⛏️Mining Industry🛻

Capital Intensity and High Initial Risk: Mining is one of the most capital-intensive industries in the world. Mining projects demand massive initial investments that can amount to billions of dollars for exploration, evaluation, and infrastructure construction. These investments are made with considerable risk, especially in the initial phases. The exploration stage is inherently speculative; a company can invest millions in drilling without finding an economically viable deposit, thus losing all the invested capital.

Prolonged Investment Cycles: From initial discovery to the first production of metal can take 10 to 15 years or more. This long gestation period means that capital is tied up for a long time before a single dollar of revenue is generated, exposing the project to changes in market conditions, technology, and the political environment for over a decade.

Cyclical Nature and "Price Takers": The sector is notoriously cyclical, with its profitability closely tied to global economic cycles and the volatility of commodity prices. Most mining companies are "price takers," meaning they have no control over the selling price of their products; this is determined by global commodity markets. A small mismatch between global supply and demand can cause extreme price fluctuations, making revenues and cash flows highly volatile.

Finite and Geographically Fixed Resources: Unlike a factory that can be built anywhere, mineral deposits are finite, non-renewable, and fixed in their geographic location. This introduces a set of geopolitical and logistical risks. The company is at the mercy of the political, regulatory, and social environment of the host country. Furthermore, as a mine operates, its reserves are depleted, and often the quality of the ore (grade) decreases, meaning more rock must be mined and processed to produce the same amount of metal, leading to an increase in operating costs over time.

How it works?

• Stripping: The top layer of vegetation and soil (known as overburden) is removed to expose the ore.

• Drilling and blasting: Holes are drilled into the rock and filled with explosives to fracture the material.

• Loading and hauling: Large excavators and shovels load the fractured ore into large-tonnage trucks, which transport it to processing plants.

Advantages:

• Higher mineral recovery: Allows for the extraction of almost the entire deposit.

• Lower operating costs: Generally more economical than underground mining.

• Greater safety: With no underground tunnels, the risks of collapses and ventilation problems are reduced.

Disadvantages:

• Greater environmental impact: Causes significant landscape alteration and generates large volumes of waste.

• Sensitivity to weather conditions: Rain, snow, and wind can affect operations.

How it works?

• Access: Tunnels, shafts, and ramps are built to access the mineral deposit.

• Extraction: Various techniques, such as cut-and-fill or block caving, are used to extract the ore from the veins.

• Transport: The ore is transported to the surface via elevators or conveyor belts.

Advantages:

• Less surface impact: Alters the landscape less and generates less visible waste.

• Selectivity: Allows for selective extraction of the areas with the highest mineral concentration.

Disadvantages:

• Higher operating and capital costs: Requires a greater initial investment and has higher production costs.

• Lower mineral recovery: Some of the ore must be left as structural support to prevent collapses.

• Greater safety risks: Workers are exposed to risks such as collapses, floods, and the accumulation of toxic gases.

How it works?

• Dredges, which are vessels equipped with excavation devices (such as buckets or suction pumps), are used to extract sediments from the bottom of the water body.

• The extracted material is processed on board the dredge or at a plant on land to separate the valuable minerals.

Advantages:

• Access to unconventional deposits: Allows for the exploitation of resources that would not be accessible by other methods.

• Continuous operations: Can operate 24 hours a day, 7 days a week.

Disadvantages:

• Environmental impact on aquatic ecosystems: Can affect water quality, aquatic life, and coastal habitats.

• Conflicts with other water uses: Can interfere with fishing, navigation, and other recreational activities.

• High costs: Requires a significant investment in specialized equipment.

Prospecting: This is the large-scale search. Geologists use regional maps, satellite imagery, geophysical, and geochemical surveys to identify "anomalies"—that is, geological areas that show promising characteristics for the existence of a deposit. At this stage, knowledge is general, and the goal is to narrow down vast tracts of land to more manageable areas of interest.

Exploration: Once a promising area is identified, detailed exploration begins. This phase seeks to confirm the presence of mineralization and delineate the geometry (size and shape) and quality (ore grade) of the deposit. The primary tool here is drilling, through which rock cores are extracted from the subsurface for laboratory analysis. The results of these drillings are crucial and generate enormous market interest, as they can either confirm or disprove a project's potential.

