While environmental, social and governance (ESG) remains the biggest risk to mining companies, executives are now ranking capital as the second-biggest risk as the sector grapples to fund the expansions required to meet increasing demand for minerals crucial to the energy transition.

This is according to EY’s recently published 2024 top ten business risks and opportunities for mining and metals report.

Capital has moved up to number two in the latest ranking, up from number eight last year.

EY notes that the sector will require access to significantly more capital if it is to mitigate the looming deficits of minerals needed for the energy transition. Yet, capital raised through debt and equity has remained steady at $178-billion in the first seven months of the year.  

Global mining and metals leader Paul Mitchell says it appears that capital is moving to new commodity markets rather than solving what is already a significant risk.

Iron and steel, gold and coal companies have attracted the most capital since 2022, but investment is increasing in nickel and lithium.

EY states that investment in mining companies is coming from within the energy ecosystem, including automotive and battery manufacturers, and the impact of incentives such as the US Inflation Reduction Act is expected to make this more attractive.

Mitchell says: "The race to support the energy transition is accelerating, with the surge in demand for critical minerals underscoring the mining sector's pivotal role. The intertwining of sectors, such as automotive and battery manufacturing with mining, signals a transformative phase where collaborative efforts will be the cornerstone of sustainable progress."

Meanwhile, ESG remains the top risk for miners and although the risks raised in the latest survey are not new, what is changing is a growing degree of complexity and investor attention.

“We believe this will spur more innovation, more ambitious targets and greater transparency in reporting,” says Mitchell.

Much of the challenge of ESG is the diversity of risk and opportunities.  He notes that companies are grappling with issues ranging from water stewardship to ethical supply chains and mine closure — all while trying to navigate what respondents describe as an “alphabet soup” of regulations and with ongoing data integrity challenges.

Forty-one percent of miners surveyed said their digital priority was a platform to track and report ESG metrics.

“To avoid disclosure missteps and make the best use of resources, miners will need a better view of high-quality ESG data, with strong governance and controls in place to ensure appropriate sign-offs and processes,” says Mitchell.

Licence to operate (LTO) is the third biggest risk for miners, with mining and metals companies facing higher expectations than many other sectors. Miners typically operate on land that is licensed, not owned, and navigate a range of formal and informal conditions around how minerals are extracted.

EY says that in the past, LTO was focused on Indigenous trust and reconciliation. Today, its scope has expanded to encompass trust at a societal level.

Sixty-four percent of survey respondents said community impact was the top ESG issue facing scrutiny from investors in 2024. Executives say their understanding of sustainability-related matters has increased significantly over the years — but now they realise they cannot tackle all matters at once. The big question is what to prioritise to create real and lasting impact.

“Licence to operate is increasingly challenging, with a broadening range of stakeholders and issues — creating a long-term focus on value beyond life-of-mine and working with communities to co-develop solutions is key,” says Mitchell.

Following ESG, capital and LTO, the list of top-ten risks is completed by climate change, digital transformation and innovation, cost management and productivity, geopolitics, cybersecurity, new business models and workforce dynamics.

Cybersecurity has re-entered the ranking for the first time since 2020, as companies experience increased attacks due to a more complex threat landscape that spans both information technology and operational technology. The survey also highlights a growing concern from miners around intellectual property, as they broaden their thinking from cyber threats being a technology problem to a business risk. With only 40% of mining and metals boards confident they understand the biggest cyber threats facing their organisation, it is clear that cyber requires greater attention.