The Structure of the Mining Environmental Market

Environmental services in mining are not one-size-fits-all. Each mine operates within a unique biodiversity zone, under varying state and federal regulations, and mining budgets for the environment are influenced by different phases of the capital cycle. These factors shape how mining companies approach environmental compliance, reporting, and rehabilitation. This article explores how the capital cycle influences environmental budgets, how biodiversity drives regulatory complexity, and how these dynamics have shaped the structure of the environmental services market, dominated by consultants, pressured by technology, and evolving through hybrid models.

How The Capital Cycle Impacts Environmental Budget

All commodities operate within a capital cycle, which is how companies deploy capital to generate shareholder returns, which in turn affects market supply and demand.

When commodity prices are high, mining companies ramp up capital expenditure (CapEx) to increase production and take advantage of elevated prices. This typically means starting new pits, acquiring new assets, hiring aggressively, and purchasing more equipment to lift output, whether in tonnes or ounces.

At the same time, competitors follow suit. Capital floods the sector. Each decade tends to have its own commodity boom: in the early 2000s it was iron ore, driven by China’s rapid industrialisation; today it’s battery minerals, lithium, rare earths, copper, cobalt, and nickel, fuelled by the global push for clean energy and electric vehicles.

During these “up” cycles, there’s usually a surge of new companies entering the market, all aiming to ride the wave of heightened demand and investor interest.

For a while this strategy works amazingly well; companies generate record-breaking profits and increase their cash. However, once the supply across the market materialises, suddenly, all that excess capacity hits the market, and the prices collapse because there is too much supply.

The new mining companies usually go broke, primarily for two reasons.

First, they often fail to raise enough capital to invest in the scale of infrastructure needed to lower their cost of production. That means they can’t afford the larger trucks, bigger diggers, or rail infrastructure required to operate in the down market. Without these economies of scale, they can’t sustain operations when commodity prices inevitably fall.

Second, once prices drop, only the low-cost producers survive. Smaller players with higher costs get squeezed out and are often acquired by the larger, more established mining companies that do have the scale to operate profitably in a down market.

This is why, ultimately, there are only a handful of mining companies that truly matter; they’re the ones that survive the full capital cycle.

This is exactly what has happened to nickel and lithium miners in the first half of 2024. The lithium price has collapsed, making many mines unstable at the current prices. In order to survive, mining companies cut costs using layoffs and putting their operations into care and maintenance (Ie not mining any material, just ensuring the equipment does not deteriorate) using their reserve funds survive (If management was smart enough to have any).

In Western Australia alone, we have seen the following mines move into care and maintenance or go out of business.

• Ravensthopre nickel-cobalt mine, care and maintenance

• Wyloo Metals Nickel Miner - We met this month and have moved into care and maintenance.

• Core lithium - Moved there finns mine into care and maintenance

• IGO Cosmos Mine - Nickel

• Panoramic Resources - Administration

The Capital Cycle Impact on Environmental Budgets

Because environmental management is not core to a mining company’s revenue-generating operations, its budget is directly influenced by commodity prices. When prices are high, additional funding tends to flow through to environmental teams. However, when prices fall, environmental budgets are among the first to be reduced, often to the minimum required to meet compliance obligations.

The Structure of the Australian Mining Market

The map below shows Australia’s mining zones, areas of land with specific geology that have the same concentration of minerals.

1. Iron Ore (Pilbara Region)- Western Australia

• Australia is the world's largest exporter of iron ore, accounting for about 56% of global supply.

• The Pilbara region in Western Australia is the largest producer, exporting around 900 million tonnes annually.

• Iron ore exports generate around $100 billion AUD annually for Australia.

• The major buyers are China (which imports more than 80% of Australian iron ore), Japan, and South Korea.

2. Coal (Bowen Basin and Hunter Valley) - NSW/QLD

• Australia is the world's second-largest coal exporter (behind Indonesia), exporting around 400 million tonnes annually.

• The Bowen Basin in Queensland and the Hunter Valley in New South Wales are key coal mining regions.

• Coal exports generate around $55-60 billion AUD in export revenue.

• Australia's coal is primarily exported to Japan, China, South Korea, and India.

