Why brands like Apple and Toyota will start demanding miners use blockchain
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Blockchain may have a key role to play in reducing unethical mining and even child labour.
The technology is best known as the foundation of cryptocurrencies such as bitcoin – but it’s now finding a broad array of uses.
Blockchain has been proposed as a way of securely sharing data on medical cannabis patients, establishing paddock-to-plate farming supply chains and even helping young people crowd-fund a house.
Now miners are examining ways of using the technology to prove their credentials in ethical mining.
Perth-based rare earths developer Arafura Resources (ASX:ARU) has begun exploring the use of blockchain technology because it expects future customers will require suppliers to verify the origin of high-tech, strategic materials.
Arafura is an emerging producer of neodymium-praseodymium (NdPr) – rare earths used to make ultra-strong magnets for micro-motors in the electric components of cars, such as seats, mirrors, wipers, steering and braking.
Demand for NdPr is expected to grow 8 per cent annually due to demand from electric car, wind turbine, industrial robot and smart phone makers.
Ethical mining is a competitive advantage
Arafura has just passed all requirements to meet stringent environmental conditions for its Nolans NdPr project 90 minutes drive north of Alice Springs.
That gives it a competitive advantage over unethical suppliers.
Most rare earths are sourced from China where there are reports of unsafe, unethical and environmentally unfriendly work practices.
Worse still, some miners in the Democratic Republic of the Congo – where most of the world’s supply of cobalt is found – have been accused of exploiting children to dig up the critical battery component.
There is a growing outrage among consumers about such behaviour – and brands are increasingly moving to change their suppliers to those who can prove they are behaving ethically.
But saying the raw materials in your battery or magnet components come from ethical sources is not enough.
That’s where blockchain comes in.
Blockchain technology enables a publicly available, tamper-proof, traceable record of digital transactions that can be automatically logged in the physical world using of radio frequency ID tags (RFIDs).
“Historically there’s been a lot of hand-wringing around the word, not just in rare earths, but also in cobalt and tungsten among other minerals, where mining practices in some countries to extract those minerals have been questionable from an environmental and social perspective,” says Arafura’s General Manager of Exploration and Development, Richard Brescianini.
Consumer brands are looking for reputable suppliers
“Companies like Apple are looking at their supply chains for key metals and making sure they are being sourced from reputable organisations with sustainable business practices.
“You’d have to think in the NdPr space, someone driving an EV [electric vehicle] or hybrid like the Prius is driving it because they’re doing their bit to green the planet by using less fossil fuels.”
(Toyota’s Prius was famously called “the biggest user of rare earths of any object in the world”, requiring 1kg of neodymium and 10 to 15kg of lanthanum).
“If they found out some of the car components were from mining operations in parts of the world where there is little regard for controlling emissions, managing wastes or protecting the well-being of workers, consumers would start questioning automakers about the benefits of buying these so-called green cars.
“We believe there’s an emerging requirement for the companies from which we all purchase cars or smart phones to say: ‘we can tell you exactly where the raw materials in the components come from’.
“I think that’s where blockchain in particular will become a very important factor.
“It will eventually get to the point where you will be able to say that the NdPr that’s in the magnets in the traction motor that drives your EV came from this block of ore, mined on this day, at Nolans in central Australia — from ethical producer Arafura Resources.”
Cobalt miners test blockchain
Already some cobalt producers are heading down this route.
Under a Congo pilot scheme, vetted artisanal miners are asked to seal each bag of cobalt with a digital tag “which is entered on blockchain using a mobile phone, along with details of the weight, date, time and perhaps a photo”, Reuters reported earlier this year.
At this month’s Buds, Batteries & Blockchain 2018 summit in Toronto – where Arafura presented – Toronto-listed Cobalt Blockchain said they would “use blockchain technology to transform the mineral supply chain.
“My best bet is that the next area of disruption for blockchain is going to be in the supply chain,” Cobalt Blockchain director Samuel Peralta said at the conference.
Arafura’s Managing Director Gavin Lockyer expects car makers and other manufacturers will soon demand that suppliers conform to blockchain-based procurement systems throughout the supply chain.
Arafura in discussion with blockchain experts
Arafura was in early discussions with Australian blockchain technology experts on “how that might work”, Mr Lockyer said.
But he emphasised that the technology was only as good as the quality of the product.
“We can begin to talk about all this type of stuff only because we’ve established our credentials to be a sustainable supplier, having just received all the environmental approvals for our Nolans project.”
“That’s the critical step of authenticity that comes before blockchain.”
Arafura is now completing the fourth of seven stages of a large-scale pilot program to support engineering design for its Nolans NdPr project.
All phases are expected to be complete by September – which will provide around 30kg of NdPr oxide that can be used by prospective customers such as Chinese and Japanese magnet manufacturers to help qualify Arafura as a legitimate supplier.
“This will ultimately underpin an offtake (future sales) arrangement that will aid us in funding our project,” Mr Lockyer said.
“We’re working feverishly to secure offtake, bringing everything together so we’re in a strong position to execute the project by end of the year.”
This special report is brought to you by Arafura Resources.
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