While technologies will open up new ways for mining companies to optimize the value of existing resources or allow access to new ones, they are not the core business of miners, and therefore can be seen as unchartered territory when incorporating them into business models, processes, and potential social and environmental externalities.
Companies like EY, for example, help clients to navigate these challenges and opportunities by applying their Now, Next and Beyond framework, which serves as a guide for enterprise-wide, digitally enabled business transformation. Too often, business transformation is composed of unconnected pockets of experimentation, and this framework helps companies unify these efforts across a company. Theo Yameogo, co-leader mining and metals at Ernst & Young, observed: “Most companies are now less reluctant to adopt digitally enabled platforms for supply chains, with an uptick in demand for things like human resource information systems for payroll and employee management. This is a major shift compared to the industry adoption rate in recent years.”
Yameogo suggested that the pandemic has created an opportunity to rethink operating models, with companies exploring capabilities to reduce the gaps between physical and digital. “We hear about more discussions and appetite in equipping key assets and activities with the right technologies that would enable visibility in terms of monitoring performance and even remote operations when the context is appropriate,” he explained.
Pierre Labrecque, principal consultant and practice leader at SRK Consulting Canada, also noted a substantial uptick in companies embracing new technology to improve project economics as deeper, lower-grade deposits become more common. “In the past, around seven or eight out of the 10 initial digital twins that SRK modelled for mining companies would confirm that a project would meet the desired production rate, but in the last five years this has dropped down to two or three out of 10… Companies need to start looking at new technologies, primarily automation of material movers like loaders, LHDs or trucks… Most of the new projects we are working on will only work if this is enabled”.
“As long as investors are demanding ESG friendly practices, companies will adopt for fear of being left out of future investments as well as understanding that it is the right thing to do both for the community and the company. If a company cannot access investment dollars because it does not have a well-structured and controlled ESG program, then that is bad business on their part.”
Daniel Ricica, Partner – Energy and Natural Resources, KPMG
ESG at the forefront for investors
In May 2020, Rio Tinto triggered a public outcry when it blew up parts of the Juukan Gorge in Western Australia’s Pilbara region as part of an expansion to extract US$135 million worth of iron ore. The fallout after the destruction of the Aboriginal heritage site caused CEO Jean-Sébastien Jacques and iron ore head Chris Salisbury to step down, and will likely result in major compensation after an Australian parliamentary inquiry presents its findings to the Senate.
“The recent outcry over what happened in Australia at the Juukan caves with Rio Tinto raises a broad concern about whether standards are being respected, and that investors have really understood what they are being told,” commented Adam Matthews, investment team director for the Church of England Pensions Board, and co-chair of the Investor Mining & Tailings Safety Initiative.
The latest high profile mining disaster came less than 18 months after the Brumadinho tragedy in Brazil left 259 dead after a tailings dam collapsed at a dormant iron mine operated by Vale. In fact, it was this catastrophe that led to the creation of the Investor Mining & Tailings Safety Initiative, led by a group of asset owners and fund managers, including the Church of England Pensions Fund, the New Zealand Superannuation (NZ Super), as well as Swedish and Dutch pension funds. The current group now controls over US$24 trillion in assets, according to Matthews, who stressed that “investors do not invest in a vacuum” and sector-wide reform is necessary if mining companies expect to retain investment.
This sentiment was echoed by Daniel Ricica, partner energy and natural resources at KPMG Canada, who observed that, as long as investors are demanding ESG friendly practices, companies will adopt for fear of being left out of future investments. “If a company cannot access investment dollars because it does not have a well-structured and controlled ESG program, then that is bad business on their part,” he stated.
In the wake of Brumadinho, the International Council on Mining and Metals (ICMM) conducted a multi-stakeholder review with investors and the United Nations Environment Program (UNEP), which resulted in the Global Industry Standard on Tailings Management being launched in August 2020.
