Sustainable Mining: Potential for Growth in the Global Economy and Food Security, Reveals PwC.

Mining faces revenue declines and reinvents its business model. PwC report highlights infrastructure for technological development and AI.

Mining is experiencing significant financial challenges and is seeking innovative ways to transform its business model. Recent PwC reports emphasize the need to advance technological infrastructure and the use of artificial intelligence to fuel the sector's growth. For the first time since 2016, the mining industry projects a drop in revenue over the course of two consecutive years.

The mining sector, therefore, needs robust strategies to ensure sustainable development, as indicated in PwC's Global Mine report. This document highlights the essential resources so that the extractive industry can not only survive, but also contribute more effectively to the global economy. An important point to mention is that the implementation of advanced technologies could be the key to reversing this adverse scenario.

The performance of the mining sector is the result of a combination of cyclical and structural factors that challenge companies to invest in growth and transformation, even with industry revenue and profit margins under pressure. The conclusion is highlighted in PwC's 21st Global Mine report, which evaluates the 40 largest mining companies in the world, including Brazil.

The importance of global mining

Mining plays a significant role in the global industry due to its participation in both building a low-carbon future and infrastructure for technological development and food generation. On the other hand, in 2023, mining sector revenues fell by more than 7%, even with the increase in production of its main products.

A big cause of this decline is decreasing profit margins, and forecasts for 2024 are not optimistic. 'The tendency is to follow the same guidelines,' says Patricia Seoane, partner at PwC Brasil and leader for the extractive industry.

Alarming industry numbers

According to the PwC report, in 2023, the world's 40 largest mining companies recorded US$845 billion in revenue, a 7% drop compared to 2022. Furthermore, EBITDA was US$217 billion, representing a decrease 26%, and net profit was US$90 billion, 44% lower than the previous year.

For 2024, projections are discouraging, with an expected revenue of US$792 billion, 6% lower than in 2023, an EBITDA of US$171 billion, 21% lower, and a net profit of US$55 billion, registering a drop 36% compared to the previous year.

Top 5 mining companies

In the Global Mine 2024 ranking, the five largest mining companies are: BHP Group LTD (Australia), Rio Tinto Group (Australia and United Kingdom), China Shenhua Energy Company Limited (China), Glencore plc (Switzerland), and Vale SA (Brazil ). The Brazilian CSN Mineração SA, which entered the ranking the previous year, occupies 34th position. This top 5 does not diverge much from the main 2023 rankings, where the order was: BHP Group LTD (Australia), Rio Tinto Group (Australia and United Kingdom), Glencore plc (Switzerland), Vale SA (Brazil), and China Shenhua Energy Company Limited (China).

Reinventing mining business models

The challenges in the mining sector go beyond revenue drops. With increasing regulatory, economic and social pressures, mining companies are reshaping their business models to create value in new ways while operating more efficiently within emerging ecosystems. PwC's Global Mine report pays special attention to how the mining industry is preparing for this transformation.

Companies are adapting to be essential components of growth, highlighting the crucial role mining plays in other spheres, such as the potential and challenges of urban mining (recycling) and in food production. Furthermore, they are leveraging technology, including artificial intelligence, to increase productivity, sustainability and production safety.

Mergers and acquisitions in mining

Mergers and acquisitions remain crucial strategies for mining companies looking to create impact. Although the number of transactions decreased in 2023, their value increased, with greater focus on critical minerals. These transactions are less focused on gain of scale and more to gain capabilities and assets that enable companies to collaborate across broader industrial ecosystems, improving logistics chain e quality control of recycled materials.

AI systems rely on a diversity of minerals and metals. Semiconductor chips are made from silicon and contain metals such as copper, gold, tin, nickel, palladium and silver. Storage devices rely on metals such as platinum, palladium and gold due to their magnetic and conductive properties.

Artificial intelligence and mining

Data center facilities use large amounts of metal in their construction. Demand for AI is increasing the need for these metals. Integrating AI into urban mining will enable the sector to achieve greater efficiency, better material recovery rates, reduced costs and lower environmental impact. 'In our study, we identified that AI can be used in several ways by the mining industry, including advanced classification technologies, logistics chain optimization and quality control of recycled materials,' comments Patricia Seoane.

Impact on food security

Extract materials that serve as the basis for agricultural inputs, mining plays a vital role in food production. Data World Economic Forum show that, to guarantee a future with a well-fed population, agricultural production needs to increase by 55% over the next two decades. In this context, the supply of raw materials for a wide range of inputs and consumable products required in agriculture makes mining an essential agent in this process.

The Global Mine Report highlights six key contributions of minerals and metals to food security. These include the production of fertilizers with phosphorus and potassium, water treatment, soil improvements, micronutrient supplements for plants, pesticides and herbicides that use minerals as active ingredients, and food supplements for animals with calcium, phosphorus and magnesium.

About PwC

At PwC, our goal is to build trust in society and solve important problems. We are a network present in 151 countries, operating in Brazil for over 100 years, committed to providing quality services in auditing and assurance, tax and corporate consultancy, business consultancy and transaction advisory. Find out more about PwC by visiting our website.

Source: © Daniela Passos