quantifying mining industry esg metrics at the asset …
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QUANTIFYING MINING INDUSTRY ESG METRICS AT THE ASSET LEVEL - AND WHY IT MATTERS
OCTOBER 2021
LEGAL & DISCLOSURE
© Copyright 2021 Skarn Associates Limited, all rights reserved.
Skarn Associates Limited (“Skarn”) has made all reasonable efforts to ensure that the sources of the information provided in thispresentation are reliable and the data reproduced are accurate at the time of writing.
Skarn accepts no liability for any direct, special, indirect or consequential losses or damages, or any other losses or damages ofwhatsoever kind, resulting from whatever cause through the use of or reliance on any information contained in the report. Thematerial contained herewith has no regard to the specific investment objectives, financial situation or particular need of anyspecific recipient or organisation.
This document is not to be construed as advice to the recipient or any other person as to the merits of entering into anyparticular investment. In taking any decision as to whether or not to make investments, the recipient and/or any other personmust have regard to all sources of information available to him.
No part of the report may be reproduced or distributed in any manner without written permission of the Skarn AssociatesLimited entity named on the cover. Skarn specifically prohibits the redistribution of this document, via the internet orotherwise, to non-professional or private investors and accepts no liability whatsoever for the actions of third parties in relianceon this report.
Skarn Associates Limited is a private limited company registered in England & Wales with registered number 10324779, whoseregistered office address Stowegate House, Lombard Street, Lichfield WS13 6DP.
Founded in 2016, based in the UK. Recently refocused and raised equity finance.
Previously key players at Brook Hunt (Wood Mackenzie), S&P Global, CRU and GFMS (Thompson Reuters
Refinitiv). We are specialists in commercialising mine economics data and research, now focused on bridging
the gap between mine economics and ESG research.
Skarn’s mission is to create high quality, independent, forward-looking mining sector ESG analysis. Skarn has
developed unique methodologies and datasets, on an asset-by-asset basis.
Charles Cooper Director,
Strategy & Content
Mark Fellows Director,
Commercial
SKARN ASSOCIATES
Sophie ChungDirector,
Industry Analysis
Martin HollandsDirector,
Environmental Sustainability
Fernando Araya BurchardPrincipal,
Metallurgical Analysis
Martin HallerAluminium Consultant
Thomas Verrept
Mining Analyst
Lucent Nicholson
Research Manager
DIVERGENT (OR DYSFUNCTIONAL?) ESG RATINGS
Ratings agencies differ widely:▪ in the ESG components they include in their rating.
▪ in the weighting they apply to individual ESG components.
▪ In the measurement of components (the “rater effect”).
Example shows a 44% range in normalised ESG ratings between six agencies.
Begs the question – wouldn’t you be puzzled by a 44% difference in company NAV estimate between two equity analysts?
Barrick Gold: ESG Rating by Agency
-3
-2
-1
0
1
2
3
Asset4
Source - Aggregate Confusion: The Divergence of ESG Ratings, Florian Berg, Julian F. Koelbel, and Roberto Rigobon, MIT Sloan & University of Zurich, May 2020.
No
rmal
ise
d E
SG R
atin
g (m
ax =
4, m
in =
-4
)
KLD
THE MINING ANALYST’S APPROACH TO ESG RESEARCH
Forecasting & reconciling
ESG impacts
▪ Asset-by-asset, forward-looking ESG models, based on mine production schedule.
▪ Requires thorough understanding of technical drivers; balancing energy inputs to emissions.
▪ e.g. fuel inputs ↔ consumption rates/tonne ore ↔ fuel carbon intensity ↔ CO2e.
Data consistency
▪ Consistent approach to presenting corporate asset ownership.
▪ Standardised metrics – e.g. production reporting basis – concentrate at mine gate vs refined metal at refinery.
▪ Critical scrutiny of company reported data, CDP etc.▪ Intelligent, flexible and transparent treatment of system boundaries.
Value-add research
▪ Carbon intensity and abatement curves; flexing functionality.
▪ Benchmarking – energy, water, land/rehab costs, ecosystem impact, social indicators.
▪ Capital and operating cost implications; connecting ESG to mine economics.▪ Longer term - Life Cycle Analysis, Scope 3 Emissions, implications for commodity markets.
