In the West, mining ventures keep falling into the ESG pit

Investment, the permitting and a lack of expertise are the main problems that need to be urgently addressed if the West is to avoid dependence upon the Chinese.

In the UK, the AIM market in London Stock Exchange used to be a good platform for junior miners to fund their startup operations. This market is a shadow of its former self as most institutional investors, now run by armies of compliance and ESG apparatchiks no longer invest in companies with a market value of less than 100 million pounds, and mining is virtually banned from greenwashed portfolios.

In the US, it has long been impossible to list a pre-revenue mining company in New York, with most North American mining finance taking place in Canada, Australia, and London. Some tax breaks for investors in qualifying critical metals projects would help compensate for the risk and length of time taken to get into production, as would a reappraisal by institutional investors of the sector.

Funds are happy to pay sky-high multiples for stocks like Tesla or Vestas, the wind turbine maker, while completely ignoring the companies which produce the metals they need.

If UK’s Ed Milliband is to come anywhere near to executing his grandiose schemes, he might ask his colleague at No 11 for some help for the producers of all the copper wiring and other critical metals he will need

On the permitting front, many mining projects, particularly large ones with big impacts, become political footballs. Witness the progress of the Resolution mine project in Arizona, which could make the US virtually self-sufficient in copper. Having gone through an exhaustive permitting process lasting over a decade and costing over $2 billion in exploration and other costs, Rio Tinto received the go ahead from the Federal and local authorities, only for Biden to ban the project in return for the Navajo and Apache votes in the swing state that had won him the previous US Presidential election.

Can Musk help out?

A more consistent and transparent process would help, as would some extra staff in the permitting departments at both the US state and federal level. The permitting process takes so long because, in many cases, the only people qualified to issue them are also responsible for fire-fighting duties and other forestry or agricultural issues.

Democrat governments were happy to let countries with lower labour costs and environmental standards produce the metals they needed. The result is a chronic staff shortage in the permitting departments.

Hopefully Elon Musk will address this problem.

Everyone’s into compliance

Expertise is the hardest nettle to grasp. The only sure-fire growth sectors in the West over the last two decades have been compliance, ESG and NGOs. In 2014, HSBC announced that 10% of its workforce of 240,000 were employed in risk management and compliance.

When I started work at a London stockbroker in 1985, we had one compliance officer. There is no shortage of university courses in NGO studies in the UK and the US, but try to find a university where you can study rare earth elements and their processing and you will find two in the US: Reno and Wyoming, and only at postgraduate level.

The SOAS in London offers a course but this is for people who plan to make a career of telling countries and miners how to run their operations to comply with ESG requirements.

We are very good at producing regulators, agitators and people to boss the ever-dwindling number of actual wealth creators around but we are in urgent need of scientists and engineers to get us back on track.

The Chinese, whose rare earth expertise dates from their invention of fireworks, are able to plan their economy for the long term. Western political cycles do not sit well with the time it takes to build mines and processing plants for our long-term future.

It is often easier to give in to the increasingly vociferous zealots who refuse to let basic principles of science get in the way of ‘their truth’.

After all, when the mine or factory has finally been permitted, the politicians involved could be long gone, and unable to take the credit.