The global mining industry faces various challenges, such as weak metal prices, higher operating costs and sometimes, hostile public scrutiny. According to a German consulting firm, renewable energy can be an important tool in meeting some of these challenges, as it improves the energy cost of mines, counters opposition from ecological activists, and sends a signal of forward orientation, progressive management and corporate governance. The study, from Thomas Hillig Energy Consulting (THEnergy) and based on interviews with finance, mining and energy experts, is claimed to show that the indirect effects on a mining company’s market value are more significant than pure power cost savings.
Energy costs in mining are increasing due to higher electricity consumption and prices. Particularly for remote mines, wind or solar power plants can reduce energy costs considerably, which has a direct influence on the cost position of mining companies. The business case for renewable energy is normally positive for mining companies, according to Hillig; however, U.S. companies, for example, are a long way away from making it into the Environmental Protection Agency’s list of top U.S. “green power” users. The list is headed by brands such as Intel, Microsoft, Google and Wal-Mart. These companies, according to Hillig, consume and invest in renewable energy because it is profitable and it improves their standing toward consumers and financial markets.
Mining companies face strong opposition, often facilitated by Internet communication; for example, “Move Your Money U.K.” is a national campaign that calls on depositors to move their savings away from five U.K. banks that are claimed to support assets in oil, gas and coal extraction. On the investment side, there are similar developments; the Rockefeller Brothers Fund, a New York-based philanthropic organization whose mission statement is to “advance social change that contributes to a more just, sustainable, and peaceful world,” recently joined a divestment movement, pledging not to invest assets worth $50 billion into fossil fuels. The direct effect of such divestment is normally limited, but it brings a significant threat regarding further stigmatization of certain segments of the mining sector, which makes it more difficult to receive credits, reduces the demand for shares, triggers new legislation and complicates permitting.
For many years, Hillig maintains, the differences could not have been bigger between the worlds of mining and renewable energy. As solar and wind energy prices have dropped in recent years, many institutional investors have entered the renewable energy industry and have professionalized it. Mining companies such as Barrick Gold, Rio Tinto or Glencore as well as smaller players have realized that renewable energy has become an economically attractive solution for many mines and have built pilot projects (see project database)
“Mining companies that actively move toward renewable energy self-consumption show that they have realized that the world around them has changed and that there are threats regarding energy costs and environmental movements,” commented Dr. Thomas Hillig, founder of THEnergy. The financial markets reward companies that do not remain captives of the past but instead are actively seeking new solutions. The usage of renewable energy is interpreted by the financial markets as a signal for a flexible and forward-looking decision-making process; mining companies that are first movers in actively integrating renewables into their energy mix are therefore considered as progressive and better managed.”
Hillig said the THEnergy study challenges mining companies to act quickly, to develop greenhouse gas mitigation and renewable energy targets, to set other non-financial performance indicators regarding energy and to conceive a comprehensive renewable energy strategy. According to Hillig, “Ambitious targets and transparency grant first movers many advantages in communication. If substantial measures are taken and financial markets are targeted with the sustainability communication strategy, a positive effect on the market evaluation and stock prices can be expected.”
The Hillig study, titled The Influence of Renewable Energy on the Market Value of Mining Companies, can be downloaded here.