Welcome to the 54th edition of Deep Tech Catalyst, the channel by The Scenarionist where science meets venture!
Navigating the complexities of advanced mining requires a deep understanding of the technological bottlenecks and capital-intensive challenges inherent to this sector.
In this episode, we are excited to welcome Jason Holt, Partner at Orion Industrial Ventures. Jason will share his insights into the key barriers facing mining technology startups, strategies for securing market adoption, and practical advice for founders looking to overcome the capital intensity and long timelines characteristic of this industry.
Tune in as we uncover actionable strategies to help mining tech founders turn challenges into exponential Deep Tech opportunities.
Key Themes Covered:
🚧 3 Key Bottlenecks in the Mining Industry: A Call for Innovation
🚀 Venturing into Mining Tech: 3 Tips for Aspiring Deep Tech Founders
💰 Understanding the Capital Intensity of Mining Technology Projects
⛏️ How to Navigate Market Adoption in Mining
🚩3 Red Flags for VCs in Early-Stage Mining Tech Startups
📈 The Importance of Techno-Economic Analysis in Early-Stage Mining Tech Startups
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KEY INSIGHTS FROM THE EPISODE
🚧 3 Key Bottlenecks in the Mining Industry: A Call for Innovation
The mining industry, particularly advanced mining, is facing significant technological and environmental challenges. These hurdles not only slow down progress but also present opportunities for innovation.
Let’s take a look at 3 main areas in the mining value chain where new solutions are needed today.
1. Low Hit Rates in Exploration: A Fundamental Challenge
One of the most critical challenges in mining lies at the beginning of the value chain—exploration. The industry has an alarmingly low success rate when drilling for potential mines.
The Odds: Greenfield vs. Brownfield Sites
Greenfield Sites: These are areas with no prior mining activity. The success rate for drilling in greenfield sites is approximately 0.03%—meaning only 1 out of 3,000 drilled holes results in an operational mine.
Brownfield Sites: Located near existing mines, brownfield sites offer slightly better odds, with a 4% success rate. In other words, drilling 100 holes typically yields only 4 viable mines.
The low probabilities in both scenarios contribute to the high costs associated with exploration, making it a substantial bottleneck in the mining value chain.
Innovative Solutions for Exploration
Startups are beginning to address this challenge with Machine Learning and Data Aggregation to analyze and integrate large datasets that were previously siloed. This approach improves discovery rates and makes exploration more efficient.
2. Comminution: Tackling Energy-Intensive Rock Grinding
Another significant hurdle in mining is comminution, the process of breaking down large rocks into smaller pieces. Surprisingly, this activity accounts for 3-4% of global energy consumption, a staggering figure considering the scale of mining operations.
Emerging Technologies in Comminution
2 innovative approaches aim to reduce energy consumption and improve efficiency:
Electrical Pulse Fracturing: This method applies electrical pulses to rocks, causing them to fracture along grain boundaries. It uses less energy and facilitates easier separation of waste from valuable materials.
Gas Pressurization: Techniques involving gas pressure implode rocks from the inside out, reducing energy usage and improving the efficiency of downstream processes.
3. Waste Valorization: Turning Byproducts into Resources
Declining ore grades pose another challenge. Ore grades, which represent the percentage of valuable metal in the mined material, have fallen significantly.
Copper Ore Grades: Historically, copper grades were around 3-4%, but today they are often in the tenths of a percent.
This decline leads to a tenfold increase in waste generation, creating immense environmental and logistical challenges.
Addressing Tailings and Waste Management
Tailings—waste material left after ore processing—pose significant risks, including dam failures that can result in environmental disasters. However, this waste often contains latent value:
Extracting Rare Earth Elements: Tailings from copper production sometimes contain rare earth elements in economically viable concentrations. With the right technologies, these can be extracted, reducing waste and creating new revenue streams.
🚀 Venturing into Mining Tech: 3 Tips for Aspiring Deep Tech Founders
Becoming an entrepreneur in the mining technology sector offers exciting opportunities but also unique challenges. For scientists aspiring to spin out their innovations into market-ready solutions, navigating this asset-intensive industry requires strategic thinking, collaboration, and a focus on both technical and business aspects. Here are some tips to navigate these challenges.
1. Engage Early and Often with Industry Partners
Avoid Developing in Isolation
One of the most common pitfalls for founders is developing technology in isolation without engaging potential users or industry leaders. This can lead to creating solutions that lack relevance or differentiation in the market.