GHG INTENSITY CURVES H2O BENCHMARKING CORPORATE ANALYSIS
Available now
▪ Aluminium-alumina-bauxite▪ Copper (Mines & Smelters)
▪ Gold▪ Nickel▪ Iron ore▪ Metallurgical Coal▪ Zinc (Mines & Smelters)
▪ Cobalt▪ Lead
Upcoming
▪ PGMs▪ Forecast future years
Cu Ni Fe Au Co
Launching Q4 2021
▪ Unique asset-level approach to balancing water withdrawal, consumption and discharge.
▪ Groundbreaking application of intensity curves to water.
▪ Overlaying climate, water stress, watershed, hydrology and precipitation data.
Upcoming
▪ Gold Mines H20 Benchmarking launch (November); Copper Mines - January
Launching Q4 2021
▪ Quarterly Review – company targets
▪ Data tool – ESG metrics including emissions, water, safety & others
▪ Reconciliation of reported vs. equity basis
Upcoming
▪ Forecast ESG metrics for future years
Coal
THEMATIC RESEARCH
Regular Analytical Reports
▪ Skarn Mining ESG Bulletin launched November 2020
▪ Periodic whitepapers and thematic reports
▪ Monthly roundtable webinars
ESG PRODUCT ROADMAP Al
SKARN’S E0 & E1 INTENSITY METRICS VS SCOPES 1-3
Source: GHG Protocol, Skarn Associates; E1 GHG Emission Metrics® is a registered trademark of Skarn Associates
Scope 1“Direct”
Scope 2“Indirect”
Self-generatedPower
Fuel Consumed
FugitiveEmissions
Purchased electricity
Purchased heat / cooling
E0
Transport of
Inputs
Waste generatedIn operations
Business travel
Employee commuting
Leased Assets
Fuel and energy-related
activities
Capital goods
Purchased goods and
services
Scope 3Upstream
Scope 3Downstream
Franchises
Leased Assets
End-of-life treatment of sold
products
Processing ofIntermediate
Products
Transport ofIntermediate
Products Investments
Use of sold
products
Asset / Mine / Smelter / Refinery / Company viewpoints
E1
*As defined by the GHG Protocol Corporate
Accounting and Reporting Standard
Emissions to first-saleable product: Mining activities (Scope 1 & 2*)
Ore processing (Scope 1 & 2*)
Fugitive emissions (Scope 1 & 2*)
Transport (Scope 3*)
Downstream processing (Scope 3*)
Emissions by: Asset
Company
Country
Commodity coverage: Aluminium, Alumina, Bauxite
Copper
Gold
Nickel
Iron Ore
Metallurgical coal
Cobalt
Zinc
Lead
0.0
100
200
300
0 500 1,000 1,500 2,000
Cumulative Nickel Production (000 tonnes)
Scope 1 Scope 2 Freight & Port Downstream Processing
0
5
10
15
20
0 3,000 6,000 9,000 12,000 15,000
Cumulative Copper Production (000 tonnes)
Scope 1 Scope 2 Ocean Freight Smelting Refining
0
100
200
300
0 250 500 750 1,000 1,250
Cumulative Iron Ore (dry) (million tonnes)Scope 1 Total Scope 2 Total Freight Non-Integr.Port Non-Integr. Ocean Non-Integr.
Iron Ore E1 GHG Intensity (kgCO2e/t)
NickelE1 GHG Intensity (tCO2e/t Ni eq.)
CopperE1 GHG Intensity (tCO2e/t Cu eq.)
0
5
10
15
20
25
0 20,000 40,000 60,000Cumulative Primary Aluminium Production (kt)
Scope 1 Scope 2 MineRefinery Mine & Refinery Freight
AluminiumE1 GHG Intensity (tCO2e/t Al)
UNIQUE ASSET LEVEL ANALYSIS
E1 GHG Emission Metrics® is a registered trademark of Skarn Associates
COPPER MINERS E1 GHG INTENSITY CURVE
Vale
Sudbury
Copper
Mounta
in
Flin F
lon
Gib
raltar
Hig
hla
nd V
alley
Kid
d C
reek R
ed C
hri
s
Mount M
illigan
Mount P
olley
New
Aft
on
Vois
eys B
ay
Min
to
0% 25% 50% 75% 100%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000
Cumulative Production Percentile (%)
CO
2e
In
ten
sity (
tCO
2e
/t C
u e
q.)
