May 7, 2024

Accomplishing more: What next steps in effective climate governance should Canadian mining companies be initiating?

Dependable board oversight, integrated climate strategies, adequate risk management, honest targets and metrics, and consistent and comparable disclosures should now be a usual part of business for mining companies in Canada. While major mining companies have already implemented considerable climate governance practices and sustainability initiatives, stagnation is not an option. Major mining companies are well placed to accomplish more in their journey to net-zero and sustainability.

Our new guide recognizes five key areas where major mining companies can progress to the next level of climate governance. This blog is an excerpt from the guide.

More detailed target-setting and a clear plan to achieve them

Although setting targets and metrics can be challenging, and measuring and reporting on the company’s performance in terms of those targets can feel cumbersome, mining companies’ efforts are not in vain. In a 2022 report on the performance of the global mining sector, there is a clear demonstration that energy use and intensity, environmental expenditures, and GHG emissions improved over the period from 2011 to 2020. Specifically, GHG emissions decreased 0.9% from 2011 levels and GHG emission intensity decreased annually by 4.0% on average. This is a positive result considering the fact mining companies face more complications than other sectors in achieving net-zero emissions due, in part, to the fact that most mining sites experience higher emissions towards the end of the site’s operations from deeper operations and deteriorating grade. This presents mining companies with a unique challenge when setting net-zero targets and demonstrating progress towards those targets.

Mining companies need to do more to demonstrate their commitment to the targets they have set by providing more minutiae on the interim targets and the comprehensive action plans they are using to attain their long-term goals. The targets set by companies should be specific and plans must acknowledge any plausible setbacks or trade-offs, such as the increased energy use in new water-saving technologies. The focus should be given to data collection and processes to ensure the integrity of targets and their disclosure, as it is likely that they will be required to pass audit requirements in the future.

Most Canadian mining companies should already be measuring, monitoring, and reducing scope 1 and 2 emissions as a top priority. Many mines are installing renewable energy sources for their mining sites and upgrading their equipment to zero-carbon fuel alternatives. In 2022, 52% of Anglo American’s electricity came from renewable sources. There has been enhanced investment in renewable sources since it has become cheaper. Rio Tinto and Glencore have established wind-generation facilities at some of their Canadian mines, and IAMGOLD has built solar farms at their site in Suriname and Burkina Faso. By investing in their own renewable energy sources these mines have secured a revenue source beyond the life of the mine.

That is not to say the transition is easy as it can be challenging to negotiate for the right size of land and location on which to build these renewable energy facilities. Moreover, mines that do not develop their own renewable energy sources may find it difficult to access renewable energy at the scale needed for their operations. Low-carbon equipment alternatives also pose obstacles for mining companies. Electric vehicles are costly, unreliable, and difficult to get serviced in remote jurisdictions, although there has been success in the use of battery-operated vehicles. Newmont has replaced their underground diesel trucks at the Borden Gold project with battery-operated electric ones and is supplying other mining companies with battery-operated equipment.

These initiatives are a fantastic start, but they are not enough to eliminate scope 1 and 2 emissions. Significant emissions remain in the ventilation, heating and cooling of mines, backup generators, and the processing and transportation of minerals and metals. Proactive action to address these additional sources of emissions in mining operations can be beneficial to mining companies seeking further equity investment. There are already moves in the right direction: Rio Tinto and BHP Group have announced their intention to purchase electric locomotives to haul their iron ore in western Australia; Fortescue Metals is in the process of developing the “infinity train” which will use gravity to regenerate the electricity it needs to continue running, thus eliminating the need for recharging; copper miner Oz Minerals is in the process of trialling an electrified diesel truck that can haul the same weight as a triple road train; and Lundin Gold has implemented a ventilation-on-demand system that only supplies ventilation where needed reducing energy consumption and, consequently, their scope 2 emissions.

