Sustainable Gold Mining in South Africa: Harnessing Solar Energy for Innovation and Growth
Source: Nuno Marques on Unsplash
The gold mining sector in South Africa has encountered numerous challenges, yet it continues to thrive, supported by one of the planet’s most abundant deposits of precious metals and mining firms adept at navigating the complexities of working within the ninth-largest nation on the African continent.
South Africa boasts some of the largest gold deposits globally, with approximately 5,000 tons of confirmed gold reserves. This accounts for the bulk of Africa’s total known reserves of 6,800 tons, surpassing the United States’ 3,000 tons.
Ever since the discovery of the Witwatersrand gold vein near Johannesburg in 1886, miners in South Africa have shown remarkable resilience and determination. They have successfully navigated through various adversities, including conflicts, the challenges of aging and deeper mines, labor disputes, and regulatory ambiguities, by innovating and steadfastly pursuing the extraction of this invaluable mineral resource.
These challenges are common for mining enterprises worldwide. Nonetheless, South African gold mining operations face the unique challenge of operating in a setting where the national electric utility, Eskom, struggles to fulfill the electricity demand due to aging and inefficient energy infrastructure.
Consequently, there is an urgent need to invest in alternative energy sources within South Africa. In response, gold mining companies in the region have embraced this challenge by investing in renewable energy initiatives to maintain mine operations and ensure the safety of miners underground.
Pan African Resources has been at the forefront, becoming one of the pioneering mining firms to establish and operationalize a grid-connected, utility-scale solar facility with a 10MW capacity at its Evander mines. The company is also exploring additional solar energy projects at other mining sites and is continuously evaluating its renewable energy approach, expanding it to incorporate wind energy, hydropower, battery storage, and the transfer of power across the national grid.
The threat of power supply interruptions and the impacts of climate change present various risks and potential expenses for gold mining operations. With these considerations in mind, Pan African Resources is committed to securing energy independence and minimizing production costs through its sustainability initiatives, which include enhancing energy efficiency and broadening its use of renewable energy sources.
The Shift to Solar: A Sustainable Choice
The global shift toward renewable energy sources and away from fossil fuels is a priority on the world stage, evidenced by the commitment of 196 nations to the Paris Agreement. This pact sets a goal to limit the rise in global average temperature to well below 2°C above pre-industrial levels, with an ambition to keep the increase to 1.5°C. To meet these objectives, greenhouse gas emissions need to peak by 2025 and be reduced by 43% by 2030. The unprecedented number of weather disasters and record-setting high temperatures in 2023 underscore the urgent need to address climate change’s growing and destructive effects.
Mining is one of the most energy-intensive industries, historically dependent on fossil fuels for extraction, processing, and operations, contributing to 10% of worldwide emissions. In 2019, the gold mining sector was responsible for emitting 126 Mt CO2, akin to the combustion of 300 million barrels of oil, as per Nature Vault. This figure starkly contrasts with the iron ore sector’s annual emissions of about 70 Mt CO2, reported by SP Global. Furthermore, steel production is identified as the largest single source of emissions within the global mining and metals sector, accounting for 7% of its total emissions, based on a report from KU Leuven.
Aware of its significant environmental footprint, the gold mining industry acknowledges the necessity of mitigating its effects on climate change. To remain sustainable, many mining companies are embarking on paths to sustainability, which include the adoption of renewable energy sources to power operations and lessen reliance on fossil fuels, thereby reducing carbon emissions.
Pan African Resources is at the forefront of this transition, actively enhancing its energy portfolio by integrating a higher percentage of solar power to energize its mining activities. Solar energy is particularly appealing in Africa due to its abundance, cost-effectiveness, and sustainability, enabling mining operations to diminish their environmental impact significantly.
Beyond the reduction of greenhouse gas emissions, the adoption of solar power in gold mining brings multiple environmental benefits, such as water conservation and the restoration of lands affected by mining activities. Gold mining areas often have ample unused land suitable for rehabilitation, like the site of Pan African Resources’ Evander solar facility, which was constructed on land previously occupied by worker hostels. The relocation of employees to nearby communities has further enhanced their living conditions.
The mining industry’s extensive water usage is also addressed by Pan African Resources through the initiation of a water recycling plant, repurposing vast amounts of underground water for mining processes. This not only conserves financial resources by reducing the need to purchase municipal water but also makes more drinking water available for surrounding communities. Moreover, solar installations offer the potential for agro-voltaic projects, which utilize the land beneath solar panels for agriculture, doubling the land’s utility by generating solar power and supporting crop irrigation. This innovative approach maximizes land use, provides crops with necessary shade, and can decrease water evaporation by 20% to 30%.
The future of gold mining is set to be dominated by renewable energy, with projections from the International Renewable Energy Agency suggesting that the adoption of renewables could cut energy-related emissions in the mining sector by 16% by 2030.
