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Thursday, September 21, 2023

ESG Compliance and Better Technology a “Strategic Imperative” for Gold Miners

One of the key themes that will drive the gold space and broader mining sector in 2022 and the years ahead is environmental, social and governance (ESG) issues.

Encompassing an array of topics, from employee safety to jurisdictional relations to environmental stewardship, ESG has become especially important in the last five years as more investors take these goals into consideration.

In fact, according to a PwCsurvey of 325 global investors, 19 percent are “prepared to take a hit on their returns exceeding one percentage point in the pursuit of ESG goals.”

This trend is not only driving retail investor sentiment, but is also top of mind for the institutional investor class.

In a 2021 survey of 200 institutional investors managing approximately US$18 trillion, MSCI (NYSE:MSCI) found that 73 percent had plans to increase ESG investment, while another 800 individual US investors polled by Morgan Stanley (NYSE:MS) found that 79 percent were focused on prioritizing sustainable investing.

One way that mining firms are beginning to recognize the role of ESG is through technology, specifically tools that allow them to better mine the massive amounts of data they collect.

As Michelle Grant, partner at PwC Canada, explained, companies focusing on growth are looking at ways to accelerate the adoption of transformative technologies like artificial intelligence, analytics and cloud computing.

“It’s a strategic imperative for mining companies to advance their digital agendas,” she told the Investing News Network. “Mining companies have traditionally been seen as laggards in the digital adoption space.”

The partner and national deal leader for the energy utilities, mining and industrial product sectors at PwC Canada noted that the miners her firm has spoken to agree that digital investment is integral in fortifying their businesses.

“And it’s critical for achieving organic growth … for better recovery. It’s critical for operational efficiency, it’s critical for ESG targets,” Grant said.

Major miners leading the charge in mining automation

While the mining sector may have a history of late adoption when it comes to technology, the space is starting to embrace the ways technology can enhance operations and ultimately benefit shareholders.

The sector’s inclusion, adoption and utilization of autonomous vehicles is only rivaled by the security sector.

“What we’re seeing is miners have to build these capabilities to help them deliver, and they need to look at it as part of a holistic transformation,” said Grant, noting that the real question is how miners are using these solutions.

“They should be using them to free up capital, whether it’s enabling more autonomous processes or other things, so that they can better achieve their results,” she said. “ And we’re seeing that.”

At the front of the narrative around the mines of the future is major Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), a global leader in automation currently operating 130 autonomous trucks at its iron ore mines and properties. On its website, the company highlights the increased productivity enabled by this move.

“In 2018, each truck was estimated to have operated on average 700 hours more than conventional haul trucks, with 15 percent lower costs — delivering clear productivity benefits,” Rio Tinto explains. “They also take truck operators out of harm’s way, reducing the risks associated with working around heavy machinery.”

As part of its efforts to reduce its carbon footprint, Newmont (TSX:NGT,NYSE:NEM), the world’s largest gold miner, entered a “strategic alliance” with Caterpillar (NYSE:CAT) to create an automated, zero-emission mining system.

With an initial cost of US$100 million to be spent across two continents, the deal will help Newmont reach its goal of reducing its greenhouse gas emissions by more than 30 percent by 2030.

Its ultimate goal is being net-zero carbon by 2050; in 2020, the gold firm announced plans to spend US$500 million over five years to identify pathways to reduce emissions.

According to a Report Ocean release, the global automated mining equipment market brought in US$10.1 billion in 2021, and is forecast to grow to US$102.2 billion by 2030.

​Trickle-down effect will bring new tech to junior miners

It’s worth noting that the majors aren’t the only mining sector participants looking to bolster their ESG initiatives through automation, and this is a trend PwC’s Grant believes will continue.

“Much like many other industries, the larger players are the ones that tend to adopt first, because they have the budgets to do the bigger, larger transformations, and then it sort of trickles down,” she said.

The PwC partner went on to explain that the boom-and-bust cycle over the last 10 years has allowed majors to get toehold investments in smaller firms.

“I think when the larger companies invest in the technology, and then they’re invested in the smaller, more junior companies — that’s how it starts to trickle down,” Grant said.

This is especially true of the gold sector, which has been at the forefront of many ESG and tech advances in mining.

“We’ve seen it certainly at the majors level; we’re seeing it at the mid-tier level now, so it still needs to trickle down to the more junior level,” she added. “But from a gold perspective, we’ve definitely seen gold miners adopting technology at a faster pace than some of the other commodities.”

Tech advances will be key as gold gets harder to find

In addition to helping companies meet their ESG goals and targets, technology is also helping to maintain current recovery rates, even as deposits become more complex to access. Given that annual gold output peaked in 2018 at 3,667 tonnes, recovery is quickly becoming more important than ever.

For Grant, technological adoption is only one facet of the production conundrum.

“It’s also just thinking through how you manage your inventory? How do you manage your equipment? How do you make sure that your fleet is running optimally?” she said, “And all those things will lead to better recoveries.”

Aside from the production realm, technology has also benefited the exploration side, allowing for more new and historical data collection for better zoning and discovery. There are also tools being developed to help pinpoint drill targets, which is often a large, expensive process for companies.

“I know there is quite a bit of technology out there around how to better assess where drill holes should be made,” said Grant, noting these tools are still in their “infancy.” “Time will tell whether or not it will lead to better discoveries.” She continued, “But I think where we’re at in the technology sphere right now is certainly able to lead to better recoveries, and better operational efficiency, for sure.”

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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