3. Gold (Goldfields Region) WA

• Australia is the second-largest gold producer globally, producing over 320 tonnes of gold annually.

• The Goldfields region in Western Australia is a major contributor to this production.

• Gold exports contribute around $25 billion AUD annually.

• China, India, and Switzerland are the leading buyers of Australian gold.

These three commodities, iron ore, coal, and gold, are critical to Australia's economy, generating significant export revenue and making Australia a global leader in the resources sector.

There are other mines including Nickel, lithium, cobalt, and copper, but for now, will focus on these main commodities.

Environmental Regulations In Australia

The map below illustrates Australia's native species diversity. This diversity encompasses the range and abundance of indigenous plants, animals, and other organisms that have naturally evolved in the region over millions of years.

See Image of the Biodiversity Zones Applied to Australia’s Mining Zones

How Does Biodiversity Affect Mining?

Each biodiversity zone shown in the image represents a different level of species diversity. Areas shaded in black or purple indicate the highest levels of species diversity, where multiple native species coexist, each adapted to the unique soil chemistry and nutrient profile of that land.

Regulators assess land disruptions, whether for real estate or mining, by evaluating biodiversity in these terms. High biodiversity areas, especially those containing endangered species or sensitive habitats, typically attract greater government scrutiny and impose higher environmental compliance costs on mining companies.

Environmental Regulation in Australia

Mining projects in Australia must navigate a complex regulatory environment, consisting of three different departments:

1. State-Level Oversight: Each state's Environmental Protection Authority (EPA) manages local environmental impacts.

1. Federal Oversight: The Federal Government enforces environmental protections under the Environment Protection and Biodiversity Conservation Act (EPBC Act).

2. New Federal EPA: Recently introduced legislation for a Federal EPA may further influence approvals, though its specific role is still being clarified.

The difference between State Level Approvals and Federal Approvals

1. State-Level Approvals:

   • Managed by state environmental agencies, which oversee pollution, water use, and land rehabilitation.

   • If no critically endangered species or sensitive habitats are found, approvals remain at the state level, simplifying the process.

2. Federal Approvals under the EPBC Act:

   • If endangered species or critical habitats are identified, the mining company must seek federal approval under the EPBC Act.

   • For instance, discovering an endangered species like the northern quoll would necessitate a federal environmental impact assessment, adding complexity and time.

Example:

A mining company planning to develop a site in northern Queensland identifies the Northern Quoll, a federally protected and endangered species, during its baseline environmental assessment. Due to this finding, the company must apply for federal approval under the Environment Protection and Biodiversity Conservation (EPBC) Act before any land clearing or construction can proceed.

The presence of the Northern Quoll triggers the following requirements:

• Detailed Habitat Studies: The company must conduct an in-depth study of the quoll's habitat to assess the potential impact of mining activities.

• Mitigation Measures: Federal authorities may require the company to implement protective measures, such as setting up buffer zones around known habitats or relocating certain populations if viable.

Key Takeaways:

• Biodiversity impacts regulatory requirements; more biodiversity means higher scrutiny and costs.

• Federal approval under the EPBC Act is needed if endangered species are found.

• Thorough environmental assessments ensure compliance with state and federal regulations.

How Unique Biodiversity Zones Tailor Mine Closure Requirements in Australia

The biodiversity regions in Australia play a key role in determining the specific requirements of a mine's closure plan. The greater the biodiversity, the greater the government scrutiny for the mine’s closure, requiring more detailed and stringent restoration efforts.

Since each mine operates in a unique biodiversity zone, every mine has different closure requirements. No two mines have the same obligations, making each mine closure plan unique. Let’s emphasise this: no one has the same reporting commitments for closure; they are all different.

Further complexity arises from the level of approvals. If a mine requires both federal and state approvals, the regulatory obligations become more extensive, adding layers of compliance for the mining company to navigate.

This has resulted in the following structure.

The need for specialised knowledge to meet regulatory obligations has driven the growth of the environmental consulting industry. Consulting firms are perfectly structured to service this demand, as they can hire individuals with specific knowledge of each mining area and approval and sell these services to miners at an hourly fee. Environmental consultants possess expertise in conducting the scientific studies required for mining approvals and in navigating complex regulatory processes.

