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The gold mining industry in South Africa has faced numerous obstacles, but it remains prosperous, gaining from one of the world’s most significant reserves of precious metals and companies skilled in managing the complexities of operating in Africa’s ninth-largest country.

South Africa is renowned for having some of the most extensive gold reserves worldwide, with an estimated 5,000 tonnes of proven gold reserves. This represents the majority of Africa’s total known reserves of 6,800 tonnes, significantly exceeding the 3,000 tonnes held by the United States.

Since the Witwatersrand gold reef was uncovered near Johannesburg in 1886, South African miners have demonstrated exceptional resilience and resolve. They have adeptly handled a variety of challenges, such as conflicts, the difficulties associated with older and deeper mines, labour disputes, and uncertain regulatory environments, through innovation and a relentless commitment to mining this precious mineral resource.

While these challenges are familiar to mining companies globally, those in South Africa must deal with the added difficulty of operating in an environment where Eskom, the national electricity provider, is unable to meet the country’s power needs due to outdated and defective energy infrastructure.

This situation has made investment in alternative energy sources a pressing necessity in South Africa. In response, gold mining firms in the area have risen to the occasion by funding renewable energy projects to keep their operations running and safeguard their miners underground.

Pan African Resources leads the way as one of the initial mining companies to develop and commission a grid-tied, utility-scale solar facility with a 10MW capacity at its Evander mining sites. The firm is also investigating further solar power projects at its other sites and is constantly revising its renewable energy strategy to include wind power, hydroelectricity, battery storage, and electricity distribution over the national grid.

The risk of electricity supply disruptions and the effects of climate change introduce a range of risks and potential costs to gold mining activities. Bearing this in mind, Pan African Resources is dedicated to achieving energy autonomy and reducing operational costs through its sustainability efforts, which involve improving energy efficiency and expanding its renewable energy portfolio.

The worldwide movement towards renewable energy and away from fossil fuels is a key agenda, highlighted by the agreement of 196 countries to the Paris Agreement. This agreement aims to cap the global temperature increase well below 2°C above pre-industrial levels, aspiring to limit the rise to 1.5°C. Achieving these goals requires greenhouse gas emissions to peak by 2025 and decrease by 43% by 2030. The record number of climate-related disasters and unprecedented high temperatures in 2023 emphasise the critical need to combat the escalating impacts of climate change.

The mining sector, traditionally reliant on fossil fuels for extraction, processing, and operation, is among the most energy-demanding industries, accounting for 10% of global emissions. Specifically, the gold mining industry emitted 126 Mt CO2 in 2019, equivalent to burning 300 million barrels of oil, according to Nature Vault. This is in stark contrast to the approximately 70 Mt CO2 emissions from the iron ore sector, as reported by SP Global, and steel production’s role as the primary contributor to emissions within the mining and metals sector, constituting 7% of its total emissions, based on findings from KU Leuven.

Conscious of its environmental impact, the gold mining sector recognises the importance of reducing its contribution to climate change. To sustain their operations, numerous mining companies are adopting sustainability paths, including utilising renewable energy sources to power their operations, thus decreasing their dependency on fossil fuels and reducing carbon emissions.

Leading this shift, Pan African Resources is actively diversifying its energy sources by incorporating a greater share of solar energy into its operations. The abundant, cost-effective, and sustainable nature of solar power makes it an ideal choice in Africa, significantly reducing the mining operations’ environmental footprint.

The shift towards solar energy in gold mining offers several environmental advantages beyond lowering greenhouse gas emissions, such as conserving water and rehabilitating land affected by mining. Often, gold mining sites have extensive unused land suitable for recovery, such as the location of Pan African Resources’ Evander solar plant, built on previously utilised land for worker accommodation. Moving employees to communities nearby has also improved their quality of life.

Moreover, Pan African Resources addresses the mining industry’s significant water consumption by introducing a water recycling facility, allowing the reuse of substantial amounts of underground water for mining processes. This not only saves costs by reducing municipal water purchases but also provides more potable water to local communities. Additionally, solar energy projects present opportunities for agro-voltaic initiatives, utilising the space beneath solar panels for agriculture, thereby optimising land use, providing necessary shade for crops, and reducing water evaporation by 20% to 30%.

Renewable energy is undoubtedly shaping the future of gold mining, with the International Renewable Energy Agency forecasting a 16% reduction in the mining sector’s energy-related emissions by 2030 through the adoption of renewable energy sources.

The Boston Consulting Group (BCG) highlights three key areas for mining companies to take immediate action to tap into the potential offered by gold mining in South Africa: enhancing exploration efforts to discover new resources, tackling the current unreliable and costly energy supply, and improving the cost efficiency of everyday mining operations. These challenges can be met by focusing on innovative and sustainable growth strategies that include a larger share of renewable energy sources within the gold mining industry’s energy portfolio.

Companies in the gold mining sector making the switch to renewable energy sources can also reap significant long-term financial benefits from solar power. Solar energy installations, with their lifespan of 25 to 30 years, offer a reliable and sustainable alternative to traditional energy supplies, allowing mining companies to capitalise on growth opportunities and cost savings for many years.

