Fertilizer International 508 May-Jun 2022
31 May 2022
Anglo American: driving sustainability excellence in the fertilizer sector
PROJECT UPDATE
Anglo American: driving sustainability excellence in the fertilizer sector
The Woodsmith polyhalite project in the UK is starting to benefit from Anglo American’s ownership, with the mining major leveraging its key advantages to good effect. These include the company’s operational size and financial stability, its vast mineral extraction experience, and premium product marketing expertise. The company also believes that the fertilizer sector will benefit from its leadership in mining industry sustainability.
Important, substantive changes are underway at Anglo American’s under-construction Woodsmith polyhalite mine in northern England.
Mine redesign work to maximise the long-term value of the asset, for example, continues to be a project priority. Even more significantly, Tom McCulley was announced as the CEO of Crop Nutrients, replacing long time project lead Chris Fraser, who has moved to a strategic projects role within the company.
Mr McCulley brings with him 25 years’ worth of international experience in major mining, oil and gas projects. Most recently, he led the construction of Anglo American’s Quellaveco copper mine in the south of Peru. This mine exemplifies FutureSmart™ Mining – a transformational Anglo American programme that brings together technology, digitalisation and sustainability.
Quellaveco is Anglo American’s first 100 percent digital mine and incorporates autonomous trucks, remote control drills and cutting-edge automated monitoring systems. The high-tech mine sits on one of the world’s largest undeveloped deposits of copper which – because of its ubiquity in electronics – is central to global growth and the world’s transition to a decarbonised economy.
The majority of Anglo American’s output and investment capital is focused on ‘futureenabling’ products – with thermal coal moving out of the portfolio to be replaced by growth and new investment in copper, platinum group metals and crop nutrients.
Anglo American is well-positioned to operate as a sustainable and environmentally-responsible mining company while at the same time – through the disciplined use of capital – grow its production as a foundation for future returns.
The company views polyhalite as an integral part of its overall business strategy. For Anglo American, polyhalite is a mineral which will help the world grow more food from less land, more sustainably, to meet the needs of an expanding global population.
Changing perceptions
POLY4 (the commercial name for poly-halite) is a high purity ore (having no processing waste) with an ultra-low carbon footprint. It is also suitable for organic use.
These characteristics, and the low impact design of the Woodsmith mine itself, are an excellent fit with Anglo American’s goal of becoming carbon neutral in operational emissions by 2040, as well as the company’s ultimate ambition to build water-less, carbon-neutral mines with net positive outcomes for biodiversity.
The drive for more sustainable and environmentally friendly raw materials is a pressure acutely felt in the mining sector, given that a reputation for environmental harm is a legacy the industry has struggled to shake off. Similar perceptions are increasingly becoming associated with the fertilizer industry too, as governments and citizens become more aware of the environmental impact of the global food supply chain and the carbon intensive practices on which it depends.
Undeniably, the successful exploration, extraction and processing of potash and phosphates, as well as the invention of nitrogen fertilizers, have been miracles of industrialisation – by enabling the huge crop yield improvements that have underscored global population growth and health.
Now, however, questions are being asked by governments, consumers and farmers alike about the long-term environmental impacts of crop nutrient products and their production processes. This applies as much to outputs – crop nutrient products – as it does to the significant energy and carbon consumed during production.
Consequently, the industry needs to find a balance between crop yield and crop quality improvements as well as soil health, nutrient use efficiency, carbon sequestration and microorganism impact, along with many other environmental considerations.
The future enabling role of polyhalite
“The business case for polyhalite rests on our belief that these trends will become more and more important and will form an essential part of the calculation a farmer makes when deciding to purchase a fertilizer product,” says Alex Schmitt, Chief Marketing Officer of Anglo American’s Crop Nutrients business. “We see polyhalite’s multi-nutrient, low carbon, low chloride, soil regenerative qualities as part of the answer to the major agricultural challenge facing the industry: how to maintain or increase yield and quality while positively impacting the soil and the wider environment.”
