A new economy?
In recent years the Queensland Government has been using the term “new economy” when describing the source of rapid demand growth for a range of minerals used in manufacture of various new technologies. And what’s more, the Government has not only been talking about the new economy but investing significant funds to help build new supply chains in Queensland for the minerals needed in manufacture of those new technologies. In November 2019 the “New Economy Minerals Initiative” was launched, backed by $13 million in funding; and more recently an additional $10 million to provide direct help to industry explorers searching for these “new economy minerals” which had often been overlooked in the past.
But what is the new economy, and why does it have such prominence right now? After all, didn’t we first hear about the new economy back in the dot com era of the 1990’s? In those days it was used to describe the transition from a manufacturing-based to a services-based economy, propelled by widespread growth of the internet and the numerous opportunities it created for new businesses. In hindsight though, through the lens of the dot com bubble, we can say that the “new economy” call was made a bit too early and there was still a long way to go on the data and digital transformation journey.
As we fast forward to today, in this third decade of the 21st Century, and look carefully at what is happening around the globe we do see clear signs, or more properly, seismic shifts that are changing the fundamental underpinnings of our economy. And the fact that we stand at the confluence of these great shifts, of these global transitions, is why the term “new economy” is appropriate.
While the global population continues to grow, and with it demand for more of basically everything, it is the transitions in energy, industry and sustainability that are driving the most profound changes in our modern economy.
In energy our last great transition, the shift from reliance on wood to coal (and later oil and gas) as our primary energy source reached a tipping point some 400 years ago. We are at another tipping point now, moving from our past reliance on combustion of thermal energy fuels to a future with much greater direct capture and storage of energy from renewable sources, supplemented by cleaner, lower emissions and more efficient energy technologies. The transition from wood to coal took centuries. Steam trains in the U.S for example, only shifted to burning coal in about 1870, some 250 years after coal became the dominant fuel in Britain. The transition from thermal to renewable and lower emissions energy will likely only take decades.
In industry great transitions are more frequent, with new technologies making production more efficient as evidenced by the industrial revolutions that brought mechanisation, mass production and computers (placing the dot com era in the third industrial revolution). Today, in what is termed the fourth industrial revolution, the convergence of physical and digital systems and the technologies of artificial intelligence offer means to radically improve the efficacy and efficiency of systems across the entire span of industry and the economy.
But perhaps the greatest and most important transition underway is the embrace of sustainability by modern society. After many millennia of growth and development, this change is driven by recognition that the global population, and the innate desire of people to improve their living conditions, must be balanced with the finite resources of the earth. It is the driver of the shift in our primary energy sources. It is the driver of our need to find ways to be more efficient and more effective with what we have and what we use, as embodied by the concept of the circular economy. And most importantly for our economy, it is the driver of change in the investment sector, where the principles of “environmental, social and (corporate) governance” or ESG, are now investment criteria.
In combination these transitions are fundamentally changing our economy. That change is probably best expressed by release in 2019 of the “Statement on the purpose of a corporation” by the U.S Business Roundtable, an association of the CEO’s of America’s largest companies and investment funds. The statement expanded the purpose, and responsibility, of corporations to include “customer value, investing in employees, fair and ethical supplier relationships… care for the community and environment…. in addition to long-term shareholder value”. Amongst the many who endorsed the statement was Larry Fink, Chairman and CEO of Blackrock, the largest money-management firm in the world.
So when the Queensland Government talks about the “new economy” it is acknowledging and accepting the massive changes underway in energy, industry, sustainability, and investment, and taking a forward-looking view to find and benefit from the opportunities those changes offer.
Queensland has a long history of turning the opportunities offered by our rich mineral and energy resource endowment into success, creating great value and widespread benefit. Indeed it was discovery of gold at Gympie in 1867 that put the new State of Queensland, which had only separated from NSW some eight years earlier, onto its feet financially. We’ve built upon that initial success to develop entire industries centred on supply of the mineral and energy commodities the world needs – coal from the Bowen Basin, base and precious metals from the Northwest and Northeast Minerals Province’s, bauxite from Cape York, gas from the Cooper, Bowen and Surat Basins foremost amongst them.
But the new economy brings opportunity for us to develop a new arm of the resources sector, one with huge potential for growth, and where our potential includes not only what we supply, but how. While the new economy is driven by new technologies which create demand for a host of minerals for use in defence, medical and aerospace applications amongst many others, the greatest opportunity in economic terms is in energy.
The opportunity space across the energy spectrum spans generation, transmission and storage. In generation, last year Queensland released its “Hydrogen Industry Strategy” which sets out to supply “green” hydrogen to large energy markets in North Asia and Europe, and to domestic users too. Green hydrogen is produced from water electrolysis using renewable energy; and there are other variants (blue, brown and grey) which use some form of hydrocarbon (coal or natural gas) as the hydrogen source, but which require treatment or disposal of the carbon component.
In transmission, the widespread electrification of our energy systems, and in particular the shift to distributed generation of electricity will only serve to increase demand for copper as networks grow in both size and capacity. But given that we’ve been using copper for some 8000 years, it’s not surprising that all the easy to find and easy to mine copper has been discovered and extracted. There is a global challenge to find major new resources, which is why we need to push the frontiers of exploration, discovery and mining into deeper and more difficult terrains. It’s also why we need to re-look at what we’ve previously left behind after mining of primary ore, to find ways to extract copper from low grade ores and mine tailings. This “secondary prospectivity” is emerging as an increasingly important area of resource assessment and fits well into the objectives of the circular economy in maximising the value of what we’ve already mined.