Scope 3 emissions present the greatest challenges and opportunities for the Canadian mining sector. On the one hand, scope 3 emissions constitute the bulk of mining emissions (up to 95% for the mining of some commodities). However, there is an advantage to be had for mining companies who take the initiative on the monitoring, management, and reduction of scope 3 emissions. They will not only achieve reputational gains with investors and the public but also acquire a competitive advantage. Very few International Council on Mining and Mineral (ICMM) members have set scope 3 emissions targets, despite collectively pledging to achieve net-zero by 2050 on scope 1 and 2 targets.

Mining companies are actively exploring the possibilities of reducing scope 3 emissions through circular economy initiatives and more sustainable supply chains. A lack of demonstrable data and unpredictability of the development and accessibility of low-carbon technology can make tackling the last of these emissions difficult. The abatement of scope 3 emissions will require substantial operational changes to the mining sector with greater collaboration with clients, suppliers, and government agencies to ensure a panoramic view of the data across the value chain and mitigate against accusations of greenwashing. Collaboration offers mining companies more accurate and complete data, an opportunity to foster a more carbon-neutral mindset throughout the value chain, and more comprehensible and consistent reporting to investors.

The preponderance of mining companies has committed to the net-zero target by 2050, however, research by EY demonstrates that many of those companies have not made the requisite investment to achieve that goal. Adaptation initiatives can help mining companies achieve their net-zero targets and provide more clarity on where greater investment is needed.

Mining companies must not set unachievable targets as this could inhibit investor confidence. Many mining companies have admitted to having to reassess their decarbonization strategies due to problems in meeting their interim targets. Companies should be clear on their action plans to achieve their goals. Those action plans should be incorporated into the strategy of the company and actively overseen at the board level. Sharing the company’s strategic action plans for achieving their interim and end targets with investors helps to gain investor trust and demonstrates a thoughtful and calculated approach to decarbonization targets and metrics.

For the mining sector, carbon capture and storage (CCS) is an essential tool to achieve net-zero emissions by 2050. Tailing site facilities of deposits usually contained in ultramafic rock, such as nickel, diamonds, and platinum-group elements (PGEs), offer an opportunity for CCS as they can absorb large amounts of carbon. However, the use of CCS can be contentious as it extends the use of fossil fuels and creates opacity around the actual volumes of sequestered carbon, with some seeing it as a greenwashing exercise. Therefore, it is advised that mining companies use CCS sparingly and be prepared to provide detailed disclosures on their utilization. The same applies to carbon credits. Carbon credits can provide mining companies with flexibility in managing their emissions and reaching their net-zero targets, however, too much reliance on carbon credits may raise accusations of greenwashing. If mining companies use carbon credits, they must form part of a larger decarbonization action plan. Therefore, both CSS and carbon credits should not form part of the main solution to a mining company’s move to reduce GHG emissions and should only be used as a last resort.

Data collection and measurements

Comprehensive data collection and monitoring of climate-related targets and metrics is one of the chief challenges for companies in all sectors of the economy. Companies must establish a credible baseline against which any progress can be measured. The baseline forms the foundation for reliable and comparable reporting on targets and metrics and provides trust and assurance to investors that the company’s target-relevant action plan is viable. Investors expect more quantitative evidence of climate-related performances throughout the life of the mine. This can be difficult to obtain, especially scope 3 upward and downstream value chain emissions. Smaller partners, clients, and suppliers may not have that information in place which can hinder a mining company’s ability to adequately disclose. Financial limitations can also be a barrier to accessing and gathering reliable data. However, these challenges must be overcome if mining companies are to avoid reputational damage through incorrect and insufficient data leading to poor quality disclosures.

One possible avenue to better data for mining companies is the Natural Capital Accounting for the Mining Sector: Beenup Site Pilot Case Study. Natural Capital Accounting (NCA) “is an environmental accounting framework that provides a systematic way of measuring and reporting on natural capital assets (stocks) and ecosystem services (flows).” Although the case study was focused towards the rehabilitation of a closed mining site, it does offer some possibilities for measuring the environmental impacts of mining which can be adapted to an operational site.