Cumulative Copper Production (000 tonnes)
Scope 1 Scope 2 Ocean Freight Smelting Refining© Skarn Associates Limited
Source: GHG Protocol, Skarn Associates; E1 GHG Emission Metrics® is a registered trademark of Skarn Associates
NICKEL E1 GHG INTENSITY CURVE – BY COUNTRY
Canada
Austr
alia
Indonesia
Russia
Philip
pin
es
Bra
zil
0% 25% 50% 75% 100%
0.00
20
40
60
80
100
120
140
160
180
200
0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000
Cumulative Production Percentile (%)
CO
2e
In
ten
sity (
tCO
2e
/t S
ale
ab
le P
rod
uct)
Cumulative Nickel Production (000 tonnes)
Scope 1 Scope 2 Freight & Port Downstream Processing
Source: GHG Protocol, Skarn Associates; E1 GHG Emission Metrics® is a registered trademark of Skarn Associates
Anglo American
ArcelorMittal
Barrick Gold
BHP Group
Boliden
Century Aluminum
Chalco
CODELCO
First Quantum
Freeport-McMoRan
Fresnillo
Glencore
Grupo Mexico
KAZ Minerals
KGHM
Newmont Mining
Nornickel
Norsk Hydro
Rio Tinto
Rusal
Teck Resources
Vale
MAJOR COMPANIES – E1 GHG EMISSIONS BY COMMODITY
0
25
50
75
10
0
Alu
min
ium
Co
pp
erG
old
Iron
Percentile position: E1 CO2e Emissions Intensity/Unit Production
25 50 75 1000
E1 CO2e Emissions (Mt CO2e)
5010 20 30 400Source: Skarn Associates
0 10000000 20000000 30000000 40000000 50000000 60000000
Notes: based on equity ownership.
Emissions are for stated commodities only, i.e. exclude oil &
gas, thermal coal etc.
Anglo American excludes stake in Kumba, which is reported
separately.
Chalco excludes Chinalco’s copper assets.
MINE SITE WATER BALANCE – SKARN NORMALISATION
• Entrained• Seepage
• Evaporation• Other
CONSUMPTION
MINE SITE WATER BALANCE
As ReportedGRI Classification
WITHDRAWALS
Mine Boundary
Treated
UntreatedWater Used
Unreported Withdrawal
MINING &
PROCESSING
Recirculation
DIVERSION As Reported
DISCHARGES As Reported
Storage
Water balance normalised from: Withdrawals = Discharge + Consumption + Δ Storage
To: Reported Withdrawals + = Consumption Intensity1 (3 yr rolling average) x Production + Discharge1 Consumption intensity: as reported or benchmarked
Unreported Withdrawal
GOLD MINES WATER BENCHMARKING – ADJUSTED WITHDRAWAL
Ce
rro
Ne
gro
Lo
ng C
an
yo
n
Co
rte
z
Ta
na
mi
Tu
rqu
ois
e R
idge
Ca
rlin
Crip
ple
Cre
ek &
Vic
tor
Ka
lgo
orlie
Su
pe
r P
itE
leo
no
reM
usse
lwh
ite
Ah
afo A
kye
m
Bo
dd
ingto
nP
ho
en
ix (
Ba
ttle
Mo
un
tain
)
Po
rcu
pin
eP
en
asqu
ito
Pu
eb
lo V
iejo
Ya
na
co
ch
a
Me
ria
n
0% 25% 50% 75% 100%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Ad
juste
d W
ith
dra
wa
l I
nte
nsity m
3/O
z A
uE
q
Cumulative Gold Production (koz)
Surface GRI Ground GRI Seawater + Municipal & Used GRI Unreported WithdrawalSource: Skarn Associates
WATER WITHDRAWAL INTENSITY VS. REUSE EFFICIENCY
High Efficiency, Low Withdrawal
Low Efficiency, High
Withdrawal
High Efficiency, High
Withdrawal
Low Efficiency, Low Withdrawal
0
10
20
30
40
50
60
70
80
90
100
1 10 100 1,000
% W
ate
r R
ecy
cle
d &
Re
use
d
Log of Withdrawal intensity (m3/Oz Au Eq)
SAFETY STATS – GOLD MINES TOTAL REPORTABLE INJURIES
Mark Fellows
Director
+44 (0) 20 3290 2492
+44 (0) 79 4114 6081
Skype: mark.fellows66
www.skarnassociates.com
@SkarnAssoc
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