But it is the growth in demand for energy storage capability that opens up many new opportunities for our minerals sector here in Queensland. While today we hear a lot about lithium-ion batteries, exemplified by those used in Tesla’s electric vehicles and home “Powerwall” products, the range of elements being trialled in various battery applications spans the minerals and metals alphabet from A (aluminium) to Z (zinc).
To truly electrify the new economy a wide range of battery types will be required, some providing for example high capacity fast discharge, others lesser but longer duration discharge, to suit particular applications across our industrial, transportation and commercial sectors. It is likely that a range of battery technologies will ultimately be developed, with growing demand for a diversity of minerals including cobalt, vanadium, silver and manganese.
And the move to electrification of our energy systems will also drive demand for a range of other minerals that offer advantage in terms of energy efficiency, weight reduction, strength and durability.
We are by no means alone in recognising the great opportunity offered by the roll-out of new technologies in renewable and clean energy, coupled with broader applications to improve the efficiency and efficacy of many aspects of our modern economy. Governments at all levels in Australia, and our strategic and trading partners around the world share a similar view.
At an international level the drivers are not only demand growth, but also strategic, where concerns about resource security are rising in response to global trade and political tensions. This problem is enabled by the concentration of supply of certain minerals in certain countries, which those countries can use to achieve political or strategic advantage. That is one of the reasons why in November 2019 the Australian and U.S Government’s entered into a critical minerals partnership (and likewise with India in 2020) to work together to create new supply chains. The term “critical minerals” reflects their importance to their users and is best exemplified by rare earth element supply wherein some 95% of global supply currently comes from China, yet each U.S built F35 fighter jet requires 435kg of rare earth elements. The terms critical and new economy minerals can be considered synonymous.
The Australian federal government focus on critical minerals saw establishment earlier this year of the Critical Minerals Facilitation Office, which is working to help establish not only new supply chains, but also to support the necessary research, development, accreditation, market and investment requirements needed.
In Queensland we are developing a “New Economy Minerals Precinct Strategy” which seeks to develop an upstream precinct centred on Mt Isa and focussed on extraction and processing, and a downstream precinct centred on Townsville and focussed on refining, value-add and export. In parallel, a “New Economy Minerals Investment Prospectus” was released in 2020 to use in attracting the required investment into Queensland needed to establish new supply chains.
In more practical terms, the Geological Survey of Queensland is working with the Japanese Oil, Gas, Metals National Corporation (JOGMEC, Japan’s resource security agency) to assess opportunities for supply of various new economy minerals from Queensland, including from both primary ores (through joint-venture with local exploration and development companies) and secondary ores in mine waste and tailings.
The Geological Survey of Queensland (GSQ), using the $13 million funding provided under the New Economy Minerals Initiative (NEMI), is also engaged in a range of geoscience projects to delineate and quantify the State’s new economy minerals potential. A wide range of geophysical, geochemical, mineral synthesis and analytical programs are underway, with focus on both the Northwest and Northeast Mineral Province’s. In addition, the GSQ has awarded two rounds of Collaborative Exploration Initiative grants since November 2019, with initial funds boosted by the additional $10 million (over four years) announced early this year. Those grants are primarily directed to explorers seeking new economy minerals, with the most recent round expanding the search area outside the Northwest Minerals Province to include the Northeast Minerals Province, Southwest Queensland, and Wide Bay – Burnett region.
A key part of the GSQ work, being conducted in collaboration with the Sustainable Minerals Institute/Bryan Research Centre at University of Queensland, is to look at various methods to extract ores from waste using non-traditional techniques, including for example phyto-mining, using plants to concentrate minerals for later harvesting. The objective has clear view to finding ways to minimise the environmental footprint of mining and resource recovery in future.
“…not only what we supply, but how”
Queensland’s long history of mineral and energy resource development has led to establishment of world-class supply chains, with mineral processing, transport and export facilities well developed and supported by depth of experience in commodity specific engineering, metallurgy and materials handling. In contrast, our supply chains for new economy minerals are largely absent or immature. It means we will have to develop them afresh.
But with an eye to the future we can do that in a way to differentiate Queensland from other jurisdictions, and to make us a preferred investment destination. In short, the “how” we supply will be as important as what we supply if we are to attract the long term, patient capital needed to fund industry and supply chain development.
Capital markets are sending very clear messages to industry of the importance of satisfying ESG criteria as a condition to attract capital. Customers are doing the same, driven by growing demand from their consumers to be able to confirm the provenance of minerals used in products like electric vehicles. Tesla, for example, is supporting various initiatives to reassure customers about the ethical supply of minerals used in their products. Likewise Daimler-Benz/Mercedes has revised its supply contracts to include clauses relating to working conditions, human rights, environmental protection, safety, business ethics and compliance.
Queensland’s strong regulatory frameworks, adherence to the rule of law, respect for contractual agreements, recognition of landowner, cultural heritage and native title rights in land, and low sovereign risk will offer increasing advantage in terms of proving our ethical and responsible supply credentials.
Hard work and reward ahead
The opportunity before us, for Queensland to take a leading position in the new economy, will require strategic vision, call for long term and patient capital, and collaboration between industry, government and academia. It will be hard work, but it was ever thus, and Queensland has a rich history of turning opportunity into success.
But in the changing world of the new economy, the measure of success will be broader than in the past, calling for greater balance between the measures of sustainable prosperity: of people, planet, profit and progress. It will be a challenge, and require many changes, but it is a challenge we must turn to our advantage and future prosperity.
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