The mining sector sits at the heart of the global economy and is a foundational component of the energy transition. However, macroeconomic and geopolitical shifts pose unique and unpredictable risks to commodities markets and mining operations globally.
The unpredictable, time-sensitive nature of geopolitical events can have immediate repercussions on the production of critical resources. Unplanned disruptions—stemming from geopolitical shocks, along with climate events, equipment failures, cyberattacks, or people risks—can halt production, drive financial losses, and undermine stakeholder confidence. Building business resilience in this volatile political environment requires a comprehensive political risk management strategy.
Mining at the intersection of geopolitical tension
The mining sector is uniquely exposed to geopolitical tensions due to the high international competition and demand for the critical materials and metals necessary for industrial development, electrification, and decarbonization efforts. For instance, demand for lithium is expected to surge by 40 times by 2040.
This reliance creates vulnerabilities, particularly as the production and processing of critical minerals tend to be concentrated in a few countries. This concentration exacerbates supply constraints. Latin America, for example, a region with high political volatility, holds over half of the world’s lithium, two-fifths of its copper, and a quarter of its nickel.
This concentration often gives rise to resource nationalism. Resource nationalism occurs when countries assert control over their natural resources, prioritizing domestic ownership to maximize economic benefits. For foreign-owned mines, this can manifest as:
- Raising mining sector taxes and imposing new regulations and fines.
- Introducing export restrictions and local beneficiation requirements.
- Forcing contract renegotiations.
- Expropriating foreign-owned assets and investments.