MINE POWER

A NEWSLETTER FOR THE MINING INDUSTRY

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PwC: ESG NOW A STRATEGIC IMPERATIVE FOR MINERS

Mine 2021 report highlights compelling opportunities

Just released, global consultancy PwC’s 18th annual report on the mining industry looks at strong financial and operational performance from the world’s top 40 mining companies and projects a future ripe with opportunities. The authors see an industry that has weathered the worst of the COVID-19 economic crisis and emerged in excellent shape. Per the report, net profit in 2020 was up 15%, cash on hand rose 40%, and market capitalisation increased by nearly two-thirds compared to 2019. And they forecast things to get even better, as they expect record-high revenue and EBITDA levels and the second-highest net profit levels in the report’s history for 2021.

To the authors, this means that mining companies have never been in a stronger position “to make a big, bold pivot towards the future.” They continue, “The future is already visible today: the world is in the midst of an era defining transition to a low-carbon, sustainable economy.”

ESG pays

The key, the report suggests, is making environmental, social and governance (ESG) issues the core of organisational strategy. An article in Australian Mining quotes PwC global mining leader Paul Bendall: “This isn’t just about doing the right thing and appeasing shareholders.” Performance results suggest that a focus on ESG is now paying real dividends. The report found that companies that rated higher on ESG outperformed the broader market during the peak of the pandemic, as well as in the longer term. The authors also note that “investors are increasingly drawn to companies that actively embrace ESG policies.” Thus, “beyond their potential financial performance returns, ESG considerations are becoming fundamental to deal success.”

Multiple opportunities

The report sees two-fold long-term value creation opportunities for mining companies that “bake ESG into their core operating strategies.” These include not only improved access to capital, but also the opportunity to riding the wave of an ever-increasing demand for low-carbon products.

According to the International Energy Agency, the energy sector’s need for critical minerals that are essential for clean energy technologies could increase by as much as six times by 2040. The authors assert that “while miners will likely continue to shift away from thermal coal, they need to explore replacing that revenue stream with ESG-oriented businesses.”

The report also offers a caveat. “Although many (miners) understand the importance of ESG, some still see it as just another box to tick.” But to the authors, “ESG represents one of the mining industry’s most significant opportunities for long-term value creation, building trust and sustainable growth … Miners need to demonstrate that they not only understand the risks and opportunities of ESG but are committed to addressing them in everything they do.”

PwC’s Bendall says, “Just as the world pivots to a more sustainable future reliant on a lower-carbon economy, the miners have a chance to think strategically towards a decarbonisation future and ESG agenda, and reap the long- Read the Executive Summary and download the full PwC report here.

 

 

 

 

DECARBONIZATION IS COMING —LEAD, FOLLOW OR STAND ASIDE

In line with our focus on ESG issues this month, it’s clear that pressure is increasing on all industries, mines included, to align their business strategies and activities with the reality of a decarbonizing world. Mining.com reports that a group of 457 investors overseeing more than $41 trillion in assets and a coalition of 79 company CEOs are calling on the G7 — Canada, France, Germany, Italy, Japan, the UK and US — to work harder on reducing greenhouse emissions and cut funding for fossil fuels.

The Alliance of CEO Climate Leaders, representing top bosses of large companies such as Newmont, Novo Nordisk, Royal DSM, ABB, AstraZeneca and Deloitte, also told governments to speed up plans to cut emissions.

The investor group, representing an estimated 37% of all global assets under management said that countries and companies taking the lead with climate-related financial reporting would become “increasingly attractive” investment destinations, while laggards would find themselves at a competitive disadvantage. As they say, the writing is unmistakably on the wall.

Read more here.


CLIMATE CHANGE: CHALLENGES AND OPPORTUNITIES FOR MINERS

Also from Mining.com, news from the recent G7 conference that the Canadian government will no longer approve thermal-coal mining projects. No doubt, this hints at what’s to come for coal miners around the world.

But as one legacy commodity is abandoned, others will increase in importance as inputs to the emerging global green economy.

The chart from the economist suggests simply, “Strike coal, insert copper,” plus a few other minerals (lithium, nickel, graphite, zinc) to more than offset declining demand for coal.

Many key inputs for green energy technologies are in short supply worldwide, creating enormous opportunities for agile mining companies to capitalize on the transition.

Read the full Economist article here.