Ultimately, no matter what course a mining company takes towards retrieving better climate-related data, it is crucial that the board of directors has oversight and is actively engaged in the process. The board must understand how the data is collected, what the data limitations are, and be ready to support the implementation of strategic plans to overcome those limitations in the future. Moreover, when disclosing that data, the board should ensure that the necessary audits have been conducted and that any limitations are openly divulged to investors.

Adaptation initiatives

Due to the diversity of mining operations, adaptation initiatives will vary depending on the metal or mineral being extracted and produced, and the geography of the mining sites. Adaptation initiatives should be identified following an assessment of the climate-related risks and opportunities that affect the mining company and its sites. Reliable climate modelling to support climate-related decision-making can be an obstacle for mining companies at present; however, adaptation measures should aim, wherever possible, to reduce current climate-related risks, benefit from current and future climate-related opportunities, and diminish the impact of future climate-related physical and transition risks.

To achieve this the board and senior management should engage with all adaptation ideas from employees at all levels of business. This will ensure that adaptation initiatives extend to all areas of risk within the business. Some possible areas of adaptation for mining companies include:

Of particular focus is water stewardship and tailings which are not mutually exclusive. With water shortages a keen concern in the global mining sector, adaptive ways of managing water usage are essential. Similarly, the proper management of waste products from mining activities to prevent environmental disasters and water contamination has been a strong consideration for investors over the years. In tackling these challenges, the first step is for boards to familiarize themselves with MAC’s Tailings Management and Water Stewardship Protocols. There has been an array of industry-led adaptation initiatives that reduce freshwater usage whilst managing waste products, eliminate contaminants from tailing sites that could leak into freshwater sources, and enhance the possibility of successful reclamation of end-of-life mining sites.

One initiative is transitioning from tailings ponds to dry stacking or burying waste. This could reduce the likelihood of wet tailings disasters and allow for the reuse of that water. BHP is currently trialling two technologies at Olympic Dam in Australia to assess the possibility of reusing waste facility decant liquor to eliminate the need to store them in tailings dams and ponds. Moreover, BHP has switched to using desalinated water that is produced using 100% renewable sources at their Escondida site in Chile, preserving the precious groundwater. Similarly, Anglo American is currently trialling the recovery of water from coarse particles in their waste facilities amounting to a 30% saving in water. Suncor is implementing the Passive Aquatic Storage System (PASS) that uses chemicals to draw water out of their tailings for safe release into the environment. The treated tailings will then form part of the site’s reclamation as water is introduced to the tailings creating an aquatic enclosure.

The Mining Microbiome Analytics Platform (MMAP) project is a collaboration between the University of British Columbia, Teck Resources, Rio Tinto, the Centre for Excellence in Mining Innovation (CEMI), and others to identify, through genome sequencing, natural microbes that can replace chemicals during the extraction process and aid in the rehabilitation of the mine site after its closure. Such microbes could allow for the further extraction of copper from slag heaps and prevent toxic levels of selenium from entering the water system from mine waste. The Giant Mine Remediation Project is seeking to combat arsenic trioxide from leaking into the Great Slave Lake from frozen blocks of toxic slurry. The 237,000 tonnes of the arsenic-containing slurry were stored in underground chambers to freeze, however, the projected increase in temperature could result in the liquefaction of those frozen toxic blocks. The implementation of the Perpetual Care Plan will look to observe, monitor, and manage an adaptive plan to mitigate the release of toxins from the site.

