Elanne Almeida

Hello, everyone. I have the honor to receive three amazing executives today who I deeply admire and who will share their experience and perspectives with us today. We will talk about navigating decarbonization through the integration of sustainable strategies in mine planning and investment decisions, unleashing enablers, fostering sustainability from returns and building resilience.

It is my pleasure to introduce Rodrigo Lauria. As a Climate Change and Decarbonization Director at Vale, Rodrigo has steered Vale’s climate change initiatives impact investing strategies. His role as director spans strategic oversight of climate change, carbon markets and nature-based solutions.

I would also like to introduce Erin O'Toole. Following a diverse and extensive experience spanning the Canadian Armed Forces and recently a decade of service as member of the Parliament, Minister and leader of the official position in Canada. Honorable Erin O'Toole now leverages his experience in politics, business and the military as the President and Managing Director of ADIT North America.

And last but certainly not least, it is an honor to invite Rohitesh Dhawan to join us today in our panel. Rohitesh is the President and Chief Executive Officer of the International Council Mining and Metals, ICMM, which represents the mining industry's commitment to sustainable development.

In his role, Rohitesh leads the counsel of 25 CEOs of the world's largest mining and metal companies, involuntary leadership actions that raise the standards of responsible mining,

Gentlemen, I appreciate your time today. To start things off, I'd like to ask Rodrigo. Rodrigo, Vale has made notable progress embedding sustainability into its operations in Brazil and all over the world actually. So how are you applying decarbonization strategies within your mine planning and capital decisions in a way that builds both resilience and return on investments?

Rodrigo Lauria

Thank you for the question, Elanne. I truly appreciate this opportunity to take part in this high-level discussion.  Good afternoon and evening, good morning to my fellow panelists. I’ll actually highlight two, very briefly, two different examples that illustrates what we have been doing so far.

The first one Vale achieved 100% renewable electricity in Brazil two years prior to the goal. In the other hand, we just released our standard building report of our ISSB’s report. So there are two major examples that help us to understand how we are tackling this challenge. And I think to your point, our journey, it's grounded, I would say, to two key pillars.

The first one is the governance, about governance. Governance in the sense that we start discussions with our board of directors and the dedicated committee that, with whom we engage 6 to 8 times per year. So this discussion starts at the board level, as well as executive committee. And I think it's essential to have sustainability truly embedded in our decisions.

So I think this is a for the first step. The second one is about capital allocation and how we integrate stability into these decisions. We develop a framework that we call Laser. Laser is our environmental and social impacts framework to evaluate each project. So every single project in the company as you go into this evaluation and not only the financial figures, but also social and environmental figures are evaluated.

We have a lot of several mechanisms, such as markers and carbon price and so on. But I think, I think this helps us to understand how we are embedding sustainability into both decisions, capital and financial discussions. I'll stop here because if not, I can go through all the session. But just to give some very good examples here.

Elanne Almeida

No, that was perfect, Rodrigo. And it is interesting that you mentioned IFRS, but we know that Vale has had a number of sustainability related initiatives throughout the years. So it's great to see how the market and the investors have been paying more attention to the need to bring this to life through frameworks, such as IFRS, and obviously through the ICMM expectations.

Next, we would like to take a quick moment to engage with the audience now. Please share your perspective on the following question. Where is your organization today in integrating decarbonization into planning and decision making? We invite you to take a moment to respond to the poll.

So, Rohitesh, ICMM plays a leading role in shaping global benchmark within the sector. So what are some of the most promising enablers that you have seen that will help accelerate low carbon strategies without stalling growth?

Rohitesh Dhawan

Thank you, Elanne, it's so nice to be with you. Starting points for this conversation is the commitment that we made as a group of companies in 2021 where we said that we would achieve net zero Scope 1 and 2 emissions by 2050 or sooner.

And Vale is a leader in that regard. And the other 24 companies have their own journey to achieving that and many are there, even well before 2050, in terms of their goal. If I was to pick my favorite example, Elanne, of an innovation that is allowing us to progress towards that goal, it will be something we call the innovation for cleaner, safer vehicles, or ICSV.

Many people may not know that when you look at the total carbon footprint of a mine, between 50% and 80% of it happens to be the diesel that is consumed in these very large machines that are used on mine sites. Some of these trucks carry 400 tons of payload at a time. And if people are wondering what is 400 tons mean, that's 100 fully grown African elephants.