Feasibility Studies: A sequence of increasingly detailed engineering studies is conducted: the Preliminary Economic Assessment (PEA), the Pre-Feasibility Study (PFS), and finally, the Definitive Feasibility Study (FS). These reports analyze all aspects of the project: the most suitable mining method (open-pit or underground), the design of the processing plant, logistics, capital (CAPEX) and operating (OPEX) costs, metal prices, environmental requirements, and financial profitability. The goal of this phase is to convert "mineral resources" (a concentration of ore with reasonable prospects for eventual economic extraction) into "mineral reserves" (the part of a resource that is economically mineable with current technology and prices).

Construction: A positive feasibility study and securing the necessary financing and permits give the green light to the construction phase. This is the stage of maximum capital investment. All necessary infrastructure is built: the mine itself, processing plants, access roads, power lines, worker camps, and tailings dams for waste. In open-pit mines, a crucial part of this phase is "pre-stripping," which involves the removal of millions of tons of waste rock (with no commercial value) to expose the ore beneath. This phase can last between two and four years, depending on the scale and complexity of the project.

Operation: The mine systematically extracts the ore and sends it to the processing plant. The goal is to operate as efficiently and safely as possible, meeting the production plans established in the feasibility study. Management's focus shifts from construction and development to controlling operating costs and optimizing processes.

Revenue Generation: During this phase, the company finally sells its product (metal concentrates, cathodes, gold bars, etc.) and generates revenue and cash flow. This cash flow is used to pay down debt, cover operating costs, fund future expansions, and ultimately, distribute dividends to shareholders. The mine's profitability during this phase will largely depend on commodity prices and its ability to keep operating costs under control.

Closure Planning: Modern regulations require that closure planning begins from the initial project design ("design for closure"). Companies must submit detailed closure and reclamation plans and provide financial assurances to ensure that there will be sufficient funds to carry out this work, even if the company were to go bankrupt. This reclamation liability is a significant liability on a mining company's balance sheet.

Closure Activities: Closure involves dismantling all facilities and equipment, physically stabilizing the disturbed areas (such as open pits and waste rock dumps), long-term management of water quality, and revegetating the area to return it to a safe and environmentally stable state. The goal is to leave a positive legacy and minimize the long-term environmental impact.

Streaming (Streaming Agreement): In a streaming agreement, the financing company makes an upfront cash payment to the miner (the "deposit"). In return, it obtains the right to purchase a certain percentage of the future production of a specific metal (e.g., 25% of the silver produced at a copper mine) at a fixed, deeply discounted price relative to the market price (e.g., $4 per ounce of silver, or 20% of the spot price at the time of delivery). Settlement is made through the physical delivery of the metal. This model is ideal for a miner to monetize a by-product that the market is not adequately valuing in its stock.

Royalty: In a royalty agreement, the financing company receives a percentage of the mine's gross or net revenue. The most common type is the "Net Smelter Return" (NSR), which grants the royalty company a percentage of the revenue the mine receives from the smelter, after deducting certain costs such as transportation and refining. Settlement is made in cash. The royalty company never owns or handles the physical metal.

Flexible Source of Capital: It provides crucial financing to build a mine, expand an existing operation, or reduce debt, especially when traditional capital markets (debt and equity) are inaccessible or expensive.

Less Risky than Debt: Unlike a bank loan, a royalty/streaming agreement has no fixed interest payments or strict repayment schedules. If the mine runs into trouble and halts production, payments to the royalty company also stop. This drastically reduces the risk of bankruptcy for the miner during low price cycles.

Non-Dilutive (or Less Dilutive): Unlike issuing new shares to raise capital, a royalty agreement on a specific asset does not dilute the ownership of shareholders in the parent company. It is a way to obtain financing without giving up ownership of the company.

Direct Exposure to the Metal Price: Investors get direct upside leverage to commodity prices. If the price of gold goes up, the value of the royalty or stream increases proportionally.

