ESG Challenges for the Mining Sector

ESG strategies are becoming increasingly important, with higher standards required to successfully move toward net-zero greenhouse gas (GHG) emissions. But the challenge for major Australian iron ore miners lies in having to reduce their emissions while maintaining and ramping up production, sources told Fastmarkets.

Australia iron ore miners Rio Tinto and BHP share the ambition of net zero operational GHG emissions by 2050 (Scope 3). Rio Tinto aims for a 50% reduction in emissions in 2030 (Scope 1 and 2), while BHP has goals of cutting at least 30% by 2030. The third largest iron ore miner, Fortescue, has committed to eliminating approximately 90% of emissions by 2030 and aims to achieve net zero Scope 3 emissions in 2040.

But there is no single decarbonization pathway for Australia iron ore miners, especially given their ongoing brownfield and greenfield iron ore projects.

Renewable energy, either directly via on-site power plants or through purchasing power, electric mining vehicles and cooperating with steelmakers towards finding new steel making technology, are currently the main plans for decarbonization amongst Australian iron ore miners.

Unlike China’s decarbonization method of cutting crude steel output and restricting new steelmaking capacity, Australian iron ore miners are working to maintain or increase production in the short term, despite the potential of increasing ESG-related investment or cost.

For example, Rio Tinto, the largest iron ore miner in Australia is on track to advance the Pilbara mine replacement study, is set to make good progress on Rhodes Ridge pre-feasibility study that has a capacity of 40 million tonnes per year and is preparing to complete 70% of construction on the West Range mine, according to the company’s quarterly report released on July 16.

BHP also showed a strong iron ore performance in the 2024 financial year (July 2023-June 2024), delivering the second consecutive year of record production, according to the company’s year-end report published on June 30. BHP also increased its yearly iron ore shipment guidance to 255-265.5 million tonnes in the 2025 financial year, with a medium-term goal of increasing production by 17% to 305 million tonnes annually.

Another Australian mining giant, Fortescue, with annual iron ore production guidance of 192-197 million tonnes for the 2024 financial year, also started the new Iron Bridge mining project production and shipment in December 2023.

An Australian-based miner source told Fastmarkets that the cost of ESG plans would increase the overall capital intensity of projects, yet it appeared it was not currently calculated or directly reflected in the iron ore unit cash cost or pricing for major miners.

Some market participants added that despite the iron ore price dropping from $140 per tonne in January this year to $100-110 per tonne in July, major iron ore giants in the short term would keep current production levels steady to align with company objectives.

Australia iron ore giants have a lower cash cost compared to miners from other countries. Rio Tinto’s guidance for the 2024 calendar year Pilbara iron ore unit cash costs is $21.75-23.50 per tonne, and $17.40-18.90 per tonne by BHP’s 2024 financial year guidance, while Fortescue’s 2024 financial year cash cost guidance for hematite iron ore is $17-18 per tonne.

Iron ore prices declined gradually in 2024 amid sufficient seaborne supply and China’s soft demand. In addition, some market sources became increasingly more sensitive towards China’s stimulus measures and crude steel cut policy given the country’s decarbonization drive.

Fastmarkets’ index for?iron ore 62% Fe fines, cfr Qingdao, averaged $105.93 per tonne in July, down by 0.44% from $106.40 per tonne the prior month and down by 9.98% from May’s average of $117.68 per tonne.

Source - https://www.fastmarkets.com/insights/australian-minings-esg-conundrum/

Fortescue Rio Tinto BHP Arcadium Lithium Canada Nickel Company Nutrien and others

Many products requires key natural resources like Nickel, Copper, Iron-Ore, Lithium, Aluminum, Oil, and Gas, Potash, other nonmetals, and metals.

1. Biodiversity is a challenge for many resources company due to requirement to work with indigenous groups, right environmental plan for water and tailing ponds, and infrastructure required to extract and ship raw materials for refinement, fabrication, and end-market shipment. - Blog – ESG – Biodiversity – Fashion and Cellulose – Forestry - https://www.dhirubhai.net/posts/paul-young-055632b_consumers-want-ethical-sourcing-labeling-activity-7212132574935072769-RjyD?utm_source=share&utm_medium=member_desktop or Blog – What is next for Lithium - https://www.dhirubhai.net/pulse/what-next-lithium-paul-young-qj5jc/
2. The time it takes to approved mining projects take years - Blog – ESG – Critical Minerals – United States Canada and Australia vs Rest of the World - https://www.dhirubhai.net/posts/paul-young-055632b_united-states-ranks-next-to-last-in-development-activity-7220784072917184513-A4Ze?utm_source=share&utm_medium=member_desktop
3. Green steel has many challenges including cost of capital, capital investment, available of high-grade iron-ore - https://www.dhirubhai.net/posts/paul-young-055632b_the-state-of-the-steel-industry-in-2024-activity-7225358246964776960-1XNp?utm_source=share&utm_medium=member_desktop or https://www.datamintelligence.com/blogs/challenges-and-opportunities-in-the-green-steel-industry
4. Mining technology continues to evolve including leveraging of satellite technology, drill sampling, lithium operating equipment, and other technologies - https://prismecs.com/blog/top-five-technological-advancements-in-the-oil-and-gas-industry or https://usccg.com/blog/7-technological-innovations-transforming-the-mining-industry/
5. Emissions counting issues - The accounting flaw at the heart of ‘financed emissions’ - https://www.dhirubhai.net/pulse/accounting-flaw-heart-financed-emissions-paul-young-xre2c/ ?or https://www.dhirubhai.net/posts/paul-young-055632b_the-accounting-flaw-at-the-heart-of-financed-activity-7221963323976687617-cAIz?utm_source=share&utm_medium=member_desktop

Hitting ESG targets is becoming challenging due to cost, viability, and availability of technology to drive sustainable solutions for extraction, refinement, fabrication, and end-market shipping.

Paul is a former IBM Customer Success Manager that has deployed over 300 data and AI solutions across industry and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.

[email protected]

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Seeking employment - https://www.dhirubhai.net/posts/paul-young-055632b_hi-all-linked-in-followers-and-contacts-activity-7199365291288506369-qGVf?utm_source=share&utm_medium=member_desktop

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?Courses?—? https://www.dhirubhai.net/posts/paul-young-055632b_activity-7163302861974519809-ryf3?utm_source=share&utm_medium=member_desktop

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Monthly Reports – Australia United States Canada and Province of Ontario - https://www.dhirubhai.net/posts/paul-young-055632b_australia-canada-unitedstates-activity-7224703167886737408-QSu3?utm_source=share&utm_medium=member_desktop

Here are my last reports on Australia, Canada, United States, and the Province of Ontario

Monthly Report – Australia – July 2024 and June 2024 - https://www.dhirubhai.net/pulse/monthly-report-australia-july-2024-june-paul-young-8epvc/#

Monthly Report – United States – June 2024 and July 2024 - https://www.dhirubhai.net/pulse/monthly-report-united-states-june-2024-july-paul-young-eqrsc/

Monthly Report – Canada – July 2024 and June 2024 - https://www.dhirubhai.net/pulse/monthly-report-canada-june-2024-july-paul-young-wnpkc/

Monthly Report – Ontario – June 2024 and July 2024 - https://www.dhirubhai.net/pulse/monthly-report-ontario-june-2024-july-paul-young-nqsuc/

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