The mining sector has a twofold role to play in enabling the transition to green economies: Providing the critical metals required for green technologies, while pursuing its own decarbonisation and energy transition in order to align with the 2015 Paris Agreement targets and respond to shareholder and stakeholder demands.
Hence, while the energy transition demands increasing amounts of metals and minerals, such as Lithium, Nickel, Cobalt, Manganese, Copper, Graphite, Silicon, and Rare Earth Elements, societies, communities, investors, consumers, and the next generation of talent that seeks to work for companies with a clear purpose, are demanding that these are produced in a responsible, sustainable, and increasingly carbon neutral way.
It is precisely this linkage of the mining industry with the energy transition that has moved the sector in the spotlight of public and regulatory scrutiny. Controlling emissions has thus become an important lever not only for complying with climate targets and regulations but also for overhauling the negative public image of mining as a major polluter in order to maintain stakeholder trust and secure access to capital.
Mining sector GHG emissions
To stay on track for a global 2°C scenario, current emission levels need to be reduced by at least 50 percent by 2050, and by at least 85 percent to limit global warming to 1.5°C.
The mining sector is currently responsible for 4% to 7 % of global scope 1 and scope 2 GHG emissions, and about 28% of scope 3 emissions. Taking fugitive-methane emissions from coal mining out of the equation leaves the scope 1 and 2 emissions at 1% of global GHG emissions.
In a quest to reduce emissions, decarbonisation efforts across are gaining momentum. Several mining companies have put forth ambitious decarbonisation targets for reducing their scope 1 and scope 2 emissions. Glencore, Newmont, BHP, Vale, and Rio Tinto, have committed to reach carbon neutrality by 2050. Rio Tinto recently announced a US$7.5 billion plan to halve its scope one and two carbon emissions by 2030, BHP plans to spend about US$4 billion until 2030, and Vale intends to spend US$2 to US$4 billion by 2030 to cut Scope 1 and 2 emissions by 33% by 2030. Anglo American has laid out a plan for achieving net-zero across all its operations by 2040.
Battery Electric Vehicles (BEVs) move into focus
The main sources of direct emissions at mine sites are transport and logistics, comminution, as well as ventilation (in underground operations). Mining vehicles account for about 30% up to 80% of total emissions at a mine site, depending on site geography, commodity, mine design, and the level of operational efficiency. Switching to battery electric or hydrogen powered load and haul fleets is necessary to achieve net-zero targets.
Currently there are around 28,000 of large mine hauling trucks in operation collectively emitting over 68 million tonnes of CO2 every year. Large haulage trucks have been identified as the main source of mine emissions among mining mobile machinery, accounting for up to 25% of scope 1 emissions, followed by crushing equipment at approximately 20%, bulldozers at 7%, and excavators at 5%. The average mining hauling truck burns roughly 250,000 gallons of fuel per year and emits around 2,430 tons of CO2.
Consequently, a large focus of recent actions by major mining companies has been on replacing diesel-powered trucks by (battery) electric vehicles, or BEVs. For example, Australian mining giant BHP announced to replace a total of 160 haul trucks with Caterpillar’s new electric drive and other future low/zero-emission powertrain trucks at its Escondida mine in Chile by 2023. Scandinavian midtier miner Boliden targets the installation of 27 diesel-electric trolley-assisted haul trucks by 2023. US-based Newmont mining aims to deliver a fully connected, zero emissions mining system including battery-electric autonomous haulage vehicles encompassing an initial US$100 million investment and the deployment of 26 BEVs at three mine sites in the US and Australia. Canadian Teck Resources Ltd. will deploy 30 zero-emission large haul trucks by 2027, while Glencore is partnering with Epiroc to deliver 23 BEVs for a new nickel and copper mine in Ontario, Canada, by 2024. In addition, major industry players such as Vale, Rio Tinto, and Anglo American have entered partnerships for the installation of BEVs and to identify further decarbonisation options.
With respect to other options for alternative power systems, Fortescue Metals Group can be considered an early mover on green hydrogen. The company announced a partnership with German-Swiss equipment manufacturer Liebherr for the development and supply of hydrogen powered haul trucks. While the total cost of ownership (TCO) for fuel cell electric vehicles (FCEV) is projected to come down considerably over the next years, it is currently still at the pilot stage and broader uptake will lag behind BEVs by several years until the technology is fully proven and commercial.
