Miners must prioritise CO2 reductions

So, how’s the new job going?…

Back story: Joe Carr and I seem to have fallen into a habit of yearly catch ups.

Carr recently changed companies, moving from the role of director for Mining at Inmarsat to director of mining innovation at Axora, a start-up specialising in finding and commercialising innovative solutions to some of the mining industry’s biggest problems.

This week saw our annual ‘how’s things?’ chit chat stray into territory that I thought you, readers, would find interesting…

“It’s been a bit of a change moving from a multi-billion-dollar organisation to a start-up, but we’re well backed, and I think it’s going to be an interesting ride,” Carr replied to my initial question.

Axora was born out of the Boston Consulting Group (BCG) and a challenge posed by a major Russian mining company. It acknowledges the fact that, while there’s a lot of innovation going on in the mining space, there is also a lot of replication when it comes to technologies and solutions, particularly amongst the majors. The process isn’t generally very efficient.

Also – let’s be brutally honest – most mining companies, while great at digging holes, just aren’t built for innovation; it’s not their core competency. And those that do develop or implement useful technologies aren’t always keen to share them around.

So, what to do?

Carr explained: “We think there’s an opportunity for a company to work with various innovators to make available technologies that other companies often end up replicating, and also to bring best-of-breed solutions from other industries into the mining space.

“Miners have built plenty of interesting technologies that they don’t commercialise, but there are other industries, oil and gas is a great example, where operators have been selling their technology to other oil and gas operators for some time.

“They’ve made a solid revenue stream out of doing so and, as a bonus, it uplifts the whole market.

“I’ve been working with one oil and gas analytics company, OPEX Group, and they were talking about how today, their technology is delivering significant savings for major oil and gas operators using a cloud-hosted analytics platform.

“For them, those savings were really about CO2 emissions and not so much about power. However, that technology is also directly applicable to the mining industry and, in those applications, it saves power as well as CO2.”

CO2 savings are good news, particularly for an industry that faces a growing demand for ESG-related information, from all angles. However, power savings also lower operating costs which, in turn, offer a greater potential profit margin.

If you’re an oil and gas operator with multiple assets, then your cost of energy probably won’t be that high as you are literally producing the fuel you are using. However, if you’re a mine in, say, Canada’s Northern Territory and you’re trucking diesel into an operation during the winter months to fuel a power plant, then your cost per kilowatt hour will be significantly higher.

Turning down power consumption

How does it work? I wanted to know.

“It’s a data science driven solution based on machine learning,” Carr told me. “It’s delivered via the cloud and it works by optimising the power draw of machinery in the process plant according to its best possible output. Because you’re optimising machinery there are significant CO2 savings, and there’s also a direct saving on the cash side because you’re not burning as much fuel and you’re operating more efficiently.”

This is where the direct comparison to mining comes in, because an oil and gas platform is, essentially, a process plant with lots of pumps and motors.

“What drives a SAG [semi-autogenous grinding] mill in a mine…? A motor. And, what drives a flotation column? Pumps,” Carr explained. “It’s directly applicable. In oil and gas, OPEX Group has identified up to a 10% saving in power.

“The analytics platform makes that saving available to the operator by highlighting  how to operate their machinery in a way that won’t compromise production but will lower their carbon emissions if they choose to do so. It’s up to the operator whether or not they implement the changes.”

Carr has done some calculations to rationalise that 10% figure for mining operations.   

“A 10% saving to a gold mining company that’s mining three million tonnes of ore each year (Mt/y) at 1g/t of gold, and produces around 100,000oz/y – that’s a standard gold mine,” he explained.

“They might be looking at a power cost of US$9-10 million dollars per year for diesel to power the processing plant. That’s a low-end estimate but it could be double that depending upon the geographical location.

“If that mine saved US$1 million per year in power it would equate to roughly $10/oz off their cash cost. That’s not too shabby.

“For a mid-sized copper mine, mining around 90,000t per day of ore, they could be looking at US$10 million per year of cash saving off their bottom line, which is pretty significant for something that only takes eight weeks to implement and doesn’t require anyone on site.”