No Exposure to Operational Risk: This is the most significant benefit. Royalty companies are not exposed to the risks and costs of mining operations: construction cost overruns, labor strikes, accidents, geotechnical problems, etc.

Fixed and Predictable Costs: Their main cost is the initial investment. From then on, their costs are minimal (small management teams) or contractually fixed (in the case of streams). This insulates them from the inflationary pressure that miners suffer in their operating costs (fuel, wages, explosives).

Free Exploration Optionality: The agreements usually cover the life of the mine. If the mining company invests in exploration and discovers new reserves, extending the life of the operation or increasing production, the royalty company benefits without having to invest an additional dollar. It is a powerful upside optionality.

Diversification: Large royalty companies hold portfolios with dozens, or even hundreds, of agreements on different mines, in different geographies, and with different operators. This greatly diversifies risk. The failure of a single mine has a limited impact on their total cash flow.

In a Bullish Price Cycle: When metal prices rise, mining companies see their revenues increase, but often their operating costs also increase due to inflation in energy, wages, and equipment. In contrast, a royalty company sees its revenue increase at the same rate as the metal price, but its costs remain virtually fixed. This leads to a massive expansion of its profit margins. They capture all the price advantage without suffering the disadvantage of rising operating costs.

In a Bearish Price Cycle: When prices fall, a miner's profitability is squeezed. If the price falls below its production cost (AISC), the mine begins to lose money and may be forced to reduce production or even shut down temporarily. The royalty company's revenue also decreases with the fall in price, but since it has no direct operating costs, it is protected from operating losses. Its main risk in this scenario is counterparty risk: the possibility that the mining company could go bankrupt and be unable to continue making its payments.

Advantages of the model: This approach completely eliminates exploration risk and geological risk. The source of material is predictable and backed by a long-term contract with a top-tier producer. The company has direct, leveraged exposure to the price of copper, similar to a producer, but without the mining extraction costs.

Inherent risks: Unlike a royalty company, Amerigo is fully exposed to operational risk. Its profitability depends on the efficiency of its plant and is sensitive to cost inflation (energy, water, reagents). Furthermore, it has a very high counterparty and jurisdictional risk, as its entire business depends on a single asset, in a single country (Chile), and on the operational continuity of a single company (Codelco).

Advantages of the model: Like Amerigo, Dynacor eliminates the risk and very high costs of exploration and mine operation. Its success does not depend on a geological discovery. It provides direct exposure to the price of gold and can generate significant margins if it efficiently manages its plant and supply chain.

Inherent risks: Its main challenge is supply chain risk. It depends on a diffuse network of thousands of small miners for a steady supply of good-grade ore. It is exposed to the operational risk of its plant and to the jurisdictional and social risks associated with the artisanal mining sector in Peru. Unlike royalty companies, Dynacor's profitability is directly linked to its ability to manage processing costs.

Uses and Applications: Gold is unique among metals. Although it has industrial uses, primarily as an excellent conductor in high-end electronics, and a large jewelry market, its fundamental value does not come from these applications. Gold is, above all, a monetary asset and a store of value. Investors and, crucially, central banks, accumulate it to protect against the devaluation of fiat currencies, inflation, and geopolitical instability.

Supply and Demand Dynamics: The demand for gold is multifaceted. Jewelry demand, led by consumer giants like China and India, remains significant. However, recent dynamics have been dominated by investment demand (bars, coins, and ETFs) and, above all, by massive and sustained buying from the world's central banks. These institutions have been accumulating gold at a record pace, seeking to diversify their reserves away from the US dollar and other traditional reserve assets. On the supply side, global mine production has remained relatively stagnant for years, and the recycling of old gold constitutes a significant part of the total supply.

Investment Outlook: The investment thesis for gold is not based on an industrial deficit, but on macroeconomic factors. Its price tends to perform well in environments of negative real interest rates (when inflation is higher than nominal interest rates), a weak dollar, and high global uncertainty. The structural trend of emerging market central banks increasing their gold holdings is a powerful long-term tailwind that provides a solid floor for demand.

