According to Mining News Pro - Technologies can improve production, but social and environmental standards are also becoming increasingly stringent. The International Council on Mining and Metals (ICMM) has said that the environment, jobs, biodiversity, social health and wellbeing, a suitable tax regime and responsible consumption of water and energy must be prioritized together with the adoption of a new circular economy model.
To discuss how to achieve sustainable mining development with high standards, BNamericas spoke with Rohitesh Dhawan, CEO of the ICMM.
In the clean energy transition, will minerals be able to supply the world’s increasing demand?
Dhawan: No. We are advancing into a period of scarcity on critical minerals for the energy transition. The demand is increasing significantly, and a huge supply is very hard to develop. We’re in a situation where it will take between eight to 12 years to develop large new copper mines. The world produces around 20Mt of copper [a year], but for 2030 we’ll need around 30Mt of copper. Every electric vehicle needs six or seven times more copper than a traditional car. But if every copper project that is in the pipeline is fully executed, it’s likely that they will only give us 25Mt. So where will the other 5Mt come from? This demonstrates the shortage we may face in critical minerals. And that’s only copper. In the case of lithium and cobalt the situation is similar, as well other critical minerals for the energy transition. I’m worried about the shortage the world will face in critical minerals. There’s a significant risk that the biggest bottleneck in the transition to net zero [greenhouse gas emissions] is going to be the availability of fuel minerals.
How can we balance the high demand for minerals with high environmental standards?
Dhawan: The main principle is that when satisfying the demand for critical minerals, we must do it in a way that protects the environment and improves societies. So, meeting the demand for minerals and still maintaining high social and environmental standards must be done by adopting principles for responsible mining. The essential principle is to ensure that wherever we mine, we do this as responsibly as possible. At ICMM we have a commitment that we’ll never mine in a world heritage site. No matter how much the mineral resources are, we’ll not mine there. That means that we are unable to meet the demand for minerals because if we mine in those areas we could get access to more resources. But we voluntarily choose not to access there. Instead, we’re looking to invest more in recycling. We’ll find a way to meet the demand that doesn’t damage the sensitive ecosystems. The demand gap is very large, but we will not be operating in a way that means communities and the environment will be collateral damage.
Do you think global financial institutions should have a key role in this transition to net zero emissions?
Dhawan: Global financial institutions are absolutely critical in ensuring that the transition to a net zero economy is done through responsible production of metals and minerals. They are owners of mining companies, and investors in car or tech companies. They can demand that all the metals and minerals that are produced be done in a way that ensures maximum ESG performance. For example, the PRI [UN principles for responsible investment] have played an important role in helping to ensure that.
After 2019’s tragedy of Brumadinho [in Brazil], where the collapse of a dam dramatically killed 270 people, the ICMM created the global sustainable standards for industry tailings management. We have encouraged investors to start to advocate those standards for all industry. Global financial institutions have an important role in this commitment for biodiversity. I’m calling the financial institutions to encourage any company they are investing in to not operate in heritage sites, for example. The finance community is one of the most important points of leverage to ensure that the transition to net zero is a just transition.
How can you achieve the safe and efficient management of tailings?
Dhawan: We’re encouraging companies, no matter what their size is, to adopt the provisions of the global tailings’ safety standards, which provide guidelines depending on the size of the facility. It allows operators to find the place and adopt the best practices when it comes to tailings management.
What do you think about the nationalization of mining?
Dhawan: The private sector has created large benefits for economies through mining. That should be considered in the debate around nationalization. Chile is globally the most important producer, producing 5.7Mt of copper in 2020 where an important portion comes from private companies. That amount could grow to 8Mt by 2026 if all the key mining projects in the pipeline are implemented. Without the private sector that potential would be hard to realize. The private sector has been such an important contributor to the growth of the mining industry in Chile. I would say that 90% of the revenue from the mining industry in Chile goes to taxes, or to workers or to suppliers.
We talk about the private sector being a major employer of people. In Chilean mining, direct jobs represent 9% of the country's employment, without including the indirect jobs. I don’t believe the potential of the mining industry can be realized in Chile, or in any other part of the world, without the significant involvement of the private sector. Mining is becoming harder to produce and technologies are becoming critical, so the private sector is a key player. In Chile, for example, we found that the cost of producing a kilo of copper almost doubled from 2005 and 2019. In 2005 it was possible to extract, on average, around 10kg of copper from one tonne that was processed. By 2019 it was down to 7kg of copper per tonne. So, it’s getting much harder to extract minerals where technologies and financial powers play an important role.
Chile is debating a new tax on mining that has generated controversy...
