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Mines need to cut emissions and increase renewables – Corporate Knights

21st November 2014

By: Simon Rees

Creamer Media Correspondent

  

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TORONTO (miningweekly.com) – As the population of the planet doubles between now and 2050, the drive to cut carbon emissions will continue to gather pace. At a recent meeting between heads of State in China, the US announced its intention to reduce carbon emissions by 26% to 28% by 2025. China declared its emissions would peak around 2030. This was the first time the country had committed to an apex year.

The global drive to cut or cap emissions will be felt by almost all major industries, particularly those headquartered in the developed world and the mining sector will be no exception. There is also the increased possibility of carbon tariffs being introduced or extended.

In response, mining companies both large and small should reconsider their carbon footprint and, if they have not already done so, start implementing measures to “decarbonise”. Central to this will be the use of renewable energy alongside traditional power sources, Corporate Knights Capital CEO Toby Heaps told the Women in Mining Toronto Branch earlier this month.

NUMBER CRUNCH

Mining’s share of carbon emissions was comparatively high, according to Heaps. For example, Corporate Knights examined the S&P 500 and determined that companies involved in “materials” accounted for 36% of carbon emissions. The category comprised companies from across several industries, such as logging and chemicals, although the greatest number came from the mining and metals sector.

By comparison, 19% of carbon emissions by S&P 500 companies came from utilities, including companies that operated coal-fired power stations.

Europe returned similar statistics, with Corporate Knights analysing the Stoxx 600 and determining that minerals accounted for 38% carbon emissions. Again, the majority of companies in this category were mining and metals companies. 

A revival in commodities prices and global mining’s outlook would herald renewed scrutiny of the industry’s carbon emissions. “For when there’s greater wealth, there’s greater scrutiny,” Heaps said, adding that the industry now had the ability to make the necessary, cost-effective investments to decarbonise and reduce its dependence on fossil fuels without sacrificing reliability.

Combining renewables with traditional forms of power to form hybrid solutions could prove an important means to cut emissions further. For example, a mine in a remote region without access to a national grid could use wind power and diesel generators.

Renewables, such as solar, wind, thermal or even biogas, had never been more cost-effective or efficient, Heaps added. Assisting this had been the marked improvement in energy storage over the past several years.

The stored electricity allowed a mine to smoothly transition from renewable to diesel energy without affecting its power supply. “At the hybrid level, according to Siemens, you can save between 30% and 60% of your fuel costs and achieve a reliability rate of almost 100%,” he pointed out.

A hybrid solution may be an upfront investment that was then owned and operated by the mining company. Alternatively, the company responsible for hybrid installation could retain control of the renewable aspect and sell the power produced on a long-term, fixed-rate contract.

As well as reducing carbon emissions, a hybrid solution also diminished a producer’s dependence on fossil fuels and its exposure to rising fuel costs. “Only a few people would be willing to bet that diesel will be cheaper in ten years,” Heaps noted.

Renewables also had advantages in terms of bolstering a company’s social licence to operate. In northern Ontario, for example, many Aboriginal communities living close to mine sites had voiced support for hybrid solutions.

Companies that introduced a hybrid solution that served both an operation and local Aboriginal communities would cement First Nations support still further. “Renewable power that diminishes dependence on dirty diesel [for a community] is a massive deliverable and the effect on how Aboriginal people view your project through this kind of measure cannot be underestimated,” Heaps added.

CARBON CRUNCH

The uptake of renewables as part of a hybrid solution had not been widespread in the mining sector, he conceded, noting that the current global figure stood at just 0.1%. “But this number excludes operations that use hydropower. Include them and the amount would increase significantly, particularly when we consider Canada.”

However, the level of hybrid uptake was about to change considerably, Heaps stressed. Excluding hydro, it will rise from 0.1% to between 8% and 12% in the next decade, according to Navigant, a Toronto-based services and consultancy firm. “Today, many mines are being planned with renewables utilisation of over 50%.”

As a snapshot, Heaps highlighted some of the seniors and their level of uptake, noting that Barrick Gold currently sourced 19.4% of its power from renewables, which included hydro. “So that’s pretty significant and the company is looking to increase this.”

Iamgold was seeking to generate 15% of its power through renewables within the next three to five years, while Teck Resources intended to achieve 15% to 20%. Goldcorp and Kinross had also voiced a desire to increase renewables use across their portfolios.

In addition, many of the larger mining companies were now considering the implications of carbon tariffs or taxes being rolled out in the jurisdictions where they operated. Heaps cited a New York Times report from earlier this year; it noted that over 100 large, resource-intensive companies would no longer advance a project if it surpassed a predetermined carbon price.

Meanwhile, Teck Resources had assumed a carbon cost of $100/t for some projects. “They then run the maths. If the project surpasses $100/t in carbon emissions, it won’t pass the investment committee or get the green light,” he explained.

For juniors, a company that factored in a carbon model and considered the renewables position would increase a project’s attractiveness in terms of mergers and acquisition interest. “So are you thinking about a shadow price for carbon?” Heaps asked. “Are you assuming there will be a $30/t or $50/t price for carbon in order to see whether your projects make sense?”

Edited by Tracy Hancock
Creamer Media Contributing Editor

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