Circular economy

A circular economy converts linear operations into circular operations to minimize waste, reduce emissions, and maximize value through by-products created from waste that would normally be disposed of. Circular operations can take the form of the recycling—i.e. the collection and recovery of minerals and metals through various processes—of mining waste (such as slurry and tailings), retrieval and reuse of manufactured waste, and the recycling of minerals and metals from end-of-life (EOL) products. The circular economy requires mining companies to look at possibilities internally and along the value chain. By focusing on the value chain, mining companies can take ownership of their metals and minerals throughout their life. This has reputational and financial benefits as companies that can demonstrate engagement in the circular economy on a value-chain scale will gain a front-runner advantage. Glencore has this advantage already. They have been processing and recycling electronic and battery waste for the past 30 years and now seek to test the recycling of more complex materials. Anglo American is moving in the right direction by trialling new chemicals on their tailings to help extract more minerals out of the mine’s waste whilst further stabilizing the tailing facilities.

By exploring how they can recycle, refurbish, repair, reuse, and repurpose existing infrastructure and waste products, mining companies have the opportunity to exploit the reputational benefits and capital gains that can arise from it. BlackRock, in collaboration with the Ellen MacArthur Foundation, seeks to steer investment towards companies that are actively engaged in the circular economy. Failure to implement circular economy initiatives could result in missed growth opportunities through greater investment and additional value from waste. For example, upcycled mining waste can be used as an additive for soil in the rehabilitation of mining sites, in the construction of roads, or by other companies to process other materials. However, it would be incumbent on mining companies to check their waste first for unprocessed material as there is an estimated $10 billion of gold remaining in Canadian gold mining waste. Extracting minerals and metals from waste tailings can, therefore, increase the minerals extracted whilst reducing waste.

As metals and minerals are not completely depleted through use, there is the potential for them to be recycled several times. Consequently, the upscaling of mineral and metal recycling offers a secondary supply of these products contributing to greater security in the availability of critical minerals and metals whilst alleviating pressure on the virgin material supply. However, even if the EOL recycling rates on minerals and metals were to reach 100%, the exploration and mining of new sources of minerals and metals will continue to need high levels of investment to meet demand. Figure 4 demonstrates the demand for primary and secondary metals and minerals by 2050 if recycling rates were scaled up to 100%, thus emphasizing that recycling will not substantially impact the demand for primary materials.

Different metals and minerals present varying degrees of recycling opportunities and geography can play a large part in the ability and cost to recycle. Established waste streams that contain widely used metals and minerals have proficient recycling processes. Figure 5 demonstrates that EOL recycle rates for base and precious metals are reasonably high. This is due to the past and present bulk use of base metals—making them easier to collect—and the high price of precious metals. However, this is not the case with lithium and the rare earth elements (REEs) needed for clean energy technologies. This is expected to change with an influx of electric vehicle (EV) battery waste anticipated after 2030. The total battery waste from EVs sold in 2017 will amount to 250,000 tonnes. By recycling the minerals and metals in these batteries, they could contribute a secondary supply of 10% of the nickel, lithium, cobalt, and copper required by the new battery market.

It is worth noting here that the recycling rate of elements can be impacted by several factors. One is the possible recovery time due to the long-term nature of the infrastructure they are used in. Another is the current recycling processes that are available. Certain recycling methods can deplete the level of the element, thus negating the time and money it would require to extract some elements. This is the current issue with extracting lithium from lithium-ion batteries. Some elements are recyclable but not economically feasible to do so, due to the complexity of the recycling process required. For instance, to recycle new iron and copper alloy 50 different materials must be separated.

Innovations in technology are perpetual and these challenges will be overcome in time. There are several ways that the recycling of critical minerals and metals will improve. Analysis of global stocks of these elements is underway and this will provide a deeper understanding of secondary mineral stocks and demand. Directors of mining companies should keep themselves constantly informed of any developments that can bring their firm into the circular economy of the future.

Greater consideration for local community impacts

Mining companies must move beyond regulatory requirements in their efforts to build bridges. They must demonstrate through deeds and actions their commitment to fostering cultural awareness and advancing truth and reconciliation. Mining operations need to learn from past issues and demonstrate meaningful respect for the importance of the land to the people who reside there. However, it is also important that any consultations with Indigenous Peoples and local communities are sincere and that any concerns are appropriately heard and actioned.