Just to put it into perspective on one truck. So you can just imagine how much energy this truck uses and how much diesel they consume, which can be in the region of 1000l over the course of a shift or one of these trucks. So back in 2018, we were scratching our heads a little bit thinking we want to decarbonize these trucks.

But we can't seem to be able to buy electrified trucks. And then we would have a conversation with the people that make those trucks, the likes of Caterpillar, Komatsu, Sandvik. And they were scratching their heads saying, we want to sell these electric trucks, we don't know if people will buy them. And we said, this is crazy. Why not bring the suppliers of these equipments with the buyers of them to speak with one voice to each other?

Because now, I mean Vale is one of the biggest mining companies in the world, but even if Vale said, we will buy all your electric trucks, it's not enough to get them to fully transform their supply chain to supply electric. But when the third of the mining industry, which is captured by ICMM, speaks with one voice and says, we are committed, we will buy your trucks, it accelerates progress.

So when we started this work about seven years ago, the best estimate we had was that these electric vehicles would be available by 2040. Today, we are probably two years away from having these electrified trucks available at scale for the industry to adopt. So we have shaved off probably between 10 and 15 years of the development cycle through something that sounds so simple, but it's often so hard to achieve, which is collaboration.

Elanne Almeida

It is great to hear that we are just two years away from having that at scale. Thank you, Rohitesh.

Next, we would love to hear your thoughts on another key topic from today's discussions. What is the strongest motivator for decarbonization in your organization? Thank you for your continued engagement. Please take a moment to respond to the poll.

So, speaking of capital allocation, Erin, from your perspective, advising global organizations, including mining companies and investors, how are sustainability linked risks reshaping capital allocation in mining?

And are you seeing companies evolve fast enough to meet investors’ expectations?

Erin O’Toole

Well thanks for the good discussion. And I'm happy to say I do see companies moving fast. And the good thing is the early work done on sustainability, on ESG by the resource sector, mining, but also oil and gas is paying dividends. And with ESG now at a bit of a polarized crossroads, there's actually going to be a little less pressure on producers to meet very stringent environmental standards.

But it's not the time to ever step back from. The one thing is I think there will be swifter capital allocation to good projects. There will be less difficulty with some other things that were becoming a challenge, projects a few years ago that weren't suitably sustainable enough. So there's a rebalancing going on right now with respect to ESG.

And you see that around the world, but you see that in Canada, where I just left politics and Parliament, you actually see projects getting resource projects and mines built faster. So right now there's a bit of a rebalancing of ESG. And the smart thing that players, like Vale and some of the other world leading companies need to do, is to continue their sustainability efforts to stay ahead of the curve as they are, but just realize the aspects of the ESG goals, worker rights and some of the challenging regions of the world like West Africa, there needs to be as much of a focus on supply chain certainty, support for workplace conditions, tailing plans and these sort of other environmental remediation pieces are right now almost equally or more important than say emission reduction.

So while there's a little less pressure on the sector now, you know, in Canada, our Prime Minister, Mark Carney, was just elected on a mantra of build baby build. So there's been a pivot on ESG around the world.

But what we're telling clients is don't stop any of the great progress you're making on sustainability. Also make sure your ESG plans include this supply chain certainty and include some of these workforce sustainability efforts while you're also getting emissions down. And as my colleagues said, some of the investments in equipment, in technology is now starting to pay significant dividends.

So our advice is even though there's a little less political pressure in both the West and in the developing world than a few years ago, keep up sustainability efforts, but also be mindful of other aspects of the deglobalization period we're in.

Elanne Almeida

I couldn't agree more, Erin, and I think that we have a global study, it's called “Top Ten Risks and Opportunities in Mining and Metals.” And over the last 5 or 6 years, sustainability has been part of the top, at least top five risks. Last year it reduced, it dropped a little bit in the radar off top 10, but it continues to be there.

I think it's part of, almost part of business as usual, but it doesn't mean that people will just ignore or deprioritize sustainability.

That's my hope. And talking about that, Rodrigo, Rohitesh, what are some of the tradeoffs you've seen as companies navigate energy constraints, green infrastructure access, the need to decarbonize and near-term cost pressures?

Rohitesh Dhawan

Well, I would say Elanne, there are a number of very important decisions that executives are having to make. And to put a finer point on what Erin was saying, which I really agree with. We are in a situation where rather than companies necessarily having to respond to investor pressure or outside pressure, in some cases they're the ones having to drag others along their decarbonization journey who may be less motivated than they were say five years ago.

