Max Pacella
Investment Analyst
Equities
22 Oct, 2021

“Green Mining”.

Though the term sounds like an oxymoron, the concept of environmentally friendly mining has been touted for a number of years as a way to potentially add longevity to dirty industries which are rapidly losing favour with consumers and governments – see Mike’s note yesterday on coal to this effect.

Framed in the context of whether green mining can help the investment prospects of resource companies – particularly given domestic equity exposure to the sector – today we’ll review the technology which could ameliorate the environmental externalities of mining, both now and in the future.

What is Green Mining?

Broadly, green mining is the use of technology to either offset or reverse the environmental impacts mining activities create.

This in effect attempts to limit the environmental footprint of existing mining activities.

We often think of mining as just leaving big holes in the ground, however, the impacts extend well beyond the geological damage.

To name but a few; carbon emissions generated by the equipment and processing, water usage and waste from cooling, chemical processes, acid damage caused by some refining techniques – there are a raft of environmental no-no’s which the mining industry produces.

So, what are some methods that “green mining” looks to employ, to either reduce or reverse the negative impact that the sector has on the environment?

1) Carbon Capture

Carbon capture is a relatively new technology which has gained more attention through several prominent companies including Climeworks and Aker (FKM:FRA). The idea is to trap carbon dioxide emissions produced by mining operations, and transporting it underground using the same open-cut infrastructure as the mine itself.

Relatedly there are new methane capturing techniques – with methane being a common by-product of coal mining operations particularly – which can oxidise the methane gas and split it into carbon dioxide (which then gets fed into the above system) and water vapour, which can be released into the atmosphere.

2) Water Wastage and Discharge

Many mining operations use a substantial amount of water, which is then discharged as polluted and toxic wastewater – fracking and coal seam gas operations are particularly notorious for this.

In response to this, part of green mining is the implementation of programs such as zero discharge water operations, which recycle that wastewater into safe and viable water for agricultural purposes – though frankly I wouldn’t trust drinking it.

Not only does this present a growing market for industrial wastewater processors, but it also removes the cost of discharging the water to the miners themselves (plus saving on water cost). There are a few interesting technologies which currently are involved in this process; vacuum evaporation, ozone-based treatment, and crystallisation.

3) Energy Efficiency

This one may seem obvious, but powering mining machinery with cleaner, more efficient energy sources and renewables is part of green mining’s attempts to limit environmental damage caused by the sector.

This can include powering machines with cleaner fuels or hybrids (for example, diesel-electric hybrids), installing solar panels and wind turbines around the mine site to provide electricity, and upgrading the project infrastructure to integrate renewables.

That last point plays into the increasing adoption of hydrogen fuel-cell batteries, which are being touted as a viable candidate to power mining vehicles on a commercial scale today.

An example of a company looking to spearhead this particular initiative is Vulcan Energy (VUL:ASX), who are looking to have a zero carbon lithium production through the harnessing of geothermal energy.

Does This Work / Will It Work?

There is mixed sentiment around if green mining is advanced enough to adequately mitigate part of the environmental issues which the resources sector generates, particularly in the face of a far more climate-conscious global society.

A study released a few weeks ago by the European Environmental Bureau labelled green mining as a myth and found that the EU must reduce its extraction of natural resources by 65% to prevent further permanent environmental damage. This study was in response to the current form of the European Green Deal plans, which were supposed to be leading the way to a cleaner EU resources sector.

However not all bodies feel the same, in fact our own Minerals Council of Australia and other mining industry bodies are adopting sustainable mining frameworks to establish a universal metric to assess company sustainability.

Last year our government released a $1.9 billion AUD investment package towards new energy technologies (with a promise of a further $18 billion in the next decade), which included provisions for the development of clean hydrogen fuel-cells for mining vehicles and equipment.

Clearly, a divided psyche around this matter.

This will likely be driven by the corporations themselves. Rio Tinto (RIO:ASX) engaged in its own feasibility study last year to see if hydrogen could replace liquid natural gas in its aluminium refining facilities. A subsidiary of Fortescue Metal (FMG:ASX) also entered into an agreement to explore and conduct feasibility studies on green hydrogen projects based out of India.

Time Will Tell

For now, it is unlikely that the impact of green mining technologies will be sufficient to convince the wider investment community that parts of the sector is not anti-ESG.

We are only now making inroads into significant technological improvements which can be actioned on a commercial scale, and those will then need further time for industry-wide adoption.

This needn’t be the end for green mining, however – any technology that helps improve environmental outcomes, even in some resources which might be considered ‘transitionary’ on our way to electrification, is a positive for humanity.

Green mining may very well become a kind of sentiment-support for the resources sector, however at the moment it may be a case of too little, too early to tell.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.