The case for leaving NZ’s gold in the ground

Saturday, 28 December 2024

This article was first published on June 13 and is re-published as part of our summer showcase.

The reporter selected this story for another airing as while no push-back was received from the mining industry on its arguments, preparations for the ‘fast-tracking’ of several gold mines are still continuing.

ANALYSIS: An interesting argument is being put forward to support mining’s inclusion in the Government’s proposed fast-track consenting regime that is less about self-interest and more about altruism.

The world needs minerals, in part to make electric vehicles, wind turbines and solar panels for the “energy transition”, but New Zealand isn’t currently doing its fair share.

Josie Vidal, chief executive of mining industry body Straterra, told Parliament’s environment select committee this week there would be no energy transition without mined minerals.

“In a world that requires more minerals, it is not appropriate for New Zealand to sit on its mineral wealth and expect everyone else in the world to provide.”

More than that, mines here should have higher environmental and labour standards than those elsewhere in the world, she says.

Vidal hasn’t posed the following question, but if it’s a choice between New Zealand dotterels and Africa's great ape population, which should we choose?

Research led by Germany’s Martin Luther University warned in April that a third of the great ape population is currently threatened by copper, lithium, nickel and cobalt extraction in Western Africa.

The “better here than elsewhere” argument for mining provides food for thought, perhaps, but it does rather depend on the specifics of the mineral in question.

New Zealand doesn’t have known large reserves of cobalt or lithium, which are two of the “problem” ingredients needed to support the energy transition, Vidal concedes.

The majority of mining companies that the Government wrote to in April to provide information on fast-tracking applications are instead interested in opening goldmines or coalmines.

There is, or at least was, something both gritty and romantic about the prospecting and mining for gold, which was one of the key activities on which the nation was founded.

Much of the former and almost all of the latter may have given way to giant machines, cyanide leaching and cold economic equations.

But do we have a duty to mine it to chip in and help the world transition to a ‘greener’ future?

Gold doesn’t appear to be commonly used in solar panels outside of solar arrays attached to satellites in space, but it is used in very small quantities in printed circuit boards in EVs, and in electrical interfaces in wind turbines.

The big ethical downside of goldmining is that it is extraordinarily energy intensive.

Researchers from the University of Nevada estimate mining and refining a single kilogram of gold generates 12.2 tonnes of carbon emissions.

Very much like the linkage between bitcoin mining and the price of electricity, it is the cost of oil versus the market price of gold that is one of the biggest determinants in whether it is worth digging it up out of the ground.

In 2018, 20% of the operating costs of the world’s five largest mining companies were directly accounted for by energy costs, according to research by Toronto-listed firm Goldmoney.

But it estimated that when indirect costs were included, about half of the production costs of the average goldminer were closely linked to energy prices.

The lower the concentration of gold being mined, the worse the energy trade-off, but because the price of gold has roughly doubled over the past 10 years, it can now be economic to mine gold even where it exists in very small concentrations.

Santana Minerals believes its Rise and Shine find in Central Otago, which is a prime candidate for fast-track consenting, could become the country’s biggest goldmine.

In March, it estimated it contained 972,000 ounces of gold at a concentration of 2.5 grams per tonne, which Santana describes as “outstanding”.

To help visualise the concentrations we are talking about here, gold, with a specific gravity of 19.3, is about seven times more dense than the schist rock common in Central Otago.

Santana would therefore need to extract and smash up about a double-garage sized volume of rock (210 tonnes) to extract 525 grams — about 5½ teaspoons — of gold.

Do we need it that badly for the green transition?

Last year, according to the World Gold Council, less than 300 tonnes or 7% of the 4448 tonnes of global gold production was used to make what could be described as useful stuff.

The rest was roughly equally divided into making jewellery, or gold bars and coins held by central banks and other investors.

In a more usual year it can be about 10%.

Either way, that translates into only about half-a-teaspoon of gold in that double garage of rock being put to an obviously useful purpose.

According to the United States Nasdaq stock exchange, central banks alone hold just under 37,000 tonnes of gold, which based on last year’s consumption would be enough to supply the industrial demand for gold for more than 120 years.

Certainly, there is no need in at least the next few millennia to dig up more to make EVs or wind turbines.

Peter Sharpe, chief operator officer of the country’s largest goldminer, Oceania Gold, makes the point that even gold that is just sitting in the vaults of banks is performing a task of sorts.

That gold is designed to be “a store of value”, giving financial markets confidence in local currencies and providing a last resort means of exchange if an apocalyptic crisis turned all the world’s paper money into Monopoly money and we were all living off fried rat.

The snag in using that as a justification for mining is it doesn’t necessary follow that function is better fulfilled by anyone mining more gold.

Gold is freely tradeable and almost infinitely divisible and its value per kilogram as a store of value should be an exact inverse function of the number of kilograms of gold there are in circulation.

Having more of it doesn’t increase its overall usefulness as a store of value or means of exchange for the same reasons that bitcoin has managed to become a store of value precisely because the volume of the digital currency that will be “mined” is capped.

The awkward irony about gold is that its value does rise on the back of conflicts and geopolitical concerns, which can be expected to be increasingly linked to climate change.

It is an allegory for the human condition, perhaps, that the worse climate change gets, the greater the financial incentive to dedicate more precious energy to digging up the shiny metal and sticking it in a vault.

At what point does that get silly? Is digging it up at 2.5 grams per tonne silly enough?

Perhaps the only ethical case that could be made for mining gold in New Zealand right now is that if that was less energy intensive than the mining of gold that would otherwise take place elsewhere, then it could displace some carbon emissions.

But the bigger truth is we’d all be doing ourselves a favour if we collectively agreed to leave what’s still left to be mined in the ground for a while.