Mineral Impulse™ Retrospective
We didn’t start Inspire Resources from a burning platform of social justice. That came later😊. In the beginning, we thought it was about commercially enabling system-level innovation. With hindsight, perhaps it was really about trying to introduce dynamic capitalism to a rentier industry. And maybe that’s why it was so hard.
It was 2019, before the Pandemic, before Critical Minerals, before the Great Inflation, before today’s ‘Schrodinger’s Supercycle’. The mining industry was still seeking redemption for the terrible M&A decisions it had made during the Chinese supercycle that had ended 5 years earlier. Innovation Theatre was trending, with glitzy pitch events at mining conferences, and a few (vanishingly few if we’re honest) success stories.
I had been working with mining companies as an innovation consultant. One fruitful engagement was with Dundee Precious Metals, whose visionary CEO Rick Howes sponsored a long-term whiteboarding exercise with luminaries like Adriaan Davidse, John Megannon and Mike MacFarlane. We all shared an exasperation with mining’s systemic obstacles to innovation, which conflicted with the message coming from the innovation theatre. What we figured out is that the engineered systems of mining are fundamentally shaped by the business model – the nuts and bolts of who makes money from what. So business model innovation is where Inspire Resources set out its market stall.
We lamented the bespoke model of mine design, driven by the relationship with investors. “But every mine is necessarily unique, that’s just the way it is”, said the engineers making good money by designing unique mines. We believed that a ‘mass customization’ approach, with modular systems enabling risk-sharing alliances of ‘equipment as a service’ (EaaS) partners, had great potential to unlock smaller mines and accelerate innovation. The missing piece was a systems integrator that could scale the model across many sites and throughout the mine lifecycle. That was what Inspire Resources was to be: the first mining-as-a-service (MaaS) orchestration company.
It soon dawned on us that we could also help mining adapt to a shifting power balance among stakeholders. If local voices were becoming stronger (for example, through legislative support for the free, prior and informed consent (FPIC) of Indigenous people) then obviously there would have to be changes to the trade-off calculations that have historically favoured value to distant shareholders over cost to local stakeholders. We knew we could do that more easily than incumbent miners and their engineering companies.
We sensed that the power balance was already shifting, so we hitched our wagon to that horse by defining the local community as our MaaS customer. Naming our offering Mineral Impulse™, we proposed a business model in which the community, as customer, would define the requirements of the mining project and decide what was optimal in the numerous design trade-offs.
The obvious question, which made our idea vulnerable to criticism, is how the local community gains the power to be the customer, which is far beyond the power to merely be consulted. To tackle this head-on we chose an audacious concept in which the community owns the project; ownership is not the only route to power, but it is readily understood and can be observed in renewable energy, where more than 4000 community-owned projects already exist.
We knew this was a provocative strategy, because there is still a tendency in some mining companies to see communities as rent-seeking competitors. By distancing ourselves maximally from such mindsets, we hoped to attract interest from outside the mining sector - particularly from socially-responsible investors. And in any case, we could reasonably expect that mining companies would simply ignore us.
“You need a pilot project”, said every sceptic we shared the concept with.
To test the Mineral Impulse idea, we would need to bring together a mineral resource and its local community, project-level investors, regulators and industrial EaaS partners. And of course, to get some venture investment into our own company so that we could grow to effectively orchestrate the partners on the long march to revenue. Here are some reflections on our interactions with each of these groups, in a mostly Canadian context:
We found a few (fewer than 10) prospectors and explorers who were open to the idea of sharing ownership with a local community. Among their mineral prospects, those that were early enough to use for an experiment ‘below the fiduciary radar’ would have taken too long to mature into the demonstration project we needed. Explorers closer to the development stage were fully engaged in trying to raise capital, and had little capacity to engage with novel business model ideas. This is where change can really start though – more on this in a future article.
There are almost no examples of communities already holding mineral licenses, yet we found one: a brownfield project whose rights were 100% owned by an exploration company held by an Indigenous investment company. The company generously listened to our ideas but ultimately gave us extremely valuable advice: that their board would be looking for a joint venture partner that had a proven track record of mine development.