Learn from Industry Leaders: Major players may already be working on similar technologies. Early engagement ensures your solution addresses an unmet need and avoids redundancy.
Move Out of the Lab: Get feedback from industry stakeholders to refine your technology for practical applications.
Distinction Over Difference
To stand out, technology must be not just different but distinctive. A slight improvement won’t suffice in a competitive and risk-averse industry. Founders should focus on creating clear and unique value propositions that address specific pain points in innovative ways.
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2. Understand Long Timelines and High Capital Requirements
The mining technology sector is characterized by long development cycles and capital-intensive projects. Founders and investors must calibrate expectations accordingly.
Plan for Extended Development
Unlike software startups, where timelines to market can be short, mining tech ventures often require years to develop, test, and implement.
Realistic Timelines: Avoid overly optimistic projections. Instead, align your roadmap with the industry’s pace, understanding that reaching value inflection points will take time.
Asset Development Considerations: Companies venturing into asset-heavy projects must anticipate significant upfront capital requirements.
Leverage Non-Dilutive Capital
Given the high costs, leveraging non-dilutive funding sources is crucial for preserving equity and scaling effectively.
Government Grants: Many founders have experience writing grants in academia, but specialized firms can streamline this process and allow founders to focus on core activities.
Capital Strategy: Partnering with firms that excel in securing government or private funding can ease the financial burden of pilot projects and early-stage development.
3. Build a Diverse and Balanced Team
Mining tech startups often begin with highly technical founding teams—often composed of academic collaborators. While technical depth is vital, a balanced team with diverse skill sets is essential for long-term success.
Add Business Acumen: Pair technical founders with individuals who have strong commercial expertise, such as MBA graduates or professionals with experience in scaling businesses.
Leverage Complementary Skills: A diverse team ensures the startup can tackle both technical challenges and business operations effectively.
💰 Understanding the Capital Intensity of Mining Technology Projects
The mining industry is capital-intensive, requiring significant financial investments to move from prototyping to commercial deployment.
To give you an idea of the magnitude: the pilot phase involves scaling the technology for real-world mining operations. For mining tech companies, the costs of a pilot project are significantly higher than those of comparable projects in other sectors.
Cost Multipliers: Mining tech pilot projects can be 5 to 10 times more expensive than similar pilots in climate tech. This is largely due to the sheer scale and infrastructure required to test mining technologies in operational environments.
Typical pilot projects in mining can require budgets running into the hundreds of millions of dollars, depending on the type of technology and its application.
For major mining operations, such as large copper mines, the total investment required—including extraction, rock crushing, leaching, and other processes—can approach $1 billion or more.
Scaling to full commercial production often necessitates extensive infrastructure development and long-term operational planning, adding to the overall costs.
Strategic Implications for Deep Tech Founders
The significant capital requirements for mining technology projects influence key decisions for startups, particularly around business models and funding strategies.
Licensing Can be a Viable Business Model
Given the scale and expense of commercializing mining technologies, many startups find it challenging to raise the necessary capital to produce and deploy large-scale equipment. Licensing technology to established mining companies is often a more viable option.
Financial Design: Focus on Partnerships and Non-Dilutive Funding
To navigate the high costs of mining projects, founders must adopt a strategic approach to funding.
Non-Dilutive Capital: Securing government grants and subsidies can provide essential funding for pilot projects without diluting ownership.
Strategic Partnerships: Collaborating with mining companies or infrastructure firms can provide access to additional resources and operational support.
Phased Investment: Structuring funding rounds to align with key project milestones can help manage investor expectations and ensure continued support.
⛏️ How to Navigate Market Adoption in Mining
Market adoption is a critical challenge for startups in the mining technology sector. The conservative nature of the industry, combined with high costs and established processes, often makes it more difficult to achieve widespread adoption compared to other sectors.
FROM OUR PREVIOUS EPISODES:
3 Tips for Building a Meaningful B2B Proposal
Understand Partner Needs: Engage with your potential customers (in this case, mining companies) early to understand their challenges and tailor your technology to address specific pain points.
Establish Credibility: Demonstrate a clear value proposition that aligns with the strategic goals of potential partners.
Leverage Industry Expertise: Work with advisors or investors who have deep knowledge of the mining industry and can facilitate introductions to key stakeholders.
