(The opinions expressed here are those of the author, a columnist for Reuters.)
SYDNEY - Mining companies in the West are facing two overarching challenges in trying to produce enough metals to enable the energy transition, and at the same time build alternative supply chains to lessen their dependence on China.
The problem is that there is a vast gulf between the scale of the ambition and the reality of what's actually happening, and what's likely to happen in the next few years.
This gap was the hidden theme at this week's International Mining and Resources Conference (IMARC) in Sydney, the industry's largest gathering in Asia that brings together miners, investors and government policymakers.
There is little doubt that Australia is a country well-placed to play a major role in supplying many of the metals vital to the energy transition.
It is already the world's largest producer of lithium and iron ore, the key raw material for steel.
It is also a top supplier of copper, nickel and zinc and has proven reserves of other critical minerals such as cobalt and rare earths.
The challenge is developing the resources, building new mines and perhaps developing downstream processing, rather than merely exporting ores as has happened in the past.
The previous models for developing mines appear no longer effective, and even if some projects do progress, they are nowhere near enough to provide enough material for the energy transition.
In the past junior miners raised equity capital, conducted exploration and proved up a resource. At this point they could try and raise more capital, seek big-pocketed partners or hope that a large mining company would buy them out.
While this happens to some extent, the story at IMARC is largely one of dozens of small mining companies seeking financing, and most ending up with little to show for it.
Raising equity capital is hard given the absence of deep pools of retail investor funds and the reluctance of institutional investors to fund risky, long-term projects.
The major miners have pulled back on acquisitions in recent years, preferring to run operations leanly and return cash to shareholders, and if they do invest it's largely been brownfield expansions of existing operations.
The irony is that in seeking cash to try and reduce reliance on China's dominant role in the energy transition supply chains, the mining industry in the West has been exposed as lacking capital and motivation to invest.
Michael Willoughby, global head of metals, mining and transition materials at HSBC, told a forum at IMARC that there is capital available for mining, but it's located in developing countries such as China, Indonesia and Saudi Arabia.
These countries also tend to have governments that are prepared to offer deeper support, such as 1% loans and tax holidays for mining and processing investments, Willoughby said.
Australia's federal government last week doubled its funding for critical minerals to A$4 billion ($2.52 billion), but this is largely viewed as a small amount by the industry.
To put the funding in perspective, a junior mining company seeking to develop a cobalt mine in New South Wales will need about A$1 billion to build and commission a mine.
If the government were to fund that project, it would take a quarter of the total money available and deliver a relatively small volume of just one of the metals deemed vital to the energy transition.
Even the U.S. Inflation Reduction Act, which offers around $369 billion in support to de-carbonise the economy, is unlikely to be enough to build an entire supply chain for critical minerals that lessens dependence on China.
It's likely that Western governments will have to increase support to develop new mines and processing industries, as well as reform policies so that private capital is encouraged to invest.
In addition governments will have to improve on the time taken to approve new mines, while juggling the need to ensure that they are as environmentally friendly as possible.
But if Western countries and companies are serious about building new mines and processing facilities and reducing their reliance on China, the total bill is likely to be measured in trillions of dollars, rather than the billions currently being committed.
At the same time, Western countries are attempting to move from fossil fuels in electricity generation and transportation to renewable alternatives such as hydrogen, solar, wind and battery storage.
Once again, these supply chains are dominated by China, and once again reducing dependence is possible, but costly.
What's not being talked about is how all the new mines, mineral processing and renewable energy equipment is going to be funded.
The opinions expressed here are those of the author, a columnist for Reuters.
(Editing by Miral Fahmy)