The mining industry is at a crossroads as latest industry insights reveals that electric mines can operate at costs between 56% and 88% lower than their diesel-powered counterparts.
However, just 60% indicate that their next mining operation will transition to electric.
Nearly all (84%) of industry professionals believe that Australia’s mining sector will not meet the government’s goal of achieving 82% renewable energy penetration by 2030.
These startling numbers were published within the ‘Electric Mine Consortium: 2020 to 2024: What we learnt from four years of a radical experiment in cross-company collaboration to build a zero particulae and zero carbon mining industry’ report.
The primary barrier to adopting electric equipment, cited by 76% of miners, is the high capital cost, which is rated 1.5 times more significant than the next major concern: confidence in operational effectiveness.
The report went into this a little more, stating: “There are several reasons why Australian miners have not adopted battery-electric underground load and haul equipment, while around 15% of Sandvik’s Canadian and European order book is battery electric.
“The overriding reason is a lack of clear policy support in Australia. Canada has had clear air quality standards for some time, leading most famously to the Borden mine’s first move to electrify. In support of this are a price on carbon, a 30% capital tax write-off for electric equipment and supporting infrastructure and substantial grants to fund early fleet adoption, such as the Canadian Government’s funding of A$12 million ($8.3 million) to fully electrify Glencore’s Onaping Depth mine.
“In contrast, Australia maintains a generous diesel fuel tax credit that will cost Australian taxpayers A$37 billion between 2024 and 2030.
“For BHP’s iron ore operations in 2023 alone, this tax credit is worth over A$500 million. Unsurprisingly, while BHP has committed to large electrification of its Chilean fleet of 200-plus heavy haul trucks before 2030, any electrification targets in Australia are for the period 2030 to 2040. This is seemingly a policy difference laid bare. As of 2024, Chile imposes a tax on diesel for miners (of around $0.12 per litre), whereas Australia does not.
“The Australian mining industry is also not subject to a universal price on carbon, at any price, unlike Canada and Europe. The closest policy instrument is the Safeguard Mechanism, but this covers only 200 facilities in Australia, of which most are coal mines or LNG facilities. At a 100,000 t C02-e per annum threshold, only a small handful of large iron ore mines are captured as well as very large base metals mines
like Olympic Dam and Newmont’s Telfer gold mine, and downstream alumina and aluminium processing facilities. The vast majority of mines are not subject to a compulsory carbon market.
“In a more subtle way, our mining regulations are also a major challenge to electrification. In Western Australia, ventilation regulations do not differentiate between diesel or electric equipment, which means that the ventilation benefits from using electric equipment, estimated to be anywhere from 20 to 40%, cannot be captured.”
In light of these findings, the industry is urging the government to implement tax incentives to accelerate the decarbonisation of mine sites.
“With diesel particulates posing severe health risks such as lung cancer, and with current Australian standards being over 6x higher than level considered safe by Safe Work Australia for underground miners, electrification is not just an economic opportunity; it’s a health imperative,” Graeme Stanway, Chair of the Electric Mine Consortium, said. “Investing in cleaner technologies can eliminate these hazards and support our commitment to sustainability.”
This is also where the EMC come up with their operating cost reduction assumptions (see table below):
| Base case | Scenario 1
New technology, new economics |
Scenario 2
Global carbon pressure |
Scenario 3
Technology and external pressures align |
|
| Fleet capex | OEM quotes Sep 2024
BEV up to 50% higher |
BEV matches diesel equivalent | OEM quotes Sep 2024
BEV up to 50% higher |
BEV matches diesel equivalent |
| Fleet lifecycle |
15,000 hrs |
20,000 hrs | 15,000 hrs | 20,000 hrs |
| Battery performance | Sep 2024 performance | 30% improvement | Sep 2024 performance | 30% improvement |
| Employee costs | Typical Australian labour rates | 5% labour cost reduction | 5% labour cost reduction | 5% labour cost reduction |
| Energy costs | Diesel $AU1.20/L | Diesel $AU1.20/L | Diesel A$1.70/L
(Aus rebate removed) |
Diesel A$1.70/L
(Aus rebate removed) |
| Product premium | Gold price US$2,000/oz | US$2,000/oz | +5% premium | +5% premium |
| Carbon costs |
No carbon cost |
No carbon cost | Carbon A$100/tCO2-e | Carbon A$100/tCO2-e |
|
Net present cost |
120% of diesel | 88% of diesel | 87% of diesel | 56% of diesel |
These findings are based on the first and most extensive collaborative financial modelling exercise on mine decarbonisation undertaken in the Australian mining industry, allowing executives to identify to granular detail the risks, opportunities and pathways to electrify.
Mark Norwell, Managing Director & CEO of Perenti, whose business recently teamed up with their client IGO and business partner ABB, to complete one of the first studies of converting an underground mine’s fleet from diesel vehicles to BEVs, said all stakeholders had a role to play in the shift to mine electrification.
“The study we recently conducted demonstrates that we are getting closer to an all-electric mine and that collaboration is the key to make it happen,” he said.
“We are optimistic that in time an electric underground mine will be the most economic and socially responsible mining method. The electrification of underground mines will deliver significant benefits to health, environment and cost.”
The CEO of Sandfire, Brendan Harris, noted, “Our purpose is to mine copper sustainably to energise the future, so we welcomed the opportunity to collaborate with industry peers to build a deeper understanding of electrification. Renewable energy already accounts for 73% of our electricity needs and we have a decarbonisation plan to reduce emissions by 35% by 2035 and achieve Net Zero emissions by 2050.”
Ivan Vella, Managing Director and CEO of IGO Limited, added, “Our collective journey toward decarbonisation will only be achieved through collaboration and cooperation across our industry. More than just helping demonstrate the value case for mine electrification, the EMC has facilitated the sharing of findings and been an effective advocate for our industry as we pursue our respective decarbonisation roadmaps.”
Context: Mining and environmental sustainability
- The global mining industry contributes 8% of total emissions;
- Over 80% of listed miners have committed to net-zero targets;
- Currently, less than 10% of the Australian mining sector utilises renewable energy;
- While 15% of Sandvik’s global haul truck production is battery-electric, no BEVs have been sold in Australia to date for on-going load and haul production; and
- It is estimated 90% of the mining workforce will experience hearing impairment by age 50.
Specific areas of cost reduction
Transitioning to electric mines presents substantial benefits, including:
- A 100% reduction in Scope 1 & 2 emissions for fully electric mines powered by renewables;
- Up to 30% reduction in overall operating costs;
- Up to 50% reduction in energy costs;
- A 20% decrease in maintenance costs; and
- A 30% reduction in ventilation costs.
