Dubai: The energy industry – the fossil fuel kind – gets much of the attention when it comes to any plan of action on sustainability targets. At times, it seems that it is the only industry to deliver big on climate action.
But there are other industries that need to do their share of heavy lifting on any such transition. Heavy industry is an obvious one for change, and so is the mining sector.
In this regard, gold mining does come under intense spotlight, given that it is one industry where change has not materialised as fast or as well as in other industries.
John Mulligan is Director of Market Relations and Climate Change at World Gold Council. In an interview, he has his say in how gold mining is already facing up to the challenges of doing the right thing. Because one thing will not change – the demand for the yellow metal will remain insatiable.
Do you think the mining industry will face the brunt of any future sustainability moves by governments?
Mining companies have, in many instances, been ahead of governments in demonstrating their awareness of sustainability objectives and in striving to adopt higher standards of performance on a range of environmental and social issues.
When it comes to gold mining, this is best articulated in the Responsible Gold Mining Principles – 51 principles covering the whole spectrum of relevant environmental, social and governance (ESG) factors.
When we consider gold miners’ proactive moves to decarbonise their operations, with positive implications for both the wider gold value chain, the communities and economies in which they operate, these companies have frequently been ‘first movers’ – acting well in advance of government policy and regulations.
Gold mining - perhaps because of its value creation and pivotal role in many developing economies - often comes under particular scrutiny. But the leading companies have frequently shown great awareness and, in some cases, leadership in driving progress on, for example, the energy transition and local adaptation measures.
Would you say mining companies will find it difficult to adopt green measures and still go about their mining operations at reasonable costs?
I think most major or forward-looking mining companies are now fully aware that sustainable and responsible business practices – green measures – are a core part of business and operational strategy, whilst also reinforcing their social licence to operate.
They also know that this is good for business. Enhanced corporate performance on ESG factors is often linked to greater company resilience and more robust valuations.
Gold miners often operate in locations where there are few similarly committed high performing companies, and where governments often lack the capacity or political will to drive positive change.
They have therefore become increasingly mindful that their actions will have significant local consequences, but also recognise that these can represent opportunities to support local socio-economic development, and this will, ultimately, prove beneficial to their operations.
When it comes to gold mining’s climate-focused actions, the business case is often particularly strong. The gold mining companies that have sought to embrace renewable energy sources and embrace new technologies in pursuit of greater energy efficiency have generally reported significant cost savings alongside substantial carbon reduction.
What’s the status with new gold mining discoveries? Or is it still the case that current gold supplies are still met by older mines?
Gold production has been particularly strong in recent years, on a reasonably stable, albeit undramatic growth trend. Whilst there are no longer many substantial discoveries of scale, and therefore we don’t expect that trend to continue for much longer, there are projects coming online that suggest production will remain relatively robust for some time.
If new mine discoveries ground to a standstill, the obvious question is what will happen to supply - and prices. Your thoughts?
Supply does not drive the gold price in any direct way. It takes many years to translate a meaningful discovery into production, resulting in new gold coming onto the market, meaning that the hypothetical situation you describe probably misrepresents market dynamics.
While the perception or expectation of supply constrains may influence investor sentiment, thus possibly supporting the price, we have no reason to expect that this ‘standstill’ situation is realistic. Or reflective of likely price drivers in the near to medium future.