https://www.miningweekly.com

Net-zero emissions commitments hold benefits, but also downsides, for miners

6th January 2021

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

Font size: - +

Miners are targeting massive carbon reductions over the next 10 to 15 years on the path to achieving net-zero emissions by 2050, with equity research company Jefferies warning that this implies higher costs and capital expenditure (capex), but also a trend of less supply, higher commodity prices, higher free cash flow and higher share prices.

The commitment to net-zero emissions is a result of mining companies coming under increasing pressure to make explicit and sizable capital commitments for initiatives that target the reduction of greenhouse-gas (GHG) emissions in line with global plans to meet the Paris Agreement target of limiting global warming.

Some miners – like Fortescue, Rio Tinto, BHP, Newmont and Vale – have given explicit guidance about investment in such initiatives, Jefferies says in its equity research report for metals and mining, published on January 6.

However, for others, “initiatives to address de-carbonisation are bundled within ongoing projects to improve operational performance”.

While miners generate GHGs, they also produce the metals and minerals that are critical for the transition to a low-carbon economy, which Jefferies says bodes well for potential demand for copper demand in the renewable energy and electric vehicle (EV) sectors, as well as other metals like nickel, zinc, cobalt, aluminum, lithium, vanadium and platinum-group metals (PGMs).

“All else equal, the miners that produce these metals are well positioned, whereas those that produce fossil fuels and, possibly, iron-ore, face structural demand risk as the world goes green,” the report notes.

The upshot, however, is that mining companies will need to reconfigure their portfolios and make significant investments to reduce scope 1, 2 and 3 emissions, which means that operating costs will increase, as will the capital intensity for new projects.

Supply growth should also slow as a result, the report states, noting that the marginal cost of production for most commodities should increase, meaning that the end result will likely mean higher commodity prices; higher earnings before interest, taxes, depreciation and amortisation, as well as free cash flow; and higher mining share prices, on average.

Scope 3 emissions will be a problem for iron-ore and coal miners, Jefferies laments, but says that it will be “less problematic” for copper and other base metals miners.

In addition, based on current technologies, the transition to a low-carbon economy requires copper, nickel, zinc, aluminum, cobalt, PGMs and some other metals, meaning that mining companies will increasingly rely on renewable energy sources and new technologies to reduce energy consumption and, in so doing, Scope 1 and Scope 2 emissions.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION