Facing the prospect of a massive cash spend to decarbonize their operations, miners are looking toward new monetary supports such as carbon reduction-oriented customers and environmental, social and governance funds that could help foot the bill for carbon-reducing upgrades, miners said during the Energy and Mines Toronto Summit held Nov. 28–29.
Miners, particularly producers of copper, lithium and other metals crucial to rechargeable batteries and electric vehicles, find themselves at the forefront of the energy transition. They are beginning to heed calls from governments and consumers throughout the EV supply chain to cut down on their emissions. Although operational changes such as fleet electrification can come at a steep price — and in many cases, are only in the earliest stages of implementation — miners hope that the promise of lower-carbon metals will draw new investors with attractive funding structures.
"The investors now don't just include the investment banks that are out there," Brent Bergeron, senior vice president for corporate affairs and sustainability at Pan American Silver Corp., said during a Nov. 28 panel. "The supply chain is going down to the people who are using our products at this point, and they're starting to make sure that there's partnerships … to be able to source a sustainable product from those companies. I think that you're starting to see that impetus move a lot faster these days."
Customer-driven investment
Much of the investor push for miners' decarbonization has come from downstream mineral consumers, multiple experts said during the event. That new reality might mean that ore from less carbon-intensive miners could appear more attractive to EV manufacturers and battery-makers. Those companies are getting more involved in the supply chain as demand for critical minerals increases.
"Investors want to be part of the [decarbonization] journey and want to pick investments that help them on the journey, but they're investors, they need returns, and that's their fundamental objective," Leon Binedell, president and CEO of nickel and cobalt miner Sherritt International Corp., said during a Nov. 29 panel. "What we've found is our customers, the consumers of our product, are a little more interested in the decarbonization journey and they're actually doing a lot more diligence on ‘What is your ESG footprint?' And that goes way, way beyond decarbonization."
Rob McEwen, chairman, president and CEO of diversified miner McEwen Mining Inc., highlighted automaker Stellantis NV's investment of more than $100 million in shares of McEwen subsidiary McEwen Copper Inc. as an example of customer-driven decarbonization. McEwen Copper operates the Los Azules copper mine in Argentina.
"Stellantis … came in, and it was the first time they invested in a copper mined resource deposit anywhere in the world," McEwen said during a Nov. 28 panel. "They said, 'We want you to be net-zero by 2030.' We're well on that way, and that's one of the reasons they invested."
McEwen also suggested that mines adhering to net-zero goals could one day be eligible for funding from ESG investors.
"We should be looking at alternative financing sources," McEwen said during the same panel. "Morningstar estimates that there is over $2.5 trillion invested in ESG and impact funds around the world. If our mining industry can shift a little bit and become easier on the environment, there's a source of funds there that I think could represent some of the lowest-cost financing in decades for the mining industry."
Rewarding good actors
Multiple mining representatives also indicated that if investors are serious about wanting miners to implement decarbonization plans, they should incentivize and support metals producers that are already working to cut their carbon emissions.
"You should reward people who are trying to decarbonize, but you should also look to reward the people who are actually the low-carbon performers," Chris Adachi, director of climate change at Teck Resources Ltd., said during a Nov. 29 panel.
That reward could come in the form of a price premium, some experts suggested, echoing a sentiment previously expressed by some producers of traditionally carbon-intensive products such as steel. Without such a premium, producers might not have a sufficiently strong incentive to produce lower-carbon materials.
"Adding such capital-intensive decarbonization [plans] to grow projects when the current pricing doesn't reflect the value of that can really stifle projects," Alex Mulloy, a low carbon specialist at Vale SA's Canada subsidiary, said during a Nov. 29 panel.
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