By Dr. Amit Tripathi
The mineral exploration sector globally faces significant challenges in attracting investment, particularly when considering the additional hurdles posed by achieving net-zero emissions. For decades, the global mining industry has been grappling with the consequences of chronic underinvestment in exploration for new mineral deposits. This trend, coupled with the geographically concentrated nature of existing mines and processing facilities in often politically volatile regions, has created a potentially precarious situation. The coming surge in demand for critical minerals driven by the burgeoning field of Artificial Intelligence (AI) threatens to exacerbate this supply crunch. A confluence of factors is emerging that suggests these obstacles can be overcome.
This analysis explores how significant corporate profits, technological advancements, environmental restrictions, and consumer pressure are converging to create a more attractive landscape for exploration investments, ultimately accelerating the path towards a sustainable future.
A 2023 report by S&P Global Market Intelligence revealed a concerning decline in global exploration spending. Since 2012, exploration budgets have shrunk by nearly 60%, with a particularly sharp decline following the 2014-2016 commodity price slump. This lack of investment has resulted in a significant slowdown in new mineral discoveries. As a figure, a 2021 study by Fraser Institute highlights that the number of discoveries of world-class copper deposits (>2.5 million tonnes) has plummeted from an average of 5 per year in the 1990s to just 1 per year in the last decade. Further compounding the supply challenge is the geographically concentrated nature of existing critical mineral deposits. For instance, the Democratic Republic of Congo (DRC) holds an estimated 70% of the world’s cobalt reserves, a vital component in lithium-ion batteries that power electric vehicles and many AI applications. Similarly, China dominates the processing and refining of several critical minerals, raising concerns about potential supply chain disruptions due to geopolitical tensions.
The global push towards achieving net-zero emissions by 2050 further intensifies the supply challenge. The transition to clean energy technologies like solar panels, wind turbines, and electric vehicles all rely heavily on critical minerals. As per a 2022 International Energy Agency (IEA) report, achieving net-zero by 2050 could require an up to 6-fold increase in demand for some critical minerals compared to the baseline scenario.
While the net-zero transition is a well-understood driver of mineral demand, the rapidly expanding field of AI presents a potentially even more significant, yet underappreciated, challenge. AI hardware requires vast quantities of specific minerals for components like transistors and memory chips. A 2023 article in Nature estimates that the training of a single large AI language model can consume as much energy as several dozen households in a year, highlighting the immense resource needs of this technology.
Although the energy demands of AI technology are expected, the true extent and scale of AI’s impact on mineral demand remains relatively uncertain. However, as AI applications proliferate across various sectors, from autonomous vehicles to advanced robotics, the demand for critical minerals is likely to surge exponentially.
Market Response – Innovation and the allure of windfall profits
The potential for substantial financial returns remains a primary driver for investment in exploration. The average internal rate of return (IRR) for successful exploration projects in the past decade hovered around 25%, significantly higher than average stock market returns. This lucrative prospect, coupled with the rising demand for minerals critical to clean energy technologies (e.g., lithium, cobalt, nickel, copper), is expected to attract continued investor interest. Technological advancements are playing a crucial role in de-risking exploration activities, thereby increasing investor confidence. Innovations in areas like remote sensing and geophysical techniques allow for more precise targeting of potential mineral deposits, reducing the need for expensive drilling campaigns. Data analytics and machine learning are beginning to enable better interpretation of geological data, leading to more informed exploration decisions. These advancements are being spearheaded by companies like Kobold, Goldspot, VerAI, Geoexploration, MiningAIx, AI Resource Exploration etc. These companies are at the forefront of development and use of cutting edge technologies like AI, ML, computer visualisation, CAGE-IN, mind mapping in mineral exploration and have successfully reduced discovery timelines for mineral exploration projects by up to 30%. The benefits have largely been accrued on the early stage of reconnaissance and drill targeting, which are also the highest risk part of the exploration cycle.
Stringent environmental regulations, once seen as a deterrent to exploration, have started to act like a catalyst for innovation. Companies are increasingly adopting environmentally friendly practices such as water use optimisation, utilising renewable energy sources to power exploration activities, strict waste management and disposal protocols etc not only comply with regulations but also enhance a company’s social responsibility profile, attracting environmentally conscious investors.
Consumer awareness and expectations regarding corporate social responsibility (CSR) are undergoing a significant shift. Globally, consumers are applying sustained pressure on companies to prioritise ethical practices and supply chain traceability. This trend directly translates to a growing demand for minerals that are demonstrably sourced and mined responsibly. Exploration companies that can effectively demonstrate transparency throughout their operations and adherence to stringent environmental regulations will be well-positioned to attract critical investment capital, the support from investors for such initiatives is in its infancy but rapidly gaining ground especially in advanced mining jurisdictions. Investors are increasingly recognising the long-term sustainability and risk mitigation benefits associated with ethical sourcing practices. Multiple surveys consistently reveal this rising trend – consumers are demonstrably more willing to pay a premium for products manufactured utilising ethically sourced metals.
This shift in consumer sentiment presents a significant opportunity for exploration companies that prioritise responsible mining practices. By demonstrably aligning themselves with ethical sourcing principles, exploration companies can gain a competitive edge in the marketplace. This not only enhances brand reputation but also translates to potentially higher margins due to consumer willingness to pay a premium for ethically sourced products.
Years of underinvestment in exploration, geographically concentrated supply chains, and the dual demand drivers of net-zero and AI development paint a concerning picture for the future of mineral supply. To avoid a potential bottleneck that could stifle technological progress, a multi-pronged approach is emerging. The potential for high profits, technological advancements, environmental regulations, and consumer pressure – is creating a more compelling investment proposition for the exploration sector. While challenges remain, particularly in balancing net-zero targets with mineral demand, the combined force of these incentives is likely to overcome many of the existing obstacles. The growth of AI as well, presents both challenges and opportunities for the critical metals and energy sectors. By strategically investing in exploration, technological advancements, and responsible resource management, we can ensure a sustainable supply chain that fuels both technological progress and a clean energy future. This trend is likely to accelerate and pave the way for a future where increasing investment in responsible, technology driven exploration activities contribute to a sustainable and resource-secure future.
The author is Director, AI Resource Exploration Pvt Ltd. The author has spent several years exploring for minerals in the Indian Ocean Region (IOR) and South America and has over two decades-long experience of working in varied policy jurisdictions globally. He can be contacted on info@geoexplorationllc.com
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