“I don’t want to sound like I’m on a reality TV show and say that we have to take a leap of faith,” a mining manager said at a major conference in Perth focused on the industry’s energy transition. “So I won’t say that.” But many of his peers did.
If there was a clear takeaway from this year’s Energy and Mines Australia Summit (EMAS) in the Western Australian capital, it was that the so-called clean energy future is absolutely rushing at today’s miners and their incumbent suppliers. Ready or not.
In the absence of funding and supply mechanisms, infrastructure and market price signals, many miners have started climbing towards lofty decarbonisation targets.
Some want to be first to net zero, or even “real zero”, seeing pots of gold at the end of the differentiation rainbow (and along the way). Others, as has been customary, are content to be in the race to be second. The conference heard that risks for them could be multiplying.
The ‘journey’ for the early movers is “exciting”, “expensive” … “risky”. Supply chains lack vital links. Embedded systems and cultures need to be changed. Critical pieces, such as non-diesel equipment, are not commercially ready.
“We’re building the plane as we’re flying it”, a technology company CEO said.
“We’re also trying to fund the build and then we’re trying to justify future purchases of more planes at the exact same time as we’re building the [original],” said Rob Derries, innovation and technology manager at Gold Fields Australia.
John Mulcahy, Rio Tinto’s principal surface mining technology advisor and a veteran of more than three decades in the industry, said there were few parts of the major’s business “that won’t be impacted by the energy transition”.
“It’s the biggest change I’ve seen in my career.”
While lack of access to renewable-fed or nuclear grids, and variable mine lives, mean many miners are racing the clock to find sustainable, viable site-power options, transitioning away from diesel-driven production equipment and systems presents compound problems.
Michael Lewis, technical director technology with Komatsu, said when Tier 4 diesel-engine standards for off-highway vehicles were brought in 15 years ago it was “probably the biggest development activity for almost every OEM [original equipment manufacturer] in their history”.
“Every piece of equipment needed to be redeveloped.
“[But] if I contrast what happened back then to now, it’s night and day.
“The energy transition … is an order of magnitude larger than what we thought was the biggest development activity that we ever had and would ever probably see.
“There’s about 10,000 ultra-class [mining] trucks in operation right now worldwide. This represents probably about … 10 years of manufacturing capability if you’re going to replace them brand new. Obviously this is something that’s not going to happen overnight.
“And these trucks are not available today to buy.
“There’s some pilots and some different things going on, but it’s going to take a few years to ramp up.
“The good news is there are different pathways [to non-diesel]. That’s going to help quite a bit.
“But there is a growing demand. The demand is going to outstrip the capability of the OEMs.”
Time and money
Timing, a critical dimension in mining investment decisions, is more important than ever, according to ABB’s Ratna Kanth Dittakavi.
“There is a lot of technology development which is needed … and there are very few technologies which are commercially available which could be installed and utilised right now,” he said.
“There is no real clear roadmap … I don’t think we all end up with full electrification with a trolley or with a battery or hydrogen.
“So the timing itself is a big challenge. It’s not just reaching a 2026 or 2030 target but [finding] permanent sustainable solutions.”
Shane Clark, leading a unique surface haul truck automation project at a gold mine in WA as contractor MACA’s strategy and growth general manager, indicated the US$25 billion-a-year global contract mining sector had some crucial decisions to make about technology adoption to remain relevant in future. MACA became part of Thiess, the world’s largest surface mining contractor, last year.
“Between us and the Thiess group we’ve got thousands of assets with a lot of sunk carbon already and to think that the OEM solution will come along and displace 5500 rigid dump trucks in operation in Australia in the kind of timeframes that we’re seeing clients require, off the shelf, is pretty hard to see,” Clark said.
“At the moment we’re trying to extrapolate a lot of conclusions which means that the OEMs aren’t able to necessarily take a huge amount of data points to inform their supply chain and production requirements, which is a hell of an undertaking for the amount of assets that these guys produce in a year.