Uses and Applications: Silver occupies a unique position, halfway between gold and industrial metals. Like gold, it is a precious metal historically used as money and a store of value in the form of jewelry, coins, and bars. However, unlike gold, more than half of silver demand comes from industrial applications. It is the metal with the highest electrical and thermal conductivity, making it indispensable in electronics, soldering, and, crucially, in green technology. Its antimicrobial properties also give it a role in medicine and water purification.

Supply and Demand Dynamics: The silver narrative is increasingly linked to its industrial role. The energy transition is a key catalyst: electric vehicles use a significant amount of silver, and it is an essential component in the manufacturing of solar panels (silver paste in photovoltaic cells). Demand from this sector is projected to grow exponentially. Added to this is its use in the expansion of 5G networks and consumer electronics. On the supply side, mine production, often a by-product of mining other metals like lead, zinc, and copper, has struggled to keep pace with this growing industrial demand. Investment demand, though volatile, adds an additional layer of pressure on the market.

Investment Outlook: The investment thesis for silver is twofold. On one hand, it benefits from the same macroeconomic factors as gold (hedge against inflation, dollar weakness). On the other, it presents the growth potential of an industrial metal at the center of the technological and green revolution. This dual character makes it a leveraged investment in both monetary uncertainty and global industrial growth. The main risk is its volatility, as its price can be affected by both speculative investment flows and industrial demand cycles.

Uses and Applications: Often called "Dr. Copper" for its ability to diagnose the health of the global economy, this metal is the cornerstone of all electrical infrastructure. It is used in wiring, construction, communications, electronics, and transportation.

Supply and Demand Dynamics: Copper is at the epicenter of a perfect storm of demand. The energy transition is the main catalyst. An electric vehicle (EV) uses up to four times more copper than an internal combustion engine car. Renewable energies, such as solar and wind, are orders of magnitude more copper-intensive per megawatt of capacity than fossil fuel power plants. Furthermore, the expansion and modernization of electrical grids to support this massive electrification will require astronomical amounts of copper. Added to this is a new wave of demand from the construction of data centers to power artificial intelligence. Projections indicate that in the next 30 years, 115% more copper will need to be mined than has been extracted in all of human history. Meanwhile, supply faces enormous challenges. New discoveries of high-quality deposits are becoming rarer, existing mines face declining ore grades (which increases costs), and the time required to obtain permits and build a new mine exceeds a decade. A structural supply deficit is projected from 2025 onwards.

Investment Outlook: The copper market presents one of the most compelling long-term bullish theses among all commodities. The demand story is clear and powerful, while the industry's ability to meet it is highly uncertain. This creates a fundamental imbalance that should drive prices upward in the coming years. The main risks are not on the demand side, but on the supply side: political instability in major producing regions (Chile, Peru, Democratic Republic of Congo), growing ESG hurdles, and the technical and financial difficulty of launching new projects.

Uses and Applications: Lithium has become synonymous with the modern energy era. Its primary use, and the one driving its market, is in the manufacturing of lithium-ion batteries, which are the dominant technology for electric vehicles and large-scale energy storage systems. It also has secondary uses in the manufacturing of ceramics, glass, and lubricating greases.

Supply and Demand Dynamics: Lithium demand is experiencing exponential growth, driven almost entirely by the mass adoption of EVs. Projections suggest that demand could multiply by more than ten times by 2050. Supply has responded with a rapid increase in production, mainly from two sources: hard-rock mines (spodumene) in Australia and brine extraction from the salt flats of Latin America (the "Lithium Triangle": Argentina, Chile, Bolivia). A key geopolitical factor is that China overwhelmingly dominates the intermediate stage of the supply chain: the refining of lithium into battery-grade chemicals (lithium carbonate and hydroxide).

Investment Outlook: Lithium is the archetype of an "explosive growth" commodity, and its market is characterized by extreme volatility. The price experienced a parabolic rise followed by a crash of more than 75% in 2023. This volatility is the main challenge for investors, as it can curb the investment needed to meet long-term demand. The investment thesis focuses on the clear growth trajectory of demand but requires careful project selection and a high tolerance for risk.

