Can a business that depletes finite natural resources rather than depreciating them be sustainable?
As someone who has worked in the mining industry for some time, intends to spend the foreseeable future there, and also considers themselves to be an environmentalist, the answer to this question makes me incredibly uneasy.
But just because a conversation is difficult, doesn’t mean it’s not worth having. The premise of The Intelligent Miner is not to provide answers, but to simply discuss mining, including its hard truths, in order to raise awareness and spark discussions.
It was therefore only right that I invite the person who posed the above question to me, to come talk about it.
“It’s an oxymoron,” Benjamin Cox, told me. “What we have is an industry that is trying too hard to be cool, to meet the needs of the global environmental community, and so is focusing on global issues. And yet the issues we create are mainly local; we deplete local resources for the global good.”
Cox and his colleague, Sally Innis, both PhD candidates at the University of British Columbia, research global carbon taxation and what it would mean for the mining industry Their research should prove eye opening for an industry that is doggedly focused on reducing its carbon emissions.
Both joined me for the debate in early January.
Cox continued: “Mining companies come into local regions to extract global commons i.e., metals, and leave behind local liabilities to clean the water supply, manage tailings dams, sustain local environmental costs etc.
“You can’t have a solar panel or a computer without mining. The Zoom call we’re on was made possible by copper that was mined in Chile. But we’re not maintaining a social licence that makes sense, because of that fundamental dichotomy and conflict.”
Innis added: “By definition, mining cannot be sustainable because we’re dealing with finite resources. There’s going to come a point, whether it’s in my lifetime or hundreds of years from now, where the industry runs out of minerals. So how we value what is sustainable, in terms of water, land, forests etc… that’s incredibly important.
“Tailings storage facilities are a prime example of this – they exist in perpetuity. We are extracting metals and minerals for the global good, but the local burden, the risk, is going to be there forever.
“It’s a big problem, but an interesting problem.”
Depleting finite metals
“Environmentalism requires acknowledging that we’re creating liabilities and depleting precious resources fast,” said Cox. “The amount of copper consumed in the last 100 years is the same as our copper allotment for the next 1,000.
“By 2100, we’re probably going to be down to the dregs. By 2200, we’ll be out of virgin resources in any material way.”
Innis weighed in: “If you look at where the mineral resources are left in the world, they are predominantly in countries that aren’t having climate marches,” she said.
“They don’t have governments that are pushing for carbon taxation, and they don’t usually have great access to clean water or green energy. So, the local burden is magnified quite a lot.”
“Do you think people, companies would care more if these operations were in their backyard? I asked.
“Yes,” said Cox. “People would care far more. But the problem is that people are not aware of the damage they cause, because they don’t necessarily see it as damage.”
“Isn’t that the whole tragedy of the commons?” said Innis. “We’re incapable of seeing the cliff that we’re running towards at full speed. But on a more positive note, there are plenty of things that governments and individuals can do to change that. I’m a strong believer in circular economy.”
Concepts like circular economy hold huge potential, but they do entail a significant amount of change – for example, a major upheaval of the municipal waste system – and change takes time. We’re not going to recycle our way to a green economy, but in 15 or 20 years it could feasibly contribute to society’s metal requirements.
“There’s no silver bullet that’s going to solve the issue of how we’ve used commons over the last 100 years,” said Innis. “However, if we’re willing to embrace change rather than resist it, there’s plenty we can do to move towards a greener future.”
A matter of time
Part of the problem is that the mining industry leaves behind footprints that will last for many generations, beyond the corporate existence of the companies that create them.
When we start to look at things from an environmental liability perspective – we’re talking 200, 500, 1,000-year timescales – there are very few companies that have survived for 200 years or more. These liabilities are created against corporate structures that are not designed to match them.
This is just one reason for the trust deficit that has, unfortunately, become a defining feature of mining in recent years. There is much discussion around environmental and social issues and the relationships that mining companies have, or would like to have, with indigenous peoples.
But a key hang up is that the two often have different perspectives when it comes to time. To groups who have lived in sync with their natural environment for thousands of years and plan to do so for many more, short termism breeds mistrust.
There is also the question of value when it comes to natural resources. Many traditional cultures consider commons like land, water, energy and minerals, to be sacred, beyond monetary value. The greater the value of something, the better we take care of it. However, in Western culture, value is often determined by price.
If the price were right…
Which begs the question: if we could put a fair price on commons, one that reflects their holistic value, how might things change?
“Fair to whom?” Cox countered. “Fair is a wonderful concept, but it’s also very subjective. So, let’s break it down into three interior concepts: can we quantify the value of the commons we impact? Is there a value attached to them beyond monetary value? And, if so, can we put a number on it?
“We’re humans, we like key performance indicators (KPIs). Currently, we’ve got none around carbon, water or tailings. We have none around poor resource usage and recovery. We have none around human capital, equity and inclusion. So how can we quantify fairness?
“We can’t. Most of time, we have to qualify it at best.