“We’re stuck a little bit at the first step of getting enough mine owners to embark on small journeys to inform their [new non-diesel] products.
“What the industry needs is obviously more early adopters to take small bites and learn what that actually does in real terms to their grid, and to their chosen charging solutions so we can really look to scale.
“As a contractor everything that we invest in ultimately has to deliver a lower cost per tonne moved.
“We’ve always been successful with having a fairly balanced fleet; half old [equipment], half new. When that new fleet comes to half-life we buy replacement assets and … I see this battery transition, or energy transition in general, being something similar. The only thing that changes is the powertrain is more agnostic.
“If we look at the future when the OEM is supplying such a capital-intensive asset that’s autonomous-ready … it’s [potentially going to be] much easier for the OEM to be the only solution in town. What does a contractor bring to the table when you’ve got robot trucks that are getting charged on their own?
“We focused first on retrofit autonomy because we saw that as a real enabler for the battery-electric transition. We think there’s a case there for the retrofit solutions and trying to lower that cost of ownership and allow enough capital for the mine owner to redistribute into the infrastructure.”
The conference heard new hardware (equipment) and software would potentially reshape mining and become more significant enablers of better core asset and energy management in future. But despite the increasing role seen for automation and AI, people remained central to both managing and driving change. On this score, Derries was among a number of speakers worried about blindspots.
“A lot of what we’re doing and what we’re working on is simulations and theoretical assumptions,” he said.
“There’s a bunch of trials going on [but not] a lot of practical experience in the introduction of these technologies. That’s a major risk as a mining company as we try to implement these technologies.
“I see that as a gap that we need to try and manage and I’m not really sure how we’re going to do it yet.”
All on-board the decarb express
Mining’s key stakeholders – investors, communities, customers, employees – want to see change, the conference heard. Are the former ready to pay for it, particularly where the standard investment case has a few holes (assumptions) in it?
“It’s funny,” said Bellevue Gold CEO, Darren Stralow. “When you talk to investors, when you talk to creditors, when you talk to anyone … about your ESG focus and what you’re doing [with decarbonisation], they get quite into it and like it and say, that’s great. But when it gets to the … people in the rooms with no windows who review your credit … They’re not there yet.”
Bellevue is building its namesake, A$250 million gold mine in WA’s north Eastern Goldfields. Stralow told EMAS the company had a “world-leading aspiration” to achieve net zero emissions by 2026, with that target covering scope 1 and 2 emissions. An 88MW hybrid power plant will start with 80% renewable feed, with hopes of increasing that with advances in battery storage technology. Diesel mining equipment “is the barrier between us getting from net zero to real zero”.
While signs are pointing to a lower total cost of ownership for many battery electric vehicles (BEVs) versus their diesel incumbents, “that’s not proven yet”.
“Until that’s proven you can’t get the blokes in the windowless rooms to understand it, which is a challenge,” Stralow said.
“Your typical way of doing it [introducing new tech] would be [to] fire some bullets before we fire some cannonballs.
“Bring it in and prove this [superior] life of ownership cost.
“But we don’t have time to do that because by the time you do that you’ve gone 10 years out and you’ve suddenly missed the boat.
“We’ve got a big challenge going forward and it’s going to take bravery, it’s going to take leadership in terms of actually doing it and not waiting.”
Jessica Jones, ESG director with Resource Capital Funds, said equity investors were generally circumspect.
“The valuation methodologies and the modelling is improving but … it’s quite immature to be honest at this stage,” she said.
“With things like carbon pricing regimes as well as seeing the real cost of decarbonisation projects, and seeing the reputation benefits actually realised with time, I think that gives people a little bit more faith and confidence to actually try those techniques and start ranging things.
“We’ve done a bit of that ourselves; ranging different options and possibilities and scenarios.
“That’s the start.
“But it’s really early because of the complexity [and] uncertainty at the moment.
