Sustainability

Decarbonization: The rapid evolution of the mining sector

By: Michael Faralla

January 31, 2022 - 2 minutes 30 seconds

As an industry that plays an essential role in the transition to a low-carbon economy, the mining sector is facing a sea of rapid change. There is renewed focus and optimism around the production of metals necessary in the energy transition and the production of clean energy, including copper, nickel, cobalt, and lithium. At the same time, mining companies face pressure to address their own decarbonization strategies and meet the global reductions called for in the Paris Agreement.

Moving the needle on ESG

For a long time, mining companies have incorporated key elements of ESG into the way they operate. With mines often located in remote regions and developing economies, these companies have always focused on their "license to operate" through community and government engagement, and local investment in communities and suppliers. At the same time, mining companies are looking to reduce their carbon footprint using new technologies which have the added benefit of improving working conditions and safety.

The heightened focus on ESG has provided the opportunity for mining companies to highlight and showcase their existing ESG initiatives. Examples include remote operated or autonomous haul trucks and other mining equipment; when paired with electrification, this reduces carbon emissions and improves safety by removing people from high-risk areas and improving the environment in which they work.

Barriers to addressing ESG and decarbonization

Some of the biggest challenges mining companies face are around power sources, water usage, tailings management, and CO2 emissions. Mining is energy intensive and alternative power sources are often difficult to come by for remote, or non-grid-connected operations.

However, the sector has been innovative at installing renewable energy (such as wind or solar) and providing a supplementary benefit of a long-term power supply to local communities long after the mine has closed. Another example is reducing water usage through increased recycling and removing water from tailings. These provide the added benefit of improving the stability and safety of tailings dams.

The road ahead

Mining companies are facing the call to increase transparency and reporting around ESG initiatives, activities, and results. The good news is that they already have a robust ESG culture and operating framework to draw on. However, investors increasingly want to hear about their progress, and in particular, their responses to any ESG challenges they may face.

ESG is embedded in the way we advise our clients at TD Securities and we have invested in building in-house ESG expertise to ensure we can anticipate clients' evolving needs in the sustainable finance field. During the recent Agnico Eagle and Kirkland Lake Gold merger, in our role as advisor to Agnico Eagle we combined the expertise of our Mining team and our Sustainable Finance & Corporate Transitions group to provide a comprehensive ESG review of the project's sustainability risks and opportunities for Agnico Eagle. Our depth of industry experience and innovation in providing ESG-related advice has allowed us to adapt to industry changes and continue to provide market-leading advisory services.

Focusing on ESG has changed the way we advise and help our clients. Sustainability and ESG perspectives are being incorporated into M&A transaction analysis and decisions. Working in close coordination with our clients and partners, we identify the most pressing ESG issues for the industry, conduct in-depth peer benchmarking, study best practices and review sustainability ratings to better inform our merger and acquisitions assessments, and their impact on our clients.

Disclaimer

The views or opinions expressed herein represent the personal views of the speaker and do not necessarily reflect the views of TD Securities or its affiliates. This material is intended to provide commentary on economic, political or market conditions. Not Advice: The information contained in this material is for informational purposes only and is not intended to provide professional, investment or any other type of advice or recommendation, or to create a contractual or fiduciary relationship. Neither TD Securities (USA) LLC (“TD Securities USA”) nor any of its affiliates (collectively, “TD”) makes any representation or warranty, express or implied, regarding the accuracy, reliability, completeness, appropriateness or sufficiency for any purpose of any information included in this material. Certain information may have been provided by third-party sources and, while believed to be reliable, has not been independently verified by TD, and its accuracy or completeness cannot be guaranteed. Not Securities or Derivatives Research: This material has not been produced, reviewed or approved by TD’s securities or derivatives research departments. The views of the author may differ from others at TD, including TD securities or derivatives research analysts. Not Independent: The views expressed in this material may not be independent of the interests of TD.

Michael Faralla
Managing Director and Head of Global Mining, Investment Banking, TD Securities

Biography

Michael leads a team of professionals across North America, Europe and Asia Pacific who provide comprehensive cross-border financial advisory services to mining companies globally, including capital raising and M&A. He has extensive experience advising on capital raising across equity and debt capital markets, drawing on his experience leading equity capital markets origination in the mining and oil and gas sectors within the firm.