Why Digitalisation is the Bedrock of Mineral Procurement

Mining operations are changing dramatically, driven by growing demand for critical minerals and sustainable operations. With high pressure comes the risk of failing to scale responsibly.

Allianz explores how the industry depends on a digital transition to rebuild strategy and meet expectations. The energy industry is rebuilding to implement electrified end-use, renewables and storage.

Similarly, AI growth creates higher demands for data centres, specialised network equipment and high-performance computing.

Rising critical mineral demand

These shifts rely on large volumes of metals and minerals, requiring processing and refining. Consequently, global mineral extraction has increased significantly in the 21st century.

According to the International Energy Agency (IEA), lithium demand is expected to increase fivefold by 2040. Graphite and nickel will double, cobalt and rare earth elements will rise by approximately 60% and copper will see a 30% increase.

Opening new mines is insufficient; processing capacity, transport infrastructure and a skilled workforce must also increase.

AI demand requires immense increases in data centre infrastructure. The IEA shows global data centre electricity demand will rise from approximately 415 TWh in 2024 to about 945 TWh in 2030.

This requires significant levels of metals and minerals, also relied upon by the growing electric vehicle (EV) industry. Mining companies face greater demand than ever.

The rapid scale-up increases the risk of bottlenecks, project delays and price volatility.

"The green and digital transition won’t fail for lack of ambition – but it could stall for lack of materials," explains Ludovic Subran, Group Chief Investment Officer at Allianz.

"Our latest report, Mining for the future: Addressing liabilities and unlocking sustainable transition opportunities, looks at mining as both a critical enabler and a potential bottleneck."

Managing regional supply risks

Supply struggles to respond to demand as new projects take years to finance and permit while facing environmental regulations.

The growth pace does not match demand, resulting in prolonged fossil-fuel dependence and overconsumption in existing mines. Mineral depletion is rising globally but remains concentrated in specific geographies.

In resource-rich countries such as the Democratic Republic of Congo, Zambia and Mali, extraction dominates economies while depletion levels remain high.

Extraction is shouldered by high-resource but lower-income nations, risking a resource trap. If materials cannot be mined responsibly, short-term economic gains could result in structural vulnerability.

Moreover, these countries face high domestic environmental costs like land degradation and air pollution. Rwanda demonstrates a high ratio of environmental damage to economic gain.

Mining contributes from 2% to 4% of global GDP and supports millions of livelihoods but impacts the planet significantly. It accounts for from 4% to 7% of global greenhouse gas emissions and drives forest loss.

Gold mining accounts for 41.7% of total mining-driven deforestation, followed by coal mining at 26.3%.

The shift towards renewable energy has reduced coal-related deforestation but shifted the problem to regions extracting minerals for renewable energy.

All supply chain, procurement and logistics leaders should attend:

• Procurement & Supply Chain LIVE: The Net Zero Summit - QEII Centre, London, March 4-5
• Procurement & Supply Chain LIVE: The US Summit - Navy Pier, Chicago, April 21-22

Co-located with Procurement & Sustainability LIVE, these events bring together COOs, CSOs, and senior decision-makers at a moment when supply chains and commercial performance are increasingly interconnected.

Strategies for supply resilience

Building supply resilience requires a thorough understanding of how political and sustainability risks coincide with geological endowment.

The Geological Service for Europe has mapped hard-rock deposits for the EU's 2023 critical raw materials list. This demonstrates that potential supply is diverse across Europe.

The EU has an expanding network of strategic partnerships aiming to diversify supply and implement sustainable mining principles. However, diversification must prevent reliance on vulnerable regions.

Undertaking mining operations with poor sustainability performance is a liability. Businesses need to be aware of tailings stewardship, community impact and land rehabilitation.

Though expensive, these measures protect the environment and safeguard local communities. By engaging stakeholders and workers early, mining projects can embed sustainability.

This helps mines meet demand faster, safer and more sustainably.

The EU has an expanding network of strategic raw materials partnerships, which is aiming to diversify supply and implement sustainable mining principles across the value chain. However, diversification needs to be undertaken with care as to prevent the reliance on other vulnerable regions or unsustainable operations.

Undertaking mining operations with poor sustainability performance is a liability. Businesses need to be aware of tailings stewardship, community impact, land rehabilitation, water treatment and post-closure monitoring. Though these can be expensive, they are vital to protecting the surrounding environment and safeguarding the local communities. 

As these are now expectations, businesses can plan for this before the project begins, meaning costs can be integrated into the plan more efficiently. Through engaging communities, stakeholders and workers, mining projects can be built with sustainability, responsibility and longevity embedded. This will help mines meet demand faster, safer and more sustainably.