Uses and Applications: Over 98% of all iron ore mined in the world is used to make steel. Steel, in turn, is the fundamental material for construction, infrastructure, machinery manufacturing, automobiles, and home appliances. It is, literally, the framework of the modern world.

Supply and Demand Dynamics: The demand for iron ore is directly linked to industrial production and urbanization worldwide. China is the dominant player, consuming more than 60% of the global supply to feed its vast construction and manufacturing sector. Therefore, the health of the Chinese economy, particularly its real estate sector, is the main driver of the market. India is emerging as the next major engine of demand growth. Supply is highly concentrated in a handful of large producers (Vale, Rio Tinto, BHP, Fortescue Metals Group) that operate gigantic mines in Australia and Brazil.

Investment Outlook: Although often considered a "traditional" and cyclical commodity, iron ore has interesting investment narratives. The first is its role as a direct proxy for the Chinese economy. Investing in iron ore producers is a leveraged way to bet on the growth (or contraction) of Chinese infrastructure and industry. The second, more long-term narrative is the transition to "green steel," which seeks to replace coal with hydrogen in the manufacturing process. This shift could create preferential demand for higher-quality, purer iron ores.

Uses and Applications: Uranium's use is almost exclusive: it serves as fuel for nuclear power reactors. The fission of uranium atoms generates an immense amount of heat, which is used to produce steam and generate electricity without emitting carbon dioxide. It has minor applications in medicine (isotopes) and industry.

Supply and Demand Dynamics: The uranium market is emerging from a decade of stagnation following the Fukushima accident in 2011. Now, it is facing a renaissance. Faced with the urgency of the climate crisis and the need for energy security (evidenced by the gas crisis in Europe), governments worldwide are once again betting on nuclear energy as a reliable, baseload, and carbon-free source of power. Dozens of new reactors are under construction or in advanced planning stages, especially in China, India, and Russia, and many Western countries are extending the lifespans of their existing fleets. This new demand is facing a constrained supply. Years of low prices led to a drastic lack of investment in exploration and development of new mines. A significant portion of current global production is not profitable at historical prices, indicating that much higher prices are needed to incentivize the new supply required to avoid a future deficit.

Investment Outlook: Uranium is in the early stages of what appears to be a long-term structural bull market. This market is driven by a fundamental paradigm shift in global energy policy, where the narrative has shifted from "nuclear power is dangerous" to "nuclear power is essential for decarbonization." This change has created a supply-demand imbalance that could take many years to resolve, given the very long lead times required to discover, permit, and build new uranium mines.

Uses and Applications: It is essential to distinguish metallurgical (or coking) coal from thermal coal used to generate electricity. The function of metallurgical coal is not energetic, but chemical and structural. After a process of heating at high temperatures in the absence of air (coking), it becomes coke, a hard, porous material. Coke is the essential ingredient in a blast furnace, where it serves two irreplaceable functions: it acts as a reducing agent, removing oxygen from the iron ore to produce liquid iron, and it provides the structural support and permeability necessary for the furnace to operate. In short, without coke, there is no steel in large-scale primary production.

Supply and Demand Dynamics: The demand for metallurgical coal is inextricably linked to steel production, which in turn depends on global construction and industrialization activity. As with iron ore, China is the main consumer, but India is becoming an increasingly important driver of demand. Supply is highly concentrated geographically, with Australia being the world's leading exporter of high-quality coking coal. Supply can be affected by weather events (cyclones in Australia) and logistical challenges. The development of new mines is a long and costly process that faces growing opposition on environmental (ESG) grounds.

Investment Outlook: Investing in metallurgical coal is a bet on the persistence of traditional steelmaking. While the "green steel" narrative (using hydrogen instead of coal) is powerful in the long term, the technological transition is enormously complex, expensive, and will take decades to materialize on a scale that displaces coal. In the short and medium term, the demand for steel for global infrastructure, including the energy transition (wind towers, power grids), will continue to depend on coking coal. The thesis is based on the market underestimating the longevity of this demand, creating a profitable investment "bridge" until alternative technologies are viable at scale. The main risk is regulatory and perceptual (ESG), which can limit the valuation multiple of these companies.