Renewable energy enables mining operations to achieve energy self-sufficiency, producing the required energy on-site rather than depending on grid-supplied electricity. This reduces the risk of power outages, a particularly acute risk in South Africa, and eliminates exposure to the fluctuations in fossil fuel prices driven by global economic and geopolitical developments.

Innovative exploration, utilising modern software and modelling techniques, is a fundamental aspect of Pan African Resources’ strategy for growth. The company has strengthened its technical capabilities and enhanced its mining and underground planning by adding more in-house ore resource geostatisticians and mine planners.

BCG also points out the issue of costly, unreliable, and unsustainable electricity as a major barrier to the success of the gold mining industry in South Africa. It notes that South Africa’s electricity costs are among the highest compared to a selection of other countries and are particularly high within the mining sector. The recent approval of a tariff increase of approximately 19% by the National Electricity Regulator of South Africa (NERSA), along with the financial and debt challenges facing the utility, means that these costs are likely to continue to escalate. BCG’s analysis indicates a growing gap between electricity supply and demand up to 2030.

The ongoing energy crisis in South Africa poses a significant challenge for gold mining companies operating in the region. To mitigate this challenge, it’s essential for these companies to diversify their energy portfolios, reducing their reliance on fossil fuels by incorporating a variety of renewable energy sources.

At Pan African Resources’ Evander gold mining operation, the impact of load shedding — deliberate power cuts to prevent grid overload — has been starkly evident, with interruptions in the electricity supply from the grid resulting in a 5% decline in production within just a six-month timeframe. By enhancing the solar power capacity at this location, the company is determined to markedly diminish the threat of power shortages, thereby safeguarding future production levels.

The decision to invest in solar energy is further justified by the diminishing payback periods, driven by the escalating electricity prices charged by Eskom, the primary energy supplier in South Africa. For instance, the solar power setup at the Evander mine, which cost approximately R150 million to establish, was anticipated to pay for itself within five years as of 2022. This period is expected to shorten further with the predicted increases in Eskom’s tariffs, boosting the return on investment and fortifying the financial health of the entire organisation.

Gold mining companies in South Africa, Pan African Resources included, are progressing with their renewable energy projects, demonstrating a commitment to durable and sustainable investments. Ensuring a reliable energy supply protects these businesses from the negative impacts of international geopolitical tensions and the potential economic recessions triggered by spikes in worldwide energy costs.

With nations like the United States facing the possibility of a recession due to sustained high-interest rates, diversifying investments across various regions, sectors, and asset types becomes increasingly prudent. In these volatile times, gold mining companies that have secured their energy requirements are poised to benefit from the perceived stability of gold as an investment. As the value of gold increases, so does the profitability of mines that have proactively managed their energy expenditures, thereby enhancing their financial prospects amidst global economic uncertainties.

The mining sector has traditionally been linked with significant environmental impacts, including the destruction of ecosystems, alteration of landscapes, and adverse effects on the quality of soil, water, and air. Furthermore, mining operations are notably high consumers of energy, contributing substantially to global greenhouse gas emissions.

To address these environmental issues, the industry has implemented a range of measures aimed at reducing the ecological damage caused by mining activities. These include restoring landscapes to prevent erosion, cleaning up soils contaminated with metals or chemicals from the mining process, and controlling emissions into the air.

In recent years, the focus has expanded to include the industry’s carbon footprint, particularly the high levels of greenhouse gas emissions associated with the use of electricity and a historical dependence on fossil fuels.

Efforts to mitigate these impacts include enhancing energy efficiency through various means such as adopting modern, low-emission machinery, and utilising electric vehicles and equipment for underground operations. Additionally, the deployment of renewable energy projects aims to lessen the reliance on non-renewable energy sources. According to the World Gold Council, shifting to renewable energy and improving energy efficiency by 2% to 8% could lead to a 4% reduction in gold mining emissions by 2030, helping the sector align with international climate goals.

https://www.gold.org/download/file/15455/Gold-and-Climate-Change-The-Energy-Transition.pdf

Pan African Resources is dedicated to producing gold in a manner that prioritises safety, efficiency, and environmental sustainability, minimising its ecological footprint. The company has outlined a detailed decarbonisation and energy management plan for the next decade.

Ambitious targets have been set by the company to escalate its renewable energy usage to 15% by 2027, 30% by 2030, and 50% by 2035. Considerable investments in solar energy have been made at the Evander Mines, which is currently operational and poised for capacity expansion, and at the Barberton Mines, slated to commence operations in June 2024.

Additionally, Pan African Resources has secured a Power Purchase Agreement (PPA) with Sturdee Energy for the distribution of 40 MW across the grid and is contemplating a 10MW solar initiative at its MTR project. The company is vigorously pursuing renewable energy PPAs for wind, hydro, and battery storage solutions.

In its pursuit of energy independence and a smaller carbon footprint, Pan African Resources has achieved notable progress in energy efficiency, reducing its electricity consumption from 1.40 million GJ in 2021 to 1.38 million GJ in 2022, despite an uptick in mining volumes. Initiatives such as the introduction of high-efficiency motors and compressors, along with the exploration of battery-operated vehicles for underground use, have been implemented.

Source: Pan African Resources 2023 ESG Report