The future of mining is already here

While the role of so-called battery metals such as lithium has captured investors’ imaginations, copper usage holds the key to intensifying global efforts to decarbonise through electrification.

In fact, copper’s role in the renewables revolution is making it more of a ‘green metal’ than a ‘red metal’, which is its more common description.

‘Green’ copper usage aside, there’s also an increasing focus on how the metal is produced in the first place. As well as demanding that producers avoid controversial geographies, investors want to see copper mined using sustainable, low-emission techniques.

In a report commissioned by the International Copper Association Australia, the Warren Centre notes that copper mining has remained largely unchanged for years, despite smelting and flotation innovations.

‘‘A zero emissions copper mine of the future will be significantly different . . . and will require fundamental changes in how energy is consumed, sourced and abated,’’ the report says.

As a major copper producer, Australia is at the forefront of the ‘arms race’ to innovate and deliver sustainably mined material – and South Australian producer Hillgrove Resources is leading the charge.

This month, Hillgrove will deploy a transformative new mining machine to commence an underground decline at its Kanmantoo mine site, 65 kilometres south-east of Adelaide.

Mining is expected to restart in 2022.

Developed by Komatsu in Wollongong, the MC51 continuous mining machine promises a safer, faster, greener and cheaper way to build a mine.

So far only two of these machines exist globally, with the other unit recently starting a trial at Vale’s Garson mine in Sudbury, Canada.

At Kanmantoo, the machine will cut a 500-metre underground decline and establish underground drilling platforms.

‘‘The MC51 obviates the need for blasting,’’ says Hillgrove chief executive Lachlan Wallace. ‘‘This results in safety benefits and saves on time and costs because workers don’t need to be evacuated for blasts.

‘‘The machine is also fully electrically powered, which is a crucial step towards zero-emissions mining.

‘‘While other miners have electrified site vehicles and other ancillary services around the mine, we’ve gone further and electrified the mining development process itself. This is an Australian first for portal and decline development.’’

The fume-free MC51 units are powered by electricity from the state’s renewables-oriented network. Other benefits are lower input costs for ground support and ventilation, while downstream processing costs are also lowered because of the smaller rocks produced.

In deploying the continuous mining machine, Hillgrove is backed by a $2 million grant from the South Australian government, which is keen to foster innovative and sustainable ways to tap the deep and complex deposits in the state’s north.

The Kanmantoo open-pit operated from 2011 to 2020, producing 137,000 tonnes of copper from three pits, the largest of which was more than 360 metres deep. Drilling below the pits over the past three years has shown the mineralisation continues at least a further 500 metres below the base of the pits and remains open at depth.

‘‘The drilling demonstrates grade, width and continuity, confirming the commercial viability of underground mining,’’ Wallace says. ‘‘The 68-hole drilling campaign led to 92 economic intersects, which is an exceptionally high strike rate that provides confidence the planned drilling program will continue [to] grow the resource.’’

Crucially, the economics of Kanmantoo 2.0 are enhanced because the processing plant is already there. With a capacity of 3.6 million tonnes a year, the facility has been on care and maintenance and needs only minimal refurbishment costs to restart.

‘‘We have plenty of latent capacity in the processing facility and ample permitted tailings storage capacity,’’ Wallace says. ‘‘This puts us in a unique position to take full advantage of rising copper demand as we have the flexibility to ramp up annual production without further permitting or capital expenditure.’’

Hillgrove is in the process of raising a further $2 million through a share purchase plan, over and above the $10 million raised recently in an institutional placement. The proceeds will fund an ongoing 16,000-metre infill drilling campaign to expand the resource.

‘‘This raise sees us fully funded to FID (final investment decision) stage and we have already commenced discussions with funding parties about development financing options,’’ Wallace says.

He acknowledges Hillgrove’s past issues linked to flawed geological modelling at the project’s outset that impacted revenue expectations.

‘‘Since revising the geological model in 2016 the company has been able to turn the project around and repay upwards of $70 million in debt, distribute a $9 million franked dividend and retain sufficient working capital to kick-start exploration to create the underground mining opportunity,’’ Wallace says.

The upside of Hillgrove’s past challenges is that it holds handy tax credits of more than $190 million, as well as $17.6 million of franking credits (enough to underpin $50 million of fully franked dividends).

‘‘We have a robust plan to rapidly recommence copper production and create free cash generation from Kanmantoo for very modest capital development costs,’’ Wallace says.

‘‘We are also very excited to be doing this in a way that leads the industry towards zero-emission mining, which is without question the way of the future.’’