By Sean Browne and Geoff Linnell
The mining industry is facing increased pressure to be more mindful about environment, social and governance (ESG) compliance. Rather than being overwhelmed by the obligation to comply, the industry should understand the inherent benefit of ESG adoption, which presents a lucrative opportunity through which to build resilience and create sustainable value in your business, no matter the commodity cycle, thereby enhancing your profitability and competitive advantage in the long-term.
You may inherently understand the benefits of ESG but wonder whether responsible business practices will have any material benefit on the profitability, growth or the sustainability of your business. The answer should be a resounding “yes”. Evaluating companies on their ESG scorecard, or perhaps lack thereof, is fast-gaining prominence within the global investment community.
Moreover, ESG is growing in prominence due to the younger generation’s strong ESG preferences and prioritisation of value-based investments, which will mark an important milestone for ESG investing. According to a report by American finance company MSCI, the next few decades will see the largest generational wealth transfer in history of an estimated US$30 trillion from baby boomers to millennials, which currently account for 23% of the global population and which are typically entering or are in the midst of their prime earning years. This represents a major shift in buying-power from the traditional profits-focused generation to one that prioritises sound environmental practices, transparency and social upliftment – aspects that ESG inherently promote.
Predicting the future in cyclical industries such as the mining industry is very difficult, more so in wake of the COVID-19 pandemic. No one really knows what post-pandemic economic recovery will look like or how long it will take. Because the future is inherently uncertain, and commodities tend to exhibit large and unexpected movements in their prices over relatively short periods, it is important to remember that value can be created at any time. This will ensure that your mining project is better prepared to weather any sudden downturn in the market while also enabling you to take advantage of any market upswings.
While you may think to play it safe during times of uncertainty, and may become more prudent in your capital allocation practices, there is still value to be had. Investments aimed at extracting maximum value from your mineral resource is a way to ensure your business is more resilient and will deliver attractive returns throughout the cycle, independent of commodity prices.
Despite uncertainties around global post-coronavirus economic recovery, a clear theme has however emerged and that is the need for post-pandemic recovery to focus on building back better through a green recovery, with sustainability at the heart of any new agenda. This agenda becomes clearer when considering that a host of countries have recently announced major commitments to significantly cut their carbon emissions, promising to reach “net zero” in the coming years.
Supporting the establishment of sustainable, value-driven businesses
The pace of change brought about by the COVID-19 pandemic, compounded by ESG performance requirements, will require mining companies to pivot their offerings to benefit both themselves, the mining industry, society and the environment.
To quote Canadian base and battery metals mining company Ivanhoe Mines Founder and Co-chairperson Robert Friedland: “There will be no one price for copper. There will be no more one price for gold. Everything will be priced in relation to its ESG components and will be priced in relation to how much global warming gas is created in making that commodity.”
At Acrux Resources, we have dedicated our time to assist the mining industry establish sustainable and value-driven businesses that are able to better manage risks by improving efficiencies and outputs, thus enabling the mining industry to outperform regardless of the commodity cycle, by implementing technology enhancements that improve efficiency and are ESG-compliant.
The need to optimise and expand in the mining sector, which would enable a move down the cost curve, has never been more important for junior and mid-tier mining companies. However, we recognise that as these companies emerge from this economic crisis, with weakened balance sheets and a low commodity price environment having hampered their recovery, the need for bespoke, cost-effective solutions will be greater than ever.
Acrux Sorting Technologies – through a strategic partnership with separation and sorting technology provider IMS Engineering – provides a fully-funded, turn-key, sensor-based sorting technology that enables resource owners to materially increase saleable product at no upfront capital cost, while also reducing a company’s environmental liability by lowering its emissions and carbon footprint, water use and waste management requirements. The cutting-edge green technology creates value for producers through the optimisation and efficient use of the full resource base, thereby driving down unit production costs, increasing production and subsequently repositioning the company lower on the cost curve.
Moreover, through its shareholding in fines recovery technology provider FineTech Minerals, Acrux Resources is able to provide ultra-fine oxide mineral recovery for particles finer than 110 microns. Following rigorous testing, we are building our first commercial ultra-fines recovery plant, using our bespoke technology aimed at positioning mineral owners as low cost producers of minerals.
These solutions provide extraordinary value no matter where you are in the commodity cycle and ultimately contributes to the ESG scorecard of resource owners, ensuring that ESG becomes a part of how mining companies are run.
Sean Browne and Geoff Linnell are Acrux Resources Executive Directors