'Opening new mines in Europe should not be taboo'
If the European Union (EU) wants to reduce its dependence on critical raw materials that are essential for the energy transition, new mining will be needed, say Nathalie Bally, Responsible Investing Expert, and Anthony Sandra, Portfolio Manager at KBC Asset Management. This must of course be done as responsibly as possible.
We cannot afford to trade our current dependence on fossil fuels for a dependence on scarce resources.
Anthony Sandra, portfolio manager KBC Asset Management
As a message, it carries weight: 'The battery in your electric car is not made from good intentions alone.' According to Bally, that perfectly sums up the challenge facing Europe: making the green transition while realising that it involves difficult choices.
Reducing Europe's dependence on fossil fuels means speeding up the green transition. That requires a lot of critical raw materials. The lithium or cobalt needed for electric car batteries or energy storage are good examples. The EU imports most of these raw materials, often from countries with regimes that place less value on human rights, environmental regulations and CO2 emissions. 'By bringing raw material production back to Europe, we have an opportunity to do better. Europe can set an example by focusing on mines that have more limited impact, with stricter environmental standards and more focus on communities, and then completing the circle by focusing on recycling and reusing residual waste,' states Bally.
The ideal situation
The European Commission wants to reduce dependence on strategic raw materials. The ambitions of the recently introduced Critical Raw Materials Act are high. By 2030, the European Union must derive at least 10 per cent of its strategic raw materials from its own mines, refine 40 per cent of its ores and derive 25 per cent from recycling.
Companies should already be considering a shift from a linear economy to a circular economy during the product development phase.
Anthony Sandra, portfolio manager KBC Asset Management
Sandra advocates being more resource-conscious. Companies should already be considering a shift from a linear economy to a circular economy during the product development phase; first and foremost, the aim is to keep the product in use for longer and that after the end of the product’s lifecycle, the waste can be used as a new raw material. 'We recently saw the introduction of Right to Repair in Europe, which is excellent news. If you can get a smartphone with a broken screen fixed, you won't have to buy a new one. And batteries that no longer have enough capacity for electric cars can be given a second life by using them to store renewable energy for use during peak hours.'
What about the calls to end mining altogether and only recycle? If we look at the figures, that currently appears unrealistic. 'There are currently not enough metals in circulation to meet the exponentially increasing demand through recycling alone. 'The International Energy Agency has calculated that, if we were to recycle all batteries by 2040, that would still produce barely 10% of the metals needed,' Sandra said. 'So in the initial phase, there still needs be a primary supply until sufficient supply is available, so that in the future we can move towards a completely circular economy where recycling is the main source of materials.'
Europe can also focus on alternatives. Sandra gives the example of Australia's Vulcan Energy, which uses geothermal energy to sustainably extract lithium from the ground in the Rhine Valley. 'That process is still in its infancy, though, and it will be some time before it can be done on an industrial scale.' By 2026, Vulcan Energy expects to produce 24 000 tonnes of lithium hydroxide, enough for 500 000 cars.
In our own backyard
Mining therefore remains necessary to meet short-term demand. Including on our own European soil. In Sweden, large quantities of rare earth metals have been found near the town of Kiruna, which are important for electric vehicles and wind turbines. And lithium reserves have been discovered in the French department of Allier. So it is possible. But to self-produce enough rare earth metals to meet at least 10 per cent of consumption by 2030, dozens of new mines need to be opened in the EU.
In fact not a single new mine has been opened in the last decade.
'We all want smartphones, laptops, electric cars, batteries and solar panels, but we don’t want mines in our backyard,' Bally acknowledges.
'Fully sustainable mining is impossible, but that doesn’t mean it can’t be improved. Europe can make a fresh start by taking advantage of the technological advances that the mining and processing industry has seen in recent years. Moreover, undertakings can be given to restore biodiversity afterwards. New mines should not be taboo if more independence is the objective.'
Europe can set an example by investing in mines with more limited impact. with stricter environmental standards and more focus on communities, and then completing the circle by focusing on recycling and reusing residual waste.
Nathalie Bally, Responsible Investing Expert at KBC Asset Management
Communication and dialogue are crucial here, says Sandra. 'We are already seeing the Swedish mining company LKAB or the French minerals group Imerys having early discussions with local communities about the potential impacts. It’s not just about employment, but also about environmental impact. It’s important to bring people into the whole narrative early enough, before it takes on a life of its own ... In the interests both of the local community and the company itself.'
Coal is and remains a NO GO
Yet all this will still not be enough to meet the need for critical raw materials in the short term, says Bally. Substantial imports remain necessary for the time being. 'We are in a transitional period towards more sustainability and more independence. That takes time.'
In the meantime, as an asset manager, KBC does not want to shrug off its moral responsibility with regard to strategic commodities, says Bally. 'We don’t invest in mining companies which mine thermal coal. These continue to be strictly excluded from all our actively managed funds. We can support other mining companies by investing in them, as long as they meet our strict screening criteria.
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