The mining industry supplies the mineral resources essential for the industrial growth, economic progress, and stability of many emerging economies. However, in recent years, mining has become an area facing several challenges, especially in terms of environmental risk and sustainable development. The mining sector is among the top contributors to greenhouse gas emissions, damaging our ecosystem. These factors are a significant risk to the mining industry. However, integrating environmentally friendly mining practices can present a sustainable solution to these problems.
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Mining Industry and Sustainability: Strict Environmental Rules Have Major Impacts on Mining
In the previous four decades, the shift toward climate preservation and sustainable industrial practices has shifted the mindset of the mining industry toward other factors, particularly environmental, social, and governance (ESG) factors, as a key tool for promoting sustainability.
The report published by WTW Mining highlights that mining operations can substantially affect nearby ecosystems, affecting climate, water quality, and biodiversity. Yet, they also have the potential to deliver significant social advantages to local communities and stakeholders. Consequently, miners must embrace sustainable mining practices to mitigate their environmental impact and enhance their societal contributions. This is possible by working on risks identified under the ESG factors and devising a concrete plan.
Although various ESG factors, such as climatic changes, water resource handlings, local procurement policies, diversity, etc., have been given much attention, tailings management issues were overlooked in the past. This issue was highlighted after the devastating dam collapse at the Córrego do Feijão mining site in Brumadinho, Brazil. The incident led to the death of more than 270 people.
Following this incident, the Church of England launched a new initiative termed the Investor Mining and Tailings Initiative. This initiative aimed to enhance transparency regarding tailings management practices by establishing a Global Tailings Portal. It also sought to develop and implement a Global Industry Standard on tailings management to raise the bar for industry-wide practices in this area.
To date, 45 of the top 50 largest mining companies globally, constituting 87% of the industry by market capitalization, have engaged with the Global Tailings Portal initiative by providing information. The emphasis of this initiative is now transitioning toward adopting the established standard for tailings management practices.
Digbee ESG: A Platform for Risk Managers of the Mining Industry to Understand ESG Risk Factors
Jamie Strauss (JS), an experienced mining industry financier, established Digbee ESG in 2020. This initiative, encouraged by Blackrock and Orion Mining Finance, aimed to offer a disclosure platform for the mining industry. The objective was to tackle the challenges of ESG in the mining sector and broader ESG issues across industries.
Three primary objectives were established for designing the platform. Firstly, it aimed to simplify the disclosure process for mining companies, address input and output concerns regarding what information needs to be disclosed, ensure a standardized structure suitable for various stakeholders' needs, and facilitate due diligence and ongoing monitoring.
Secondly, the platform sought to enhance the credibility of the mining sector and minimize the risk of greenwashing by offering validated public data.
Lastly, the platform aimed to serve as an ESG communication platform for the industry, enabling effective communication with investors, insurers, local communities, governments, NGOs, and other interested organizations.
In an interview with WTW, Jamie Strauss emphasized that the result of the highlighted three objectives was a tailored set of frameworks specifically designed for the mining industry, catering to companies of all sizes. This futuristic and forward-thinking approach represents a significant departure from global standards and other ESG structures.
The organization ensured that these frameworks align with over 30 global standards and are regularly updated. They also implemented an independent and rigorous assessment process. This approach has created a single repository of credible and standardized data that can be effectively communicated.
A Brief Overview of the Geopolitical Risks to the Mining Industry
The geopolitical landscape surrounding any critical minerals project is unavoidable. The set of geopolitical risks varies greatly, and therefore, miners and investors try to develop different strategies that allow them to reduce and control these risks well.
A whitepaper by White & Case on the geopolitical issues and decarbonization of the mining industry has demonstrated that market concentration shifts from various levels of the mining value chain and supply chain to different players, presenting a diverse range of risks and opportunities. Mineral resources are geographically fixed, giving significant leverage to exporters who dominate their respective markets.
Nations that rely on mining-related tax and export revenues seek to enhance their control over vital resources, alter fiscal policies, and capture more value domestically. Meanwhile, other countries are expanding their production to challenge established market leaders and strengthen their competitive standing.
As critical minerals are becoming a crucial need, countries that are abundant in these resources expect as many economic benefits as possible. This development would induce the government to take part in the mining sector while at the same time enforcing more taxation, royalties, and regulatory stringency. Sometimes, nationalization may influence critical minerals' production, which negatively affects mining, extraction, and export by miners. Many countries are investing in the development of domestic processing facilities, ensuring that mined materials undergo processing within their borders.
EY recently published a report on the top business risks to mining. The report states that mining companies are beginning to reap some benefits from green mining initiatives. However, downstream sectors will likely receive the most incentives for decarbonizing technology.
While subsidies typically boost demand more than supply, they may not fully address miners' challenges, including obtaining environmental permits and social licenses. There is significant concern that this imbalance could significantly widen the gap between the supply and demand of critical minerals in the near to medium term.
Technological Risks in the Mining Sector
Digitalization is transforming the mining industry and its operational efficiency. Artificial intelligence (AI) for machines, machine learning, transaction data, big data analytics, automation, and robotics are needed to create streamlined processes in all facets of mining.