These consultants often specialise in specific mining zones, as each zone has unique plant species and distinct regulatory requirements based on the biodiversity and state regulations in that area. Their localised knowledge ensures that mining projects comply with all relevant environmental standards.

Once the mine has begun, environmental compliance is managed by quarterly, biannual or yearly reporting cadences. Where miners submit compliance reports to the respective department about the status of their environmental obligations.

To complete the reports, mining companies often outsource to experts in rehabilitation, flora, fauna, and geotechnical fields. These consultants design monitoring programs, assess rehabilitation performance, and produce annual reports for government submission.

The Critical Relationship: Miner, Consultant, and Regulator

Here is an example of the typical consultant workflow once a consultant begins working with a mining company.

The Structure of the Environmental Services Market

Now with a familiarity with how biodiversity dictates approval level and the environmental risk, we can understand how these requirements have affected the industry structure.

The environmental services market in mining is serviced by three distinct types of companies: pure-play technology firms (such as Dendra), traditional environmental consultancies, and hybrid technology/consulting firms. Each category brings different capabilities and approaches to addressing the industry's environmental challenges.

Pure Play Technology Companies

Technology-focused companies represent the smallest market segment by revenue in the environmental services industry. These companies specialise exclusively in technology-based solutions, primarily generating revenue through master service agreements and SaaS fees. Their product offerings typically include SaaS platforms, environmental data collection systems, monitoring equipment, and digital compliance tools.

However, pure-play technology companies face significant scaling challenges due to the structure of the mining and environmental market. The primary challenge stems from regional biodiversity variations; each mine operates within a unique ecological context with different environmental requirements and regulatory frameworks. This variability makes it difficult to implement standardised solutions across multiple sites.

The need for customisation presents another major hurdle. Standard solutions rarely meet site-specific needs, forcing these companies to extensively modify their products for each client. This requirement fundamentally conflicts with the traditional SaaS model, which relies on standardised solutions for efficiency and scalability. As these companies take on new clients, development costs continue to rise due to ongoing customisation needs.

These factors create substantial business model challenges. Customer acquisition costs remain high due to extensive customisation requirements, making it difficult to maintain sustainable profit margins. Furthermore, these products often struggle to become mission-critical to mining operations, resulting in high churn rates as solutions fail to fully address complex site-specific needs. This combination of high costs and customer turnover creates significant obstacles for long-term business sustainability.

Consulting Firms

Environmental consultants dominate this industry because they're uniquely positioned to serve mining customers' needs. Their success stems from their ability to customise services for each mine site's approval process based on specific biodiversity requirements.

What makes these consulting relationships particularly sticky is the specialised knowledge required; consultants need specific qualifications and experience to navigate approvals effectively. This creates high switching costs, as changing firms not only involves significant expense but also increases environmental risk. As a result, consulting relationships typically last at least five years. These firms primarily generate revenue through billable hours, with a significant portion of their work requiring on-ground presence.

Consulting + Technology Companies

The environmental consulting model is evolving, with firms now leveraging their consulting profits to develop in-house technology products for their existing client base. This hybrid model is particularly appealing to customers as it offers a one-stop shop solution. For example, firms like Astron have developed competing products such as Ecoda, alongside various drone and satellite offerings that integrate remote sensing capabilities into their consulting business.

This integrated approach addresses a major limitation of pure-play technology companies. While technology-only firms can provide data, they can't help clients apply that data meaningfully for regulatory reporting. This creates a significant problem for mining companies – if they choose a pure-play data service like Dendra, they still need to hire consultants to interpret and apply the data meaningfully, effectively increasing their overall budget.

Conclusion

The structure of the mining environmental services market is shaped by three forces: regulatory complexity, site-specific biodiversity, and the capital cycle. These forces create high demand for custom, expert-led solutions, making consulting firms the dominant players. Their deep knowledge of regional ecosystems, approval processes, and rehabilitation pathways gives them an edge that pure-play tech firms struggle to match. While technology companies offer efficiency, their inability to become mission-critical at site level limits scalability. Hybrid firms—combining consulting with in-house tech—are best positioned for growth, offering tailored delivery with product leverage. In this market, credibility, adaptability, and localised expertise define long-term success.