Miners get 'free pass', for now, to bet on zero-carbon

THERE were lots of calls to place bets at this year’s Diggers & Dealers in Kalgoorlie. “Bet on Western Australia,” said the state’s Chamber of Mines, and premier Mark McGowan. Bet on (the new) Northern Star Resources, said Bill Beament. “[You can] bet on the All Blacks in Auckland,” said Mincor’s CEO, David Southam. Was there a safer bet than that one? Maybe. Northern Star’s Mary Hackett highlighted what she saw as an absolute sure thing for miners at the annual Diggers Gold Industry Group breakfast.
Miners get 'free pass', for now, to bet on zero-carbon Miners get 'free pass', for now, to bet on zero-carbon Miners get 'free pass', for now, to bet on zero-carbon Miners get 'free pass', for now, to bet on zero-carbon Miners get 'free pass', for now, to bet on zero-carbon

Speakers at the Gold Industry Group breakfast (left to right): Mary Hackett, Dale Henderson, Joanne McDonald, Michael Wood and Nicki Ivory. Image: Gold Industry Group

Hackett, director and chair of the gold leader's environmental, social and safety committee, said the industry's decarbonisation course was set and investors were already backing winners.

But where investors and other key stakeholders were awarding kudos now to miners that grasped the decarbonisation imperative, putting in place clear plans for the future and adopting currently available measures to cut carbon emissions, attitudes were almost certainly already hardening.

"Today we've been given a complete free pass to say, I know, sure as eggs, in 10 years' time there will be a really deep interest in organisations that are clear and that are sustainable, and to now set themselves up to achieve [requisite] goals," Hackett said.

"If somebody told you today that gold was going to be this price, or lithium was going to be this price, for the next 10 years, you would work around that [and shape a business accordingly] today."

Miners similarly had to factor in demands for, and actual, structural change to traditional fuel and power use, and other environmental impacts. "Very few industries ever get really put on notice that they're going out of business," PCF Capital managing director Liam Twigger said at the event. "I think if you produce a fossil fuel now the sentiment seems to be right across the globe that you're going out of business. It might take 20 years but that is what is going to happen. And if you're a business that's using fossil fuels, unless you can demonstrate that you're moving  to a sustainable power source over the long term you're going to be starved of capital."

Hackett said: "If you're not seeing climate change and you're not seeing some form of sustainability risk on your top 10 risk register today you need to ask, why not?"

Hackett joined IGO head of corporate affairs, Joanne McDonald, Pilbara Minerals chief operations officer Dale Henderson, and Deloitte sustainability and climate change services director Michael Wood on a panel discussion about opportunities and challenges in mining's energy-use shift. Deloitte corporate finance partner Nicki Ivory moderated the discussion, held after the launched of the accounting firm's new report on increasing "climate change" risks for mining's mid-market companies.

The report said major global miners were already being forced to change the way they operated, and plan for the future, and smaller companies would not be able to dodge new investment, finance, regulatory and social pressures.

"Companies failing to take action are already starting to suffer the consequences," the Deloitte report said.

"This is no longer about being one of the good guys, this is about immediate financial impacts.

"Mid-market players face higher debt costs, reduced investor options and falling valuations. Investors are challenging companies to rethink their portfolios and future capital investments and increase the robustness and depth of their sustainability performance.

"At the September 2019 Climate Week event in New York, it was reported the number of institutional investors committed to cutting fossil fuel stocks from their portfolios rose from 180 in 2014 to more than 1,100 in 2019, representing more than US$11 trillion in total assets. Some financiers and insurers have also begun to green their portfolios by adopting clean lending targets, in some cases, divesting from more carbon-intensive industries."

"Society is looking for companies to set ambitious climate-change targets and they're looking for ambitious action"

Hackett said signing up to international Taskforce on Climate-Related Financial Disclosure (TCFD) recommendations had brought Northern Star "immense [praise from] … our investors" and given the company a strategic framework and metrics that were "usable".

Investment in large and small-scale energy efficiency opportunities, including renewables but also switches from diesel or coal-based power generation to natural gas, could deliver operational improvements and provide "that superior business case to offer better results to your investors and shareholders".

Northern Star, embarking on a merger with Saracen Mineral Holdings to create a top-10 global gold company, has the balance sheet and sees a clear business imperative (as well as sky-high gold prices) to start making far-reaching changes today.

Other miners, such as emerging hard-rock lithium producer Pilbara Minerals, paying off initial project debt and battling with subdued commodity prices, see the business case for a low or no carbon footprint but also have to deal with realities of the here and now, according to Henderson.

"In the battery business our customers are demanding clean product - they want to know it's low carbon," he said.

"We absolutely feel that pressure [for change].

"The top challenges for us I would say are … balancing investment [in renewable power and other initiates aimed at reducing Pilbara's carbon footprint] versus cash on the balance sheet. Being a young company, we've got to make these decisions on far we go, and at what time. As much as we all want to go to solar tomorrow … it costs a lot.

"Number two, it's about technology [and] where on that technology adoption curve you want to enter.

"You've got a choice of being at the innovator end and spending money on innovation, [or] being an early adopter. Or do you want to be a laggard? Obviously you don't want to be a laggard. For us, we're committed to 2MW of solar penetration, going to 5MW. We're busy doing the design now. I put that in the category of being an early adopter.

"And then the third challenge is around your supply chain.

"To understand carbon flow … you've really got to have a deep understanding of your partners, up and down the supply chain. [These are] whole new relationships, and we're getting into that mode very quickly."

The speed of change - technological, principally, but also related to society's expectations and then regulatory change - was raised by the panel as a key challenge for miners looking to adapt operationally, and strategically, to future demands.

IGO's McDonald said the company had added a 6.7MW solar PV array to the existing diesel power station at the new Nova nickel-copper-cobalt mine in WA, and was moving from underground electric light-vehicle trials to testing heavy-duty electric loaders.

Elsewhere in WA Gold Fields has installed a 4MW solar, 18MW wind and 13MW battery microgrid to provide more than half the Agnew gold mine's electricity needs, and Sandfire Resources has Australia's largest solar PV installation at the DeGrussa copper-gold mine, part of a 16MW solar and battery array integrated with a diesel generator.

"Society is looking for companies to set ambitious climate-change targets and they're looking for ambitious action," McDonald said.

"But a number of companies that have set ambitious targets have already found these are outdated, and … ambition levels are changing all the time.

"Nova 2.0 today  would have the ability to be fully electrified," McDonald said.

"At the time we were building Nova the technology wasn't quite ready, but that is all changing now.

"[Local company] Safescape is already supplying electric light vehicles for underground. We will soon start trialling Sandvik electric loaders.

"When you talk to different people in this area the technology is there and it's ready, and electrification is possible. We're quite excited at IGO about [these opportunities]."

Ivory said the takeaway there was that "if you're building a new mine now, make sure you're factoring this into your plan".

"You might not put it all in place up front but enabling it to be electrified is the key."

While policy and regulation might yet take some choices away from miners and other industrial power users, Hackett cautioned the audience not to look past ‘better' current baseload routes as the path to the ‘best' long-term options became clearer.

She said natural gas power was a fossil fuel option but one that delivered 30% less emissions than diesel.

"We've got such a long way to go and writing off any industry today is really dangerous, but taking ourselves on that journey is really important," she said.