Report highlights rising geopolitical risks

ESG, geopolitics and climate change have rated as the top business risks and opportunities for metals and mining in an annual EY report. The result is not surprising, according to EY global mining and metals leader Paul Mitchell. "The past 12 months have witnessed huge upheaval and change. War in Ukraine, climatic events, new governments in key mining regions and shifting relationships in others are all impacting the world’s mining and metals companies," he states in the report's executive summary. "These external factors will continue to drive a shifting of the sector’s risks and opportunities as stakeholder and capital market pressure hold miners accountable on multiple fronts." EY surveyed global mining and metals executives between June and August 2022 for the report. While ESG (environmental, social and governance) maintained the No.1 spot, geopolitics rose two places this year to come in at second ranking. Understanding new governments in key markets - including Australia, the US, Chile and Peru - is among the challenges for miners. "As governments seek to fill revenue gaps after spending throughout the pandemic, many are capitalising on, orconsidering how to capitalise on, higher commodity prices through new or increased mining royalties," the EY report notes. "Seventy-two per cent of respondents said this was the most likely impact of geopolitical uncertainty on their operations. "For example, Chile’s government plans to increase copper royalties on companies that produce more than 50,000tonnes annually and, in Australia, the Queensland state government has increased coal royalties.We may also seegreater use of other instruments such as excess profits tax or windfall taxes." Carbon regulation and China’s strategic control of many minerals, particularly rare earths, are also key geopolitical issues. Concerns over the security of supply of critical minerals will intensify as the nexus between climate change and political risk becomes more evident, the EY report notes. "As governments move to mitigate near-term climate change impacts and accelerate the energy transition, they are prioritising policies that highlight the importance of metals and minerals needed for renewable energy production and storage." This could play out in several ways, including:• Increasing investment in critical minerals production: Some markets, including the US, Europe and Australia, aredeveloping critical mineral mines to mitigate potential risks that China may restrict the export of rare earths.• Local content rules: The US Inflation Reduction Act is an example of legislation aimed at incentivising companiesto support local industry. • Friendshoring: Geopolitical control of minerals in friendly countries is becoming a policy tool to help securefuture supply. • Cross-border cooperative value chains: Companies along the electric vehicle, battery or renewable energy production value chains are collaborating to capture value in a region.

Report highlights rising geopolitical risks

Industry Queensland

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