The Economic Benefits of Solar in Mining
Growth Potential
The Boston Consulting Group (BCG) highlights three critical areas for immediate action by mining companies to leverage the opportunities presented by gold mining in South Africa: enhancing exploration efforts to discover new deposits, tackling the current unreliable and costly energy landscape, and improving the efficiency of daily mining operations. These challenges can be addressed by adopting innovative, sustainable growth strategies that increasingly integrate renewable energy solutions into the energy portfolio of the gold mining sector.
The shift towards renewable energy, particularly solar power, offers gold mining companies significant economic benefits in the long run. Solar power installations, with their lifespan of 25 to 30 years, provide a reliable and sustainable energy source, enabling companies to harness growth opportunities and realize cost savings over an extended period.
Renewable energy solutions empower mining operations to achieve energy self-sufficiency, producing the required energy on-site, which eliminates dependence on grid-supplied electricity. This autonomy from the grid mitigates the risk of power outages—a significant concern in South Africa—and shields the operations from the fluctuations in energy prices driven by global economic and geopolitical dynamics.
Pan African Resources is actively pursuing innovation in exploration through the use of advanced software and modeling techniques. This strategy is supported by enhancing the company’s technical capabilities and optimizing mining and underground planning with the addition of skilled mine planners and geostatistical experts in ore resource management.
Cost-Effectiveness
BCG also points out the detrimental impact of costly, unreliable, and unsustainable electricity supply on the competitiveness of South Africa’s gold mining industry. South Africa’s electricity rates are among the highest compared to a group of peer mining nations, with recent tariff increases approved by the National Electricity Regulator of South Africa (NERSA) set to exacerbate these costs. BCG’s analysis predicts a widening gap between electricity supply and demand up to 2030.
https://media-publications.bcg.com/south-africa-untapped-goldmine-opportunities-for-mining.pdf
Without intervention, the high energy costs and continued reliance on coal-fired power could diminish the competitiveness of South African gold mines. However, many mines have anticipated this issue and are investing in alternative energy sources.
BCG further emphasizes the importance of improving the cost efficiency of daily mining operations. Renewable energy stands out as the most viable solution for achieving this, offering substantial long-term cost savings that can enhance the financial performance of mines. These savings come from reduced dependence on purchased electricity—which is subject to above-inflation rate increases—increased productivity, minimized downtime, and lower operational costs.
Moreover, by generating their own power, companies not only protect themselves from the volatility of energy prices but can also earn additional revenue by selling surplus energy back to the grid.
Pan African Resources is already reaping the financial rewards of its investment in solar power. The company’s Elikhulu solar PV plant is saving approximately R3 million monthly, or R36 million annually, on electricity costs. With a target to achieve 30 MW of solar capacity by 2024, the company anticipates annual savings of R100 million by producing 75,000 MWh of energy annually.
Atlas Renewable Energy summarizes the economic rationale behind mining companies’ adoption of solar power: “Solar power is not just a sustainable choice; it is a strategic decision for mining companies to remain competitive in an industry where cost efficiency is paramount.”
Diversification and Risk Mitigation
The South African Power Crisis
The energy crisis in South Africa presents a formidable challenge for gold mining companies operating within the country. To counteract this issue, these companies must broaden their energy strategies, moving away from a heavy dependence on fossil fuels towards a more diverse mix that includes renewable energy sources.
At Pan African Resources’ Evander gold mining site, the detrimental effects of load shedding — intentional power outages to avoid overloading the power grid — have been palpable, with disruptions in grid electricity supply leading to a 5% drop in production over a six-month period. By expanding the solar energy capacity at this site, the company aims to significantly lessen the risk of power outages and, consequently, prevent future reductions in production.
One of the encouraging factors for investing in solar power is the shortening payback periods, thanks to the rising costs of electricity supplied by Eskom, South Africa’s main energy provider. For example, the solar installation at the Evander mine, which had a construction cost of around R150 million, was projected to recoup its investment within five years by 2022. This payback period is likely to decrease even further with anticipated hikes in Eskom’s tariffs, enhancing the investment’s return and strengthening the financial performance of the entire group.
A Resilient Investment
Gold mining firms in South Africa, including Pan African Resources, are advancing their renewable energy initiatives, showcasing a dedication to resilient and future-proof investments. Securing a stable energy supply shields these companies from the adverse effects of global geopolitical tensions and the economic downturns that can result from surges in global energy prices.
As countries like the United States face the prospect of a recession due to prolonged periods of high-interest rates, the logic behind diversifying investments across different regions, sectors, and asset categories becomes even clearer. In such uncertain times, gold mining entities that have taken control of their energy expenses stand to gain from gold’s reputation as a stable investment. As gold prices rise, so too does the profitability of mines that have invested in managing their energy costs, positioning them for greater financial success in the face of global economic challenges.
