The author of a landmark “triple bottom line” study that got an initial public airing at the recent Electric Mine 2024 conference sees deeper data transparency feeding more compelling environmental, social and governance financial models that have a bigger bearing on mine investment decisions in future.
Adaptus technical director Michael Marinovich spoke at the Perth event with Tess Lewis, senior decarbonisation advisor with Australian lithium, nickel and copper miner, IGO.
IGO suspended work on the significant Cosmos underground nickel project in Western Australia earlier this year due to spiralling costs and soft commodity prices. This month it released an economic study on electrification of the diesel mining fleet at Cosmos. The study showed, at this stage, electric vehicles fall short of diesel incumbents on purely financial grounds.
About a year ago IGO also engaged Adaptus to look more holistically at the electric-versus-diesel capital equipment equation.
Senior IGO managers have spoken publicly about safety risks posed by diesel vehicle emissions, particularly in underground mines, and other speakers at the Electric Mine conference dialled up the volume on this issue.
The forum also heard about a raft of EV trials and infrastructure developments aimed at helping miners meet ambitious decarbonisation targets.
And it heard that the industry’s attempts – and individual company moves – to arrest a broad talent drain would hinge increasingly on the level of sophistication of moves to address long-standing health, safety and environmental concerns.
“The [Adaptus] analysis demonstrates that a comprehensive approach that considers both financial and ESG factors can lead to better decisions,” Lewis said.
“In this case, by electrifying the fleet, the cost disadvantage of electric vehicles was reduced and approached parity.
“The study provided valuable insights into ESG factors most relevant to fleet electrification decisions, such as diesel particulate matter health impacts, safety benefits from reduced overall maintenance, heat impacts and the social cost of carbon.
“This highlighted the hidden negative externalities associated with a traditional diesel fleet.”
Marinovich said: “Anticipating higher future energy costs and an increasing focus on sustainability, electric vehicles become superior to diesel, resulting in millions of dollars of potential financial and ESG benefit.”
The Adaptus modelling added new meaning to the oft-used “future-proofing” term used to describe steps being taken by some companies to mitigate various identifiable risks.
Marinovich said structured decision-making (SDM) and environmental economics had been part of project studies in industries such as oil and gas, defence, public water management and healthcare for some time.
“Adaptus consultants have previously applied these methods and tools to several early-phase mine feasibility studies, and decisions like water disposal and reuse in the Pilbara,” he said.
“The part that is a bit more unique in this [mine electrification] context is incorporating the economic valuation and environmental economics into a cost benefit model.”
By ascribing credible cost ranges to ESG variables such as diesel particulate matter (DPM) emission, or PM2.5, nitrogen oxide emission (NOx), maintenance safety, noise, heat and social carbon impacts, Adaptus was able to model a range of what-if and sensitivity scenarios for IGO.
As with life-cycle EV costs and long-term electrification project NPV assessments, vital data is thin on the ground in some places. Marinovich is optimistic change is coming on this front.
“The issue we’ve had on studies up to this point is about public availability of published data for DPMs, NOx and so on, in underground mines,” he said.
“This was one of the reasons why we had to go for an emissions factor and estimated dollar-per-tonne-emitted approach, rather than a site-specific assessment of impacts.
“We need more published data.
“We need to get real measurements of the levels under business as usual [current diesel fleet] conditions, and real measurements in scenarios involving pilots of battery electric machines and be able to compare those.
“Hopefully what we’ve presented inspires others to start presenting a bit more of the data and start thinking more about these issues.
“For now, though, putting a dollar value on something that was previously intangible is good because you get debate. I saw that discussion at the conference.
“I was also trying to talk about the decision model that we have as a communication tool, not a black box that you put data in and spit the answer out straight away.
“It’s a communication and discussion tool.”
Marinovich said timing had historically been a key factor in accurate pricing of ESG factors such as those addressed in the IGO study.
“Through industrial history as issues emerge, attention grows, and with that attention comes regulation, which usually leads to costs to address them.
“Examples from the past would include asbestos, general health and safety over the last several decades, and more recently greenhouse gas emissions.
“In a sense there are already financial costs being incurred to address DPMs through measures like ventilation.
“Where this study differed was that it expanded the lens to ask, who else pays for DPM risks in the long run, and who benefits from DPM reduction?
“Because DPM risks are a much longer-term health issue than, say, a coal mine gas explosion, it’s still emerging what the long-term risks are and what the true costs to workers are down the track.
“Those effects are still an economic externality right now but that may change one day.”
Marinovich said he was seeing a “pretty strong buy signal here that we’ll see a few more studies”.
“IGO had their set of risks and benefits,” he said.
“Other operators that have slightly different ones might be trying to assess different technologies in their mine to decarbonise. They know there’s all this other benefit they could be unlocking but they don’t know how to do right now.
“We can definitely help with that.
“For us and for the industry, I think getting more knowledge across different operating contexts is also really important.”
Lewis suggested framing the Cosmos electrification “problem” – not just the lagging economics of BE fleet integration in mining but “systems that value financial or NPV modelling above all else” – as an opportunity to “find ways to say yes” created a platform for the thorough and integrated valuation exercise.
“The mindset shift … allows us to focus on opportunities and not always the barriers,” she said.
“It will be key to enabling a fast-paced net zero transition.”