“Mining companies are taking local water, local minerals to feed the global economy. Yet we’re spending all of our time trying to quantify and price commons that we’re consuming at a global level. There needs to be differential pricing based on where operations are located and the end product.”
Another way to look at this is, if you live in Portland, Oregon, where it rains a lot (as Cox does). Is it fair to value the water you receive the same as the water in the Atacama Desert where it rained two centimetres in the last three years? No.
There is a price gap that arises from the perceived value i.e., how much we need or want something in generating an end product, and how much money can be made from that end product.
From a user perspective, if mining companies can find a way of making or saving money based around water usage, then they will value that water more. They will use it more responsibly because they want to make money, and they will make money because globally there is a scarcity of critical metals and metals prices will continue to rise. But that burden on the locals is still there and will be there no matter the price of metals and minerals.
If putting an arbitrary number on commons means that we will consume them differently, then we need to make sure that the price is right and that the proceeds go towards addressing liabilities created by users at the local level.
The local versus global equation
We’ve used water to illustrate this example but, in reality, a holistic approach towards natural resource management, or stewardship, is required.
Standalone efforts in water management, carbon emissions reductions or land usage will not move the dial enough to make a difference. In fact, it just shifts the burden around.
Innis explained: “Tailings facilities are another example of how overvaluing just one common results in undervaluing everything else. Wet tailings facilities can be the most energy efficient way to deposit and store tailings outside of places like the Atacama Desert.
“But those facilities exist at the expense of the water, the land, the footprint of that facility, at the risk of seepage to downstream communities. That’s why we can’t just focus on one common above all else, because it moves the problem elsewhere.”
That said, there has to be a way of minimising the local burden while still satiating global demand. Can we optimise for multiple variables (each being a common) to create a more sustainable approach to mining?
“You have to overvalue the local at the cost to the global to maintain a business operating in the mining industry,” said Cox, thoughtfully. “We tend to focus on single variable algebraic equations around carbon when discussing commons. We’re worried about global warming caused by carbon; therefore, we must focus everything on that one variable.
“If you look at the impacts of mining, we only impact four or five variables at any material scale: water, tailings, air, land, ore…
“The average carbon footprint of a copper operation is 3.83 tons of carbon per ton of copper produced. From the models that we’ve developed for Chile we can further calculate that for that one ton of copper an operation might consume 90 cubic metres of local water and leave 120 metres of tailings waste in perpetuity. And yet our primary focus is the four tons of carbon.
“If we value the four or five variables, and write a rational value equation based on them, we will very quickly start to track what we consume and shift what we do. But if we just focus on carbon, then we’ll never get rid of tailings dams because they’re still the most carbon-effective way to handle tailings in every place, bar Chile.”
Maintaining a social license
One thing we were yet to touch upon, but which was central to everything we’d talked about, is social licence to operate. Risk to social license has featured on EY’s Top 10 Business Risks to Mining and Metals list for several years now.
“Honestly, I think that’s the reckoning that’s coming to the mining industry based on this local burden versus global good argument,” said Innis soberly. “But it might not be coming to a head fast enough.
“Most mining companies have mines, some operational, some closed, which have been around for a long time. What do you do with an operation that has used a lot of commons already and, to keep up with demand, it needs to continue to use commons?”
It’s a good question. Given mining’s past performance, how can we ensure continued access to commons for the next 20, 50 or 100 years?
“Well first, we need to value the local impact,” said Cox. “Put a number on things, and track what is cared about. Second, start to rank the importance of the commons we impact based on our carbon footprint.
“The global copper mining industry might consume 80 million tons of carbon a year, but from our models we know that the amount of waste it generates (around three and a half billion tons) is greater than all of the world’s municipal waste combined (around 2.0 billion tons). And that’s just copper.
“The difference is that mine waste is going to end up in the backyards of roughly ten million people. The municipal waste ends up in the backyard of seven billion people because everyone generates it, everyone owns it.”
In short, although the industry is trying to improve its environmental performance, it’s focusing on the wrong things.
Innis added: “Providing access to commons for 20, 50, or 100 years goes beyond the mining industry, but mining is a central part of making things better. That’s why we, as academics, are pushing for better valuation of impact on commons at the local scale.”
Getting people to care
The other piece of the puzzle lies in addressing the disconnect between mining and the consumer.
“If you speak to anybody outside of the industry, they know very little about mining or tailings,” said Innis. “That lack of understanding means that they don’t connect the local burden, things like mine waste, to the global climate change movement.
“The Australian wildfires that we saw in 2019-20 were all over the news. Carbon emissions and their impacts are easy to grasp, but mining is not associated with that. For the younger generation, providing that visual, everyday connection is really important. We see push back on other industries that we just don’t see that in mining because there’s no connection to it. That needs to change.”
“We’re all doing our best,” I said. “Even just talking about these issues puts them on the radar,”
Cox agreed: “It’s not our job to necessarily fix everything, but we can start by saying here’s a problem, how do we solve it, how do we look at it, and how do we get the voice out there?”