Critical minerals in conflict zones: managing the risk to face the demand
The energy and digital transitions are driving a historic demand for strategic minerals and raw materials. Electric vehicles, wind turbines, and batteries are just a few examples of the technologies that depend on these resources for both production and operation.
While mining projects are being developed in France and across Europe, geological limitations mean that a significant portion of these supplies must be sourced abroad, including from regions where governance may be unstable. For manufacturers and investors, engaging in the extraction of strategic minerals often entails navigating the risks associated with operations in conflict zones.
Unprecedented Need for Strategic Minerals in the Energy Transition
Low-carbon technologies—such as electric cars, wind turbines, and solar panels—require vast quantities of specific minerals. According to the International Energy Agency (IEA), the energy transition will necessitate a four- to sixfold increase in the production of these materials. For instance:
Demand for lithium could increase by 40 times by 2040.
Requirements for graphite, cobalt, and nickel may grow by 20 to 25 times.
Philippe Varin, author of a report for the French government on securing mineral raw material supplies, highlights the urgency: "In the next 30 years, we will extract as much material as we have since the beginning of humanity."
Europe’s Roadmap to Strategic Mineral Independence
Amidst rising geopolitical tensions and the aftermath of the war in Ukraine, the European Union has accelerated efforts to reduce its dependency on foreign resources. Inspired by the U.S. Inflation Reduction Act (IRA), Europe is pursuing a secure and sustainable supply chain through measures outlined in its draft regulation on strategic raw materials. Key goals include:
Developing extraction projects within Europe.
Supporting the recycling of raw materials.
Diversifying foreign sources, with no more than 65% of a mineral’s supply coming from a single country.
France has also taken decisive action. Under the France 2030 Plan, €500 million has been allocated to a Strategic Materials Fund led by Infravia, aiming for a €2 billion target. Recognizing its limited domestic reserves, France is advancing a dual approach:
Mineral resource diplomacy, exemplified by a 2023 agreement between the French Bureau of Geological and Mining Research (BRGM) and the National Geological Survey of Congo.
Diversification of supply chains to mitigate dependency risks.
Navigating Risk in High-Conflict Areas
Europe’s ambition for resource independence faces the reality of constrained geological resources. Many strategic mineral reserves are located in regions marked by political instability and conflict which hold reserves of lithium, graphite, and bauxite, including:
The Democratic Republic of Congo (DRC),
Mozambique,
Guinea,
Ethiopia, and
Mali.
In these areas, the presence of valuable resources can exacerbate tensions, from the expansion of armed jihadist groups to political instability caused by military regimes. Moreover, many resource-rich countries are moving toward processing economies by restricting the export of raw materials and reforming mining codes. This shift increases the risk for international companies operating in these regions, as a greater portion of value-adding processes occur locally.
Risks for Companies Operating in Conflict Zones
Operating in conflict zones poses a wide range of legal, financial, and reputational risks, including:
Complicity in human rights abuses, often through private security arrangements.
Financing armed groups, either directly or indirectly, which can expose companies to prosecution.
Increased exposure to corruption and organized crime, which often flourish in unstable environments.
To mitigate these risks, businesses must carefully assess the additional financial and human resources required to operate in such regions. They should weigh the long-term prospects against the immediate challenges.
Strategies for Conflict Risk Management
Conflict risk is particularly challenging for businesses because its onset and trajectory are often beyond their control. For mining projects, which typically take 17 years from initiation to production, strategic planning is essential. Companies can implement the following measures to optimize predictability:
Foster local engagement: Collaborate with civil society to promote education, employment, and gender equality, reducing social tensions.
Plan for disengagement: Prepare for withdrawal if the situation becomes untenable.
Prioritize safety: Protect employees and affected communities, while ensuring compliance with human rights standards.
Adopt enhanced due diligence: Use frameworks like the United Nations Development Programme’s Guide to Heightened Due Diligence to structure operations responsibly.
Conclusion
The energy and digital transitions demand substantial quantities of strategic minerals, creating both opportunities and risks for businesses and investors. Companies must engage in rigorous country monitoring, enhanced due diligence, and active community engagement to navigate these challenges successfully.