As a result of the physical distancing requirements and government-mandated shut downs put into effect in response to COVID-19, many mining operations have idled. However, certain trends were emerging from the mining industry prior to the onset of the global pandemic, and we expect many of these trends to continue once mining operations resume in the normal course. One such trend to keep an eye on is the increased use of joint ventures in the mining industry, and we anticipate seeing this continue into the future.
In our recent blog published April 7, 2020, Environmental, social and governance (ESG) considerations for the Canadian mining sector, we highlighted how ESG factors are becoming an increasingly prevalent focus for companies in the mining industry. With investors focusing on sustainability and seeking companies that are decreasing their carbon footprint, investments in low-emissions technology developments are rising. In response, joint ventures have been forming between technology companies and mining companies.
As an example, Apple is backing a joint venture between Alcoa Corporation and Rio Tinto Group to develop a carbonless aluminum smelter which would eliminate direct greenhouse gas emissions from the smelting process. Under this joint venture, Alcoa and Rio Tinto will be focusing on developing the technology, while Apple will facilitate the collaboration and provide technical support. The parties anticipate that sales will begin in 2024, and Apple will be one of the initial buyers, using the aluminum in its own products.
Another example involves lithium mining companies looking to capitalize on the exponential growth in worldwide demand for “battery” metals, which has been driven in part by the demand for cellphone batteries and electric vehicles. Forecasts predict the demand for lithium, one of the primary metals used in electric vehicle and cellphone batteries, to overtake supply by 2025. However, lithium mining companies require the right technology to extract lithium sustainably and cost effectively and with the lowest carbon footprint. Livent Corporation has partnered with E3 Metals Corp. with the goal of producing battery-grade lithium hydroxide that can be used in the manufacturing of lithium-ion batteries.[1] Pursuant to the agreement, Livent will contribute up to $US 5.5 million towards the joint venture and will utilize its technical expertise to assist in the accelerated advancement of E3’s lithium extraction process towards commercialization. Livent will also have the option to convert its investment into equity of E3.
In addition to joint ventures which are focused on technology advancements, we are also seeing more joint ventures involving mining companies and governments. For example, Barrick Gold Corporation and the Government of Tanzania have formed a joint venture to oversee Barrick’s future gold mining operations in the country. The joint venture will give the Tanzanian government full visibility of, and participation in, decisions made for various mines in the country, and aims to establish a sustainable mining operation capable of creating long-term value for Barrick. After the recoupment of initial capital investments, the two parties will share equally in the economic benefits generated by the Tanzanian mining operations.
While not a new trend, Indigenous involvement in mining projects has been continuing and increasing. Indigenous communities are transitioning to becoming active and key participants in the mining industry. For example, the Lhoosk’uz Dené Nation and Ulkatcho First Nation in British Columbia have signed an agreement with the Province of British Columbia in support of the Blackwater Gold Mine to be located within their territories. The agreement commits to sharing a portion of the mineral tax revenue generated by the mine. The First Nations have also entered into a separate agreement with New Gold Inc., who will operate the mine with the First Nations, which affords the First Nations direct participation in the project.
In Alberta, Indigenous communities now have an increased pool of capital available to them as a result of the Alberta Indigenous Opportunities Corporation (AIOC). The government of Alberta recently established the AIOC with a mandate of facilitating investments by Indigenous groups in natural resource projects and related infrastructure. The AIOC is making available up to $1 billion for Indigenous communities to participate in major energy, mining, and forestry projects. In an effort to focus on investments that have larger returns for Indigenous communities, the AIOC will be looking at Indigenous proposals that have a minimum $20 million Indigenous investment in the project. To meet this investment threshold, Indigenous groups can join together and pool funds. The intent of the AIOC is to bridge the gap between Indigenous groups wanting to participate in the natural resources sector and their financial capabilities.
Although COVID-19 has caused many mining operations to halt, we expect these joint venture trends to continue once operations resume.
[1] Livent Corporation, Livent and E3 Metals Announce Joint Development Agreement to Advance Lithium Extraction Process and Technology (September 18, 2019), online: Livent Corporation Investor Relations <https://ir.livent.com/news/news-details/2019/Livent-and-E3-Metals-Announce-Joint-Development-Agreement-to-Advance-Lithium-Extraction-Process-and-Technology/>.
