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Is it time to revive the UK mining sector?

Transitioning to a low-carbon economy needs UK energy infrastructure to be rebuilt and rewired. This will require large volumes of critical minerals, many of which are mined and refined in countries with complex supply chains.

Last year, the UK government set out its critical minerals strategy to strengthen supply chain resilience of critical minerals.

A core part of the strategy is to accelerate the growth of the UK’s domestic mining capabilities. It is proposed that the UK could increase the exploration and production of critical minerals and develop specialised refining capabilities where economic and strategic opportunities exist.

The UK’s industrial past was heavily linked to mining. Its rich coal, limestone, iron ore and other metal deposits combined with engineering skills and ingenuity laid the foundation for the country’s industrial heritage. While UK mining has significantly declined and many of the associated skills and refining capacity has moved elsewhere in the past half century, our mining heritage provides a strong base on which to rebuild the UK mining industry.

This article explores the opportunities and challenges to developing UK mining and refining capabilities and some of the solutions to overcome them.

Demand for critical minerals will significantly increase

The UK has identified 18 minerals that are critical. This means they are vitally important and would pose a risk to the UK economy if their supply chains were disrupted.

UK demand for lithium and nickel could rise six-fold by 2035

The UK needs critical minerals for much of the electrical equipment essential for economic growth and everyday life including mobile phones, laptops, televisions, satellites, fibre optics, medical devices and robotics. They are also integral to energy transition technologies and infrastructure. Solar panels, wind turbines and electric vehicles (EVs) all use them.

Consequently, electrification and the energy transition will push global demand for critical minerals far beyond the current supply capacity. For example, UK demand for lithium and nickel could rise approximately six-fold by 2035 (see figure 1), and consumption of rare earth elements (REEs) is projected to rise 650 per cent from approximately 20,000 tonnes to 150,000 tonnes by 2050.

UK mining has the opportunity to partially meet demand from domestic natural resources. The full extent of the UK’s critical mineral resources is still relatively unknown, but new deposits are being discovered. For example, in 2020 ‘globally significant’ levels of lithium were found in Cornwall.

Further exploration and development is needed to map out the commercial and strategic prospects that the UK geology offers. The Critical Minerals Intelligence Centre (CMIC) will publish a national assessment of the UK’s critical minerals geological potential in late 2023.

What is needed to develop the UK mining industry?

Win hearts and minds

The mining industry – both in the UK and globally – has a chequered past.

The UK industry was dominated by bulk commodities that drove the industrial revolution. Perceptions remain largely tied to the past with iron ore and coal closely linked to heavy industry, and ESG issues such as pollution, environmental degradation, mining accidents and local community issues.

Critical minerals are different. They are specialised minerals found in smaller concentrations and used in technology which facilitates the transition away from fossil fuels to cleaner energy. Mining techniques have also developed significantly, and ongoing investment into research and development provides an opportunity for the UK to deliver improved and more sustainable mining and refining.

The reputation of the sector has not caught up with the reality of a modern, more advanced industry creating barriers for UK mining.

Compounding this issue is the UK’s density of population and development. Mineral deposits do not follow artificial boundaries, but exploring and developing them, often over large areas, will require consent from the landowners of where they are found as well as local community support. It will be difficult to gain this support without a change in public perception of the mining industry.

UK mining should work with UK government to consider a campaign to reposition the sector and demonstrate that mining can be done responsibly and bring value to all stakeholders.

To achieve this, the benefits of critical minerals mining in the UK and the instrumental role that mining plays in the energy transition need to be clearly explained.

For example:

  • meeting the UK’s net zero ambition will not be possible without critical minerals. They are integral to clean energy technologies
  • UK supply can support the broad range of sectors reliant on critical minerals that are vital to the UK economy and modern life
  • a secure and transparent critical mineral supply chain will lead to a more orderly, stable and potentially earlier energy transition
  • UK production of critical minerals would reduce the carbon footprint of important component source materials
  • UK production can boost UK businesses and supply chains
  • many critical minerals are sourced from countries with less stringent environmental, social and governance (ESG) standards. UK production that meets and exceeds ESG standards helps avoid these issues and may help promote international best practice.

Clear, consistent communication, strong stakeholder engagement and a sincere commitment to listening and partnership will demonstrate that mines can be built and operated responsibly with minimal impact on the environment and local communities.

