By Terry Heymann, Chief Financial Officer, World Gold Council
A deep and enduring commitment to environment, social and governance factors is creating transformative opportunities for the gold mining sector.
Across the globe, environmental, social and governance (ESG) has focused mining minds on sustainable and responsible practices – not just because it’s the right thing to do, but also because it creates value for all stakeholders over the long term.
The mining sector has long had a focus on health and safety, and, increasingly, this focus has broadened to cover a range of ESG risks. This is supporting the gold mining industry to becoming genuinely transformative for employees, contractors and local communities.
The journey is ongoing, but many Australian miners are seizing the opportunities that come from a holistic approach that flows from embracing their role as long-term stewards – not just of the resources they mine, but also of the lands they use, the capital they attract, and the communities with which they interact.
Enlightened mining companies know that doing the right thing across all facets of mining has a compounding positive effect on total value creation – from positive impacts for communities and workers, to lands and shareholders – all the while minimising the impacts of extraction.
Unlocking new and deeper conversations in a highly dynamic and consolidating sector
A focus on enduring positive impact is opening up new discussions with customers, suppliers and investors who are demanding to see and understand how mines are creating sustainable value. There is not only an ethical imperative to do this, but also a financial one, because miners who do not embrace the idea of sustainability in a holistic way will struggle to access capital from investors who are increasingly integrating ESG factors into their decision-making processes.
If mining companies score poorly on ESG assessments, then access to capital may be limited or, most certainly, be more expensive – as can their insurance. In the global battle for human capital, they will also likely lose out in the race for the best and most inspired talent, who place ethical considerations high on their list of criteria for preferred employers.
They may also lose potential suiters as the industry consolidates. In Australia, the mergers and acquisitions (M&A) landscape is dynamic against a backdrop of increasing costs, greater complexity in locating and extracting reserves, and aging mines. If mining companies do not have strong ESG practices, their ability to participate in the M&A market is likely to be severely diminished.
While the industry is highly experienced in assessing the financial implications of acquisitions, companies have only more recently begun to fully incorporate and standardise sustainability risks. Any perceived ESG uncertainty translates to higher risk and higher costs. It can now clearly be a deal-breaker.
Industry consolidation also potentially offers opportunities. In particular, additional access to capital to support the significant investment required for new technologies, such as renewable power generation and moving the industry further away from fossil fuels – and potentially leaving laggards without capital or partners.
Industry approaches critical in steering the journey and demonstrating sustainable wealth creation
Recognising the needs for collective industry approaches as critical signposts along the ESG journey, the World Gold Council launched the Responsible Gold Mining Principles (RGMPs) in 2019, setting out clear expectations for gold miners, developed with support from World Gold Council members.
Comprising 51 principles that support 10 key sustainability objectives spanning responsible sourcing, human rights issues, action and disclosures on climate change, and advancement of the United Nations Sustainable Development Goals, the RGMPs pull together stewardship responsibilities into one complete package of actions that any responsible gold mining company should be undertaking. While members are required to conform with the RGMPs, we encourage the entire industry to adopt them.
Demonstrating RGMPs conformance over time, gold mining companies can assure investors and other stakeholders that their output has been produced responsibly, according to ESG provisions set out in the code.
Gold’s green-for-good footprint is growing
Already, there have been significant initiatives spanning each of the ESG categories across Australia’s gold industry.
At Gold Fields’ Agnew gold mine in Western Australia, for example, a renewable energy microgrid combines wind, solar and battery storage energy to provide a majority of the mine’s power. Totalling a capacity of 35 megawatts, the microgrid is supported by predictive solar forecasting technology and demand side load management to optimise efficiency. Installed at a total cost of A$111 million, the project is the first to demonstrate how a hybrid microgrid can power a remote mining operation, and how these renewable energy sources are mature enough for a large-scale industrial operation.
Meanwhile, mines continue to embrace and deepen their responsibilities to support surrounding communities. For instance, we saw Newcrest Mining work with local members of the Aboriginal community in Orange to boost COVID-19 vaccination rates. The company’s Community Support Fund supported the Orange Aboriginal Medical Service in administering almost 4500 doses of the vaccine to more than 1900 people.
These are just two of many examples that demonstrate the breadth of change taking place as miners embrace principles of ESG in their day-to-day operations, and how the industry increasingly understands the importance of operating with a social licence.
The journey continues
It would be naive to say that the industry has done enough so far, and the reality is that there are still many stages ahead along the journey. Even so, perceptions and actions are changing rapidly, and there is much evidence of progress.
Miners are replacing diesel and petrol vehicles with electric vehicles where possible, and are committing to decarbonisation targets. They are investing in autonomous and robotic solutions that are more efficient, while artificial intelligence and geospatial technology is being implemented at scale to enhance the precision of operations.
Beyond technology, there is wider and deeper engagement with local communities, many of them Indigenous, with more meaningful consultation and new programs so that the mining industry can share the wealth it generates.
Modern mindsets are also more focused on gender diversity in the workplace, and go some way to redressing historical imbalances that are not only negative for the company, but also the wider community.
And while miners have been remediating sites for a long time, a new opportunity lies in the land leases that many companies hold that are for lands far beyond those being actively mined. By embracing their role as stewards of all their lands, they’re able to have a greater impact through active land management that enhances biodiversity and community benefits.
Fostering greater sustainability across the global gold ecosystem
ESG reforms across the gold industry certainly don’t start and stop with mining companies. In October 2022, the World Gold Council and the London Bullion Market Association convened an inaugural forum where major industry participants across the entire ecosystem – including many of the large Indian, Chinese and Western jewellery associations – signed a Declaration of Responsibility and Sustainability Principles.
The goal is that alignment with these principles will give ethical players throughout the gold ecosystem the confidence to know who they are doing business with, and the knowledge that they share common commitments and values.
All of this should be seen not as an obligation, but as a transformational opportunity that presents an exciting future for the industry as it continues to responsibly and sustainably tap new sources of value for the benefit of its workers, communities, investors, and the lands it manages.
Terry Heymann is Chief Financial Officer (CFO) at the World Gold Council, and has broad experience across the gold supply chain. In addition to his role as CFO and Company Secretary, Heymann also oversees the World Gold Council’s initiatives on standard setting, including development of the Responsible Gold Mining Principles, the Conflict-Free Gold Standard and the Guidance Note on All-In Costs – all of which support increased transparency and integrity in the gold industry. Heymann also leads the World Gold Council’s program of work around ESG, including supporting further progress by the gold industry in helping to deliver the United Nations’ Sustainable Development Goals and address climate change.