The metals and mining sector is critical to our civilization, providing the raw materials to create products enabling our everyday lives and inputs empowering future innovation. Furthermore, the sector plays a key role in sustainable development through the supply of minerals and metals that are crucial to the transition to a low-carbon economy. Renewable energy from wind turbines and solar panels depends on mining outputs, as does carbon-free nuclear power. 

At the same time, because mining operations are energy-intensive and a major contributor to carbon dioxide (CO2) emissions, the sector needs to rapidly decarbonize by leveraging sustainability technologies while simultaneously scaling operations to meet a surge in demand for critical minerals.

Despite the key end use of their outputs, and in many cases ever-increasing demand, miners’ shareholder returns have lagged the market. Across the U.S., Canada, United Kingdom, Australia, and South Africa, the metals and mining sector has trailed broader market indices over one-, three-, and five-year horizons. (See table below.) Oftentimes, this performance gap has been considerable. Favorable top-line growth has been offset by increasing operating costs, which could pose a structural risk and long-term drag on returns. 

Somewhat ironically, the key to overcoming this challenge is embracing a concept with which miners have historically shared a tortured relationship: implementing holistic sustainability initiatives.

^{Percentage point difference in annualized returns: metals and mining vs. market indices
Source: CohnReznick analysis based on S&P data as of December 2024.}

Mining’s increasing environmental costs

Miners are facing a series of compounding cost challenges that require a rethinking of their operations. Copper, for instance, is becoming harder to find and requiring increasingly more difficult exploration. Once deposits are located, they’re usually of a lower grade, requiring more refining and processing to produce high-quality outputs.

Not only are these challenges costly to miners, but they’re also costly to the environments in which they operate.

• Exploration to greater depths requires greater energy consumption not only for extraction but also the required ancillary operations such as ventilation. With this increased energy intensity comes higher carbon emissions.
• Increased drilling activity requires greater water consumption.
• Increased waste requires more hauling, further increasing emissions due to the industry’s reliance on diesel vehicles.
• Mine waste also poses long-term risks of water contamination and soil degradation.

The ability of miners to improve their future performance is inextricably linked to their ability to integrate sustainability initiatives to overcome these challenges.

Sustainability practices that boost top and bottom lines

Implementing sustainability practices can play a significant role in improving miners’ total shareholder returns. These practices can have wide-ranging top- and bottom-line impacts, across multiple phases in the value chain, and span implementation timeframes.

• Mechanisms to improve satisfaction, such as career-path clarification and training, can be implemented quickly and cost-effectively. Studies have shown the correlation of worker satisfaction to productivity. Maximizing production volume not only supports miners’ top lines but also defrays their considerable fixed costs. Furthermore, higher satisfaction can help address industry challenges(Opens a new window) in talent retention and the costly exercise of attracting increasingly harder-to-find talent.
• While requiring more of a medium-term implementation horizon, ventilation on demand systems aim to reduce the considerable energy(Opens a new window) consumed by legacy ventilation – which could be as high as 50% of total energy consumed by underground mines – and the required number of shafts to carry air by supplying fresh air where and when it is needed.
• As the cost of renewable energy sources (such as solar, geothermal, and wind) continues to fall, switching from fossil fuels to these sustainable alternatives may provide a cost advantage over time. Furthermore, for mines located near population centers, renewable energy assets can benefit the community at large if capacity exceeds demand and/or after operations have ended. The social benefit of extending the use of these assets is particularly pronounced in marginalized and vulnerable communities.
• Other key decarbonization levers for the mining and metals sector are battery energy storage systems (BESS) and low-emission haul trucks.
  • Intermittent supply of renewable energy is incompatible with high-inertia mining operations, which require a stable energy source. Therefore, BESS addresses the supply fluctuation of solar and wind by providing resilient energy storage solutions for mining operations.
  • Diesel consumption in haul trucks accounts for a large percentage of fossil fuel consumption in mining operations and needs to be replaced by a low-carbon alternative like battery-powered haul trucks. Combining this technology with charging infrastructure powered by renewable energy can eliminate the carbon emissions due to diesel consumption in excavation.
• Quantum sensing technologies to improve mineral detection may be more of a long-term proposition, but they offer the promise of higher productivity at a lower cost with less waste.

Illustrating the potential impact of sustainable performance improvement initiatives, the Swedish miner Boliden implemented ventilation on demand technology(Opens a new window) across multiple sites. At their Garpenberg underground mine, the company phased in optimized control technology across its ventilation system, enabling it to compare the impact pre- and post-implementation. The fans receiving the technology showed a 40% decrease in energy consumption. Furthermore, total air flow into the mine decreased by 15%, reducing the need for heating. Both impacts reduced not only costs but also the emissions emitted while operating the mine.

In conclusion: Reconsider mining’s relationship with sustainability

In the face of lagging shareholder returns and compounding structural challenges, the metals and mining industry should reconsider its relationship with sustainability. There will be increased focus on progress made in this sector both from an emissions perspective and also a wider ESG (environmental, social, and governance) perspective as investors, customers, and other stakeholders look to the sector to play a leading role in the transition and support the communities they impact. Sustainability initiatives with the potential to increase economic returns are plentiful in scope, cost profile, and implementation horizon. Sustainability is not a hurdle for miners to overcome, but rather an enabler of performance improvement and environmental stewardship.