Addressing Environmental Concerns in Mining
The mining industry has long been associated with significant environmental degradation, including ecosystem destruction, landscape alteration, and detrimental effects on soil, water, and air quality. Additionally, mining operations are known for their substantial energy consumption, contributing considerably to global greenhouse gas emissions.
Over the years, the sector has initiated various measures to lessen the environmental harm caused by its activities. These efforts include rehabilitating landscapes to combat erosion, remediating soils tainted with metals or chemicals from mining processes, and managing air pollution.
More recently, there has been a shift towards addressing the environmental footprint of the industry, particularly in terms of its substantial greenhouse gas emissions resulting from electricity use and traditional reliance on fossil fuels.
Strategies to reduce this impact involve cutting down on energy usage through efficiency improvements (like adopting modern, eco-friendly machinery or using electric vehicles and equipment underground) and implementing renewable energy projects to decrease dependence on non-renewable energy sources. The World Gold Council projects that by transitioning to renewable energy and enhancing energy efficiency by 2% to 8%, gold mining emissions could fall by 4% by 2030, contributing to the industry’s alignment with global climate targets.
Pan African Resources is committed to producing gold in a manner that is safe, efficient, and sustainable, with minimal environmental impact. The company has developed a comprehensive strategy for decarbonization and energy management to be executed over the coming decade.
The company has set ambitious goals to increase its use of renewable energy to 15% by 2027, 30% by 2030, and 50% by 2035. Significant investments have been made in solar power at the Evander Mines, which is already operational and set to double its capacity, and at the Barberton Mines, expected to be operational by June 2024.
Furthermore, Pan African Resources has entered into a Power Purchase Agreement (PPA) with Sturdee Energy to distribute 40 MW through the grid and is considering a 10MW solar project at its MTR site. The company is also actively exploring renewable energy PPAs involving wind, hydro, and battery storage solutions.
Aiming for energy autonomy and a reduced carbon footprint, Pan African Resources has made strides in improving energy efficiency, lowering its electricity use to 1.38 million GJ in 2022 from 1.40 million GJ in 2021, despite an increase in mining activity. Energy-saving measures such as high-efficiency motors and compressors have been introduced, and the company is exploring the use of LHDs and battery-powered vehicles for underground operations.
Through these initiatives, Pan African Resources is dedicated to maintaining the highest standards of sustainable development, ensuring its future operations inflict minimal environmental damage. This commitment is driven not only by environmental responsibility but also by the recognition that sustainable practices are beneficial for long-term business viability.
Demonstrating Adaptability in a Fast-Changing Market
Gold mining in South Africa has a rich history spanning over a century, yet the industry’s longevity hinges on its ability to continuously innovate and adapt to evolving market conditions and more complex mining environments. South African miners face the dual challenge of managing a higher cost structure and enhancing productivity to remain competitive on a global scale.
Pan African Resources has stayed ahead in this competitive landscape through a progressive mindset, embracing new technologies and methodologies. The company places a strong emphasis on leveraging technology to not only enhance safety and output quality but also to optimize overall performance and seize growth opportunities. Digital advancements play a crucial role in risk management, safeguarding against information breaches, and enhancing cybersecurity measures.
In response to the increasing challenges of underground mining, Pan African Resources shifted its strategy towards more sustainable and cost-effective methods, such as processing gold from mine tailings, which poses lower risks and requires less investment.
A notable innovation adopted by the company is the BIOX® processing technique, which utilizes bacteria to extract gold from sulfide ores, offering a more environmentally friendly alternative to traditional methods.
This approach not only reduces the need for substantial capital investments but is also ideal for remote locations and continuous improvement initiatives. The company further enhances this process by employing Gas Chromatography-Mass Spectrometry (GCMS) technology to monitor the health of the bacterial cultures within the BIOX® plant.
Our Long-Term Vision: Partnerships and Growth
For Pan African Resources, sustainability extends beyond operational efficiency and environmental stewardship; it encompasses building lasting relationships with stakeholders, including investors who prioritize long-term value and believe in the enduring appeal of gold as an asset class. Gold has historically provided superior returns, making it a reliable investment, especially during times of macroeconomic and geopolitical uncertainty.
Pan African Resources has demonstrated its capacity for growth as a mid-tier gold mining entity, capitalizing on industry consolidation opportunities such as the acquisition of Mintails Mining SA, which significantly increased the company’s production capacity by 25%. The company’s commitment to innovation has enabled the profitable recovery of gold from surface tailings, while its investments in renewable energy, including solar, wind, and hydro projects, are set to ensure the energy security necessary for future growth.
The pressing electricity challenges in South Africa have not only impacted the local economy but have also underscored the need for a transition to renewable energy within the mining sector. This shift has accelerated investments in sustainable energy sources by companies like Pan African Resources, enhancing their long-term viability and ensuring benefits for all stakeholders in the years ahead.
