trending Market Intelligence /marketintelligence/en/news-insights/trending/GqJSGQ1VJ1jbuF3uS2llVg2 content esgSubNav
In This List

Miners deploy ESG principles, new technologies to clean up industry's image

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Miners deploy ESG principles, new technologies to clean up industry's image

When the tailings dam collapsed, it sent 32 million cubic meters of mineral wastewater across the countryside of Minas Gerais, Brazil, killing 19 people, destroying villages, polluting a major river and prompting claims of more than US$47 billion.

SNL Image

Brazil's worst ever environmental disaster, at the Samarco mine in November 2015, remains a tragic reminder of the risks mining operations can pose and how devastating their effects can be.

SNL Image
The Samarco dam failure flooded the small town of
Bento
Rodrigues in Minas Gerais, Brazil.
Source: Associated Press

Investors, in particular those with strict compliance frameworks, have long been wary of the risks linked to mining, not least because the public's image of the industry is widely that of a dirty business. Now, large asset owners and managers have been insisting that miners adopt environmental, social and governance principles, and the industry, conscious of its reputation, is moving in that direction.

A recent survey by the International Council on Mining & Metals, or ICMM, showed that issues around social acceptance of mining and environmental improvements rank highest among stakeholders as the topics the industry is likely to face in the midterm. The ICMM invited comments from its own database of contacts, nearly 8,000 private and public-sector companies, trade associations, nongovernmental organizations and academic organizations.

The results are very much in line with an accelerating trend among pension funds, sovereign wealth funds and other investors with strict mandates to divest risky portfolio allocations such as coal and mountaintop removal operations, which are typically linked to large-scale deforestation.

Norway's Norges Bank Investment Management annually reviews its portfolio alignment with sustainable business models. The fund, at 8,522 billion Norwegian kroner, or about US$1 trillion, the world's biggest sovereign wealth fund, in recent years gradually decreased its exposure to companies active in coal mining or associated with questionable mining techniques.

Many lenders have taken a similar stance, pulling out of dubious mining deals amid growing pressure from shareholders.

However, they have not exited the mining industry per se but merely narrowed their focus based on risk-management strategies and ESG principles.

Just this week, National Australia Bank Ltd. announced it will no longer finance new thermal coal mining projects but increase lending to renewable energy projects.

SNL Image

"Investors are crucially important; we are starting to see more responsible investment," the ICMM's sustainability manager, Paul Taylor, told S&P Global Market Intelligence in an interview. "[They] want to understand what risk they have in their portfolio, and having evidence that shows how companies are responding to the increasing challenges around social and environmental performance is giving investors more confidence."

Sustainable developments reduce risk

The ICMM is an industry body whose declared purpose is to drive change for establishing a safe, fair and sustainable mining industry. Members of the organization, now comprising 25 multinational mining companies, commit to implementing 10 principles as well as a number of position statements for sustainable development, pursuing best practices in areas such as human rights, safety, environmental performance and sustainable governance. Transparency is crucial in this context.

"We are starting to see a lot of more movement around investor interest in this field," Taylor said. "As far as investors are concerned, [when these principles are deployed] they understand that a mine is going to be sustainable … which would reduce the risk for a lot of communities, for example."

Often mining operations only get approval from authorities if companies contribute to local infrastructure, communities, and other economic aspects such as employment rates. This can involve housing, education and health facilities as well as taxes or royalties.

SNL Image

Alongside the social and economic components, environmental factors play a role, including water management with the aim to reduce fresh water usage, a reduction of greenhouse gas emissions and energy usage as well as reduced tailings or waste.

"There is a real opportunity to start incorporating new technology, and we are starting to see new technology come through," said Taylor, adding that miners and key suppliers are encouraged to work collaboratively on new technology. "The outcome of that is improved performance."

Industry aims for transparent sustainability standards

Efforts to step up transparency around sustainability and ESG standards have been ongoing for years. Many companies release annual sustainability reports, maintain dedicated performance trackers or host investor days.

Randgold Resources Ltd., for example, plans to host an ESG event at an upcoming Cape Town conference in response to growing interest in the field.

Majors such as Rio Tinto, Vale SA, BHP Billiton Group and Anglo American Plc are just some players that have made it part of their mandate to release not only operational and financial results but also sustainability figures.

Some of these are driven by new technologies and innovations that are replacing conventional mining methods.

"There is a very clear business and ESG case for accelerating development and deployment of new technologies: improved [health, safety and environmental] performance, productivity gains and financial returns, supporting better workforce relations and a broader license to operate," Rio Tinto wrote to S&P Global Market Intelligence.

The list of such developments is long. Drones and electric or autonomous trucks are being introduced, resulting in less fuel usage and thus reducing the carbon intensity of mining activities, and intricate systems have been developed to reduce water and energy usage as well as waste material.

Examples of new technologies

Using special technology to withstand extremely cold winter conditions, Rio Tinto installed four wind turbines at its Diavik diamond mine near the Arctic Circle in Canada. The turbines save the equivalent of about 100 fuel truck trips over a 300-kilometer ice road each year, reducing carbon emissions.

Anglo American actively invests in novel processing techniques that are more capital, energy and water efficient than conventional methods of comminution and concentration. The company explores microwave, sonic and pulse technologies to process ultrafine particles lost to tailings. Further ahead, it is looking at swarm robotics for the safe, precise and direct targeting of valuable ore on a daily basis.

The company has also been at the forefront of tackling water usage issues, aiming for waterless mining.

"We have done some promising lab work on copper tailings using additives. Dry tailings is a really important area for us because water sent to tailings ponds often represents the largest water loss at a mine," the company's technical director, Tony O'Neill, told S&P Global Market Intelligence. "We meet three-quarters of our total operational water requirements by recycling/re-using water (2016). These types of dry processing techniques will allow us to reuse 80% of process water, moving us closer to our goal of a waterless mine — while delivering on our sustainability goals."

SNL Image
Goldcorp Inc.'s Borden project in Ontario will use electric
vehicles to become the country's first all-electric mines.
Source: Goldcorp Inc.

Canada's Goldcorp Inc. has been working on developing the country's first all-electric underground mine in Ontario since 2014.

The Borden Lake underground operations will solely rely on battery-powered vehicles instead of diesel engines. This will eliminate greenhouse gas emissions and result in healthier working conditions underground. Combined with an automated on-demand ventilation system, the model brings down energy costs for ventilation by 70%.

"Imagine how much of a shift that has on our industry; in some cases, the equipment doesn't even exist yet," Goldcorp's Brent Bergeron, executive vice president corporate affairs and sustainability, said in an interview. "It basically means that we have to go back to our supply chain and force a change within their thinking. If they want to sell us equipment for this mine site that we are permitting as an all-electric mine ... they have to get on board with us and start developing that technology."

The initial cost of the equipment is higher than usual. This is partially offset by a C$5 million injection the Canadian government provides.

As a member of the Paris Agreement on climate change, the government supports initiatives that reduce greenhouse gas emissions.

An opportunity for leadership

Equally important are the health and safety benefits for workers, who usually live in the surrounding communities.

"What you have [as a result] is an initiative that is actually being supported by the government and local communities in terms of the permitting process," Bergeron said.

Altogether, these components make it a lot easier to convince board members, shareholders and stakeholders that there is an actual financial case by changing the way of doing business, Bergeron said.

As far as the perception of mining is concerned, he believes that innovation provides an opportunity to demonstrate that the mining industry can actually drive positive changes for stakeholders.

"We can take a leadership position in this area because there are companies that are extremely innovative and will contribute to some of the [climate change] goals that we want to push forward."