Risk of "Fake Commercial Traction"
One of the significant risks for startups in the mining industry is falling into the trap of fake commercial traction. This occurs when companies engage in initiatives that appear promising but lack real potential for long-term commercial relationships.
The Impact on Startups
Engaging in initiatives without meaningful outcomes can drain resources and delay progress for startups. This highlights the importance of targeting authentic opportunities with organizations committed to collaboration and adoption.
An Industry-Specific Challenge: The Business Model Barrier
One of the most critical challenges for mining tech startups is aligning their business model with the operational realities of the industry. For example:
Brownfield Sites: Convincing operators to replace existing infrastructure, such as a ball mill with 10–20 years of remaining life, requires a compelling cost-benefit analysis.
Greenfield Sites: Targeting new mines may seem like a viable alternative, but the number of new mining projects permitted annually is extremely limited.
Startups must carefully balance innovation with practicality, ensuring their solutions fit seamlessly into existing operations or offer transformative benefits that justify adoption.
The Role of Investors in Facilitating Adoption
Investors with industry experience play a critical role in guiding startups toward successful partnerships.
Facilitating Introductions: Investors can leverage their networks to connect startups with relevant industry players.
Providing Strategic Advice: Experienced investors help startups navigate the complexities of securing agreements and building trust with partners.
Ensuring Quality Agreements: By reviewing and advising on MOUs or LOIs, investors can ensure early agreements are actionable and meaningful.
🚩3 Red Flags for VCs in Early-Stage Mining Tech Startups
Investing in mining technology startups comes with unique challenges and considerations. While the industry offers significant opportunities for innovation, it also presents pitfalls that can hinder the success of early-stage ventures.
Let’s explore the key points VCs examine in mining tech startups.
1. Imbalanced Team Composition
A well-rounded team is essential for navigating the complexities of the mining industry. Startups with a heavy focus on technical expertise but lacking commercial or operational acumen can struggle to bring their solutions to market.
Red Flag Indicators:
Teams composed solely of academic or technical experts without business or industry experience.
A lack of diversity in skill sets, especially in areas like regulatory compliance, finance, and market strategy.
2. Unrealistic Timelines and Cost Projections
Mining technology projects are inherently capital-intensive and require extended development timelines. Unrealistic projections can signal a lack of understanding of industry dynamics.
Red Flag Indicators:
Underestimation of the time and resources required to reach key milestones, such as scaling pilot projects or securing regulatory approvals. E.g. Proposals suggesting rapid exits (e.g., within 3 years) for seed or Series A startups.
3. Lack of Awareness of Regulatory and Environmental Compliance
The mining industry is heavily regulated, and environmental compliance is a significant barrier to the adoption of new technologies. Founders who fail to address these aspects risk facing operational and legal roadblocks.
Red Flag Indicators:
No clear plan for managing wastewater or other byproducts of their technology.
Limited understanding of regulatory frameworks and how they apply to the proposed solution.
📈 The Importance of Techno-Economic Analysis in Early-Stage Mining Tech Startups
A decade ago, TEA was a relatively niche concept, but it is now commonly taught in entrepreneurial engineering programs and supported by specialized firms. Over the past decade, TEA has become an essential component of startup evaluation, particularly in asset-intensive industries like mining technology.
FROM OUR PREVIOUS EPISODES:
What is Techno-Economic Analysis?
TEA combines technical and economic assessments to evaluate a technology’s feasibility. It examines:
Production Costs: Materials, energy, and operational expenses.
Market Viability: Revenue potential and competitive positioning.
Sensitivity Analysis: Impact of variables like energy prices or material costs on unit economics.
Financial Projections: Realism vs. Conversation Starters
Five-year financial projections are a standard part of early-stage pitch decks, however, in the very early stages (pre-seed) their accuracy is often limited.
Common Pitfalls
Founders from academic backgrounds often lack experience in creating business models or financial plans. This can lead to:
Unrealistic Assumptions: Overly optimistic cost estimates or revenue timelines.
Limited Market Context: Insufficient understanding of industry-specific constraints, such as regulatory compliance or operational integration.
A Practical Example: Many startups in mining technology rely on electrochemical processes, yet often underestimate the cost of firm, green electricity needed to power their systems. Investors frequently scrutinize these assumptions to ensure realistic unit economics.
For this reason, investors and founders at the very beginning typically treat these projections as a framework for discussion rather than definitive plans. Subsequently, investors often play a proactive role in helping founders refine their TEA and financial projections.