“As there is more certainty I think it will improve and actually get to the point where you can do that [modelling and valuing] more accurately and give people more confidence to invest.”
Management at Leo Lithium, a circa-A$1 billion ASX-listed company developing the US$285 million Goulamina lithium project in landlocked Mali with China’s Ganfeng Lithium, hadn’t spent “a whole of time thinking about how we’re going to put an order in with Komatsu or Caterpillar” for BEVs, experienced project director Tom Blackwell said on a panel of small-to-mid-cap company leaders.
“We’ve got to make some money first.”
The veteran lithium project delivery specialist said Leo had political, regulatory, jurisdiction and other pre-production risks on its plate. “I think I can probably speak for everybody on this panel,” he said. “It’s really tough for us to get out there and make those longer-term decisions for what’s going to happen in the future with all of these other risks.
“We’ve got to get up and running. We’ve got to do the low-hanging fruit stuff in terms of decarbonising.
“We’re pretty lucky … We’ve got a massive resource that’s quite high grade. We’ve got a strip ratio that’s pretty low. But we’re very remote; we’re off the grid in Mali. We’re 1000km from the port.
“So we’re going to start on thermal [power] and move to, initially, some solar penetration. We’ll be targeting around 30%. Longer term for us it’s hydropower [via the grid].
“We just simply have to use less energy. We’ve got to find ways to do that. We have to be super-efficient in what we do.
“In our situation we got tied up in the race to produce lithium and meet our customer demands. So we just didn’t have the opportunity to do all of that fantastic engineering that’s been talked about [here] to come with a fully electric solution.”
Luke Graham, CEO of new WA mineral sands producer Strandline Resources, said the company’s cornerstone Northern Australian Infrastructure Facility loan for its A$260 million Cockburn project was predicated on the usual financial due diligence, but also Strandline’s decarbonisation plan.
“We know that mining companies are under increasing pressure from governments, from our shareholders, investors, our lenders … to really be able to define our emissions profile,” Graham said.
“Your emissions profile per tonne of ore is in the same conversations now as your cost per tonne.
“That really starts to get boards shaping strategy … and that then just drives down into actions through operational plans.
“Going back to 2017 and 2018 when we were doing the definitive feasibility study for our Cockburn project, we had the decarbonisation initiative right there. We mapped out a staged approach for the implementation … [starting with] a hybrid power station with solar and battery, integrated with LNG gas engines [that] gives us a baseline of about 30-35% renewables.
“You need to have conviction in setting out the roadmap [and] to continue to be adopting either electrification initiatives, renewable initiatives, or just really high efficiency equipment initiatives in your operation.”
Faith and conviction have become valuable commodities in mining.
Graeme Stanway, CEO of Perth-based State of Play, told EMAS a staggering 90% of the world’s global carbon emissions were now covered by net zero commitments.
“We’ve got 35% of Australia’s energy being delivered by renewable energy.
“In China there’s been a 93% increase in growth in the electric vehicle sector [and] 75% of planned coal plants have actually been scrapped over the last few years.
“We’ve got funds such as GFANZ [Glasgow Financial Alliance for Net Zero] that cover nearly $150 trillion of investments globally that are committed to net zero.
“So if there is any doubt that the energy transition is underway we should cast that aside.
“The question for the mining industry is, are we actually moving at a pace that’s commensurate with this sort of change, and commensurate with the pressure that we’re putting on ourselves.
“Three years ago we surveyed the industry [and] 55% of respondents believed that we would fully electrify mines within the next five-to-10 years. But when we did that survey again just recently that’s down to 18%.
“So the rate of change internally in the industry isn’t commensurate with the energy charge externally and the pressures that are on us. Now why is that?
“Our thinking is that it’s probably due to three things.
“Once we got into this change that the challenges are much more complex than we expected.
“The technology readiness is not quite where we expected it to be.
“And importantly I think there’s a situation where the ambitions that have been put out externally aren’t translating internally into systems and investments as well.”