The BEV business case
With currently only 0.5% of mobile equipment being battery electric, the technology is only starting to become economical. However, with technological maturity improving, battery electric vehicles (BEVs) are becoming cost competitive faster than expected.
While diesel machines have a lower CAPEX but higher OPEX, it is the other way around with BEVs, constituting a dilemma for miners. Even though the market prices for battery packs have plunged from US$1,100/kilowatt hour (kWh) in 2010 to US$156/kWh in 2019, and are projected to fall even to US$100/kWh by 2023, high upfront investments in new technologies pose challenges for miners.
To respond to these challenges, OEMs have started to come up with business model innovations. Epiroc has introduced a “Battery as a Service model”, which was first implemented in a Vale-owned Canadian operation. In this model, Epiroc takes ownership of the battery itself and automatically replaces and updates the units as needed, allowing the mine site to focus on production. Similarly, Volvo Autonomous Solutions has launched a completely autonomous compact haulage system designed for use in confined areas where miners are only paying for the services they use rather than purchasing the equipment.
However, beyond mere cost evaluations, BEVs also make an important contribution to improving worker health and safety by removing diesel particulate matter (DPM) as well as noise emissions, especially underground. DPM has been identified as highly carcinogenic and poses a major health hazard for workers. Further, when operated remotely or autonomously, BEV are providing additional health benefits by eliminating the risk of collision-related injuries or fatalities. Collision-related fatalities were the leading cause of fatalities across operations in 2018, accounting for 30% of fatal accidents.
Furthermore, new technologies, such as (autonomous) BEVs can increase workplace attractiveness and provide an advantage in the competition for talent. The new generation of talent the industry is now seeking to attract is concerned about working for companies whose values align with theirs and who have a clear purpose in terms of their contribution to sustainability and to the planet.
BEV technology challenges
Despite business model innovations and an improving business case for BEV adoption, there are some remaining technology and mine design challenges that need to be addressed to increase the attractiveness of large-scale implementation of BEVs.
BEVs in mining are usually operating continuously, and with the heavy weight of the trucks and machines, the heavy payloads, uneven grounds and often steep ramps in the mines, battery ranges are not sufficient to last an entire shift. Consequently, battery swaps or charging times and locations need to be carefully planned. Whereas diesel tanks lasted a full day, battery equipment may require two to three swaps per day, making the planning for the battery range and the location of charging stations critical.
These challenges have led Australian mining innovator Olitek and Swedish electric highways developer, Evias, to develop a dynamic charging solution for BEVs in underground environments that are based on rail conductors fixed to the roof of the main decline as part of the BluVein project. Epiroc has signed on to collaborate with BluVein in developing and testing the viability of their patented slotted (electric) rail system.
While these are promising developments, additional solutions for implementing dynamic and fast charging need to be developed, tested and applied to reduce the run-time to charge ratio for batteries and thus further improve the business case for BEVs.
BEV mine design challenges
With respect to mine design, implementing BEVs require a range of considerations and adaptations. Implementing BEVs in brownfield operations is more challenging and imply a significant effort in site redesign with operational implications for strategy, scheduling and skill sets of people involved.
For greenfield operations, while there’s the chance to design the mine layout and planning to best suit the needs and capabilities of BEVs, and to fully redesign material transport and handling suited for electric mobile equipment, there is still an extensive list of factors that must be considered and elaborated when switching to electric, such as travel distances, the grade of the ramps, the ambient temperature in the mine, and access to the electric grid, integration of renewables on site as well as electricity prices, and training requirements for the workforce.
The need for holistic energy management
Linked to the mine design requirements is the need to understanding the power requirements, as well as the question from the energy source provided. It is essential to not only consider battery powered mobile equipment but the entire energy supply and demand as well as the sourcing of power for the respective mine site. In order to fully decarbonise haulage and transportation, the electricity has to come from renewable energy sources.
With energy costs rising in various parts of the world and electricity accounting for up to 20%-30% of operating costs already, integrating options for renewable self-generated power may become an increasingly viable option.
