The mineral extraction and processing sector is Tasmania’s largest export industry. The state has been extracting and exporting iron, copper, lead, zinc, tin, high-grade silica and tungsten for more than a century.
This sector, steeped in history, is set to undergo a major transformation. Similar to the shift taking place in the oil and gas industry, mining is on the cusp of rapid automation, electrification and decarbonisation to reach the goal of net zero emissions.
The push is threefold: the environmental, economic and health imperatives all stack up. Net zero has garnered broad social and economic support across stakeholder groups, including employees, insurers, investors, communities, banks, boards and shareholders. Given the mining industry contributes 2 to 3% of global CO2 emissions, achieving net zero mining is essential to keep global warming below the Paris Agreement 1.5°C limit.
What does ‘net zero emissions’ mean, and what are the drivers behind net zero mining? We’ll outline the actions miners can take, the barriers to overcome, and the companies at the forefront of the shift.
What is net zero mining?
A company reaches ‘net zero’ when the carbon emissions from its operations are balanced out by an equivalent amount of CO2 removed from the atmosphere. This means every mine must understand its emissions profile, set a baseline, and commit to Decarbonisation activities.
A mine’s carbon footprint comprises three types of emissions:
Scope 1: Direct emissions from operations the mine owns or controls, e.g. diesel vehicle emissions;
Scope 2: Indirect emissions from energy needs, e.g. electricity, steam, heat, cooling; and
Scope 3: Indirect emissions from the supply chain, e.g. transport, processing, product end use.
What’s driving net zero mining?
A combination of social pressure over health and climate concerns, as well as a rapid advancement in technology, has caused a surge in support for net zero mining.
The push is coming from within the industry itself. Minerals Council of Australia members have committed to the Paris Agreement climate goals of net zero emissions. The Council says 20% of members plan to decarbonize by 2040, and 61% by 2050.
The 2021 State of Play: Electrification report states 89% of the world’s leading mining executives expect mine sites globally to electrify within the next 20 years. A massive 91% expect the shift to electrics will create new business opportunities, and nearly 80% of those surveyed expect a health-related industry class action in the next 15 years.
State of Play co-founder and chair Graeme Stanway says the industry is re-evaluating the status quo of operating heavy diesel-powered equipment alongside people in underground, confined spaces. He pictures a future “where machinery is safe, automated and battery-powered. This would effectively cut out two of the biggest issues in mining: carbon impact and particulate exposure, and result in zero carbon emission mines.”
The economics of decarbonised mining are also looking increasingly attractive as the technology for decarbonised mining matures. For example, while upfront costs of battery or fuel cell electric haulage trucks will remain higher than an equivalent diesel truck for some time, McKinsey estimates that by 2030 electric vehicle maintenance costs will be 20-30% lower than diesel, and fuel costs 40-60% lower. Increased automation should also lead to better safety records and lower labour costs.
Furthermore costs of capital are estimated to be up to 25% higher for miners with low environmental, social and governance (ESG) scores relative to their peers. This provides companies with a strong incentive to improve ESG scores as an avenue to secure lower cost funding. Carbon taxes are also expected to drive significant technology advancement across high-emitting industries where abatement opportunities could be implemented at lower costs than companies paying to polute.
Where should mining companies begin?
Unsurprisingly, mining companies are Decarbonising the emissions they can most easily control: their scope 1 and scope 2 emissions.
This means focusing efforts on operational energy efficiency improvements (scope 1) to reduce energy and water consumption, and replacing fossil fuels with renewable energy sources (scope 2), even developing in-house renewable power production.
Australian mining companies have a major advantage when it comes to sourcing alternative energy. “We have an abundance of renewables that the industry is tapping into, particularly in our most remote operations,” says METS Ignited CEO, Adrian Beer. “Local mine sites have the opportunity to install solar and wind, and battery energy storage systems to power their operations at much cheaper cost than many global players.” Tasmanian companies have an even greater advantage to leverage here, as the state already runs on net 100% renewable energy.
Decarbonisation examples from the Minerals Council of Australia include:
As well as investment in technology, Deloitte stresses that mining companies will need to undergo cultural change. Decarbonisation requires a clear, sustainability-driven purpose that resonates with employees, and strong leadership that turns purpose into action.
Technical and engineering skills will need to increasingly digitalise and be aligned with ESG priorities. “For the country to fully realise the opportunity of zero emissions mines, we also need to be able to effectively implement these technologies,” says Mr Beer. “We need to modernise our regulatory framework, and consider what skills our sector will need, across the entire range of the workforce, from trades and technicians, university graduates, through to our scientists and PhDs.” What are the barriers
Much of the technology around net-zero mining is still in its nascence. However, Decarbonisation solutions are expected to become economic within this decade, and mining companies can already take action to prepare.
Greenfield sites can be designed differently for lower emissions and costs, incorporating more charging stations and reduced need for ventilation. Re-designing existing mines will take time, particularly for energy-intensive mines that are deeper, more remote, or lower-grade.
Another major factor is the need for industry commitment to technologies: only large-scale uptake will drive down costs. According to McKinsey this requires multi-stakeholder collaboration, including mining companies, original equipment manufacturers (OEMs), suppliers, oil and gas players, and commodity customers.
Who’s already moving
The MCA says Anglo American has committed to net zero emissions by 2040 and so has Fortescue (scope 1 and 2 now brought forward to 2030), with BHP, Downer, EnergyAustralia, Glencore, Idemitsu, Newcrest, Newmont, Rio Tinto, and St Barbara are all working toward a 2050 timeline.
S&P Global Market Intelligence says 11 of the 30 largest mining companies already claim to be carbon neutral, or have set net zero goals by 2050 or sooner:
MMG who operate in Rosebery have recently announced 2050 targets "MMG is also implementing a whole-of-company climate resilience strategy. It covers our energy mix, technologies, efficiency and mitigation measures that will determine interim 2030 targets and support the 2050 goal. This work is due for completion in early 2022."
The Ellis Richmond approach to net zero mining
Preparing a site-specific Decarbonisation strategy and financial model is the first step toward net zero mining. Ellis Richmond’s three-stage approach includes:
Scope: complete emissions audit, develop a strategy, build the business case and put in the work to allow the organisation to make a public commitment.
Strategy: prepare an execution plan for each Decarbonisation project, identify key roles and resources, identify scope three emissions partners, develop cost model and schedule, and apply for any grants as applicable.
Deliver: execute, control costs, report on progress, consult on practical impacts and provide stakeholder updates.
Get in touch to discuss how Ellis Richmond can help you reap the economic, social and environmental benefits from Decarbonising your operations.