New research into Australia's gold mines revealed "consistent, significant relationships" between gold grade and greenhouse gas emissions intensity per ounce, with average gold grades to fall 44% by 2029 that will significantly boost that intensity.

The research will be published in Journal of Cleaner Production in September by CSA Global principal geologist Sam Ulrich, who is undertaking his doctorate in geological controls on the operating cost structure of Australian and New Zealand gold mines under the supervision of his co-authors, Allan Trench and Steffen Hagemann, at the Centre for Exploration Targeting in Perth, Australia.

The study is titled "Greenhouse gas emissions and production cost footprints in Australian gold mines." It is the first to investigate whether relationships exist between greenhouse gas emissions and energy consumption with reported costs of production, all-in sustaining costs, the source of the gold mined — open pit, underground or both — and the individual mine power source.

Gold mining in the study refers to mining, processing, concentrating and smelting to produce gold dore bars at the mine before being sent to a third party for refining. The gold mines in the study, representing over 90% of Australia's annual gold production, produced 5.9 million tonnes of carbon dioxide equivalent, or 1.1% of the country's total greenhouse gas emissions.

The report warned that without taking measures to reduce greenhouse gas emissions, the aforementioned 44% decline would lift the emissions footprint per ounce for open pit, open pit and underground, and underground mines by 49%, 32% and 34%, respectively.

The study said currently implemented and planned abatement interventions forecast greenhouse gas emission reductions of between 7% and 52%, and introducing electric vehicles, especially in underground mines, would significantly cut greenhouse gas emissions further and reduce capital and operating costs.

Australian gold production was sourced from about 63 mining operations as of Dec. 31, 2018, comprising 46 gold-only deposits and 17 deposits with gold plus other metals. About 54% of the mines operate underground, 22% operate as open pits, and 24% mine from both sources.

High-grade mines have low greenhouse gas emission intensities and are lower cost. The inverse is true for large low-grade mines, though open pit mines have the highest intensity on average but the lowest costs. Mines that have both open pit and underground operations have lower greenhouse gas emissions intensity than open pit mines but are the highest cost. Underground mines have the lowest greenhouse gas emissions intensity and have higher costs than open pit but lower costs than mines that have both open pit and underground operations.

Ulrich told S&P Global Market Intelligence it was notable that "being connected to the grid is the worst thing possible." Victoria, home of the recent land rush due to the success of the Fosterville gold mine, has a higher emission factor for electricity consumption from the grid compared to other states and territories as brown coal provided 76% of Victoria's grid electricity in 2018. Emission factor is kilograms of carbon dioxide equivalent per kilowatt-hour. The study used figures as of June 30, 2018.

The five gold mines that are the least emissions-intensive are Gwalia, Mount Carlton, Agnew, Granny Smith and Tanami, though Ulrich said Agnew could be the best now since Gold Fields Ltd. equipped it with hybrid renewable energy in May.

Trench told Market Intelligence that while open pits have the potential emissions benefit of electric fleets versus a diesel fleet, open pits do not have underground mines' added efficiency of "not having to break as much rock ... you can use smaller openings because there are no fumes, so your ventilation requirements go down."

"You still need ventilation because when you blast, you still need to clear the fumes, but not from all of the diesel fleet, so there's the extra kick in underground," Trench said.

Grade challenge

Market Intelligence metals and mining research analyst Chris Galbraith said in an interview that Australia's weighted-average gold grade in 2019 of about 1.75 g/t was 23% lower than in 2005, when Australia produced 24% less gold. Most of that increase over time came from more mines and more material moved, as opposed to coincidentally higher gold grades at copper-gold mines, for example.

Grade has also been a deciding factor in building or reactivating a mine for several years, Galbraith said. Even though 2019's average grade was lower than 15 years before, it was higher than the low of 1.51 g/t eight years before.

"So while there are some year-to-year fluctuations, those grades have been lower in the not-so-recent past," Galbraith said, adding that grades are "well on their way" to dropping further. Grades in Australia are expected to fall another 6% in 2020 and keep falling "for the foreseeable future."

Ore throughput is expected to increase over the next three to four years to maintain production levels before falling off in 2023-24, with a generally similar story elsewhere, though timetables vary.

Galbraith said a good comparison for grade is West Africa, whose mines, like Australia's, are mostly open pit operations and whose grade closely mirrored Australia's as it ramped up gold production over the years, as seen in the chart below.

Though they were nearly the same in 2018, in 2019, West Africa's weighted-average grade increased, mainly due to the reactivation of Ghana's Obuasi in December 2019, which is processing ore that is more than twice the grade from when it shut down. Yet West Africa's grades are still expected to decline just like Australia's, albeit from a higher starting point going forward.

"As with many mature jurisdictions including West Africa, the likelihood of finding higher-grade discoveries increases as jurisdictions that weren't previously open to exploration or mining investment open up," Galbraith said.