An example is the Woodsmith Project in Yorkshire. It is an underground mine where trees are planted to mask surface buildings, and minerals will be transported beneath the North York Moors National Park to a processing facility on a brownfield industrial site, removing the need for mine-site processing.

This approach may not be economical for many applications, but it demonstrates that innovative and low-impact approaches can be successfully employed in sensitive environments.

Reduce costs and increase tax incentives

Mining is capital intensive. A large proportion of the capital is invested in equipment and mine development.

It also often takes years for mining companies to make revenue from mineral extraction.

Reducing upfront costs will be key to reviving mining in the UK. This will require innovative business models, such as leasing equipment to reduce the cost burden and provide a defined recovery route for the equipment after its use.

The UK also does not have a favourable tax regime. A specific tax regime will be needed that provides fiscal clarity and incentives to invest in sustainable mining in the UK. This could involve tax breaks and credits to reward companies that take a sustainable approach to mining.

In absence of a distinct tax regime, mining groups could look to negotiate bilateral agreements with the government that would provide appropriate and stable fiscal terms in return for delivering low-impact mining projects. Such agreements should specifically involve exemption from environmental taxes. With government support, the UK could become a leader in sustainable mining and could promote best practice in addressing ESG issues abroad.

Build mineral refining capabilities

Some critical minerals are already refined in the UK but this needs scaling up to support domestic demand.

In many countries, especially where mining is an important source of government revenue, refining capabilities are already rising. In some places, international miners must establish refining facilities as part of their licence to operate, or at least strongly encouraged to do so by local tax rules. Therefore, most minerals will be partially refined close to where they are extracted.

While it is unlikely that there will be a large volume of critical minerals waiting to be processed globally, there may be opportunities for the UK to build high-end refining capabilities, where critical minerals can be further processed or combined to form a valuable product – such as magnets. This can improve supply chain resilience as high-end refining is dominated by a handful of countries (see figure 2).

International competition for critical minerals is expected to grow steadily. The UK would benefit from competitive trading hubs where import and export activities are made simpler and easier, particularly with respect to processed material. The UK’s departure from the European Union has made this challenging with complex administration and import tax policies.

However, the UK’s location is beneficial due to its access to several ports which connect it to global markets. There is also an abundance of brownfield sites around these ports, many of which offer substantial potential for regeneration as planning and obtaining permits for brownfield sites can be less complex.

Taking advantage of UK ports by combining them with tax relief and simplified customs procedures will be imperative. The UK currently has eight planned freeports - which are designated areas exempt from taxes (see figure 3). These freeports could create attractive import and export opportunities. Building high-end refining facilities in these freeports could strengthen the UK’s position to serve international customers as well as support domestic demand.

Investment in a Rare Earth Separation Facility at Saltend by metals company Pensana is a good example. It is located within the Humber freeport near Hull and will be one of three rare earth producers located outside of China.

International trade policy also needs to evolve to enable the UK to develop refining capabilities for the next generation of metals and minerals that the country will need for a more transparent, low-carbon future.

Retain and retrain mining skills

The UK has a wealth of educational institutions that train highly skilled engineers and geologists. The Camborne School of Mines at the University of Exeter is one of Europe’s leading higher education institutions for minerals and mining engineering.

However, many graduates leave the UK to work in both established and emerging mining jurisdictions, where opportunities for learning and higher incomes are greater.

Reviving the UK mining sector could help new engineers find work in the UK and convince others to return.

Organisations looking to redevelop the UK mining industry will need to work more closely with universities and market their strategies better to stimulate interest.

Ample opportunities also exist in retraining and redeploying workforces in industries and parts of the country that have seen decades of decline. These include the steel and coal sectors, where a skilled workforce could be used to revitalise local economies.

So, is it time to revive UK mining?

Developing domestic mining and refining capabilities could bolster the resilience of the UK critical minerals supply chain and offer business opportunities in the UK.

The UK government needs to show intent to execute its strategy if it wants mining companies to pursue opportunities. This includes introduction of a supportive tax regime and incentivising low-impact sustainable mining.

Companies can seek to address the challenges by working to change the public perception of mining, deploying innovative cost reduction methods, exploring market opportunities for UK refining and building an attractive workforce proposition.

Get in touch with one of our experts to discuss how your organisation can be best positioned to succeed in UK mining.

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