A senior mining geologist and PhD researcher at the University of Western Australia says a US$50-100/tonne carbon price could just about be the nail in the coffin for South Africa’s gold industry, while underlining Canada and Finland’s “green gold premium” credentials. High-grade gold mines in Australia making the switch to renewables and hybrid power grids could still woo carbon-sensitive investors in future.
CSA Global principal geologist Sam Ulrich told the RIU Resurgence conference in Perth, WA, research over the past six years showed the gold sector’s mounting cost challenges with declining average ore grades could be connected with increased energy use typically associated with moving and grinding lower-grade rock.
If the rising costs and squeezed margins are not a big enough challenge, being marked down or written off by large sections of the investment and finance community for emitting too much greenhouse gas is looming as a different problem, and carbon taxes would make life more interesting again.
Ulrich says regional and country power grids, and energy sources, were part of the problem for some mine owners.
Stellar market performer Kirkland Lake Gold makes an interesting case study.
Ulrich’s comprehensive Australia gold-mine data going back six years generally shows higher-grade, underground mines with lower energy intensity and costs are among the lowest greenhouse gas (GHG) emitters per ounce of gold produced – on a kilogram of CO2-equivalent per ounce basis. Big openpit mines with large mills sit at the other end of the CO2-eq/oz scale.
Ulrich says Kirkland Lake’s Fosterville gold mine in Victoria, Australia’s highest grade and most profitable gold mine of recent times, as well as Stawell in Victoria, are outliers on his charts, which “highlights the importance of understanding the energy source of the mine and interpreting the data correctly”.
“Both mines are connected to the Victorian electricity grid which is dominated by energy generated by brown coal, the most GHG emissions intensive electricity in Australia,” he says.
But Kirkland Lake’s high-grade underground Macassa mine in Ontario, Canada, has the lowest GHG emissions intensity in his dataset at 53kg CO2-eq/oz with its all-electric mining fleet and connection to Ontario’s hydro-power supply.
Ulrich says massive, low-grade Cadia in New South Wales is another outlier because it’s a unique (for Australia) panel cave underground leveraging huge efficiencies in the mining phase, but is plugged into the state’s coal-fired power grid.
Ulrich says Gold Fields’ Agnew mine in Western Australia has transformed into the country’s lowest CO2-eq/oz gold producer with its new wind-solar microgrid power source, while four of the five lowest intensity mines in Australia have all adopted measures to abate GHGs.
A global weighted average emissions intensity curve for mining has Finland at the bottom of the curve, and South Africa, with more than 20-times greater average emissions intensity per mine than Finland, at the other end.
“Canada’s average is 2.5-times less than Australia’s, and South Africa’s average is over 1,000kg CO2-eq/oz higher than Australia’s highest intensity mine,” Ulrich says.
China is not able to be represented accurately, but Ulrich and CSA – owned by one of the world’s biggest environmental consulting firms, ERM – estimate its gold mines are higher on the average CHG emissions intensity curve than South Africa.
“Using those average country emission intensities the impact of a hypothetical carbon price on average gold mine production costs can be estimated,” Ulrich says.
“Of the world’s top-five producing countries Canada receives the least impact [from US$50/t and $100/t carbon costs], followed by the USA, Australia and Russia.
“South Africa, overall, clearly suffers the biggest impact from a hypothetical carbon price.
“In Australia gold grades have been declining and are forecast to decline further. This is causing the average emissions intensity in Australia to rise. It’s risen 40% from a previous study, and it’s predicted the average grade will drop to just over 1gpt by 2029 which means, depending on the type of mine, the emissions intensity will increase by up to nearly 50%.
“Declining gold grades can actually wipe out any gains from real reductions in total greenhouse gas emissions on an emission intensity basis per ounce.”
Ulrich says his ‘Insights into the economic cost structure of gold mining: From all-in sustaining costs to quantifying externalities’ PhD research has looked at mine emissions intensity per ounce of gold produced, and per tonne of ore processed. He prefers the former measurement, which is related to saleable gold, “whereas emissions intensity per ore tonnes processed is not affected by changes in gold grade nor is it directly related to the saleable product, which can hide the impact of things like declining gold grades which is a common scenario seeing today”.
“Both intensity [measures] have advantages and using them together allows a more robust interpretation of why a change in emissions intensity might have occurred.
“But if you’re only going to report one my personal preference is by gold ounces produced.”
He says ESG reporting, including energy intensity and emissions, is improving but is far from regimented.
“The impact on value has been shown for companies that are showing a high carbon risk awareness and have a high disclosure level,” he says.
“GHG intensities can be used to identify emission-intensive mining assets with higher potential carbon risk.
“Institutional funds and lenders been asked to increase disclosure and mitigate climate risk through lowered GHG footprints, and this pressure is leading them to not invest in companies and assets with a higher carbon risk which will lead to companies disposing of or discontinuing high GHG intensity mining operations if methods to abate emissions are not feasible.”
DATE: 17 September 2020