Mining vs tech: the battle for speculative capital

Mining and tech are two high-risk, high-reward sectors with a diverse pool of small-cap stocks vying for investor interest.

No doubt, tech has won the popularity contest over the last decade, absorbing the bulk of investor capital.

Speculators hunting multi-bag gains as they chase the next Brainchip (ASX: BRN), Appen (ASX:APX) or Altium (ASX:ALU).

Risk capital, an arena traditionally dominated by junior mining stocks, now has a new home in tech.

It’s one of the reasons small-cap miners continue to underperform.

But, we can’t blame it all on tech. In fact, the tech industry may very well be the spark that ignites a resurgence in the small mining stocks.

Now more than ever, the industry needs to innovate. That will give the sector at least some chance of meeting the vast quantities of copper, silver, rare earths and other critical metals needed to meet future demand.

After all, we live in a consumer-obsessed economy that adds around 1 billion people every 12 years.

Achieving the impossible means finding enough raw materials to sustain rampant global growth amid a once-in-a-century energy transition.

That task can only take place with colossal innovation in the mining sector, where new technologies enable geologists to uncover orebodies, or, where metallurgists can unlock novel methods for ore recovery.

But, according to mining insiders — Robert Friedland included — mining remains stuck in the dark ages.

That’s despite the sector’s past history of innovation.

As far back as 7,000 years ago, ancient Sumerians discovered a technique of refining copper ore, crushing and heating the rock in a process we now call ‘smelting.’

More recently, we watched another major leap forward.

Until a few decades ago, modern miners relied on processing techniques not too dissimilar from the ancient smelters. But to smelt ore you need fresh rock, sulphide ore.

Accessing that rock means digging 50 metres or more below the surface, beyond the weathered zone.

You see, shallow rock tends to oxidize and break down, making it unsuitable for processing. This is why billions of tonnes of copper-bearing rock was relegated to mining waste dumps.

That changed in the mid-1980s, following a revolution in copper processing known as solvent extraction and electrowinning (SX-EW). The process gave miners the means to economically process shallow oxidized ore.

Simply put, SX-EW uses a process known as leaching — a method of dissolving ‘useful ingredients’ with a solution — using sulphuric acid.

This purified solution then undergoes copper electrolysis.

The breakthrough handed miners a windfall. The weathered ‘waste’ rock was suddenly a valuable resource.

Sitting close to surface meant it was far more accessible and cheaper to extract.

The oxidized ore is also soft and relatively easy to dig up.

Importantly, that means less energy to crush, reducing costs at processing facilities.

Electrowinning was a game changer in copper supply. Stockpiles of ‘waste’ rock suddenly entered the global feedstock.

Modern innovation?

Of course, there are some innovations currently pushing mining forward.

One of these involves a technique known as bioleaching, where scientists use microbes to leach valuable metals from sulphide ores, and use nature to do the work traditionally performed by large scale energy-intensive processing facilities.

No doubt, this will barely scratch the surface in terms of what’s needed for future supply.

But an exponential lift in commodity prices could be the catalyst that drives a new wave of tech innovation in the mining industry.

In fact, mining could be one of the last great frontiers for the tech movement.

A sector RIPE for disruption.

From bioleaching to artificial intelligence, the mining industry is bracing for a tidal wave of new tech that promises an unwinding of the traditional business paradigm.

Tech billionaires are already onboard.

Recognizing the problem, Jeff Bezos and Bill Gates recently backed a startup integrating AI in mineral exploration to drive target generation.

The privately held company, Kobold Metals, doesn’t offer an opportunity for small-time investors — but this convergence of mining and tech is an emerging trend that’s sure to grow.

James Cooper runs the commodities investment service Diggers and Drillers. You can also follow him on X (Twitter) @JCooperGeo.