For many businesses, climate change isn’t simply an aspirational ESG-compliance target for the prospectus, it’s an existential threat.
Extreme weather, such as floods and heatwaves, is already affecting mining projects and their surrounding communities, in mild cases pushing project timelines out as miners wait for inclement conditions to pass, and in the worst cases, crippling productivity and safety and destroying infrastructure and jobs.
Mines are often situated in unforgiving, remote terrain and exposed to challenging weather conditions, and exposed businesses are therefore pretty adept at planning for weather contingencies.
“While the mining industry is no stranger to operating in harsh environments, the increasingly erratic nature and intensity of these natural hazards will challenge their traditional operating models,” United Nations Global Compact Network Australia (UNGCNA) head of programs Corinne Schoch said.
In this article:
- What extreme weather does to mining
- A twofold defence strategy
- Adapting mining operations to climate change
- Reduced emissions must be part of the approach
- Scope three emissions obligations
- Planning to exist in the net-zero world
What extreme weather does to mining
In December 2019, coal miner Whitehaven was forced to cut its production guidance at one of its mines in NSW as a result of ongoing drought and bushfires.
In July 2021, Rio Tinto recorded a 12% decline in its quarterly iron ore shipments from its Western Australian operations due to materially high rainfall.
Cyclone Yasi shut down 85% of Queensland’s coal mines in 2011, resulting in major miners like BHP, Rio Tinto, Anglo American and Peabody Energy declaring force majeure on their customer contracts.
In Chile, a heavily copper-dependent economy, torrential downpours in 2015 forced mining companies to suspend operations, putting 1.6 million tonnes of resource on hold.
In 2021, deadly torrential rainfall put a halt to iron ore operations in the south of Brazil.
At the timing of writing, La Nina weather patterns observed by the Australian Bureau of Meteorology (BoM) are wreaking unprecedented havoc along the northern part of the eastern seaboard, and mining operations in these regions have not been immune.
While companies do factor in seasonal rainfall into their planning, these weather events are increasing in both severity and frequency.
A twofold defence strategy
In the face of this material threat, companies are following a twofold defence strategy of climate change mitigation and adaptation.
The first plank – mitigation – is about arresting the march of climate change. The second plank, which acknowledges that climate change is already here, is adaptation, which involves developing strategies to survive and thrive in spite of it.
“The impacts of climate change on the mining industry are drastic,” said Schoch.
“Climate change is becoming more and more apparent – especially here in Australia. The Bureau of Meteorology’s State of the Climate Report shows that Australia has already warmed by 1.4°C since 1910.”
“Natural hazards due to climate change like drought, water stress, competition over finite water resources, flooding, fires and extreme weather are only going to increase in frequency and intensity.
“As mines are asset-intensive businesses, these weather events will continue to pose a risk to company assets and infrastructure, increasing the potential to disrupt operations.
Adapting mining operations to climate change
Given our reputation for tier-one mining, it’s no surprise that Australia is a world leader in climate adaptation for the industry, according to the CSIRO, which has been working with the mining industry to help companies reduce their vulnerability to climate threats and to adapt operations according to their specific circumstances.
Along with helping companies adapt, the organisation hopes to help companies mitigate their own impact on the environment.
CRATER (Climate Adaptation using Terrain Evaluation Results) is a tool developed by the organisation to help mining decision-makers overcome the challenges posed by extreme weather. It uses spatial analysis and multi-criteria evaluation to present adaptation options for mines.
It can be used to identify flooding ‘hot-spots’ around a mine, for example, or layer historical and human experience data into a geographic information system to build a model of the mine’s unique vulnerabilities.
Fault-identifying and capital investment analysis gives operators the ability to assess a mine’s ability to adapt and to evaluate various adaptation and mitigation options.
CRATER was successfully trialled in an Australian Coal Association Research Program (ACARP) funded pilot project at a mine in a flood-prone part of Queensland’s Bowen Basin and will now be used ahead of each wet season.
The CSIRO is now working on developing a tool for mining companies to evaluate exposure to climate and weather-related susceptibility across the supply chain.
This tool will assist mine operators to develop risk management plans and encourage the emergence of adaptive mining chains.
Adaptive mining chains are able to provide information on locations and activities in the supply chain that are particularly exposed to extreme events and therefore identify those that may benefit from adaptation and contingency plans.
Reduced emissions must be part of the approach
Companies have an obvious obligation to shareholders to avoid reduced productivity as a result of extreme weather, but the compulsion to act shouldn’t stop at the bottom line.
“The mining industry is under increasing pressure from its investors, government and communities to reduce emissions,” said Schoch. “Currently, mining is responsible for 4% to 7% of greenhouse gas emissions globally.
“The industry faces a major challenge: reduce its emissions while also producing the necessary metals required to support the achievement of a low-carbon economy.
“The focus of the Paris Agreement is the urgent need to decarbonise, meaning industry must prioritise low carbon metals. The mining industry will have to decarbonise by bringing in technologies such as solar, wind and electric vehicles.”
Schoch believes the lowering direct and indirect emissions – known as scopes one and two, in greenhouse gas accounting – will largely come from the use of renewables for power and the elimination of diesel trucks.
“When it comes to scope three emissions, this becomes more challenging, but mining companies are working with their customers to assess how steel, for instance, is being processed,” she said.
Scope three emissions obligations
For Brian Innes, partner - energy transition at Partners in Performance, the issue isn’t just about delays, but about supplier and offtake challenges miners will need to adapt to as climate change progresses.
These concerns are covered by scope three in emissions accounting, which covers the most tenuous of carbon connections to a business and stretches across the product lifecycle and supply chain.
“There are some physical risks that come with climate change, including sea-level rise, changing vegetation, changes in rainfall patterns,” he said.
“For the physical mine itself, these risks are generally pretty manageable. The risks that are less manageable are about what's happening up and down the supply chain.
“Scope three emissions, which involve questions like ‘are people going to want my product?’, present more of the material risk that some of the commodities we work with are struggling with.”
“Metals producers are looking to make their product greener, says Brian’s colleague Inga von Fircks, partner - energy transition at Partners in Performance. “They’re getting pressure from buyers who want to ensure their scope three emissions and upwards are greener and cleaner.
“If you look at it on a project basis, there are likely going to be more projects with more demand for the non-fossil-fuel projects.
“If miners are digging out metals rather than fossil fuels, they can actually do that in a very green and sustainable way, which can help them overcome some of the operational risks due to climate change and severe weather patterns,” von Fircks continued.
“The amount of hydrogen we have got to produce to green these products is immense, so there’s a whole lot of new projects coming online,” said Innes.
“Australia has quite a bit of momentum here, from our resources base and the people who are playing in this space.”
Planning to exist in the net-zero world
So how do mining companies move towards net-zero?
“Make sure you can articulate that you do have a plan to get to a decent reduction, say 30 to 50% by 2030, and that you could get to net-zero by 2040 if you had to,” said Innes.
“Understand what’s possible in the next five years and get on with it so you can communicate to investors and stakeholders that you’re doing something.
“Be clear about the technologies that are evolving that are going to ensure that your business will still be operating in the net-zero world.”
All the experts Proactive spoke to agreed that change must come from the top. Boards and business executives must ensure they understand the opportunities and threats of a low-carbon transition on their business and on the communities in which they operate.
This means some tough conversations at board level about front-line assets, new investments and potentially divestments. A transition plan must be well-communicated and inclusive and receive support from the company, its investors and the wider community.