ESG and Renewable Energy
Permitting continues to hamper growth
ESG is a priority across the mining industry as companies strive to lower their carbon footprint and environmental impact. In the face of increasingly high expectations from the general public and stringent regulatory requirements, the mining industry is going all in on steps to lower the industry’s carbon footprint and water usage.
The stringent ESG requirements and long permitting processes to reach production are identified across the board as the greatest challenge to incentivizing investment in the country. In addition, the country’s ideological approach to permitting is a major area of concern for the industry.
In January 2023, Chile’s Committee of Ministers officially denied permits for Andes Iron’s US$2.5 billion Dominga project on environmental grounds. However, the decision was seen as purely political within the mining industry. Rejecting the Dominga project was a campaign promise of President Boric, and he expressed his distaste for the project in his first speech after winning the election.
In a press conference, Nicolas Grau, the Minister of the Economy, rejected claims that the decision would dampen enthusiasm, saying: “When you see the wide range of investment projects that are being developed in the country, you see that this protection of the environment, and more specifically our contribution to the fight against the climate crisis, outside of being an obstacle, will be an opportunity and a catalyst for both national and foreign investment.”
Providing room for positivity in the industry, the Chilean Committee of Ministers approved the environmental permit application for Anglo American’s US$3 billion Los Bronces Integrated Project (LBIP) on April 18, 2023. The environmental regulator had previously rejected the project in May of 2022. The mine, one of the two largest copper operations owned by Anglo American, is over 150 years old and running out of high-grade ore.
Speaking of the approval of Los Bronces, Mauricio Mazuela, CEO of Hitachi Energy, said: “I think we are seeing more dynamism on the part of the government, which leads us to be more positive in terms of potential growth because I believe the government has realized that Chile will play an essential role in global electrification.”
“The transition to green energy will take between six and eight years to gain momentum, after which a significant change will occur.”
Raúl González Rojas, CEO, Saesa Innova
Today, any project seeking approval must provide thorough evidence of its environmental metrics. Aclara Resources is in the process of turning its PEA into a PFS for the Victoria Norte rare earths project. Ramón Barua Costa, CEO, emphasized the project’s environmental approach, highlighting that 95% of the water will be recirculated, and the remaining 5% will be obtained from municipal wastewater.
However, an ESG-centered mine plan is not just about what happens while the mine is active but also what is left behind. Barua Costa said: “There is no crushing, milling, or tailings dam because the extraction process does not create liquid or solid residue. The mine closure process is also crucial, and we have committed to revegetating closed areas as we move forward with native species of trees and flora.”
Many mines in Chile are reaching the end of their life cycle, generating demand for mine closure operations. In 2009, the government first required companies to offer a conceptual closure plan from the beginning of their operations, and since then, regulations have become significantly stricter. Rosario Urrutia, country manager at Stantec, said: "Mine closure is a complex and multidisciplinary issue involving both engineering and environmental aspects."
In today’s regulatory landscape, Chilean mines must be mindful of environmental priorities from the beginning to the end of the mine. It is a task to which they have dedicated themselves with enthusiasm and through hard commitments. Industry leaders seek a permitting regime that recognizes mining’s sustainability focus.
Renewable Energy
On March 16, Chile and Peru formed an alliance to develop a roadmap to promote green hydrogen usage in mining as part of the industry-wide drive towards a carbon-neutral industry. Green hydrogen is one of a variety of renewable energy sources contributing to the Chilean mining industry’s shift towards cleaner energy. Chilean mining companies’ clean power purchase agreements signed during 2022 totaled 40% of their total energy consumption, with that rate estimated to reach 65% in 2025.
Green hydrogen, wind, and solar are rapidly increasing, but they are only some renewable opportunities reaching the market. Each of these areas needs a dramatic increase in investment to meet demand, and there are a significant and encouraging number of projects in the Chilean pipeline.
“The government is strengthening its commitments, especially in the decarbonization process, with well-established goals for 2030. Chile plans to eliminate coal from its power generation and transportation grid and increase the use of gas to completely phase out coal.”
Luis David Rodriguez, Vice President Andean Zone, TotalEnergies
The government could facilitate that pipeline of projects through a variety of steps. Ignacio Mackenna, commercial director at Abastible, called for the government to promote energy exchange with Argentina, saying: “There is cheap and abundant energy in Argentina on the other side of the mountain range, and if the government facilitates the energy exchange, it will alleviate energy pressure.”
Mackenna also expressed the need for streamlined regulation to improve flexibility: “The government must adapt the entire regulatory framework to meet the new commercial reality. In part, this can be done by incorporating digitization of systems to make the energy market more competitive, flexible, and demand-oriented.”
A renewable energy matrix is complex, and as mines move towards renewables, they must prioritize flexibility. For example, solar power is only generated during the daytime, requiring any mining project using solar also to provide alternative energy sources.
Aggreko offers mobile and modular energy solutions that incorporate various energy sources. Currently, the company is in the testing stages of its new energy system at Gold Fields’ Salares Norte project, which combines solar and traditional energy sources. Jose Rodríguez Monje, managing director of Chile and Peru at Aggreko, explained: “The extent to which renewable energy solutions form part of the matrix depends on the weather conditions and other variables.”
Mauricio Mazuela, CEO of Hitachi Energy, acknowledged the complexity of a green energy matrix: “We must push for solutions that address the intermittency of renewable energy parks. Renewable energy alone is not a complete solution because everything must contribute to a stable electrical supply. I believe the country is complying with commitments made at COP. A virtuous circle between the private sector and society drives renewable energy production.”
“In a few years, new technologies such as green hydrogen will reach cost-efficiency curves that allow the large energy consumers in the mining industry to use this energy more broadly. The past four years have seen a boom in the growth of extra capacity for renewable energy projects.”
Thomas Aldunate, Head of Business Development Renewables, OHLA
For a country with abundant natural resources and ambitious renewable energy targets, Chile still has a long way to go. “The so-called non-traditional green energy makes up approximately 20% of the energy matrix, while coal power generation still runs at about 38%. The goal is to reduce that 38% to zero by the decade’s end,” stated Germán Millán, partner at PwC.
“The government is an excellent facilitator of this shift, but there are still some gaps in this support,” said Rodríguez Monje, who believes that staffing in the regulatory area is one such challenge: “The regulatory agency (SEC) requires certifications for all energy installations, and this is a mandatory demand for our mining customers,” Monje explained. “However, we see an unattended need to speed up the process.”
A shift to renewable energy would be transformative not just for the mining industry, but for the country at large. Sergio del Campo, representative director of Sonnedix Chile, said: “As the participation of renewable energy increases in the larger energy matrix, Chile’s independence from shocks in the world economy increases. If Chile can primarily generate power through renewable resource and dispense with imports, it will be less affected by global economic cycles, causing less inflation and more financial independence.”
Article header image courtesy of AMSA