The investigation led by the Investor Mining & Tailings Safety Initiative revealed that around a tenth of tailings dams – 166 of the 1,635 dams studied — have had safety issues in the past. Considering there are over 3,500 tailings dams globally, the challenge at hand will require buy-in from all parties, and not just the larger ICMM member. Tom Butler, ICMM CEO, weighed in on the subject: “I have spoken to a number of companies and private equity funds who invest in smaller companies who have made it clear to the companies they invest in that the Standard must be adhered to.”
Butler also added that the UN has had a lot of interest in the Standard from countries who want to make sure that this is applied. For Doug Morrison, CEO of the Centre of Excellence for Mining Innovation (CEMI), the industry must recognize that the increasing delay in getting approval for mining projects is almost always related to environmental impact. Moreover, the failings at Brumadinho and Samarco were the result of a flawed approach to tailings management. “Nothing about the nature of these tailings ponds was going to change by simply leaving them there. If you rely on human beings to execute perpetual care and maintenance for decades, if not centuries, eventually mistakes will be made.”
Morrison suggests that the two mainstream methods of tailings management – subaqueous deposition and dry stacking – are set up to fail as they require perpetual human intervention. CEMI’s Mine Tailings Consortium has come up with a radically different way to manage tailings, by splitting the waste stream into two in an SST process (separation, sequestration and treatment). “Secondly, we were looking for a useful way to use the benign tail that is left behind, and once the contaminated material has been recycled or stored, then the benign material can be used for agricultural purposes,” elaborated Morrison, who stated that the value of production in the time companies would save obtaining a social license to operate would dwarf the incremental increase in operating costs to maintain the SST system. “The net benefit to the industry would be significant from both a sustainable and a financial standpoint,” he concluded.
“There are very few mining projects where water is not a key social and environmental issue, or even the main one. Understanding water is key to maintaining and securing the support of local communities, avoiding unanticipated capital expenditures and limiting post-closure liabilities.”
Stephan Theben, Mining and Minerals Sector Leader – Canada, SLR Consulting
Navigating water regulations
Typically, as mining projects become more complex and markets more knowledgeable, increased community and regulatory engagement is involved. As a result, companies must be skillful in managing water because it affects the economics of the project and it is essential in gaining social license to operate.
Stephan Theben, mining and minerals sector leader Canada at SLR Consulting, a firm that specializes in integrating the mine operators, engineering and ESG components of a project, stressed the importance of having a good water management strategy: “There are very few mining projects where water is not a key social and environmental issue, or even the main one. Either there is not enough water, often the case in South American projects, or there is too much water, as is the case often in northern climates such as Ontario and British Columbia. Understanding water is key to maintaining and securing the support of local communities, avoiding unanticipated capital expenditures and limiting post-closure liabilities,” he said.
When asked how the mining sector’s view on water has changed in recent years, Eric Lannegrace, founder and managing director of minera Solutions, replied: “Water treatment is now taken seriously and upstream of any project. It is a result of having more regulation. It is also that there is a greater sense of awareness of those environmental issues that threaten mining companies. They are tackling the challenge head on and trying to take the best course of action.”
For this reason, demand for minera Solutions services remained robust throughout the pandemic, as the number and quality of water treatment projects across Canada continued to increase throughout 2020.
Inevitably, one of the factors driving increased diligence pertaining to sustainable water practices is the implementation of more stringent regulations. The metal and diamond mining effluent regulations (MDMER) are taking affect in 2021, and this will limit unionized ammonia. This means that if Canadian mines discharge unionized ammonia at a concentration higher than the new limit, mine owners will have to make additions to their treatment systems, which could include adding new filters. “Mining companies are implementing more and more biological systems in order to treat for this ammonia. As always, because of the nature of the business, they have a lot of total suspended solids (TSS) that are in the water. Overall, there are a lot of opportunities related to TSS, metals and ammonia in Canada,” Lannegrace acknowledged.
Image courtesy of Great Bear Resources