We naïvely expected that socially responsible investors would be interested in a business model that supported community-led governance, especially as the mining implications of decarbonization were starting to be discussed. We had heard a lot about generational shifts of capital towards social impact, and we certainly tried to engage with impact investors. But frankly we got nowhere. We have found no evidence that anyone is trying to cross the empty chasm between impact investment and mining investment. That’s not the investors’ fault – who is offering them a new investment product? Just one little startup from Canada? We will need more critical mass to create a new investment market. Again, look out for a future article on this.
We approached Canadian federal and provincial governments, looking for openness to innovation in regulatory regimes. We knew that Mineral Impulse would be smothered by a regulatory regime that could not take advantage of (1) community being the proponent, and (2) modular, scalable, standardized designs. We were not looking for quality concessions – we wanted to be held to a higher standard of accountability than incumbents. But we needed a pathfinder jurisdiction that would work with us. We didn’t find one. All the governments we spoke to seemed to have bigger fish to fry, or to have difficulty thinking outside the colonial box. We even put forward a novel proposal based on an orphaned site that was a thorn in the side of a provincial government – and we were ghosted. Governments in Canada may be socially progressive, but in my experience they are industrially conservative. Incumbents have far better access. Perhaps we should have been looking abroad.
Industrial partnerships was the area in which we made real progress. At trade shows, OEMs would sometimes express cautious interest in EaaS models with the proviso that they be involved in whole-system design. Thanks to the support of OZ Minerals as strategic client, we were able to demonstrate a model-based co-design approach to a novel whole-system concept, with which the industrial partners were so enamoured that they participated pro bono. See white paper here. The technical paper resulting from this project recently won the CEEC Medal for Technical Research.
In the early days we tested the waters for a venture investment by trying to show up like a tech startup. We hung out with angel networks. We emphasized that Mineral Impulse was a platform business model that could scale exponentially due to network effects, with Inspire Resources as the orchestrator. We developed plans and projections. We argued that we were not going to be trapped by assets and sunk cost, that digital technology and agility were our core. We pointed out that other regulated industries were being disrupted. A VC firm active in mining tech generously lent us their ears, but ultimately couldn’t see a fit with their business model. Government startup support agents were also mystified by the product and couldn’t see a way to help. A few strategic clients have kept us alive with consulting work, and boy are we grateful for that!
This sounds like woe-is-me, but really it’s been a tremendous learning experience, and we have grown a fabulous network. We are continuing with trademark protection for Mineral Impulse, because I still believe that it is where you get to if you extrapolate today’s shifts in the mining social context. I just want our future allies to be aware of how hard the change is going to be. While advocating for Mineral Impulse, I often felt that there was some kind of force field that kept people from questioning the incumbent mining business model. Yet perhaps even I had not questioned it deeply enough. I told myself that we were bringing novel tools to a capitalist mining enterprise to enable it to adapt to a new social contract; introducing a choice-making customer to the equation; opening new markets based on new formulations of value. But maybe mining today is not really capitalism, at least not in the dynamic sense where innovation confers legitimacy. Perhaps it is more rationally thought of as rent extraction in a zero-sum space contested by high-inertia governments and investors. Would a rentier want social licence to become explicitly revocable, as we were implying? Would a rentier want to become a service provider vulnerable to replacement? Perhaps not an easy option for incumbents, but escaping from the ‘asset mindset’ in which communities are your competitors is necessary if society is to hold the raw materials enterprise to a higher standard of accountability and progress.
Being too early may be, as they say, the same as being wrong, but Mineral Impulse has not failed: it served the purpose of showing us how much more needs to be done. The clarity it has given us, even in the role of straw man, has been more than worth the time we have invested. We may not control the consensus of political economy, but that consensus is more mobile in advanced economies than at any time in the last 50 years: we can support a network of companies and humans to be less constrained by legacy mental models and more able to adapt to an increasingly uncertain operating environment.
So that is what we have decided to do.