Bill Gates and Richard Branson have their sights on the mining sector — and investment opportunities for startups abound
Written by Holly Bridgwater. Originally published in SmartCompany/StartUpSmart
Tech giants are on the hunt for investment opportunities in the mining sector, in a push that is destined to change the landscape of the resources industry. Among those leading the charge are tech billionaires Bill Gates, Jeff Bezos and Richard Branson — all backers of technology fund Breakthrough Energy Ventures (BEV).
Last year, BEV joined forces with hedge fund a16z to invest in mineral exploration company KoBold Metals and its search for ‘ethical’ cobalt. The billion-dollar fund was also instrumental in raising $20 million in Series A funding for Lilac Solutions, a mining technology company focused on transforming lithium production. In isolation, these may seem like incidental snippets of mining news. But scratch the surface and a whole new world of investment — and potential for industry innovation and disruption — is revealed.
Gates, Bezos and Branson have all built their careers on innovation, thinking outside the box and pushing through disruptive change. And now they have set their sights on the mining sector.
Tesla CEO Elon Musk has also flagged his interest in the industry. Last year he tweeted that “we might get into mining”. That may sound like a vague promise, but remember he also tweeted that he’d rocket a car into space — then did it a year later.
Make no mistake: tech money is flowing into mining. And big data, vertical integration, ethical supply chains and ‘green’ practices will be on the agenda for tech giants with mining ventures.
There will be disruption. But mining companies that adapt to the challenge from the tech sector stand to gain significant opportunities while also driving the industry into the active, agile future it needs.
Mining sector’s wake-up call
When Elon Musk first flagged that he was forming SpaceX to privatise space exploration, he was widely told it couldn’t be done economically.
So he broke everything down to first principles and found ways to make it happen. SpaceX is set to become a reality with its first launch involving human astronauts in its Dragon 2 spacecraft now imminent.
This neatly summarises the disruption the tech sector thrives on.
From laptops and smartphones to social media and space exploration, tech has consistently found ways to make the impossible economic, creating vast new markets for its products along the way.
When applied to the mining sector, this pattern signals that companies involved in the exploration and mining of materials the tech sector needs, such as rare earths, could face disruption.
After all, the tech sector is not entering mining as a simple investment — its involvement is a means to an end.
BEV is looking for ethical sources of cobalt and lithium — crucial ingredients in the batteries powering the tech sector’s gadgets — cobalt is one of the main components in a Tesla Model S battery.
This shows a desire within the tech sector to create its own end-to-end solutions for raw materials. And if these companies can find ways to do it better and cheaper than the existing players, investment will surge.
With exploration and discovery rates lower than they should be, this is the wake-up call the mining sector needs.
Opportunity for junior companies
There are many highly effective junior miners in Australia and around the world that push exploration boundaries and new projects into existence.
But there are also thousands of small exploration companies with high overheads that limit the amount of drilling they can do.
This keeps economic mineral discovery at levels lower than they could be while impeding the mining sector’s overall growth.
The entry of tech money signals that large customers for the mining sector’s products are impatient with the supply — and they think they can do better.
That’s because technology businesses are on the lookout for a different kind of investment opportunity in mining. It’s not about striking it rich on the chance of a new discovery, or parking cash in a long-term project.
Tech investors are looking for results they can exploit with their own businesses.
And companies that can deliver viable projects in the areas they are looking at will succeed in attracting their backing.
So if you’re a junior working to define a resource in any way linked to the tech sector, this could be the opportunity needed to raise activity levels, and signal that you have something worthwhile.
Tech investment won’t tolerate trading on a story — they’ll say prove it or get out of the way.
Vertical integration creates tougher competition
Copper, cobalt and lithium are the key ingredients for electric car batteries. Miners that seek, find and exploit these resources are riding a big wave of demand right now.
But imagine if an electric car company such as Tesla started sourcing its own resources for making batteries, either through its own operations or by exclusively investing in certain companies.
That could cover everything from lithium and cobalt for Tesla batteries, to rare earths for the magnets in the electric motors.
With its own mining assets, Tesla would become a vertically integrated manufacturer, able to build the entire spectrum of parts for its vehicles that are set to dominate the future of driving.
This could be a threat to the mining industry because most of the value for a vertically integrated company is generated in the sale of downstream products, such as batteries or vehicles.
A vertically integrated company will not be worried about higher costs at the front end, and it will be less vulnerable to short-term commodity price fluctuations.
This represents significant potential competition for traditional mining companies, which could find themselves competing on material price with a tech company that doesn’t mind the pinch.
This means mining explorers need to find ways to become more efficient if they are to compete effectively or go under a tech company’s umbrella.
Tech will do it greener and smarter
The debate over how to address climate change is complex — but the simple fact is that the mining sector wears plenty of criticism for its environmental impact, despite significant efforts made over the years by miners to improve their processes.
The shift to renewable energy sources and greener, more ethical supply lines is gaining pace, and the mining sector has a key role to play in helping the world transition.
The entry of tech firms into mining will greatly accelerate this process.
Bill Gates is a prominent campaigner for measures to reduce climate change, championing everything from renewables to recycling.
With his investment through BEV in ‘ethical’ cobalt, Gates is helping to usher in a new future for miners focused on green practices.
“To stop the planet from getting substantially warmer, we need breakthroughs in how we make things, grow food, and move people and goods — not just how we power our homes and cars,” he said in his blog GatesNotes.
What the tech billionaire is referring to is the circular economy — the total impact a material has on the environment through its use.
His search for ethical cobalt is not just concerned with how much workers are being paid or the emissions its extraction generates. The focus is on reducing the impact of its entire life cycle, from extraction through to use and disposal.
To improve mining, tech companies investing in the sector will deploy innovations such as big data analysis, artificial intelligence and machine learning as business-as-usual.
Robotics and remote operations could also become standard, reflecting the tech world’s natural affinity for all things cutting-edge to identify efficiencies across the entire operation.
Whether it’s personal computers, smartphones or electric cars, technology companies have always pushed to extract maximum value out of their operations.
Their entry into mining will be no different — and explorers and producers that reflect these qualities, or prove able to accommodate them, will thrive.
To the stars and beyond
The mining industry is the bedrock of Australia’s economy and creates huge wealth worldwide.
But the entry of tech money and innovators, including Elon Musk and Bill Gates, will bring the shake-up it so desperately needs.
To secure its future, mining needs to be cleaner, greener and meaner with data-driven technology creating new efficiencies that drive projects forward.
Tech investment money coming into the sector will only accelerate this process, and open up new opportunities.
It is vital the mining sector not only welcomes these opportunities but also embraces the chance to elevate their operations.
Written by Holly Bridgwater. Originally published in SmartCompany/StartUpSmart