Top News

globe with background of trees

Environmental, Social and Governance (ESG) is a lens used to rate a company or an investment and its exposure to environmental, social and governance risks. That includes the physical risks of climate change, the reputational risks from lack of action and the regulatory risks of government action. Alignment with ESG principles means a company understands, and hopefully optimises, their risk profile.

For resources companies, expectations of corporate behaviour are changing rapidly. More and more investment capital is being redirected towards more responsible entities, and sustainable investment now tops $35 trillion globally, including 25 per cent growth over a two-year period in Australasia. For the companies participating in Australia's largest mining conference, the International Mining and Resources Conference (IMARC) in 2022, the stakes have never been higher with the need to get it right and to be transparent.

More and more, companies are scrutinised by a growing legion of environmentally engaged investors that hold businesses to a higher moral and ethical standard; a standard that places corporate accountability side-by-side with —sometimes even higher than —government responsibility in driving the social, political, economic and public health agenda.

This has seen a rise in production of the ESG report which varies widely across sectors, commodities and jurisdictions. The value of producing one is clear, but it seems that actions speak louder than words for those who choose not to produce an ESG report.

Investing through an ESG lens

Natural Resource Expert and Managing Partner of Pacific Road Capital, Matt Fifield, uses ESG reports to firstly gauge whether companies are savvy enough to note that investors want to see companies producing ESG reports.

"ESG has become a bit of a buzzword, particularly in the space of producing reports. However, the fact that a company cares enough to actually produce a report, shows that they have thought about it, that they are alive enough to know that people are interested to know about this stuff and that they care about being transparent," he said.

Overall, as an investor, if a company is producing an ESG report, it signifies that the company recognizes the importance of ESG. That said, ESG reporting in recent years has gone from something that is desirable to something that is crucial to attracting and retaining investor capital and support.

In the mining sector, formal adoption and integration of ESG standards is generally inversely related to size. Large integrated companies already operate within robust ESG frameworks. Smaller producers however, many of whom are at the forefront of key growth areas such as critical minerals and energy transition, are often well behind the large, diversified companies in making ESG risk management systematic and disclosing to outside stakeholders.

This however is changing; Pacific Road conducts an annual survey of publicly listed mining companies on key exchanges with market capitalisation ranging between US$100m to US$2bn on their ESG disclosure and reporting and can confirm that there have been marked year-on-year improvements in ESG reporting.

"Our analysis demonstrates that there is an elevated awareness amongst small-to-mid cap companies of the increasing importance that the investment community places on ESG performance in the belief that strong ESG performance will enhance both short- and long-term value creation," Fifield said.

A company committing to producing an ESG report also implies that the company is serious about creating both short- and long-term value whilst mitigating risk. While it is not necessarily true that companies without an ESG report have something to hide, it could raise tremendous, if not deal-breaking concerns from the investment community.

Different regions of the world do require different areas of emphasis; bribery and corruption policy, for example, are key in less developed countries, while first nations and water policies are more important in others. The ESG report, when developed properly, provides an investor great insight to the most material risks.

In today's world, an ESG report provides an investor with access to everything—capital from investors and strategic partners, customers, governments, and a wide range of external stakeholders. Particularly in a post-COVID world, the mining ecosystem has become more connected, and having an ESG report is an essential means of engagement with these constituencies.

"Over time too, we think that ESG will serve as a key driver of value creation for miners. Consumers ultimately will pay more for commodities that are sourced in ethical and high-performing ways, and as a result, investors will see premiums for companies that perform well from an ESG standpoint. We're not there yet, but we think one day good ESG will flow directly to the bottom line," Fifield said.

The key ingredients of an ESG Report

Pacific Road Capital believes that an ESG report needs to overall communicate the material risks of a miner's operations and state explicitly how these risks are being managed. Matt Fifield and his team have provided the following list as some guidance:

  • Disclosure of risk: One needs to recognise that risk materiality is different for different operations and where these operations are in the maturity continuum from early explorer to stable producer. The investment community want to see that a company has thought about risks, identified them, and is savvy enough to know where these risks could affect their business;
  • Policies: While dry, companies need to provide guidance on their ESG policies and specify the performance standards that they are using to frame and measure their individual performance. This shows the company is well-managed and provides some comfort to an investor;
  • Key reporting areas: Identifying ESG focus areas of Disclosure, Corruption, Human Rights, Indigenous Rights, Tailings, Air-Water and Rehabilitation, Health and Safety, Economic & Community Contributions, and Diversity as being important.
  • Overall Disclosure is a big focus as a starting point, with the belief that "what you measure is what you get" supported by ensuring that Board and management incentives are linked to ESG performance metrics. It shows a company is sincere and takes its responsibilities seriously.

