Gold has benefitted greatly this year, becoming one of the metals that performed best as its prices reached new highs. Additionally, a number of new mines have also started their operations, largely due to the strong price performance of the metal in the past recent years. With the growing concern on the effect mining has on climate change and the environment generally, a review of gold mines’ greenhouse gas emissions is in order.
Underground mines have lower greenhouse carbon footprints as compared to their open-pit counterparts, which are larger. The underground mines usually process less material and operate at higher grades. For every ounce of gold that is produced in an underground mine, underground operations reportedly emit less than half the CO2 equivalent that the open pit mines do. It should be noted though that the difference in power sources, methods used in mining and the location may influence the trends in emissions from gold mines.
Using the discount cash-flow models from S&P Global Market Intelligence, we note that large gold mines have the potential to generate a larger amount of free cash, as they have a large production base. This, however, may result in a slightly higher volume in the emissions. The larger mines also see slightly above average returns per every ton of emissions.
Underground mines have also been found to bring about more free cash flow as compared to open-pit mines; nearly $422 per ounce of gold compared to open-pit mines numbers of approximately $375 per ounce of gold.
In addition, regional variations have been found to affect the emissions of different mines. For instance, gold mines in Australia have a relatively higher intensity of greenhouse gases, thus emitting more greenhouse gases, which is roughly the same with gold mines in Russia. Mines in Russia give rise to considerably more free cash flow for every ounce of gold produced on a cash-flow basis. This is mainly due to the low fuel costs and a low valuation of its currency, the ruble. It should also be noted that both the United States and Russia are significant greenhouse gas emitters, emitting close to 0.77 metric tonnes of CO2 equivalent and 0.82 tCO2e respectively, for every ounce of gold they produce.
In Canada, greenhouse gas intensities are lower, mainly due to the large number of underground mines. Additionally, a majority of the country uses electricity that has been obtained from renewable sources and a further 82% from sources that do not emit greenhouse gases.
Many mining firms are keeping environmental concerns at the front of their minds while going about their operations. One such company is Josemaria Resources Corp. (TSX: JOSE) (OTCQB: JOSMF), whose flagship project in Argentina has been described as presenting low risks while having a high-profit potential.
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