Uses and Applications: "Rare earths" are not a single mineral but a group of 17 chemical elements with exceptional magnetic and electronic properties. Although they have a wide range of uses, their most critical and market-driving application is in the manufacturing of high-performance permanent magnets. Elements like neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb) are crucial for creating the powerful, lightweight magnets needed for the motors of electric vehicles and the generators of wind turbines. They are also vital for consumer electronics (hard drives, speakers) and advanced military applications (guidance systems, lasers, sonars).

Supply and Demand Dynamics: The demand for key rare earths is experiencing explosive growth, directly correlated with the production of electric vehicles and wind turbines. The efficiency and power density offered by these magnets are, for now, irreplaceable. The market is characterized by extreme geopolitical concentration. China exercises almost total dominance over the entire value chain, controlling not only a majority share of mining but, more importantly, over 90% of the world's processing and separation capacity of these elements into the high-purity oxides the industry needs. This dominance gives it formidable strategic leverage.

Investment Outlook: Investing in rare earths is a high-risk, high-reward bet on geopolitics and technology. The thesis is based on the critical and irreplaceable nature of these metals for the energy transition and defense. The efforts of Western countries to develop "mine-to-magnet" supply chains outside of China are a long-term driver but face enormous technical, financial, and environmental challenges. The main risk is the extreme price volatility, which China can manipulate through production and export quotas, and the technical difficulty of investing in viable projects outside the Chinese ecosystem.

Definition and Purpose: Introduced by the World Gold Council in 2013, AISC was designed to offer a much more transparent and complete view of the true costs of mining, surpassing the old and misleading "cash cost" metric that omitted many essential expenses. AISC represents the total cost to maintain (sustain) the current production levels of a mine.

The AISC formula groups all recurring expenses necessary for the mine to continue operating:

Where:

• Cash Costs: Include direct mining and processing expenses, such as labor, fuel, energy, and reagents.

• Sustaining Capex: Investments necessary to maintain production, such as equipment replacement or the continuous development of an underground mine. Capital for major expansions ("growth capex") is excluded.

• Sustaining Exploration Costs: Expenses to find new reserves to replace those being extracted near the current mine.

• General and Administrative Expenses (G&A): Corporate costs such as management salaries, office rent, etc.

Importance for Investors: AISC is the "great equalizer." It allows investors to compare the operational efficiency of different mines and companies on an "apples-to-apples" basis. A company with a low AISC is more profitable and resilient to price drops. The difference between the metal's selling price and the AISC is the mine's profit margin per ounce, a direct indicator of its profitability.

Definition: NAV is an asset-based valuation that seeks to determine the intrinsic value of a mining company by calculating the present value of all future cash flows its mines are expected to generate throughout their lifespan.

Calculation: Essentially, it is a Discounted Cash Flow (DCF) model for each of the company's mines. The steps are:

1. Estimate future production: Based on the mine plan and the mine's proven and probable reserves.

2. Project revenues: By multiplying annual production by a long-term price forecast for the commodity.

3. Project costs: By estimating future operating costs (AISC) and taxes.

4. Calculate annual free cash flow: Revenues - Costs - Taxes - Capex.

5. Discount the cash flows to present value: Using a discount rate that reflects the project's risk (typically between 5% and 10%, depending on country and asset risk).

6. Sum the present value of all mines and adjust for corporate net debt, closure liabilities, and other assets/liabilities to arrive at the company's total NAV.

Price/NAV Ratio (P/NAV): Once the NAV is calculated, it is compared to the company's market capitalization. A P/NAV ratio below 1.0x may indicate that the stock is undervalued relative to the value of its underlying assets. A ratio above 1.0x suggests the market is paying a premium, which may be justified by an exceptional management team, high exploration potential, or a location in a very low-risk jurisdiction.

Reserve Life: Calculated by dividing the total proven and probable reserves by the annual production. It indicates how many years a mine can continue to operate with its current resources. A long and stable reserve life is a sign of sustainability.

Net Debt / EBITDA: Measures the level of financial leverage. In such a cyclical industry, a low level of debt is a sign of strength and resilience.