And, let me mention you an amazing statistic to explain that. In 2000, if you were building a new copper mine, and you'd be lucky to have it open by now given how long it takes to build a new copper mine, but that's not the point. If you were building a new copper mine in 2000, the cost per ton, the capital intensity per ton of copper was around $5,000.

Today, in admittedly nominal terms, so there's a level of inflation built in here, it would be $45,000 per ton of copper. And it tells you how much capital intensity to get the same level of output has risen over the last two decades. So as boards and executive teams, you're faced with some really difficult challenges, as Rodrigo was explaining, to balance where you put your money between growth projects, M&A, because we know that building greenfield mines is very hard at the moment, and investing in projects like decarbonization.

And so those trade-offs become very complex because of this increased capital intensity of bringing new supply on stream to supply the world with increased demand for critical minerals.

I would highlight two other challenges, Elanne, that really force trade-offs. The first is that you have an environment, particularly in the gold mining sector, but to some extent and others too, where you have short life of mine plans, which can be as short as five years in the gold industry, which can be right up to or even shorter than the typical payback period for a decarbonization initiative.

So as a board or a management team, you would find it very hard to sign off on a renewable energy project or an electrification project, which doesn't, you know, which is pushing up against your life of mine plan. How do you then recover the cost that you've invested? Now, of course, the nature of the gold business is that you're always five years away from closing the mine because you do more exploration, and that extends it further and that extends further.

So it's a really difficult balance to get because the life of mines typically don't give you that predictability to make long-term investments. And the final thing I would say, Elanne, is a range of site-based, very seemingly tactical issues that are holding back some progress. So it ranges from the fact that not all equipment are configured the same. So a bit like if you have a Samsung phone and I have an iPhone, we can't use the same charger. Equipment in mining also faces similar challenges. So we're working to try and make that more consistent. You also have a situation where the grid is not always ready to take on new renewable energy. So you might want it, but the grid investment hasn't been there to allow you to do that.

And the most difficult, in my opinion, issue operationally is increased safety risks from electrified vehicles. So you have a particular safety risk in mining called arc flash, which is where an electric current leaves its predictable path, goes through the air and ends up hurting people or killing them as a result of electrocution. Now, as we're putting these enormous batteries into moving equipment, the risk of arc flash is increasing and the mining industry has such a huge focus on safety that getting to grips with this risk and ensuring that we can manage it really well, it might be the thing that holds us back from decarbonizing faster. So I hope that gives a flavor of both some strategic capital allocation questions, as well as some operationalsite level issues that will need to be worked through that pose tradeoffs and challenges for people, even if they are very well intentioned and want to execute on a decarbonization journey quickly.

Rodrigo Lauria

From my perspective, I think this question is very good to summarize what we have seen that have a kind of short-term cost versus long-term gains, so how to balance this, those points. I think, I have to assume a very clear view that low carbon economy is already underway.

So it's not if we, if you do this, but how we do this. And we need to acknowledge, from my perspective, the pace is lower than initially expected. So based on that, some bottlenecks arise, such as investments when talking about new energy solidification or any low carbon economy. Maybe the return is a very long-term return. So we need to invest in the short term and the return to come years later.

Some measures, we need to acknowledge that increase operational complexity. So how to implement those technologies is already another issue. Remote mining, most of the time will require, you have some, you don't have the grid ready to operate, certainly to use, such as biofuels or even diesel to keep these operations running.

And anyhow, early adoption is always a matter of how to balance the costs and the gains and how you transform this into your NPV discussions. So I think what need to be clear is that it's not easy, but you need to really discuss this within the board prior to any capital allocation. So once you have the final investment decision, it seems like you check all these boxes in the way that we'll be assuming that this capital allocation will be the best decision for the company balancing return and progress on decarbonization journey.

Elanne Almeida

Thank you, Rohitesh and Rodrigo. As a sustainability person working with mining, I'm confident that we will continue to evolve into achieve the standards that you're all aiming. And with that in mind, I've got a final question for all of you. So we are approaching COP, as a Brazilian, I'm happy and excited to say that we will be hosting COP towards the end of the year.

And I think that this gives us a new perspective in terms of what else we can do as a country to make sure that this is not a point in time event, this is something that will trigger more actions, not only at the national level, but hopefully at regional level. So to all of you, what gives you the confidence that decarbonization in mining can drive long term business value, resilience and bringing it closer to home?

What still needs to change for broader adoption across the Americas? So I'll start with Rohitesh, and then Rodrigo, and then Erin.