A financial insights report authored by Identec Solutions states that the digital reformation of mining in 2017 estimated its cumulative value to be greater than $425 billion by 2025, which is roughly 3-4% of the industry revenue of that year. It should be noted, though, that there is a strong reason to believe that a sizable number of enterprises in the extractive industries are facing difficulties in properly implementing their digital plans.
While all decision-makers concur on the crucial role of technology and innovations in ensuring the organizations' survival, only a few think they are highly prepared for the upcoming digital transformations. This also indicates the delays with which the metals and mining industry performs compared to the automotive or chemical sectors, with a digital maturity level almost 30-40% lower than in comparable sectors.
The digital twins’ technology is a game changer for the mining industry, as highlighted by an article in Decision Analytics Journals. The digital twins technology, enabled by remote sensing capabilities, allows miners to gather real-time data and gain comprehensive insights into their operations. However, their adoption remains limited, likely due to a lack of awareness regarding their capabilities and the initial investment required for on-site sensor implementation.
Despite substantial technological investments, miners often struggle to extract meaningful insights from their data. Critical business data is often highly complex and challenging to access, hindering the ability to unlock its total value. To address this challenge, miners must identify which data is essential, when it is needed, and how to extract it from their business processes. This necessitates a deeper understanding of the relationship between organizational data and business processes, distinguishing valuable data from transactional information.
Miners must build proficient teams comprising experts in strategic change, data science, and mining disciplines to facilitate effective decision-making and drive impactful changes. Successful organizations prioritize delivering rapid results and insights while also having a well-defined strategy for scaling innovations across their operations. This business strategy ensures the success of mining operations in the modern era of analytics.
Shortage of Labor in the Mining Sector
For a considerable period, effective work, enthusiasm, and special skills have been crucial in ensuring mining operations' success, profitability, and safety. Given that the industry now faces an unexpected skills shortage, practical steps devoted to new talent acquisition and retention are being placed as the initial priority of miners.
A recent report by McKinsey states that more than 100 million people who work around the world are supposed to transfer to new occupations by 2030 due to digital transformation.
The mining industry faces a big challenge in attracting and retaining talent, with around 71 percent of the industry leaders publicly emphasizing that the shortage of talent is an obstacle to achieving the objectives. Health and safety risks and environmental destruction have made attracting new talent very difficult. To keep up with vital changes and innovation, the mining sector should tackle these problems and lay a foundation for top talent to shift their careers to this industry.
What Major Opportunities Present Themselves for the Mining Sector?
With the advent of technology and the integration of digital advancements, many opportunities are present for the mining sector. USC Consulting Group has highlighted the use of drones in dangerous mines to keep humans safe.
Portable 3D printing machines are also now being extensively researched and optimized for the mining sector. Mining equipment often gets damaged during operations, which can halt the operation and lead to significant losses. Portable 3D printers capable of printing mining equipment on-site can revolutionize the mining sector. The ability to quickly locate, produce, and install specific tools or parts on-site for damaged machinery can significantly reduce lead times and eliminate the necessity of transporting costly equipment to remote sites.
Automation is gaining popularity in the mining industry, with innovations such as truck-less conveyor-belt ore transport systems, subterranean electric vehicles, and drones driving this shift. One significant advantage of automation is its ability to enable mining operations to run continuously without needing constant physical presence.
Electric vehicles have become popular recently. The number of people owning these vehicles is steadily growing, causing a sharp rise in the consumption of battery minerals, notably lithium, cobalt, and nickel. This is a good sign for new startups to work on mining these precious minerals and entering the domain of electric vehicles.
Governments worldwide are searching for new areas with potential for mining. This has been recently demonstrated in India, where the Yogi Adityanath Government in Uttar Pradesh has identified 790 new mining areas across various districts in the state, including Mirzapur and Jhansi. This initiative aims to make minor minerals more affordable and accessible to the public while also fostering industrial growth in the region.
What Strategies Can the Mining Industry Adopt to Tackle These Challenges?
The mining industry faces increasing challenges and risks. The only possible solution is to formulate a good risk management strategy that addresses all the important factors.
A risk analysis study has been published in Commodities, highlighting a method for selecting important risk factors. The study demonstrated a systematic approach to climate risk assessment for mining companies by presenting the case study of the Antofagasta region, a critical center for copper production vital for electrification efforts.
The first essential step was to highlight the key hazards of the mining region. Key hazards identified in the area encompass heavy rainfall, droughts, and heat waves, each impacting mining facilities differently.
The response of these facilities to such hazards is contingent upon various vulnerability factors. The assessment incorporated five key vulnerability factors: topography, mine size, proximity to health facilities, access to water sources, and collaboration among neighboring companies. The risk analysis revealed that droughts represent the most substantial climate risk to large-scale copper processing plants, with limited implementation of adaptation measures among operational facilities. This presented a good example of conducting a climate risk analysis to be followed by mining companies to identify the key factors and decide on a strategy to minimize the risks.
The Mining Safety and Health Advisory Committee of Australia has also introduced an educational tool to aid mining and quarrying operations in conducting thorough risk assessments for enhanced risk management decision-making.