Dhawan: The tax burden from mining projects in Chile would range between 39% and 44.5%. When we look across the world in comparable jurisdictions to Chile, that’s a similar rate that we see in other parts of the world. In 2021 we found that ICMM companies [27 in total] paid an effective tax rate, across all jurisdictions, of almost 39%. That tells us that the current tax regime in Chile is in line with the tax regimes in similar jurisdictions. Chile has become a major economy for mining investments. Not only in production, but also in exploration. It’s worth keeping in mind that 6% of the world’s exploration for metals and minerals happens in Chile, which is much larger than other mining jurisdictions. That’s a signal that the Chilean tax regime has been quite encouraging and supportive of investments. If that’s supposed to change that will put Chile out of line compared to other economies, adding risks to investments.
BNamericas: Is it convenient that Chile enters the EITI [Extractive Industries Transparency Initiative]?
Dhawan: It would be very good for the country, for its people and for the industry. Our research, called the social progress report, looked over the past 25 years to measure the rate of development in countries where the mining industry is significant. We found that countries with better governance achieved better economic outcomes for their people. In other words, when the mining industry is well governed and when transparency is included, like it is already in Chile, people get much better benefits from mining. And transparency is an important part of that governance. If Chile joins the EITI, as already many countries have, this will be a clear signal that the Chilean government believes in transparency as a way of making sure that the people will benefit most from the mining industry.
BNamericas: What do you think about creating a regional agreement to develop lithium within the Latin America triangle?
Dhawan: I’m not aware of the benefits or the downside of creating a regional agreement in the lithium triangle area. I could say that one major challenge to lithium production in the region is how to extract without using significant water resources. We know that extracting lithium from salts consumes a significant amount of water, up to 2mn liters for 1t of lithium. There are alternatives being seen that will allow lithium to be extracted without significant amounts of water. But maybe no country in the triangle will be alone in this challenge, so working together could be beneficial.
BNamericas: Water is critical in mining and desalination plants are part of the solution to reduce the use of continental water in operations.
Dhawan: Desalinization is a solution that many mining jurisdictions are seeking to ensure that the use of water in the industry is not competing with household or other industrial uses. Chile has important works in desalination. More than 80% of Chile’s copper production is done in water stress areas, so finding a way where mining copper does not worsen the water stress is critical. The mining industry in Chile uses about 4% of water in operations, while electricity is 4.5% across the industry. Agriculture use is around 11.8% and livestock, 73%. So when you compare mining with agriculture or livestock, you realize that the mining industry uses a small portion of the water. The mining industry uses only a quarter of fresh water where 43% comes from underground and 25% is desalinated. There are more desalination projects underway to preserve the surface and underground waters. The industry is not only working on using less water in operations, also to recycle as much as possible. About 75% of the water that’s being used in Chile is recirculated water.
BNamericas: How can social conflicts around mining projects be addressed?
Dhawan: We’re working on a program in ICMM which we call “social performance” and is related to how the mining industry interacts with society and with local communities. We provide guidance to achieve a shared vision for the mining industry that works for local communities, companies, and governments. We commit that wherever we mine we’ll make every effort to seek the informed consent [from communities] before we mine. Once that’s obtained, we achieve the opportunity to decide together between mining, companies, and communities. Joint processes are something achievable.
BNamericas: What are other priorities for global and Latin American mining?
Dhawan: I will highlight four priorities. One, we’ll announce a new commitment about how to improve diversity and equity inclusion in the mining industry. Only 15% of the global mining [workforce] is made up of women and that’s not good enough and we have to do much more for the participation of women around the world. One point will be to provide safe working conditions. A second key priority is biodiversity, involving climate change and the water challenge. These three aspects are the nucleus that the world depends on. We’re facing a world crisis of nature, where there’s mass extinction, impacting human lives, animals and plants. We want to go beyond that trend by not impacting the environments where we operate. Nature is a top priority for us. We’re working to ensure that the many different ESG standards that currently exist for responsible mining are converged into a smaller number of standards that everybody can get. Finally, we’re working on defining the circular economy issue, as it’s key to achieve the Paris Agreement and other social-environmental goals. The circular economy for minerals and metals considers their infinitive recyclable and reusable aspect.
BNamericas: About technologies, where automation and artificial intelligence appears, are there risks for human capital?
Dhawan: Technologies can bring a lot of benefits for the mining industry, if this is done in a thoughtful way. People are right to be concerned about the future of work, and the future of communities in a world where automation is increasing, there’s a concern if some day humans will be replaced by machines. But when automation is well done, it can significantly increase economic opportunities for everybody. And the jobs that come from automation might be different to the jobs before automation. The World Economic Forum estimates that in 2017 the rate of employment for new automated equipment in the mining industry was about 0.5%. By 2025 it was estimated at 25%. So there’s a trend into more automation. This requires a new type of system. The operators of haul trucks or automated fleets in mining require more skills to participate in this new economy. About 50% of the employees in mining are likely to require some kind of reskilling or upskilling to help create the mining industry of the future. Globally all industries are called on for that. The OECD estimates that globally nearly 1.7bn people may require reskilling or upskilling by 2030 in order to participate in the new economy.