Mining companies need to take a two-pronged approach to community impact assessments. The first is the effect that ongoing operations have on local communities and the second is planning for the mine’s closure in the future and ensuring that COIs receive a net benefit from the mine’s presence.

Ongoing Operations

The principle of ‘Free, Prior and Informed Consent’ (FPIC) as recognized by the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) should inform mining companies’ engagement with COIs. BC, home to over 800 major and junior mining companies, is the first Canadian province to put UNDRIP into law with the Declaration on the Rights of Indigenous Peoples Act. Often mining sites form part of the heritage of local Indigenous Peoples who have a deep connection and reliance on the land for their physical, economic, and spiritual wellbeing. Consequently, FPIC instills a universal right to self-determination for Indigenous Peoples, which requires any proposed projects near or on their land to gain their express consent, and provides the Indigenous Peoples with the power to negotiate on the design, operation, observation, and evaluation specifications of those projects.

There is a need for greater consultation and collaboration with COIs from the mine’s nascency through to its termination. This can create value for the COIs and the mine. The traditional awareness and understanding that Indigenous Peoples have for the land indicates they can provide the mine with ample aid in designing, operating, and sustainably closing the mine. Indigenous Peoples can provide useful information on how to preserve the surrounding natural habitat and regenerate the mine site in the future. South32 worked with the University of Wollongong researchers and the Illawarra Local Aboriginal Land Council to help restore the land on Mount Kembla using traditional Aboriginal knowledge of the land.

Mining companies have the opportunity to assist COIs with the climate-related problems they face in the future, whether that is through renewable energy supplies or better water stewardship projects that enhance the freshwater supply in the surrounding area. Mining companies can include COIs in the climate resilience and adaptation journey of the mine by sharing climate-related data with the community to aid in local preparation for weather events and plan emergency contingencies. Ideally, the mine would work with COIs to ensure mutual survival over the long term by weathering climate-related risks together. To achieve this, mines need to be prepared to engage more meaningfully with COIs. This can help to avoid situations where a mining company’s adaptation initiatives have a negative, unforeseen impact on the community. For example, adaptation to a mine’s port facilities to better manage sea level rises and coastal erosion should engage the local community to ensure those adaptations do not increase local flooding, harm sea life, or create a hindrance to a community’s access to the coast.

The best way for mining companies to increase consultation and collaboration is by creating an impact framework based on stakeholder value that spans the entire value chain. This impact framework can help companies recognize, understand, and report on their Indigenous relations and the value they add to COIs. This includes considering the impact mining operations have on air and water quality, noise and vibrations, and the long-term health of COIs.

Mine Closures

Mining companies should have full consideration for the closing of the mine at the advent of the project and ensure ongoing decisions are made with the impact on mine closure options in mind. At present, there are over 7,500 inactive mines in Canada, and that is excluding data from BC, Québec, and Yukon. With just under half of those considered to be Class A, B, or C, there is the potential for substantial harm to the environment, and the health and safety of the public. As part of this consideration, mining companies should incorporate climate change and engage with COIs to ensure that the mine leaves behind a constructive legacy upon closure that benefits the surrounding community over the long term. The complexity of mine closures makes the consideration of repurposing and rehabilitating the environment an additional challenge; however, there is assistance to navigate this challenge. The Leadership in Sustainable Mine Closure Program formulated by the University of British Columbia in tandem with Rio Tinto, Curtin University, and EY provides a sound standard on what an effective mine closure should look like, including how it can be achieved, and variables that should inform the decision-making process on the closure of the mine throughout the value chain.

A sound mine closure requires that the rehabilitated land be capable of supporting the use of that land with a low risk of pollution-related incidents. The Australian Department of Environment and Heritage Protection requires this risk to remain low for 30 years following the mine closure. A mining company’s ability to ensure land rehabilitation for such a length of time is inhibited by climate change. Climate change introduces uncertainty on extreme weather-related events and climatic fluctuations that could result in the rehabilitation’s failure.