Climate Risks Coming Under Closer Financial Scrutiny

THE CONFERENCE CALLER: Australia’s next generation of gold producers may face being snubbed by investors if they do not adequately plan to mitigate the intensity of their expected greenhouse gas emissions. By Mark Fraser

Moreover, mining houses chasing lower grade deposits are likely to come under closer scrutiny given the higher amount of energy required to process increased ore tonnages.

According to CSA Global (part of the ERM Group) Mining Industry Consultants principal geologist Sam Ulrich, industry financiers were now looking to fund resource projects with lower carbon footprints.

This not only included banks, institutional investors and individual shareholders, but also superannuation fund managers and metal end users.

Speaking after his appearance at the recent RIU Resurgence Conference in Western Australia, Ulrich told Resources Roadhouse that mineral proponents now faced a number of choices when it came to managing their emissions intensity.

Current miners connected to coal-fire power infrastructure, he suggested, could look at measures like maintaining grade via the fast-tracking of underground operations or infusing available renewable technologies (like solar and wind) into their energy mix.

Also, as many mines have worked on a 3-4 year annually incrementing life-of-mine (LOM) plan, owners may want to consider extending the LOM plan in order to take financial advantage of technological developments in the power market.

Meanwhile, newer producers with an initial longer LOM plan have an advantage in this area – they have more electricity-generating options at their disposal.

At the moment, Ulrich said, Australia’s gold sector was 26th out of 35 based on greenhouse house gas emissions intensity by gold ounces produced.

The lowest was Finland, followed by Bulgaria, Canada, Armenia and Argentina. South Africa came in last at 35th.

“On the one hand you could say Australia’s got to lift its game, but the other problem is that a lot of the country’s gold mines – maybe half – are still connected to the grid, and grid electricity in Australia is still obviously dominated by coal,” he explained.

“So, there’s that issue, whereas if you take somewhere like Canada or Finland, it’s mostly hydro, so they’ve got a competitive advantage from the start.

“And this is not related just to gold – it covers all commodities.

“So when some politicians say we should be using more coal, it doesn’t actually help the competitiveness of our industries.”

While the new emerging generation of investors, such as Gen Z and Millennials, who were keen to see their retirement nest eggs beefed up by low carbon emitting enterprises, end users – like car manufacturers – also wanted to be associated with suppliers who had successfully mitigated their air pollution.

“Being able to say, like the nickel, cobalt and lithium miners, that you are producing metals which enable a low emissions future may be great, but if you are a car maker, or other end user, might you want to be able to say that you got your materials from the cleanest source possible?” Ulrich asked.

“Do you want to say you sourced your product from a high emissions intensity mine or a low intensity one?

“This too is also going to be a consideration as the industry moves towards its emissions reduction goals.”

During his RIU presentation, Ulrich said recent studies had predicted the average grade for Australian gold mines would drop by just over a gram per tonne by 2029 which meant, depending on the type of mine, a possible increase in emissions intensity of up to 50 per cent.

Mitigating these kinds of carbon risks, though, would give companies access to lower cost equity and debt capital.

“Climate risks are financial risks and it is never too early to start addressing them,” Ulrich said.

“There are financial benefits for good disclosure, being carbon aware or having a climate change plan.

“And these benefits are not only for large companies, but also for junior ones.

“Being able to demonstrate a lower carbon risk should lead to a higher firm value, and easier access to investment funding.”

 

Web: www.csaglobal.com