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Mining
Will there be green premiums?
It’s a question being asked by and of mining executives across a range of sectors as the typically dusty, dirty and morally suspect world of digging stuff out of the ground and selling it for profit looks to adapt to a changing world.
In industries like nickel, rare earths and lithium, demand for ESG traceability and supply chain provenance is growing as companies with more eyes on them than the middlemen traders that typically deal with miners, like car makers, become direct customers.
Some miners say ESG and low carbon production will become a ‘ticket to ride’ in those sectors, especially if you’re selling to consumers in Europe or North America.
In gold the situation is a little different.
There is little scope for ESG-based gold buying at the moment because of how gold is refined and packaged.
Typically refiners, primarily in Australia the Perth Mint, will take gold in from multiple parties, mix them and refine into gold bars at scale.
But Darren Stralow, the CEO of up and coming miner Bellevue Gold (ASX:BGL) says the company is testing the market for an ESG friendly gold product, with its Leinster gold mine of the same name expected to be one of the lowest carbon emitters of any when it enters production in the second half of 2023.
While the biggest sources of gold demand are jewellery and investment, the latter of which tends to drive price, it is a major component in electronics like laptops and mobile phones where equipment producers are growing more concerned about the sustainability of their supply chains.
Bellevue made two, interlinked, announcements today signposting if not confirming its ‘green credentials’.
The first was a native title agreement with the Tjiwarl People, the traditional owners of ~13,000sqkm of country between Leinster and Wiluna which is home to some of Australia’s biggest mining operations.
The second was an agreement for EDL to deliver a hybrid wind-solar and gas power station which will run the mine at an average penetration of 80% renewables, with the gas turbines to have ‘engines off’ capabilities, meaning the operation could run at times at 100% renewables.
While green premiums do not yet exist, Stralow believes BGL can help create that market.
“We’re trying to be a market leader in terms of challenging the rest of the industry to come forward and present something different about their products,” he said.
“It’s all well and good to have the product just go into a bucket and be sold the same as everybody else.
“When you have an opportunity to have a differentiated product that actually does have some social benefits attached to it, it’s a really good test case to see whether the world values green traits as a value add.
“There’s a lot of talk about the world wanting to be greener, and it’s an opportunity for consumers and end users to put their money where their mouth is.”
ESG traceability in metals has been compared to the world of diamonds, also used in jewellery, where concerns about the origin of diamonds mined by child and slave labour in Africa — the inspiration of the film Blood Diamonds — has led to supply chain provenance campaigns.
Stralow said BGL was talking with multiple refiners to set up a “verification process”.
The native title agreement follows a similar agreement signed by the Tjiwarl over the nearby Kathleen Valley lithium mine with Liontown Resources (ASX:LTR).
Tjiwarl Aboriginal Corporation chairman Brett Lewis said in a statement the Tjiwarl native title holders “worked hard to make sure culture and heritage is protected as much as possible.”
Bellevue was previously developed, producing 800,000oz at 15g/t up to the late 1990s at a time long before the Tjiwarl received recognition from the Australian legal system of their ownership of the land.
Stralow said the Tjiwarl People are the key stakeholders for the Bellevue mine.
“We had over 100, traditional owners visit site during that process to really map out the culture of the area and map out the stories and really define what’s important to them about the ground,” he said.
“Also to understand our project, understand what we were going to do and get comfort that we were going to be good corporate citizens with the area.”
The importance of relationships between miners and their traditional owner stakeholders has grown in focus since Rio Tinto’s Juukan Gorge debacle in 2020.
Stralow said the process of completing the NTA had improved the layout of the 200,000ozpa underground gold mine.
“So we did that process over a series of months and a series of site visits and what we have now as a document is something that is going to add value to us because our operation is better because it’s better laid out,” Stralow said.
“It’s better management of the country that we’re in, and then it’s going to benefit them because they’re going to get jobs, they’re going to get contracts, they’re going to get economic benefit.”
Mining stocks recovered through the afternoon, trimming their losses by a collective two thirds with the materials sector ending the day just 0.24% down.
Coal miners Yancoal (ASX:YAL) and Whitehaven (ASX:WHC) found support, while Iluka (ASX:ILU), gold miner Capricorn Metals (ASX:CMM) and platinum miner Zimplats (ASX:ZIM) were big gainers in the mid-tier.
Analysts say Russian supply issues and improvements in semiconductor production are improving the outlook for PGMs, mainly used in catalytic converters in cars.
“Palladium gained (last week) as LME’s move to consider sanctions on Russian base metals raised fears of further supply disruptions,” ANZ senior economist Adelaide Timbrell said in a note.
“Recent bottlenecks in the semiconductor industry are starting to ease. This should help support the auto
sector, and the outlook for demand of auto catalyst metals platinum and palladium should also improve.
“Combined with supply side issues, platinum and palladium markets are likely to remain relatively tight.”
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