Kate du Preez, Commissioner for Resources Safety and Health and chair of the advisory committee, highlighted that the Risk Assessment Education Resource enhances risk management practices within the mining and quarrying sector. It focuses on evaluating critical controls and ensuring their effectiveness through verification.
Sectara has also identified the crucial role of creating business continuity plans that delineate actionable steps in case of disruptions in quickly restoring critical operations and minimizing the impact of loss events.
Geo-Spatial Intelligence and AI: Digitalization Tools to Make Mining Safer and Productive
Geospatial intelligence is a technology that integrates diverse data, such as satellite and drone imagery, to offer a comprehensive perspective of specific locations. In mining, its primary use lies in monitoring environmental conditions.
With the advancement in modern technology, artificial intelligence (AI) and machine learning (ML) algorithms can be applied to geospatial data. AI and ML algorithms analyze vast remote sensing data to discern patterns and trends, facilitating more precise decision-making. Remote sensing helps monitor surface changes, detect subsidence or landslides, and assess the stability of tailings dams and waste sites. The incorporation of these digital tools and advanced sensing mechanisms is an effective solution for making mining operations safer and optimizing their efficiency by planning beforehand.
In the modern age of digitalization and sustainability, we are observing rapidly altering industrial trends. Clean energy transitions necessitate significant material inputs. Essential minerals and bulk materials, including steel, cement, plastics, and aluminum, are indispensable for various technologies and infrastructure, spanning from wind turbines and electric vehicle batteries to electricity grids.
To align with net zero goals, mining capacity for critical minerals must rapidly expand. This is only possible by identifying the major risks and developing an effective risk-minimizing strategy that incorporates the latest digital tools while keeping in mind environmental regulations.
Continue Reading: Significant Mining Trends of the Last 20 Years
References and Further Reading
Bentham, J., (2023). Navigating geopolitical challenges in critical minerals projects. [Online] Available at: https://www.globalminingreview.com/mining/10112023/navigating-geopolitical-challenges-in-critical-minerals-projects/ [Accessed 08 March 2024].
Business Standard, (2023). Yogi govt identifies 799 new mining areas for cheap minor minerals. [Online] Available at: https://www.business-standard.com/india-news/yogi-govt-identifies-799-new-mining-areas-for-cheap-minor-minerals-123081300043_1.html [Accessed 11 March 2024].
Commissioner for Resources Safety & Health, (2023). Risk assessment resource launched by Mining Safety and Health Advisory Committee. [Online] Available at: https://www.crsh.qld.gov.au/news-publications/news/risk-assessment-resource-launched-by-mining-safety-and-health-advisory-committee [Accessed 12 March 2024].
Digbee ESG, (2024). Digbee ESG Overview. [Online] Available at: https://digbee.com/esg [Accessed 07 March 2024].
EY, (2023). Top 10 business risks and opportunities for mining and metals in 2024. [Online] Available at: https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/mining-metals/ey-top-10-business-risks-and-opportunities-for-mining-and-metals-in-2024-final.pdf [Accessed 09 March 2024].
ICMM, (2023). Fourth anniversary of the dam collapse at Vale’s Córrego do Feijão mine in Brumadinho. [Online] Available at: https://www.icmm.com/en-gb/news/2023/brumadinho [Accessed 06 March 2024].
Identec Solutions, (2023). MINING RISK MANAGEMENT: DIGITALISATION AND PROFITABILITY. [Online] Available at: https://www.identecsolutions.com/news/mining-risk-management-digitalisation-and-profitability [Accessed 09 March 2024`].
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McKinsey & Company, (2023). Has mining lost its luster? Why talent is moving elsewhere and how to bring them back. [Online] Available at: https://www.mckinsey.com/industries/metals-and-mining/our-insights/has-mining-lost-its-luster-why-talent-is-moving-elsewhere-and-how-to-bring-them-back [Accessed 10 March 2024].
Metalex Commodities Inc., (2023). Mining Industry; The Backbone of Our Modern Economy. [Online] Available at: https://www.linkedin.com/pulse/mining-industry-backbone-our-modern-economy-metalexinc/ [Accessed 5 March 2024].
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USC Consulting Group, (2024). 7 Technological Innovations Transforming the Mining Industry. [Online] Available at: https://usccg.com/blog/7-technological-innovations-transforming-the-mining-industry/ [Accessed 10 March 2023].
White & Case, (2023). Geopolitics and decarbonization in the mining & metals sector. [Online] Available at: https://www.whitecase.com/insight-our-thinking/geopolitics-and-decarbonization-mining-metals-sector [Accessed 08 March 2024].
Del Rio, I. et. al. (2023). Assesing Climate Change Risk in the Mining Industry: A Case Study in the Copper Industry in the Antofagasta Region, Chile. Commodities 2(3). 246-260. Available at: https://doi.org/10.3390/commodities2030015
WTW Mining, (2023). WTW Mining Risk Review 2023. [Online] Available at: https://www.wtwco.com/en-au/insights/2023/05/mining-risk-review-2023 [Accessed 06 March 2024].
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