Real time carbon calculations

The other benefit is that the software can assist with emissions declarations; it can provide real time information to operators on the carbon intensity of their plants and the impact that changes in operating conditions make to that.

“The system allows you to see exactly what your emissions impact is,” said Carr. “Some of the big miners like Rio Tinto, BHP and Glencore published their first CO2 impact reports in 2020. They’re large companies with a lot of capability, but most mid-tier and junior miners don’t have this type of reporting sorted yet.

“Given the pressure that organisations like Principles for Responsible Investment (PRI), the Transition Pathways Initiative, the Church of England Pensions Board and the Swedish Pensions Agency are putting on miners to reduce their scope 1,2 and 3 emissions, this is a really interesting way for companies and investors to wrap their head around what a mine’s emissions are to begin with, and then look at the lowest hanging fruit in terms of how to deal with those emissions.

“Given that the majority of the big miner’s emissions fall into the scope 3 category – things like steel production for iron-ore miners. If you can start to optimise processes like rolled steel production, then you can make 10% savings in your CO2 output and that will have a big impact on your overall footprint without very much work.”

The system can be applied in process plants, concentrators, smelters… any area that uses power, and because it only looks at the inputs and outputs of different pieces of machinery it is, essentially, vendor agnostic.

“Obviously it’s going to work best with large pieces of standardised machinery, pumps and motors and those kinds of things. But, in theory, there’s no reason why you couldn’t use it with other equipment too or pair it with systems like ventilation on demand (VoD),” said Carr.

The bigger picture

Talk soon turned to the opening address that mining investor Robert Friedland gave at the AME Roundup event on January 18.

Friedland made the headlines by stating that, in the future, it’s likely we will see two-tiered commodity prices, sectioned according to producer’s ESG credentials and specifically the CO2 impact of their metals.

“I thought that was really interesting,” Carr echoed my own sentiment. “If you’re a company like Tesla or VW that produces electric vehicles, and you could assign a CO2 tag to each car you produce according to the contents of its battery…

“Or, if Apple could inform customers how much CO2 an iPhone produces before it reaches their pocket… that kind of understanding will generate a significant commercial advantage.”

The change that Friedland spoke of is inevitable, and it’s my belief that it will probably happen a lot faster than most people expect. Mining companies will need to move swiftly, if not to pre-empt this change then certainly to respond to it and maintain their market position.

As the saying goes… the early bird catches the worm and, in this case, the worm could be quite a juicy one.

“I agree, I don’t think mining is necessarily ready for this change,” said Carr. “I think people know it’s coming, and many are getting ready for it. There are obviously big question marks in terms of production; there’s not enough copper being produced today to build all the electric vehicles that we say we’re going to build.

“But a lot of the juniors and mid-tier metal producers could get caught off guard. Everyone will catch up eventually, that’s just the nature of the industry, but there’s a strategic advantage to be gained given the pressure investors are applying.

“We see it applied to the majors today, but it will move down the value chain, especially in copper, nickel and battery metals like lithium.

“I imagine we’ll see a water-use tag applied to lithium in the future as well, especially for that produced in the Atacama and a lot of other places where lithium is held in salt.

“It’s definitely coming. We know it is, because we can see automotive producers saying, ‘our cars produce the least emissions before they even hit the roads’ and I imagine regulators will look at that and ask, ‘if you’re producing an electric vehicle that’s environmentally friendly, how many years does it have to run before it recuperates its production costs?’”  

Measure, manage, mitigate

For mining companies, this all boils back down to: you can’t manage what you can’t measure and, unfortunately, up until this point, measuring CO2 emissions has been an afterthought, not something that has been prioritised.

Currently, most emissions reporting is done by back calculating based on the fuel or power consumption and intensity of an operation over time. But, given the urgency of the global climate emergency, that now needs to change.

We need more accurate and immediate metrics to get our hands around this problem.

Going forward, companies will need to be able to openly state how much CO2 it takes to produce an ounce of their gold, a pound of their copper, each diamond carat etc.

And it’s not only their product’s worth that will be defined by that, so too will the reputation of their businesses.