When you are planning a new product or a marketing strategy, it is important to know which way the wind is blowing. And what colour. Today, the colour is green. The direction is harder to figure out.
The World Bank, the Asian Development Bank, the Government of Canada, the Canadian Institute of Mining, the Mining Association of Canada, the International Council on Mining and Metals, and the public all agree that mining has to go green. That means suppliers will have to help mining companies get green.
But exactly what do you do when the wind is blowing in several directions at the same time? Mining suppliers all know that energy prices, carbon prices, and metal prices affect what they sell. The price signals are confusing. Energy prices are generally rising while oil prices have crashed. Metal prices are down while carbon prices are just starting to kick in. What green products can you build now that you’ll be able to sell in 10 years?
The biggest problem for the industry seems to be energy. Few analysts doubt there will be more mining in the future. It is needed to support improving quality of life for literally billions of people around the world. At the same time, nobody with any brains doubts that even to keep up current levels of production will require more energy because grades are falling for most metals. In 2003, for example, it took $18 worth of fuel for major gold miners to produce an ounce of gold. By 2013, it took twice as much diesel, 97.6 litres, costing $101 to recover one ounce of gold.
And transportation is only three per cent of the energy required in mining. Crushing and grinding of ores consume 53 per cent of total energy. That is three per cent of the world’s electrical power. By one estimate, only one per cent of the energy that goes in is actually productive. The rest goes to wearing out grinding surfaces and bearings, heating up the rock, making noise, and producing pieces that are too small. Finding a way to get metal out of rock without crushing would be like taking Germany off the grid!
So how to square the circle? The World Bank insists that sustainable mining will be low-carbon mining. The Asian Development Bank takes the same view. It is a core goal in Canada’s Green Mining Initiative. Meanwhile, in the real world, fossil-fuel demands are rising sharply.
In fact, a shift away from fossil fuel-based electricity generation has already begun. Chile, the world’s great copper producer, has built a 69.5-megawatt solar photovoltaic project and a 115-megawatt wind farm, both powering Antafogasta Minerals S.A.’s Los Pembales copper mine. This is a country that traditionally imports fossil fuel for 70 per cent of its energy. Toronto’s IAMGOLD uses a five-megawatt solar farm for its open-pit Rosebel mine deep inside Suriname. In Australia, where mining is the fourth-largest energy customer, Rio Tinto operates a $23.4 million, 6.7-megawatt solar farm at a bauxite mine while providing electricity to an adjacent municipality. Either alternate energy companies are becoming mining suppliers or mining suppliers are marketing alternate energy. We can hope it is our suppliers moving into this space.
The simple fact is that mining companies will be paying a great deal of money for “green technology.” To be a bit more exact, consumers will pay for the green technology. If the world really commits to cutting greenhouse gases and still wants development, it will pay prices high enough for mining companies to buy low carbon, low-damage technology. That is where the opportunities lie for suppliers
Part of the problem for the Canadian mining supply industry is that green-tech will be high-tech. Solar panels, for example, are based on transistor technology developed several generations after the diesel engine. Acid control will probably come from chemical techniques that haven’t been invented yet. Bio-extraction will almost certainly be a product of genetic engineering. The next generation of mining will come out of basic science labs.
To win big in the race to supply the next generation of miners, Canadian mining suppliers will need to be backed by a big investment in Canadian basic science.
