Global mining investment rose to its highest level for almost a decade last year amid higher demand for lithium, copper and other critical minerals needed for the energy transition. 

The world’s top 40 mining companies by market capitalisation invested about $85bn worldwide in 2022, up by 19.7% from the previous year, according to a report published in June by consultancy PwC. This was the highest level of investment since 2014, when $93bn was deployed by the world’s top 40 miners, but still below the all-time high of $169bn recorded in 2012.

As is typical of mining’s cyclical nature, these higher investing activities have followed higher commodity prices. Despite coming down from a peak of 227.92 in March 2022, the IMF’s monthly price index of energy transition metals – which includes lithium, cobalt, nickel, copper and other critical minerals – stood at an elevated level of 178.06 in December 2022.

Exploration spending in 2022 by the world’s top 40 mining companies – which is included in overall investing activities – reached its highest level since 2013, according to PwC analysis. Data from the International Energy Agency shows that exploration spending on lithium almost doubled to $467m last year and copper saw spending jump to $2.79bn.

The uptick in overall mining investment has been driven by demand from the transition to electricity-based technologies, which require large amounts of copper, lithium and other minerals. But analysts caution that mining investment remains well below the levels needed to meet projected demand from the transition away from a fossil fuel-based economy. 

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The International Energy Agency estimates that the global economy will require six times more mineral inputs in 2040 than today in order to reach net-zero by 2050. Data from fDi Markets shows FDI into the manufacture of battery and electric vehicles (EVs) still far exceeds capital deployed into the mining of critical minerals used in their production.

Elisabeth Hunt, a sector leader for energy and resources at PwC UK, says that excitement around critical minerals has helped attract capital from non-traditional sources into early-stage mining investments, including from automotive original equipment manufacturers and governments.

A drive to secure supplies for the energy transition has led governments like the US, EU and UK to sign partnership agreements with friendly resource-rich countries and incentivise mining investment and exploration through grants, loans and tax breaks. In this climate, mining companies have raised $550m in venture capital funding so far this year, according to PitchBook, up from $508m raised in the first three quarters of 2022. 

“Financial availability, combined with projections of mineral shortages and associated price responses favouring forward valuations, has led to start-ups and small miners being better able to secure initial funding rounds at higher prospective valuations,” says John Mullins, a senior manager at PwC UK. 

However, it is not all plain sailing. Campaign group pressure and a historical lack of adherence to environmental, social and governance principles by some miners has made obtaining a licence to operate a new mine convoluted and time consuming. “The need to obtain minerals for ‘the common good’ is colliding with the general opposition by many communities to mining happening in their back yard,” says Ms Hunt.

It also takes many decades to explore for metals and bring mines into production. Ms Hunt notes that there is a risk that recycling becomes increasingly dominant as a supply source and demand for mined metals falls: “This may leave an overhang of investment which will depress prices and asset values.”