Getting your cut-off grade policy right for better ESG outcomes

The shift towards clean energy technologies is having a significant impact on the mining industry, with the demand for minerals such as copper, nickel, cobalt, lithium, manganese, and graphite increasing exponentially. To meet the goals of the Paris Agreement, mineral requirements for clean energy technologies would need to quadruple by 2040, and to achieve net-zero globally by 2050, mineral inputs in 2040 would need to be six times more than today. The most significant driver of mineral demand is electric vehicles (EVs) and battery storage, with lithium seeing the fastest growth, and copper demand doubling over the same period due to the expansion of electricity networks globally. The demand for these minerals is expected to rise significantly as investments in clean energy technologies continue to grow in the future. As the world moves towards a decarbonised economy, the minerals industry is under increasing pressure to reduce its environmental and social impacts and meet the increased demand for minerals. Mining companies are facing additional challenges due to the depletion of near-surface mineral deposits globally, with more mines transitioning from open pits to underground. The transition to underground mining requires the right strategy to economically access deeper mineable inventories and to keep up with future clean energy technology demands to achieve net-zero globally by 2050. One key way to achieve this is through decarbonisation using ‘green’ mining technologies such as replacing current primary diesel mining fleets with battery electric vehicles (BEVs). However, these measures through electrification overlook the bigger opportunity to maximise the socio-economic returns from the mine while also reducing the overall carbon footprint. Corporate cut-off grade policy is one of the most significant influencers on the total environmental and social impacts of the mining industry. The purpose of a corporate cut-off grade policy is to implement strategies aligned with achieving all the mining companies’ corporate goals, with decarbonisation targets becoming a primary driver for mining companies. Table 1 shows the evolution of cut-off theory with the increasing number of dimensions and driving inputs per iteration.