The gold industry is fragmented among hundreds of medium-sized and smaller companies © David X. Tejada

The head of Newmont Corporation, the world’s biggest gold producer, has said the costs of cutting emissions and going green will drive a further wave of consolidation in the industry.

Tom Palmer, chief executive of the only gold miner in the S&P 500 index, said the investments needed to reduce emissions — from electric trucks to renewable energy — required scale and long-life mines.

“One of the challenges for the gold industry is the number of gold companies,” Palmer told the FT Mining Summit. He noted that there were significantly more gold companies than in other mining sectors. “So I think the industry needs to consolidate and I think the catalyst will be climate change.”

The comments come as gold executives predict a growing wave of consolidation in the sector after last month’s “merger of equals” between Canada’s Kirkland Lake Gold and Agnico Eagle Mines.

The gold industry is fragmented among hundreds of medium-sized and smaller companies, many of which mine just one asset, all competing for the attention of investors.

Yet that constrains their ability to meet climate change targets and reduces their attractiveness to mainstream investors, who are increasingly focused on environmental, social and governance metrics.

“In order to . . . deliver on 2030 targets and net zero aspirations by 2050, you are going to need to have [mine] life and scale,” Palmer said.

“That will be a key contributing factor to more generalist investors coming into gold equities because they can see long-life businesses that are being well managed and are part of the solution to the climate challenge,” he said.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

Last November, Newmont committed to reducing its greenhouse gas emissions by 30 per cent by 2030, and said it wanted to achieve net zero carbon emissions by mid-century. The miner said it would spend $500m between now and 2025 on projects that reduced emissions.

Newmont also said it would cut its Scope 3 emissions — those from its suppliers and joint venture partners — by 30 per cent by 2030.

Newmont has switched to electric trucks at its Borden underground mine in Canada, and solar power at its gold mine in Ghana. Palmer said the costs of electric trucks would only be reduced by the use of them at scale across its mining operations.

Last week, gold companies including Newmont, Newcrest, AngloGold Ashanti, Barrick Gold and Gold Fields all committed to achieve net zero emissions by 2050, under an initiative co-ordinated by the International Council on Mining and Metals, an industry body.

Mining companies that did not make the investments to reduce their emissions and align themselves with the goals of reducing climate change faced an “existential threat”, Palmer said.

“I don’t think they will be around in decades’ time because the world is going to need businesses across the board and mining companies included to find those pathways,” he said.

Shares in Newmont have fallen 9 per cent this year, while the price of gold has dropped 10 per cent over the same period to $1,757 a troy ounce.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here

Copyright The Financial Times Limited 2024. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article