Using public forums such as conferences to talk about ESG practices and collaborate and learn from peers is also important.

"We participate in as many conferences as we possibly can. Our next big conference is IMARC in 2022 where we'll be attending as many presentations and talking to as many companies as we can about how important this kind of transparency and disclosure is, in their commitment to ESG," Fifield said.

Standardising socioenvironmental disclosure

Traditional environment or sustainability reports tended to use baseline information on, for example: water quality, air quality, noise pollution etc, and then reported on year-on-year improvements.

There is an expectation that an ESG report will do some of the same, but with the understanding that standards are an ever-evolving beast. As an example, a catastrophic failure of a tailings storage facility at Vale's Corrego do Feijao mine in Brumadinho, Brazil on 25 January 2019 brought tailings safety to the fore.

This resulted in several multi-lateral environmental and investment stakeholders collaborating (including participation by Pacific Road) to formulate a global tailings standard which has been adopted across the mining sector.

More recently, the effects of climate change have come sharply into focus with a global emphasis on decarbonisation. Into the future, Pacific Road believes that as the issues and emphasis change, there will be a continuous need for companies to monitor and assess their role in the evolving ESG landscape and their ability to drive and affect change within that landscape. Without disclosure, management teams and boards are unlikely to think about their ESG footprint nor how they can improve.

"Disclosure starts the dialogue and supports the process of continuous improvement. Companies that fail to incorporate ESG into their mindset and culture do so at their peril and will increasingly struggle with capital formation as investors look to generate risk mitigated sector leading returns," said Fifield.

Matthew Fifield will share further insights on ESG investing at the upcoming International Mining and Resources Conference (IMARC) in Melbourne January 31 until February 2.

-ENDS-

About

The International Mining and Resources Conference (IMARC) is where global mining leaders connect with technology, finance, and the future. Now in its 8th year, it is Australia's largest mining event, bringing together over 8,000 decision makers, mining leaders, policy makers, investors, commodity buyers, technical experts, innovators, and educators from over 130 countries for three days of learning, deal-making and unparalleled networking. IMARC is developed in collaboration with its founding partners the Victorian State Government of Australia, Austmine, the Australasian Institute of Mining and Metallurgy (AusIMM) and Mines and Money.

For more information, please visit https://imarcglobal.com/

Media Contacts

Samantha Morgan
Head of Marketing
IMARC
samantha.morgan@imarcmelbourne.com

Isaac Stewart
PR Consultant
Cannings Purple
istewart@canningspurple.com.au
+61 423 306 794

Featured
Exceptional Exploration Results at Linderos

The Board of Titan Minerals Limited (ASX: TTM) (Titan or the Company) is pleased to present the following update on surface exploration at its Linderos Project in Southern Ecuador. The focus of these programs has been the two main prospects currently known to exist at Linderos being the Mesta Gold Prospect and the Copper Ridge Prospect located <1km to its south. Some very exciting assay results from surface works are beginning to filter through with the key highlights so far being:

read more Show less
TTM:AU
ISR Uranium Acquisition Settled & Vendor Placement Completed

GTI Resources Ltd (GTI or Company) is pleased to advise that the acquisition of Branka Minerals Pty Ltd and the vendor placement of $600,000, as advised to ASX on 18 August 2021, have now both been completed.

read more Show less
GTR:AU

The mining and resources sector now sets its sights on Australia’s largest mining investment forum, Mines and Money @ IMARC, co-located with IMARC from January 31, 2022, to February 2, 2022, at the Melbourne Showgrounds.

It was gold price, lithium demand and China’s appetite for copper that dominated much of the discussion at Mines and Money Online Connect @ IMARC this week at the virtual event running from the 19th to the 21st October.

Mines and Money Online Connect saw 90 mining companies, 600+ investors and more than 2,000 participants log-on to hear mining executives and analysts discuss the next big thing for savvy investors in 2022.

read more Show less
kangaroos in front of the sunrise

Silver is on the rise in Australia, with new silver mines opening, production potential booming and the precious metal's valuation reaching new heights.

Analysts have been bullish on gold for the better part of the past decade, but now it's silver's time to shine. While the price of silver tends to rise and fall alongside that of gold, silver's valuation is generally more volatile — slower to move in either direction, but more prone to abrupt spikes and plunges.