Enterprise Value / Reserves (EV/Reserves): Calculated by dividing the Enterprise Value (market capitalization + net debt) by the total ounces (or tonnes) of reserves. It is a quick multiple to compare how the market values the "in-the-ground" resources of different companies.

10,000 ounces of silver

The price of silver is $25 USD per ounce

The price of gold is $2,000 USD per ounce

Standardizes mining production: Allows for comparison of operations that produce different precious metals.

Facilitates project valuation: Investors can better understand a mine's profitability without analyzing each metal individually.

Aids in strategic planning: Mining companies can better optimize their resources and calculate their revenues.

Environmental (E): This pillar covers the management of mining's impact on the natural environment. Key concerns include water management, an increasingly scarce resource and a critical point of conflict with local communities; climate change mitigation through the decarbonization of operations (e.g., electrifying truck fleets); protection of biodiversity; and the responsible planning and execution of mine closure to leave a positive environmental legacy.

Social (S): The concept of a "Social License to Operate" is now paramount. This is not a legal permit, but the ongoing acceptance and support of local communities and society at large for a mining project. This requires transparent and respectful community relations, the creation of shared value (local employment, supplier development), and ensuring the mine leaves a lasting positive social impact. A project with world-class geology can be unviable if it lacks community support.

Governance (G): This pillar refers to how a company is managed. It includes transparency in reporting (especially on ESG metrics), robust anti-corruption policies, a corporate governance structure that protects the interests of all shareholders, and an ethical commitment in all its operations.

Resource Nationalism: In times of high commodity prices, it is common for governments of resource-rich countries to seek a larger share of the profits. This can manifest through tax and royalty increases, the renegotiation of contracts, or, in extreme cases, the expropriation of assets. Changes in government in key mining jurisdictions like Chile and Peru have brought this risk to the forefront of investors' attention.

Supply Chain Security: The energy transition has elevated certain minerals, such as lithium, cobalt, and rare earths, to "strategic" status. The concentration of the production or processing of these minerals in a small number of countries (e.g., China's dominance in lithium and rare earth refining) creates vulnerabilities in the global supply chain. This has led countries like the United States and those in the European Union to actively promote policies to secure the supply of these critical minerals, either through domestic mining or alliances with friendly countries ("friend-shoring").

Permits and Licenses: The process to obtain the necessary permits to explore, build, and operate a mine is long, complex, and increasingly rigorous. Permitting timelines have lengthened in many jurisdictions, becoming a major bottleneck that delays new supply from reaching the market to meet growing demand. In Chile, for example, the government has committed to trying to reduce wait times for permits by 30% to encourage investment.

Tax and Royalty Regimes: Governments constantly review and modify the tax frameworks applicable to mining. Uncertainty about future tax increases or changes in royalty structures can deter long-term investment, as it directly affects a project's projected profitability.

Ground rock fragments

Water (used during the separation process)

Chemicals (used in the beneficiation process, such as cyanide, flotation reagents, etc.)

They have no direct economic value but may contain traces of metals.

They are stored in special impoundments called tailings dams or tailings storage facilities.

They can pose an environmental risk if not managed properly, due to potential leakage of contaminants or structural failures.

Ore Grade: This is the amount of metal contained per tonne of ore extracted, usually expressed in grams per tonne (g/t) for precious metals or as a percentage (%) for base metals.

Grade Decline: Occurs when, as the richest parts of the deposit are depleted, mining begins on material with a lower concentration of useful mineral.

Higher cost per unit of metal produced: More rock needs to be mined and processed to obtain the same amount of metal.

Lower profitability: If metal prices do not rise, the operating margin may be reduced.

Greater environmental impact: More consumption of water, energy, and generation of tailings for each unit of metal obtained.

High grade: Means that for every tonne of rock processed, a larger amount of the valuable metal is obtained, which makes the process more profitable. It is a measure of the richness of the deposit.

Gold: A mine with 5 g/t of gold is considered high-grade; one with 1 g/t might be marginal.

Copper: A deposit with 1% copper is high-grade; one with 0.3% could be considered low-grade.