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New ESG standards for gold mining

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New ESG standards for gold mining
December 25
13:00 2019

Some time ago, environmental issues, social responsibility and corporate governance were only an addition to the core business. Companies paid little attention to them, and for the most part they were needed to create a positive reputation. Recently, an ESG has become a more important issue; they even have to deal with mining companies. Responsibility and care of nature are no longer just beautiful words, but an integral sphere of work. After all, investors and the public are increasingly paying attention to it.


Sustainable development
In general, this term refers to the development of a company that can satisfy the needs of the present and create favorable conditions for future generations.

5-10 years ago, the term “sustainable development” meant only ecology. Now it has become more inclusive. It involves energy efficiency, safe work, mutually beneficial and true partnership with suppliers and consumers, as well as respect for local communities.

Investors need an ESC
A few years ago, only individual investors were interested in an ESC. Now the ESC is of a great interest for almost everyone. The non-financial reporting of the company, which reflects many performance indicators, has achieved increasing importance. The real fight for transparency of information begins. The capital of large mining companies should become more open.

Even when issuing corporate loans, organizations are asked a lot of questions on sustainable development. Such indicators as employee turnover, the accident rate, staff training, safety, etc. are important. Environmental issues have become more pressing. Investors are interested in air pollution, greenhouse gases, waste and garbage, water and fuel consumption.

Meanwhile, studies suggest that investing in companies with a higher ESG rating will not bring more revenue than companies with a low sustainable development rating. Thus, it is still a matter of image, but now it has become more important for investors.

Changing standards and reporting in gold mining

Gold mining has always been considered a toxic industry. This applies not only to ecology, but also to safety. This issue became especially pressing after the accident at the Brazilian mining company Vale at the beginning of last year. The tragedy claimed the lives of 250 people.

Modern standards force gold mining companies to disclose a lot of information. In particular, they must provide data in accordance with the International Cyanide Management Code. 

For many years, Russian manufacturers have been reporting on sustainable development. Some companies in one form or another have been doing this since the early 2000s. Recently, Petropavlovsk has come up with a proposal to introduce a paragraph on CO2 in the reporting forms. The company has justified the initiative with general concern about global warming due to an increase in atmospheric carbon dioxide. The company has been publishing CO2 emission reports since 2007.

Now the carbon footprint is in the TOP-4 business risks that will become relevant in the mining industry in 2020. The main development vectors for the companies in this industry are the transition to renewable energy and the electrification of mines.

“Green” funding vector

It’s no secret that funds and banks are more willing to support companies with eco-projects. It is about such projects as switching to renewable energy, low-carbon manufacturing vehicles, safe warehousing, etc.

Funds can be raised not only to create new projects, but also to improve the situation with existing production.

Reputation as a long-term investment

ESG is an important parameter for the modern mining business. Companies must look for new solutions and adopt effective foreign practices. Together, this has both a short-term effect (cost reduction) and a long-term effect – energy efficiency, good relations with local communities and improved conditions for investors.

The public negatively perceives gold mining and heavy production in general. There is a need to change something.  It is necessary to convey to opponents of the industry that metals are necessary for the “green” economy. Technology, telephones, cars, energy – cannot do without raw material production.


The material was prepared with the participation of Katya Wilson,
a leading analyst of the brokerage company UFT Group

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