Considering the market's longtime gold rush, silver is due for a major price hike. In 2020, silver hit a seven year high with 27 percent year-over-year growth, climbing faster than gold. Silver was on the rise again in February 2021, bolstered by WallStreetBets fervour. Though prices have stabilised since, they remain elevated compared to the past decade. Additionally, at only a fraction of gold's valuation, silver is a much more attainable buy.

Shrewd investors are looking to Australia for their silver picks. A country whose silver mines continued to flourish even when most of the world was in a precious metal slump, Australia has emerged from the COVID-19 pandemic as a major player in the global silver market.


A look at Australia and silver mining

When you think of mining in Australia, you may not think of silver, especially since the country is a top global producer of several other metals, including gold and iron ore. Nevertheless, silver is on the rise in Australia, with new silver mines opening, production potential booming and the precious metal's valuation reaching new heights.

This may be surprising news, especially since 2020 was an erratic year for silver. Global silver-mining production plunged by 5.9 percent in 2020 — its biggest drop in over 10 years —⁠ following four years of steady decline.

Output from primary silver mines plummeted by 11.9 percent year-over-year, while silver by-product suffered a more modest drop, with production from gold and lead-⁠zinc mines falling by 5.7 percent and 7.4 percent, respectively. Note that silver is largely produced as a by-product of other metal-mining processes, with 72 percent of silver production taking place at non-silver mines.

This production downturn was the result of COVID-19 restrictions that forced mines to suspend operations temporarily. Silver mine closures hit certain places harder than others, with extended closures in top silver-producing countries such as Peru, Mexico, Argentina and Bolivia causing major production drops.

Australia, however, was an exception to this rule, with production increasing by 3 percent. The reason for Australia's success is that it remained relatively untouched by COVID-19 restrictions. While other countries were forced to shut down production facilities, Australia was able to avoid these closures, continuing — and even upgrading — regular operations.

Australia is now the fifth largest silver producer globally, with an annual output of 43.8 million ounces in 2020. While the output of silver-mining giants such as Mexico and Peru (178.1 million and 109.7 million ounces produced in 2020, respectively) continues to far exceed that of Australia, global demand for silver is on the rise, hitting 900 million ounces annually and making room for a new silver-mining powerhouse.

What should investors know about silver investing in Australia?

Silver remains a relatively untapped resource in Australia, which means that investors have plenty of major mining companies to choose from.

Australia's largest mine is the Cannington mine owned by South32 (ASX:S32,OTC Pink:SHTLF). It is ranked as the ninth largest silver-producing mine worldwide, with 11.6 million ounces produced in 2020.

The country's second biggest silver-producing mine is the Mount Isa zinc mine. It is owned by Mount Isa Mines, a subsidiary of Glencore (LSE:GLEN,OTC Pink:GLCNF), and produced around 5.8 million ounces of silver in 2020. The Tritton copper mine, owned by Aeris Resources (ASX:AIS,OTC Pink:ARSRF), followed closely behind with nearly 4.5 million ounces produced in the same year.

Other notable Australian silver mines include the Golden Grove mine, which is owned by 29Metals (ASX:29M), and the Dugald River mine, which is owned by Metallic Minerals (ASX:MMG,TSXV:MMG,OTCQB:MMNGF). In 2020, these mines produced around 2.9 million and 2 million ounces of silver, respectively.

Australia's impressive silver-mining industry is well-positioned for further expansion, with Silver Mines (ASX:SVL,OTC Pink:SLVMF) planning to launch its Bowden silver project in 2023. This New South Wales-based silver mine is projected to produce around 6 million ounces of silver annually, which would make it the country's new second largest producer. The company hopes to capitalise on the promising solar panel market, which currently accounts for about 5.5 percent of all silver demand worldwide.

Moreover, Australian company Thomson Resources (ASX:TMZ,OTC Pink:TMZRF) bought the New South Wales-based Webb and Conrad silver projects from Silver Mines earlier this year in a transaction worth around US$8.6 million. The deal closed on March 31, and will enable Silver Mines to concentrate on its flagship Bowden project.

Investing in silver in Australia

There are many ways to invest in silver, including physical silver, stocks, exchange-traded funds (ETFs), mutual funds, options and futures. Choosing which investment route to take is all about balancing risk and reward.

Investing in physical silver is the most straightforward option: you simply buy a tangible piece of the precious metal in the form of bullion, official coins or medallions. Bullion is a bar or 1 ounce coin of solid silver with at least 99.9 percent purity. Official silver coins are currency produced by a government mint, while silver medallions resemble coins, but lack monetary value, .

