eBusiness Weekly
The South African mining industry is transforming itself by embracing clean energy technology and investing heavily in renewable-energy and other ESG-related initiatives.
Renewable clean energy has been a particular focus for mining companies as part of their broader commitment to sustainability. There are three key factors that are driving this growing trend among mining companies to invest in renewable private power generation.
Firstly, mines have an urgent imperative to meet their carbon emissions reduction targets. The electricity needs of mining operations are significant, and until recently most of this energy has come from fossil-fuel based sources. Investing in renewable clean energy is key to reducing their carbon footprint and lowering their overall scope 2 carbon emissions.
Then there is the need for mines to ensure electricity reliability. Most mining processes require electricity, and unreliable energy supply can have devastating consequences for their bottom line, not to mention the safety of their employees.
This is particularly relevant in the Global South countries, where electricity supply is often unreliable.
Renewable clean energy, particularly solar and wind power, addresses this need by providing a reliable energy source.
A third key driver of the transition to renewables is energy affordability and price predictability. Mines that have their own generation capabilities or that have power purchase agreements (PPAs) in place to procure renewable energy not only have the potential to pay less per kilowatt-hour for electricity than they would for current grid-supplied energy in South Africa, but also have price certainty for a set period.
This eliminates the risk of regular, and often significant, electricity price hikes instituted by the national electricity supplier.
Finally, a more conducive regulatory environment has also enabled mining players to invest significantly in clean renewable-energy self-generation.
In South Africa, for example, the amendments in 2022 to electricity generation regulations removed the cap on private power generation, making embedded generation more viable for mines that need massive amounts of energy.
Of course, clean renewable-energy solutions on their own are not a silver bullet to solve unreliable electricity supply and load shedding.
Many mines are still dependent on the national grid — even those that have wheeling agreements with PPAs — which means that when there is a power outage, they do not have access to the electricity they need.
However, supplementing a renewable-energy solution with other clean technology such as lithium battery storage can be an effective solution to curb the impact of unreliable electricity supply for mining companies.
The combination of these solutions are being considered and adopted by mining companies with large operations.
However, there is still a long way to go for the mining industry to fully transition to clean energy and overcome the financial and logistical hurdles associated with the transition.
The banking sector has a crucial role to play in enabling mining companies to overcome these obstacles and make the necessary investments in renewable energy.
Innovative funding structures and sustainable-finance solutions can help make the transition more feasible for mining companies.
Nedbank Corporate and Investment Banking (CIB) has depth of experience and expertise in advising, structuring and executing fit-for-purpose sustainable-finance solutions for the mining industry.
Recently, the bank was instrumental in the completion of a pioneering renewable-energy investment deal in the mining industry for Harmony Gold. Nedbank CIB coordinated and structured an innovative financing solution for Harmony Gold to enable the miner to refinance and upsize its key corporate debt facilities through a R10 billion package.
The sustainable-finance debt package included a green loan and a combination of sustainability-linked credit facilities with indicators and targets aimed at reducing Harmony’s carbon footprint and water usage.
The green loan will finance the second phase of Harmony’s solar photovoltaic (PV) projects, increasing its renewable-energy capacity by 137 MW. Not only is the energy transition necessary from a reputational and energy reliability perspective, but also the rapid pace of adopting clean technology in all economic sectors means that mining extraction rates for many minerals now have to increase exponentially.
Minerals like cobalt and lithium are the building blocks of clean technology, which means that the world’s low-carbon future will actually be much more mineral-intensive.
To capitalise on this reality, mines must ensure that they are sustainable, efficient, and offer compelling propositions for increasingly ESG-motivated investors. For mines, investment in renewable energy and other clean technology is key to all the above. — Mining Review
