ESG & Renewable Energy
ESG has moved to front and center as industry priority number one
There is currently a dichotomy surrounding global mining; of a world hungry for the metals and minerals required for decarbonization, yet reticent to streamline the permitting and development necessary to extract these raw materials. This is part of the reason why copper prices have remained robust in spite of a global economic slowdown and the Chinese lockdown – there is simply not the supply coming online to meet expected future demand driven by electric mobility.
Potential mining projects have no shortage of financing options at current metals prices. Tthe principal reason development is not happening at the pace required is that the environmental and social permitting processes are more stringent than ever before.
Rohitesh Dhawan, president and CEO of the International Council on Mining and Metals (ICMM) sees ESG as the key theme, describing it as an evergreen topic that arguably has the most important influence on the industry's future. “We have eight years to halve greenhouse gas emissions, at a rate of emission reduction we have never seen before, if we are going to achieve the goals set out by the Paris accord,” stated Dhawan, adding that the technologies necessary to achieve these ambitious targets are all dependent on mining, and the industry must step up not only to supply the amount of metals and minerals the world needs, but also achieve this in the most responsible way possible so that unintended harm isn’t caused in the dash for metals and minerals. “This is not simply an environmental issue, as avoiding the worst impacts of climate change is intrinsically connected to social and economic issues,” he added.
As a world, we have 8 years to halve greenhouse gas emissions, at a rate of emission reduction we have never seen before, if we are going to achieve the goals set out by the Paris accord (…) This is not simply an environmental issue, as avoiding the worst impacts of climate change is intrinsically connected to social and economic issues.”
Rohitesh Dhawan, President & CEO, International Council on Mining and Metals (ICMM)
Alejandra Fernandez Campbell, director of mining at Fitch Ratings, echoed this sentiment, pointing out that 90% of the talks at CESCO week 2022 in Santiago were related the ESG, with companies presenting plans on how to comply with zero carbon emissions as quickly as possible. She commented: “Looking at the progression of environmental standards today in Chile, they are already complex and sophisticated. Any community member can go to court without needing legal representation and raise a protection recourse when they feel that a project is affecting any of their constitutional rights.”
This has caused the environmental process approval to take several years, with large projects averaging almost eight years to be ready for execution. Indeed, environmental issues have stalled a number of high profile mining developments in Chile. In December 2021, Chilean President-elect (at the time) addressed a crowd of supporters, announcing: “To destroy the world is to destroy ourselves – we don’t want more sacrificial zones, we don’t want projects that destroy our country and destroy communities.”
During the speech, Boric promised to oppose Andes Iron’s US$2.5 billion Dominga copper-iron project, which critics suggest could jeopardize a biodiverse coastal ecosystem, and which has been in limbo for over a decade.
“Dysprosium (Dy), Terbium (Tb), Neodymium (Nd) and Praseodymium (Pr) are rare earth elements that have magnetic attributes and are critical components in the production of high-performance permanent magnets, which are important in a world transitioning towards an electric economy.”
Ramón Barúa Costa, CEO, Aclara Resources
In April 2022, Chile’s State Defense Council (CDE) launched legal action against mines operated by BHP, Antofagasta and Albemarle on the grounds of alleged environmental damage in the northern Salar de Atacama salt flats. In May 2022, Chilean environmental regulator Superintendence of the Environment (SMA) turned down the environmental permit application for Anglo American’s US$3.3 billion expansion of its Los Bronces copper mine. The decision followed an earlier recommendation by the Environmental Assessment Service of Chile (SEA) to reject the environmental permit application for the Los Bronces Integrated Project (LBIP) based on an alleged inability to completely eliminate doubts regarding the project’s public health risks. Anglo American said it will work with the SEA and the other authorities to provide further information required to demonstrate the project’s positive impact.
While there have been numerous recent success stories of permitting and development, such as Teck’s QB2, Antofagasta Minerals’ Los Pelambres expansion and BHP’s Spence Growth Option (SGO), the delays to the aforementioned project and fines handed out by environmental bodies illustrate that even companies with large budgets and dedicated ESG teams face an elevated level of compliance today. This is not a passing trend brought in by a left-wing government, but a global movement whereby citizens expect more from industrial actors.
From a sustainability standpoint, one thing Chilean mining has on its side is that the metals and minerals it produces in bulk, namely copper and lithium, are inextricably linked to a greener future. Furthermore, the country has the geological endowment to supply an even wider range of ‘future-facing’ minerals. Aclara Resources, a company spun out of Hochschild Mining, acquired the BioLantánidos Ionic Clay Rare Earth deposit from Chilean private equity firm Mineria Activa, and is looking to produce dysprosium (Dy), terbium (Tb), neodymium (Nd) and praseodymium (Pr) – rare earth elements (REEs) that are components of high-performance permanent magnets.
Ramón Barúa Costa, Aclara Resources’ CEO, explained that as the company gained more knowledge about ionic clays, three distinctive advantages came to light: “The metallurgy is extremely simple, which allows for a simple and environmentally friendly method of mining. It contains highly coveted heavy rare earths, especially those that have magnetic properties; and ionic clays do not contain radioactive material which is normally associated with rare earths.”
Aclara’s objective is to become a strategic supplier of these critical REEs, affirmed Barúa, with the company aiming to produce HREE carbonates with approximately 92% purity that have a low environmental and social footprint.