Rohitesh Dhawan

Elanne, the thing that gives me so much confidence is seeing how far we've come. Often when you're walking a very long journey, it's helpful to just turn your head back every now and again and realize how far you've already walked. And I use the example of the trucks to tell you what felt like an insurmountable mountain has now actually shrunk before our very eyes.

And the experience of companies, like Vale, moving to 100% renewable energy in a few short years. Take other companies, Anglo American is 100% renewable in Latin America and Australia. Antofagasta is 100% renewable in Chile. It really inspires me because I can see how with dedicated leadership and serious commitment, you can make strides, progress in what felt like a very, very far away goal.

So, I'm really optimistic. The thing I really wish happens is that the finance community genuinely puts their money where their mouth is. And, I mean that because I think for the large part, investors in the mining industry have not rewarded companies who have taken leadership actions on not just decarbonization, but broader sustainability and ESG. And often I see companies having to fight with investors to make the case, to keep doing what Erin was encouraging us to keep doing, which is to not slide back.

And we know how much it matters when investors genuinely come to the table to support the kind of investments we know need to be made. And so really, it's a plea to say, certainly I can only speak for the 25 companies in our group, we are exactly where we were when we first made these commitments. We want to make them happen. We are entirely committed and we would love our partners in finance to walk that journey with us. I appreciate everybody's keen to see returns in hot commodity cycle where in the case of gold or there are challenges in other commodities. But we know that this has to surpass individual commodity cycles. So really, my one ask and hope is that the asset managers and asset owners really do show up as partners in this journey.

Rodrigo Lauria

I'm also optimistic and, I think a very simple way to confirm these assumptions that when you see the trajectory of the increasing climate impact and the costs of climate impacts, so we need this transformation and transformation needs some, considering all the aspects is about economic, you need that, and how we will have tangible effects in global GDPs and corporate profits, profitability and so on. So I think from my perspective, I think we need to push this agenda forward, especially in the coming years, the next five years, probably as early mentioned, we should pride ourselves off what we achieved, but you have a lot of things to evolve during this the next years. So I think it's a macro level, what we need to address is how to evolve carbon markets regulations, how to unlock the potential of biofuels considering the Americas, how we can explore opportunities regarding the critical minerals and essential minerals and keep going on the emerging energy source, such as green hydrogen.

So we need to think about the very long period, the next five years, in the very short period, all of them together for sure, will give us more clarity on the next steps. So I think, yeah, that's it.

Erin O’Toole

Yeah. I'm very excited that, Brazil will be hosting COP, as you mentioned at the outset, in large part because the real conference in 1992 was really the kickoff to what has grown into COP and a global effort to combat climate change or global warming, as it was called back then.

I agree with Rohitesh, the progress made is something that I don't think people outside the industry truly appreciate. The investments in sustainability and workplace practices and safety have to continue even through this time where there's a little more focus on speed to project execution as opposed to sustainability. But in some of the more recent mining events I've been involved with, with The Northern Miner and some of the Canadian organizations, the sustainable mining plans that a lot of companies have now are first in class, when compared to other industry sectors.

And I hope too that the market start to appreciate what’s in those investments and those plannings. I've seen projects that involved hydroelectric generation in parts of South America for copper developments. This is what we need to see because the polarized age we're in maybe has a little less emphasis on climate now, but you only need to see forest fires in Europe and in Canada and the changes we're seeing remind us that we can't lose sight of the wider mission.

So I really think the mining sector should step forward and showcase what has already been done and the continued commitment alongside, as was mentioned, some renewed focus on safety, renewed focus on supply chain as well. And there's certainly a lot of concerns about political risk in some mining jurisdictions, but the industry as a whole has a very good record and just needs to build on that. So perhaps, perhaps that can be showcased a little bit more as part of COP, because it really is a good news.

Elanne Almeida

I couldn't agree more. I think that there is, there are many, many great things that as an industry we've been doing and yes, let's hope to see and hear a lot more about it during COP in, over the years to come.

So, gentlemen, it has been a great pleasure to have you here, to learn and hear so many amazing insights. I really appreciate your presence and thank you so much.

Theo Yameogo

I'd like to thank our panel for sharing such thoughtful and practical insight. Again, we are hoping that most of us will be in Brazil for COP30, as it's now central to the future of critical minerals and metals overall.

Now we shift to the minerals space, where growth, capital discipline and energy strategy are all converging.

This session is moderated by Dean Braunsteiner, EY Canada Metals and Mining Assurance Leader.