If you had pitched the idea of transitioning mining operations in a more sustainable direction to a board of directors 15 years ago you probably would have received some quizzical or eyebrow raising looks. Today, if you’re a mining company that doesn’t have some form of sustainability agenda, it’s you who is now probably receiving a perplexing look from stakeholders, investors and the general public.
It’s no surprise that sustainability and decarbonisation are trending strongly throughout the mining industry. Corporations like Anglo American, BHP, Rio Tinto, Vale and Fortescue Metals have in recent years progressed their approaches to minimizing the carbon footprint that their operations have on climate change and the environment.
Governments and corporations are now setting strong decarbonization initiatives. Asset managers too are making their voices heard with the likes of
BlackRock and the
Net-Zero Asset Owner Alliance, an international group of 49 institutional investors, committing their investment portfolios to carbon neutrality. These various influences have subsequently pressured mining companies into establishing robust sustainability and decarbonization strategies to address the impending climate risk.
What strategies then can we expect from miners and how will they execute them?
Decarbonization
From an emissions standpoint, there are three primary practices that can be incorporated into a mining company’s decarbonization strategy.
1. Onsite Power
Accessing electricity is fundamental for the operations of any mine site. The way and type of electricity that is obtained can make huge difference from an energy efficiency and emissions standpoint.
BHP for instance agreed to renewable energy contracts for its two mines in Chile which will result in a 20% reduction in price but more importantly, displace 3 million tonnes of CO2 emissions that coal fired plants would otherwise emit. Back in Australia,
BHP also signed a renewable power purchasing agreement (PPA) for all of its coal mining operations in Queensland that will result in an energy transition offset of around 1.7 million tonnes of CO2 emissions.
2. Diesel Reduction For Heavy Vehicles Assets
The majority of mining vehicles use diesel. To quantify this, on average, Australian mine sites consume approximately
five billion litres of diesel each year. From an emissions standpoint, the burning of just
one litre of diesel equates to 2.7kg of CO2 emissions. Therefore, five billion litres of diesel burned each year equals 13.5 million tonnes of CO2 emissions which is the same yearly emissions as around
2.9 million typical passenger cars.
Curbing this reliance on diesel then is a priority with the solution being either electric vehicles or hydrogen powered mining vehicles. Anglo American for instance has started a joint venture with ENGIE, the French renewable energy provider. The goal is to
co-create hydrogen powered mining haul trucks that, once fully operational, could drastically reduce diesel use and greenhouse gas emissions by 70% and offer real-time automation capabilities.
From a Pickles perspective, our mining division general manager Steve Wall sees potential. “We are already seeing Newmont and Fortescue Metals Group (FMG) looking at alternative fuels such as hydrogen and battery electric haul fleets. FMG is actively pioneering for hydrogen as a fuel for the majority of its mining equipment operations, as are trucking manufacturers such as Hyzon who are already in play in the Australasia region with a hydrogen fuelled fleet. Newmont has teamed up with Caterpillar to produce autonomous battery-electric haulage trucks in order to meet its decarbonization plans. Our belief is that all major mining houses will adopt an alternative fuel program at some stage with a mix of both hydrogen and battery-electric.
Some weaknesses we see from an electrified equipment perspective is that it’s going to be similar to the automotive world. The ability to last a full mining shift without recharging. The capability to quickly and efficiently recharge will be critical. Performance i.e. haul load, additional weight of battery electric will all be a consideration. Overtime these issues will be ironed out which is why miners will have to be adaptive and try to see around the alternative fuel corner in predicting values.
As we move forward it will be interesting to see the technology changes and what impact that has on asset values. We can currently sell any ICE machines anywhere globally – this won’t be the case for some alternative fuel machines.”
3. Processing Technology
Another fossil fuel hungry component of the mining sector is the processing of minerals like iron ore or lithium. Current methods require either high diesel fuel usage or electrification from non-renewably sources. Rio Tinto, in partnership with POSCO, have recently signed a memorandum of understanding to explore and develop
low carbon emission technologies throughout its steel making supply chain processes. This focus on decarbonization aims for the emissions reduction of steelmaking by at least 30% from 2030 once new technologies are in place.
As a business strategy, implementing these decarbonization practices gives mining companies the opportunity to create a strong and progressive enterprise with a competitive advantage. By committing to decarbonization, operations become less risky whilst building back the trust of stakeholders, investors and general public.
Sustainability
From a sustainability standpoint, there is a particular agenda that is rapidly being embraced by several miners around the globe, including here in Australia.
Towards Sustainable Mining (TSM) is a framework that assists mineral companies in evaluating, managing and communicating their sustainability performance. Having initially been devised by the
Mining Association of Canada, TSM has quickly become a
globally recognized sustainability program with countries like Spain, Finland, Norway, Botswana, Argentina, Brazil and the Philippines adopting the system.
The program works by focusing on three core areas of environmental, social and governance (ESG) which are independently evaluated and publicly reported against several performance indicators. The
three core areas of the framework’s guiding principles and protocols include;
- Communities and People: Improving and building upon Indigenous and local community relationships, safety and health. Incorporating appropriate crisis management and communication planning, preventing child and forced labour
- Environmental Stewardship: Implementation of biodiversity conservation management, tailings management and water stewardship
- Climate Change: Mitigation of carbon emissions through implementation of renewable energy technologies and sourcing of renewable energy
Not only is the TSM approach effective due to its three principles and protocols but also because of its
three regulatory strengths that it imposes on miners;
- Accountability: Participation in TSM is currently not mandatory for Minerals Council of Australia (MCA) members but will be by 2025. Assessments and sustainability reporting will then be conducted at the facility level where mining activities take place meaning an enhanced level of accountability and disclosures for miners. This will provide local communities with a meaningful view of how a nearby mining project is faring and what environmental impacts it is having on the surrounding ecosystem.
- Transparency: Members of TSM commit to a set of guiding principles and report their performance against the program’s 30 indicators annually in TSM progress reports. Each facility’s results are publicly available and are externally verified every three years to ensure transparency.
- Credibility: TSM includes ongoing consultation with a national Community of Interest (COI) Advisory Panel. This panels helps members and communities of interest foster dialogue, improve the industry’s performance and help shape the program for continual advancement and development.
“Our view is that initially, only large mine owners will be leading the sustainable transition. Smaller miners and mining contractors will follow suit but that is a much longer timeframe, mainly due to the cost of new HME that these contractors have. In most cases, these miners will run their equipment to its end of normal useful life before committing to more sustainable machinery with a focus on lower carbon emissions,” adds Mr. Wall.
Today, nearly every miner has some form of sustainable development agenda where they are trying to improve upon their decarbonization and ESG goals. What remains to be seen however is the significant uptake and execution of these ambitions and targets. Granted, implementation of new technologies and the scaling of renewable energy sources takes time which is why this industry trend will be an exciting one to keep an eye on.
01 Dec