The price of physical silver rises and falls alongside the metal's market value. Physical silver is a relatively safe investment, since its value can't be affected by third-party interference or bad business practices (risks characteristic of mining stocks). However, if you plan to trade often, the added costs of buying, selling and storing physical silver may make the investment not worth your while.

Investments in physical silver rose by 8 percent last year, boosted by silver's status as a safe asset and market bullishness on gold. In Australia, coins and medals fabrication increased by 35 percent year-over-year, making physical silver a smart choice for any risk-averse investor.

Of course, low risk often means low reward. If you're looking for a bigger payday, consider investing in silver-mining stocks instead. After all, when silver's market price goes up, it is often the case that the value of a mining stock could spike far higher than that of the physical metal. The disadvantage is that mining stocks are always risky — even when the silver market is strong, a mining endeavour can fail to pan out.

ETFs offer investors the best of both worlds. ETFs are a basket of varied equities, including physical metals and shares in mining companies. Much like individual stocks, they are liable to rise or fall in price according to the market, though they tend to be less risky than stocks.

In 2020, ETF investments were at an all-time-high, though Australia only has one silver ETF that includes the physical precious metal. Stocks are a much more common means of investing in silver in Australia. The country boasts over a dozen silver-mining companies, including South32 and Silver Mines, as well as Newcrest Mining (ASX:NCM,TSX:NCM,OTC Pink:NCMGF), Golden Deeps (ASX:GED) and Investigator Resources (ASX:IVR).

Don't forget to follow us @INN_Australia for real-time news updates.

Securities Disclosure: I, Isabel Armiento, hold no direct investment interest in any company mentioned in this article.

carbon emissions

Following international pressure, the Australian government has promised to reach net zero emissions by 2050.

In a last-minute commitment after months of debate, the Australian government has promised to reach net zero emissions by 2050, expecting to meet the goal largely through technology development.

The move comes following international pressure as Australia had previously refused to join countries in pledging to meet the target ahead of the United Nations' COP26 climate conference in Glasgow.

However, the plan unveiled on Tuesday (October 26), which includes a government investment of AU$20 billion, does not strengthen the target set for 2030, with Prime Minister Scott Morrison saying Australia is on track to beat its Paris Agreement goal, cutting emissions by 30 to 35 percent by that decade.


"We will do this the Australian way," Morrison said ahead of a press conference, announcing investments in new energy technologies like hydrogen and low-cost solar.

An Australian hydrogen industry could be worth more than AU$50 billion in 2050, according to the government. Meanwhile, expanding production and processing of metals like lithium, nickel, copper and uranium could together be worth around AU$85 billion in exports in 2050.

That said, Australia will continue to be heavily dependent on fossil fuels as the plan will not shut down coal or gas production. The country is a major coal player, with the third largest reserves in the world, but its reliance on coal-fired power makes it one of the world's largest carbon emitters per capita.

"We want our heavy industries, like mining, to stay open, remain competitive and adapt, so they remain viable for as long as global demand allows," Morrison said. "We will not support any mandate — domestic or international — to force closure of our resources or agricultural industries."

Australia's desire to achieve net zero emissions by 2050 is a step in the right direction, Prakash Sharma, Wood Mackenzie's Asia Pacific head of markets and transitions, said.

"Our analysis shows that Australia can reach net zero emissions by 2050," he said. The country's major trading partners — China, Japan and South Korea — are already in transition towards that goal.

According to Wood Mackenzie, nearly 83 percent of Australia's power generation will come from solar and wind by 2050, as compared to about 20 percent last year. Natural gas, bio energy, geothermal and small modular reactors will supply the remaining 17 percent in power output. Coal into power is expected to be phased out by 2035.

"Although the pathway requires complete transformation of its traditional energy and export sectors, there are significant opportunities to capitalise on and protect future revenues," Sharma said.

"This will require Australia to become a significant player in low-carbon hydrogen trade as well as being able to offer carbon storage and offset services."

Meanwhile, the Australian Conservation Foundation has welcomed the prime minister's commitment to reach net zero by 2050, but said the mid-century goal is only meaningful with deep cuts to climate pollution this decade.

"Unless the government sets the wheels in motion to cut our emissions in half by 2030, it is making climate change worse and turning its back on the opportunities," said Chief Executive Kelly O'Shanassy.

"Australia can become a global clean energy superpower in the next decade by replacing coal and gas with renewable energy," she added. "We have abundant clean energy, tools and talent, but we cannot delay any longer."

Don't forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.