Skarn carbon emission curves could redefine tier 1 mines

The curves will be a central component of a keynote speech company director and co-founder Mark Fellows will give at the Americas Gold Forum in September about ESG: Why it matters and how it will drive value for miners and investors.Skarn is pioneering a new, data-driven approach, linked to mine economics, providing data analysis tools which will help miners and investors make investment decisions and engage in more transparent discussions with all stakeholders. The approach produces curves which are similar to the cost curves which the industry uses to benchmark the cost performance of individual mines."It is analogous to the cost curve situation," Fellows said."What we are doing is analysing on a mine by mine basis using a stringent methodology to compare apples with apples. You have to have a deep technical understanding of the mining sector to do this analysis sensibly as it is a crossover between mineral economics and ESG metrics."If you cannot resolve ESG performance back to the asset level analysis and, for instance, reconcile energy inputs with carbon emissions you cannot assure the analysis has been done properly or use it to creates forecasts. You can only forecast by breaking everything back to the basic input level, as is the case with cost curves."The company's carbon emission curves received their public debut this month as diversified miner BHP included its data in its climate change report.Skarn's analysis aims to quantify carbon emissions along the supply chain at an asset level allowing companies to gauge their performance vis-a-vis the market at large. And as companies strive to push their costs towards the first quartile, it is thought they will increasingly do so in terms of CO2 emissions. "It's definitely the case that the miners are going to work hard on reducing [CO2 emission figures], for instance, BHP's plans for Escondida and Rio Tinto's at Kennecott," Fellows told Mining Journal.The Skarn analysis covers 2018 and 2019 Scope 1 and 2 CO2 equivalent emissions plus freight and downstream processing to facilitate like-for-like comparison of assets. The analysis includes emissions from mining activities, ore processing, transport and downstream processing, up to the first-use entry point."In order to form a proper view of a company's carbon footprint we need to understand it at the mine level including energy consumption and the levers to reduce it," Fellows said."Over the last 30 years the emphasis has been on maxing-out the scale of operations with openpits. That will become more complicated now, until an alternative to diesel haul fleets arrives""Quantifying emissions at a granular, asset level, allows investors and industry participants to properly understand the factors which drive a company's environmental footprint," he said. "Another issue which we tackle consistently in our company-level data is allocating asset emissions according to equity stake owned.Skarn data shows that each tonne of copper produced generates an average of 3.2t of CO2-eq in Scope 1 & 2 emissions. Including freight, smelting and refining, this increases to 4.7t. Nickel production has a much higher carbon footprint, with Skarn figures showing each tonne produced generates 22.1t of CO2-eq, which almost triples to 33.2t including freight. Iron ore has a much lower footprint at 22.1kg CO2-eq (0.221t) as the figures do not include any steelmaking emissions. However, they also almost triple to 58.9kg CO2-eq when freight is included. Metallurgical coal generates 150kg CO2-eq or 190kg including freight. CO2 emissions by commodity The 2019 carbon emissions associated with the mining and delivery to market of these four commodities therefore total over 387Mt CO2-eq, which roughly equates to the annual country total emissions from Australia or the UK.Skarn data shows the copper sector as a whole has the highest carbon intensity accounting for more than 86 million tonnes of Scope 1 and 2 CO2-equivalent emissions, plus an additional 38Mt CO2 associated with freight to importing country port, smelting and refining.The iron ore carbon intensity curve covers almost all global seaborne supply and the assets covered account for more than 34 million tonnes of Scope 1 and 2 CO2-eq emissions, plus an additional 62Mt CO2-eq associated with land and sea freight to importing country port. It is important to note that this does not include emissions from the steelmaking process.For metallurgical coal, Skarn's carbon intensity curve accounts for virtually all global seaborne supply. Mine site Scope 1 and 2 emissions accounted for a total of 49Mt CO2-eq, including fugitive methane, plus an additional 14Mt CO2-eq associated with freight to importing country port.The nickel carbon intensity curve covers Scope 1 and 2 emissions from mine sites, plus freight and downstream processing to the first saleable nickel product (Class 1 Nickel for concentrate producers, and intermediate compounds for others). The assets covered account for over 37Mt CO2-eq of Scope 1 and 2 emissions, plus an additional 67Mt CO2-eq associated with freight to importing country port and downstream processing.The data highlights the significant impact freight has on the carbon footprint of minerals such as iron ore and nickel, which could ultimately see pressure increase on shipping lines to improve their environmental performance. Freighters typically use bunker fuel, a relatively dirty fuel made from the dregs of the oil refining process and often containing high levels of sulphur and other pollutants. Shipping is estimated to generate 2.% of global CO2 emissions. Communities near ports are increasingly voicing their disapproval of ship-caused pollution—particularly in prime cruise destinations—leading the International Maritime Organization (IMO) to implement a requirement in January this year for fuels used in ships to contain no more than 0.5% sulphur, a significant reduction from the previous limit of 3.5% and industry average 2.7%."This feeds into the dialogue of miners being held accountable for their Scope 3 emissions in the supply chain - which are outside their direct management control but apply to their product supply chain," said Fellows.Nickel has the highest CO2 freight component of the four commodities. "A big chunk of nickel production is now from laterites exported from Philippines to China for use as direct smelting ore into nickel pig iron. Laterites typically grade 2% nickel, so they are relatively low grade," said Fellows. "This increases nickel's carbon footprint on a unit contained metal basis, relative to say, iron ore."Nickel also presents a challenge in defining where the end point of carbon analysis sits. "Nickel doesn't have a single easily definable end product that is easy to normalise the analysis to, what we call a system boundary. In addition to class 1 LME deliverable nickel there are ferronickel's and other products," Fellows said. BHP CO2 emission curves from Climare Change report Redefine tier 1 assetsThe CO2 curves have the potential to redefine what a tier one asset is.In addition to a certain scale of production with a certain mine life and with first quartile costs, major miners are also likely to include a first quartile CO2 emission profile. This is ultimately likely to see miners adjust their portfolios and divest assets that don't make the grade."These metrics will become entirely material to portfolio decisions and there will be a fair amount of horse trading to reposition companies on the carbon curve. BHP were explicit [in their climate change presentation] that they are looking at their portfolio with this in mind," Fellows said."Mines are looking at this really seriously."A really remote mine which has to truck-in heavy fuel oil to run generators may find a viable renewable and battery power solution that works. Conversely, being dependent on national grid infrastructure will be an issue if it happens to be powered by coal, which is a huge issue in South Africa where miners are tied to Eskom."The Skarn approach daylights some of the changes that will have to happen in the mining sector, such as dealing with declining grades, fleet management and where companies operate."Grade is a huge driver when it comes to carbon intensity per unit of metal output. The geology paradigm is towards greater CO2 emissions as the trend is towards lower grade deposits with more complex ores which are deeper and require more energy-intensive processing," Fellows said."Over the last 30 years the emphasis has been on maxing-out the scale of operations with openpits."That will become more complicated now, until an alternative to diesel haul fleets arrives. A massive energy step change is only just beginning, and options such as hydrogen require a whole new infrastructure. Trolley-assist technology with overhead lines and power cabling has big implications for mine infrastructure. The technology is developing rapidly, and the demand is increasing exponentially but it is still not entirely clear what the solutions will be or how much they will cost."Grappling with carbon curves is likely to add to production costs, which may also face carbon taxation, adding pressure for commodity prices to increase. Operations with first quartile carbon performance may also be able to obtain a premium for their production.In addition to these commodities, Skarn has also created mine-by-mine carbon intensity curves for gold, silver and cobalt which will be published in the coming weeks.

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