Mining operators: Securing a stake in the EV future

Mining operators around the world have made commitments to decarbonise operations by 2050, with some setting targets to achieve net zero by 2030. In a race to achieve sustainability goals and clean up a high-emissions industry, many mining operators are investing in new, all-electric haulier trucks, trains, crushing equipment, and bulldozers. According to a research study published recently by technology company, IDTechEx, approximately 50% of all new mining vehicles sold globally will be EVs by 2044.

In an industry where M&A activity is rampant – largely due to the need to diversify portfolios, scale operations, and secure licences to operate in areas of the world where they may lack a presence – some operators are considering whether a vertical integration strategy, targeting companies higher up the value chain, could accelerate their journey to net zero and drive revenues at the same time.

Acquiring a supplier of mining EVs, for example, could boost competitiveness by allowing operators to control the route to market of a new range of EVs. As well as helping to decarbonise their own operations, this strategy could unlock alternative revenue streams. Obviously, operators could generate revenues by selling the EVs to other operators, but they could also consider licensing intellectual property (IP) rights, re-purposing batteries for new applications or providing aftermarket services to customers in a fast-developing market.

For early movers, pursuing a vertical integration strategy could help mining operators to solidify their market position, especially during tougher economic times where commodity prices fall, and high operating costs can quickly limit growth. Operators who look to diversify their sales portfolio can remain agile and continue to operate effectively. However, this is not without its challenges, not least because it requires the operator to expand its current operating model. The management approach of the business would need to transition away from a capital projects-based mindset to focus on product industrialisation, where operational challenges, execution complexity, and approach to decision-making are surprisingly different.

One early mover in this space is Fortescue Zero, which has an ambitious goal to become the world’s first net-zero mining operator by 2030. The company acquired Williams Advanced Engineering, a prototype developer and engineering consultancy for motorsport, in 2022, with the aim of commercialising their high-performance battery IP, by developing an industry-first, scalable battery for heavy industry applications. The mining operator has recently confirmed plans to commence production of its new mining EVs later this year.

Pursuing a vertical integration strategy could bring other potential revenue generation opportunities. Once they have established their own supply chains and started making EVs, mining companies can control what they do with their new capability and assets. There are a number of options – for example, they could adopt a Battery-as-a-Service (BaaS) model, which allows them to rent out battery packs to third parties, generating strong returns over time as the industry pivots to EVs. For example, offering BaaS could generate revenues across the lifecycle of the batteries, including their end-of-life, at the same time as driving efficiencies by using battery management system (BMS) data to inform product optimisation strategies.

From a supply chain perspective, mining operators with their own EV supply chains are likely to be more resilient and better placed to navigate any disruptions that might arise due to supply shortages. They could also realise more value from the supply chain by setting up technological and commercial partnerships, for example, or by directly negotiating costs with cell providers and retaining the option to shift cell chemistry if needed. Overall, owning their own EV supply chain gives the operator much more design freedom and control over their costs. Mining companies that achieve this ahead of their competitors, could also help to influence industry standards, and their products and IP could become ‘standard essential’ in the future.

There are risks attached to vertical integration strategies too of course. Mining operators need to think carefully about expanding their business model into an area that is essentially unknown to them. Learning to operate an automotive-grade product manufacturing business requires different skills sets, such as the ability to use advanced digital technologies including AI and digital twins, increased efforts to ensure supply chain resilience to fluctuating demand, and the integration of intelligent automated systems from concept to shop floor. Mining operators need to be open minded about the challenges they could face. For example, it can take a long time to unlock synergies and set up the acquired business for success, so it is important to keep close control of costs and quality to meet customer expectations.

Pursuing a strategy of vertical integration will not be right for all mining operators, not least because it requires significant upfront capital investment. Those seeking to pivot to start manufacturing mining EVs should bear in mind that the International Energy Agency (IEA) has estimated that the global mining industry will need to invest approximately US$800 billion between now and 2040 to achieve decarbonisation. Time is also needed to configure a supply chain from scratch, which is likely to involve face-to-face negotiations with key suppliers in order to win their confidence that the business will deliver on its promises. Mining operators that decide against vertical integration, could still improve their operational resilience by stockpiling materials and components, or otherwise ringfencing critical supplies.

If mining operators lack the resources required to transition to product manufacturer, there could be other options when it comes to vertical integration. Digital technologies and know-how have become increasingly critical to competitiveness in many industries, and mining is no exception. For example, in 2024, Hexagon acquired indurad, a company that provides radar and real-time location systems (RTLS) technologies. Acquiring a tech-led company with expertise in this area could help operators to drive efficiencies and optimise productivity, generating value for the long term.

In an industry that is focused on decarbonisation, the opportunity for mining operators to expand their business model by acquiring a company that manufactures EVs is compelling. Ultimately, it is an opportunity to accelerate their net zero journeys and steal a march on the competition. However, speed is important and those that procrastinate could miss the boat. While there are risks to consider, being an early mover could position operators at the forefront of a cleaner, greener mining industry in the future.

Read the article online at: https://www.globalminingreview.com/mining/14032025/mining-operators-securing-a-stake-in-the-ev-future/