the mining family. He expects more buzz to build in these markets, but cautioned investors to be careful as it is “not going to be just straightforward” to approach these spaces.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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