“Given its high level of solar and wind resources, Chile could become one of the first countries in the world to achieve a zero emission generation fleet once thermal generation is phased out and replaced by batteries and storage technologies.”
Fabrizio Barderi, CEO, Enel Chile
The renewable energy boom
While conducting interviews with major mining companies, one of the most noticeable trends is the concerted push to use more renewable energy to power operations.
At the 2022 World Copper Conference in Santiago, Codelco, BHP and Rio Tinto all highlighted investments and initiatives in the renewables space, with BHP’s president of minerals Americas, Rag Udd, offering an open invitation to companies able to help to advance the elimination of diesel through technology.
Pablo Varela, managing director of Aggreko in Latin America, a company that supplies bespoke energy solutions and storage to power isolated mines, discussed Aggreko’s partnership with Gold Fields at its Salares Norte project, where Aggreko is working on Gold Fields’ first hybrid installation and the largest photovoltaic solar installation in Chile.
“Aggreko has committed to deliver power to the Salares Norte project for the whole life of mine, which is initially 10 years, but will likely be extended. We will start by providing diesel and solar solutions, but have committed to improve the technology as the availability of newer innovations comes to the market.”
Expanding on the type of solutions being evaluated for installing batteries at Salares Norte, Varela revealed that Aggreko is considering installing virtual gas pipelines to the site. “We currently have several small power plants running at different sites and already began construction on the main power plant which will first run on diesel while we are working on the environmental approvals to install the solar PV solution,” he said, adding that ironically it currently takes longer to attain a solar approval than a diesel approval.
One of the biggest players in the energy sector, Enel, has a gross installed capacity of 8,200 megawatts (MW) in Chile, which represents 28% of the total installed capacity in the country, according to Fabrizio Barderi, CEO of Enel Chile. “70% of Enel’s generation capacity in Chile is CO2 emission free, given that a large portion comes from hydroelectric, wind, solar, and even geothermal plants,” revealed Barderi, adding that the company intends to install an additional 3,300 MW capacity over the next three years, which will increase its CO2 emission free generation to 80% of production by 2024.
Giving examples of Enel’s work with mining companies, Barderi cited a collaboration with Anglo American to develop the first electric depot in the mining sector in Chile, which supplies energy charging services to 17 E-buses that transport Anglo American’s employees from the city to their mining operations. Barderi went on to mention Enel’s partnership with SQM to bring the first large tonnage E-truck to the Chilean market, commenting that for Chile to fulfil its potential to become a zero-emission country, it is important to push forward the consumption of electrification.
On the topic of alternative power sources, Juan Andrés Méndez, general manager of energy solutions at Gasco, remarked that waste energy recovery, something Gasco has developed in other industries, could make a big impact on mining. “Mining companies have a large accumulation of waste, such as wood pallets, that we can combust in an environmentally friendly way to avoid being disposed or transported. We can also work with food waste that through anaerobic processes can be treated and returned as an odorless fertilizer and biogas,” he said, elaborating: “The latter, in combination with LNG or LPG, can supply the entire demand of hot water for a mining camp. We also supply LNG or LPG motors that generate power more environmentally and cheaply than traditional generators.”
With the energy transition in mind, companies are rebranding to better represent the focus and direction their business is heading. In October 2021, Hitachi ABB Power Grids became Hitachi Energy. Mauricio Mazuela, Hitachi’s general manager for Chile, explained why this is relevant in a Chilean context: “In the coming years, about 50% of the power in Chile will come from the sun and the wind, and energy is now being seen from another point of view by the population. That is why we evolve our branding; if the world of energy is evolving, we must evolve.”
Mazuela remarked that there should be a country-wide commitment to install clean energy, because new lines and plants are needed: “Supplementary systems, like solar farms, as renewable as they might be, will not yield sufficient energy during the night. Therefore, a hybrid mix of different energy sources is necessary.”
Another company to have rebranded in 2021 is OHLA (formerly OHL), signifying the new owners’ focus on sustainable construction and renewable energy projects, such as wind and solar design engineering, including battery storage systems, explained Thomas Aldunate Kunstmann, business development manager renewables Latam – industrial division. Kunstmann pointed out that according to the International Renewable Energy Agency (IRENA) Chile and Mexico have the world’s highest levels of sunlight, and OHLA uses bifacial modes to transform this sunlight into energy, as well as using string inverters to enhance operational reliability and efficiency at the plants, which reduces prices. He also echoed Mazuela’s statement that big mining companies must utilize a hybrid combination of sources because they require constant energy.
Discussing the themes driving demand for renewables in Chile, Kunstmann highlighted water stewardship: “Companies utilize desalination to use water from the sea, which requires an enormous amount of energy. Renewable energy sources can facilitate this process and will gain traction as more desalination projects are built.”
Image courtesy of Enel Green Power
“Mining companies have a large accumulation of waste such as wood pallets, that we can combust in an environmentally friendly way to avoid being disposed or transported. We also work with food waste that through anaerobic processes can be treated and returned as an odorless fertilizer and biogas. The latter, in combination with LNG or LPG, can supply the entire demand of hot water for a mining camp.”
Juan Andrés Méndez, General Manager – Energy Solutions, Gasco