In some locations it is possible to secure low-carbon electricity supply through power purchase agreements. Antofagasta Minerals’ Zaldívar copper mine in Chile, for example, is already being supplied with 100% renewable energy from the local grid, which is supplying a combination of hydro, solar and wind power.
Thus, with improving economics and reliability, miners are increasing considering to lease, contract or owner-operate renewable power sources and it can be expected that new mines built over the next decade will be self-sufficient in zero-carbon power.
Acceleration through collaboration
Further acceleration of decarbonising mine transport is expected to come through collaborative innovation efforts. One prominent example is the Innovation for Cleaner, Safer Vehicles (ICSV) initiative, a CEO-led initiative initiated by the International Council on Mining and Metals (ICMM) in 2018. The ICSV initiative brings together 28 of the world’s leading mining and metals companies and 19 original equipment manufacturers (OEMs) to collaborate and accelerate the development of a new generation of mining vehicles.
The objective is to build widespread confidence in alternative power systems to accelerate the level of innovation investment required to scale up commercial solutions for the industry and meet the targets the initiative has set. To date, more than 300 vehicle fleets in over 300 assets globally have been assessed with respect to where the companies currently are and where they want to be, measured against maturity frameworks, in order to shape the next steps in the strategy cycle. These steps are focused beyond the machine, considering the planning for mine-site design and infrastructure as well as software solutions for mine planners to take more strategic action.
Initiatives like these lower the threshold for companies to implement new technologies by sharing risks as well as solutions across a larger network and could have an impact across the industry regarding the widespread adoption of carbon-free transport solutions.
Advantages for early movers
Whether through collaborative initiatives or company-based innovation networks, early movers can be expected to be at an advantage in the mid- and longer term. They are more likely to solidify their positions as market leaders in the emerging net-zero mining sector. As BlackRock CEO Larry Fink wrote in his 2022 annual letter to CEOs: “Every company and every industry will be transformed by the transition to a net-zero world. The question is, will you lead, or will you be led?“
As regulations around emissions and decarbonisation can be expected to tighten even in the face of an impending downturn, investments in developing technologies and decisive action on decarbonisation could indeed pay off, while deferring decarbonisation efforts may imply higher costs later on. McKinsey stated that already the cost of capital to be 20% to 25% higher for mining companies with the lowest ESG scores.
Further, early movers could be at an advantage if initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD) take hold and investor mindsets shift. The coalition is already supported by more than 300 investors with nearly US$34 trillion in assets under management and demands that companies report their “transition risks” under a 2°C decarbonization scenario.
Consequently, mining companies concerned about their long-term reputation, “license to operate,” and access to green and ESG bonds may need to consider more aggressive decarbonisation and resilience plans. Deferring capital projects related to decarbonisation may conserve cash and minimise debt in the short term but slow movers may be at risk for missed opportunities that become costly in the future.
Conclusions
There is no doubt that BEVs, wind power, solar panels, and stationary storage systems are all central to achieving the Paris Agreement decarbonisation goals and that each of these technologies heavily relies on metals. At the same time, decarbonising the production of these metals is not optional and mining companies need to take decisive action.
As these technologies are still developing and some are just on the cusp of becoming economical, the capital expenditure required to decarbonise the mining sector will be significant. While some companies are still holding back, those that move forward view these investments not simply as a cost but an opportunity to gain competitive advantages and a necessity to be better positioned to secure a place in the new low-carbon economy.
Mining companies invested in the production of metals and minerals required for batteries and renewable energy technology can draw additional benefits from deploying carbon-neutral technologies, thus increasing the demand of BEVs and renewable energies.
To conclude, there is room for the mining sector to become a first mover on eliminating on-site emissions and become a keystone of the energy transition, leading the path into a sustainable future.
With the global public attention on clean minerals and metals, the sector has an opportunity to rise from its dirty, dusty and dangerous negative public image and become a leader in the energy transition and the global shift towards carbon neutral economies. It is time to do mining the right way to enable the world’s transition to a greener and cleaner economy. This requires considering decarbonisation not as a mere cost factor and something that is being imposed but making it a central part of the company’s business strategy and of a clear vision for co-creating the future.
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Images: Adobestock and Komatsu.
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