Note: Article adapted from here.
The gold mining industry is quickly evolving. As costs rise, labour shrinks, ore grades decline and external intervention increases, achieving profitability is an ongoing struggle. Miners strive to remain competitive and sustainable in these turbulent times, balancing between reducing costs and complying with environment, social and governance (ESG) metrics. These metrics are highly favoured as gold is increasingly sought after as a prudent investment. Investors are diversifying their portfolios and taking greater interest in sustainable endeavours, pushing the gold mining industry to become more environmentally friendly. Between 2016 and 2018, the value of assets in sustainable investment portfolios around the world increased by 34% to approximately US$31 trillion. The gold mining industry seeks to gain immensely from becoming more sustainable.
It is crucial that the gold miners reshape their business strategies and transition towards greener mining practices, while maintaining efficiency and achieving long term margins. In 2020 miners increased their focus on climate change, development of communities, waste and water management and development of biodiversity in order to meet the World Gold Council's ‘Responsible Gold Mining Principles’, which cover all areas of ESG. To achieve sustainability, gold miners must learn to manage their costs and mitigate risks. However, there lie obstacles on their path to achieving these targets. The declining life of mine (LOM) is a major issue. Insufficient discoveries in the past decade, have substantially curbed the growth in production, essentially plateauing gold supply. Only 10% of remaining mines have an LOM longer than 20 years. Although this issue is set to exacerbate in the coming years, capital discipline and an uptrend in gold prices have allowed miners to increase their gross margin and invest cash flows towards exploration strategies, to tackle this. The mining industry can also leverage green financing alternatives. Polymetal, a mining company, was awarded a US$125 million in a green loan to help achieve their ESG targets. The issuance of sustainable bonds accounts for almost 10% of the bond market. Green capital is becoming increasingly prevalent in the market, miners must take advantage of this trend for financing their transition. As mining explorations increase, global supply is expected to improve. Mines must become more innovative if they are to achieve their ESG targets and obtain increased value long term. Digitalisation is a key tool in analysing data of decline and developing solutions that would increase yield of these unsatisfactory investments. The electrification of mines is a competitive alternative. These are energy efficient and reduce the upfront capital expenditure for mining companies.
Despite advancements in technology and increased focus on ESG, illegal mining remains rampant. Their practices are unsafe and evade guidelines, causing detriment to the health of the surrounding people and the environment. In 2016, approximately 77% of all gold mined in Ecuador, 80% in Colombia and 91% in Venezuela were extracted using illegal methods. The other countries in Latin America were not far behind on these appalling statistics. As the price and demand for gold increases, their incentives for illegal production have escalated and their operations remain flourishing. The damage they cause has the potential to eradicate the progression the gold mining industry has made.
Non-toxic gold extraction and processing offers miners the ultimate solution. Clean Mining’s, (part of Clean Earth Technologies) clean gold technology replaces traditional cyanide-based metallurgical processes with an organic and sustainable alternative.