Today's Mining News

HOW GREEN IS MY MINE?

Australia's devastating bushfires, whether caused by climate change, arsonists or government failure in forest management, have permanently changed the political and social landscape as much as they have changed the physical landscape.
For coal miners in particular the outlook is grim; and they know it. For companies mining other minerals a new set of tougher environmental protection laws are on the way.
But the greening of mining is not just a reaction to a global campaign to limit carbon emissions. There are other changes underway at the corporate level.

Anglo American lobbing a bid last week for Sirius Minerals, a deeply-troubled British potash project developer, is the latest example of a big miner reacting to the demands of its shareholders and the broader community to quit coal production and shift into fertiliser for farmers, and other less controversial commodities such as raw material for batteries and electric cars.

BHP has already made its potash move by sinking more than $2 billion into a project in Canada, with at least another $2 billion required before it makes a formal decision to start selling material from its Jansen mine - with that next step a no-brainer. BHP has also had a change of mind about nickel - once for sale but now a core business because of its newly-discovered green credentials.

Other mining companies and service providers who depend on the investment decisions of industry leaders face the challenge of finding commodities which are both economically viable and not challenged by the increasingly costly set of rules collectively known as ESG - environmental, social and governance.

Iron ore, a seemingly benign business, has had two recent environmental wake-up calls. Firstly, in Brazil with dam collapses which have been linked to climate change, and secondly in Australia where third-party carbon emissions rules seek to make a miner responsible for the activity of steel makers in China.

Goldmining has had multiples environmental events over the years, mainly relating to water management - hands up the readers who remember Esmerelda Exploration and the cyanide spill from the Baia Mare project into the Danube, one of the world's great rivers.

Copper has also had its problems over time and while it is a lot cleaner than a few decades ago there have been awful examples of poisoned rivers, such as Mt Lyall and the Queen River in Tasmania which stopped supporting any form of life.
The list goes on, and gets worse when the spotlight turns to Africa where the hunt for diamonds and cobalt has produced awful stories of pollution and brutality.

Some people in the mining industry choose to not take notice of ESG issues, treating problems as either a passing difficulty or simply not their business.
That head-in-the-sand approach is very much a left-over from an earlier era and while discussions about ESG can be uncomfortable they can no longer be ignored and it might smart to get on the front foot before being forced to change.
Rio Tinto's decision to sell its coal assets was a big step down the greening road. BHP is edging closer to a similar move, and while outgoing management team led by Andrew Mackenzie, reckoned it would be okay to sell thermal coal assets and keep steel-making coal that might prove difficult given the pace of change in an environmentally-conscious world.

Three ESG issues which caught Dryblower's eye last week were:

• Australia's bushfires and the associated drought which has further blackened the name of coal and undoubtedly made life awfully difficult for anyone proposing a new thermal coal mine, such as India's Adani - even if it can argue that India needs Australian coal to provide the electricity needed to uplift an impoverished population.
• Anglo American launching its bid to rescue Sirius and potentially make a return to a business it quit a few years ago, and
• Morgan Stanley, a big investment bank, telling clients in a research note that "decarbonisation" is the key issue for the metals and mining sector because of the way it will impact capital allocation decisions by companies and investors with the immediate issue being "a rush to exit thermal coal".

Quitting coal will be harder for some companies than others.
BHP, as mentioned, will struggle to explain the difference between thermal and metallurgical coal to people unfamiliar with mining - and that's about 99% of the population, so good luck with that campaign.
Glencore will have an even harder task because it has roots in coal as a trader and producer and quitting coal might be too tough an assignment whereas privatising might have more appeal to eliminate most public scrutiny.
Changing ownership will also achieve little in the way of reducing overall coal production because most Asian and African economies want it and they will go on using it to power their economies.

For the big miners as we know them there are game-changing events underway and they can be seen most cleanly in the exit from coal and the rush to develop "green" mining projects which is why potash is the flavour of the month - but with a lot more of that sort of commodity to come.