Political risks dawn on the mining sector

Supply chain disruptions can jeopardise project returns.

The mining sector faces significant political risks, driven by geopolitical trends, government policies, and supply chain disruptions. The demand for critical minerals intensifies this volatility, with governments and businesses prioritising their security, a Marsh insight said.

To address these challenges, companies should assess political risk exposure across their supply chains, Christopher Partridge, global mining leader, wrote in a Marsh insight titled “Geopolitics and geology: Enhancing mining companies’ resilience amid political risk uncertainty.”

Supply chain disruptions, often stemming from broader geopolitical tensions, can jeopardise project returns. Recent examples include shipping delays and increased costs due to disruptions like Houthi attacks in the Red Sea.

Countries' dominance in key supply chains, like China's in mineral processing, heightens economic disruption risks. 

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Policy changes, such as China's rare earth ban, underline the need for diversified supply chains.

Governments' focus on national supply chain resilience affects mining companies, with subsidies and trade policies influencing investment decisions. Despite challenges, identifying and managing geopolitical risks in emerging markets can yield high returns.

As governments seek revenue from natural resources, protectionist measures may emerge, necessitating robust political risk insurance. Investments in sustainability can mitigate risks and foster positive relationships with governments.

Election years and changing policies add further complexity to mining risks, highlighting the need for sophisticated risk management strategies to drive shareholder value.