Wide-ranging trial results for different crops show that, in addition to increasing yield, POLY4 can also positively affect both food quality and soil health. For example, Brazilian trials have demonstrated how POLY4 not only helps improve coffee productivity (a 6.8% yield increase) but also maintains coffee cup quality by boosting leaf magnesium levels. In citrus trials in China, POLY4 application also raised the soil’s post-harvest calcium and magnesium levels (in addition to a 16% yield increase) – enabling both nutrients to supply citrus trees in the subsequent season.
The company has some work to do in order to educate farmers about POLY4, acknowledges Dr Schmitt. But he firmly believes the market need is there, with latent demand not being met by current market offerings, at least not at the scale that Anglo American believes is necessary. The inability to pigeon-hole POLY4 should be seen as a strength, he says. The fact that polyhalite is not classed as ‘true’ potash, for example, and yet is suitable for organic farming while also being a mineral fertilizer, is simply proof that traditional fertilizer product categories are not fit for purpose in Dr Schmitt’s view.
“Once, we all drove petrol and diesel vehicles because that’s all the automotive industry was capable of producing,” says Dr Schmitt. “Now electric and hydrogen vehicles are coming to the fore because they are better solutions for our 21st century needs and consumer expectations.”
He adds: “Regulations are changing as a result and the companies that anticipated those needs are now leaders. The same will become true for the fertilizer industry and Anglo American intends to be at the forefront of this change, with POLY4 as our vanguard product.”
Dr Schmitt cites a recent visit to a food industry conference in the US as an example of where the industry needs to take its cue:
“People in that industry worry constantly about changing consumer demand: transparent supply chains, ingredient sourcing, food quality and availability, ethical pricing and, most of all, sustainability. Yet the fertilizer industry has barely begun to take this stuff seriously – but it’s coming, it’s inevitable.”
“We need to be much more customer centric, sustainable, ethical and transparent, with reliable and environmentally conscious supply chains. This adds value for consumers and shareholders alike, allowing you to position your brand and product at a premium price, and just makes good business sense.”
The bigger picture
The recent fertilizer supply chain and pricing shocks caused by the war in Ukraine and soaring energy prices have substantially raised the fertilizer industry’s profile with governments and citizens alike. The situation has caused many governments to reassess whether products which depend on the use of fossil fuels are a desirable or even practical solution to food security challenges.
At the end of March, for example, the British Government announced plans to incentivise farmers to use ‘greener fertilizers,’ promising cash incentives to move farmers away from carbon-intensive products. Other governments will doubtlessly follow suit.
These latest moves provide evidence that Anglo American’s market analysis is the correct one. Certainly, the Woodsmith Project’s stable geography and POLY4’s green credentials seem tailor-made for the emerging trends of these troubled times.
In addition, Anglo American has all the tools at its disposal to make POLY4 a success. These include the company’s sheer operational size, its financial stability, stable resource portfolio, and its breadth of experience and expertise in mineral extraction and premium product marketing – it owns diamond producer and consumer brand DeBeers, for example.
Anglo American has also made great efforts to position itself as a leader in mine industry sustainability, embarking on several landmark projects to meet its ambitious carbon neutrality goals – initiatives which offer obvious transferable technologies and lessons for the fertilizer industry.
Anglo American’s approach to sustainability
Anglo American launched its first sustainable mining plan in 2018 as part of its FutureSmart Mining™ initiative. This programme combines technology, digitalisation and sustainability, working hand-inhand together, to deliver the step-change innovations necessary to transform the nature of mining. This sustainable mining plan is built around three major areas known as ‘Global Sustainability Pillars’:
- Healthy environment
- Thriving communities
- Trusted corporate leader.
- The plan’s objectives are aligned with the UN’s Sustainable Development Goals (SDGs) and, similarly, each pillar has a defined set of targets called ‘Global Stretch Goals’.
The approach set out in FutureSmart Mining™ goes far beyond compliance with mining law or regulatory requirements. It incorporates mutually reinforcing elements that positively transform the experiences of all business stakeholders, both locally and globally, and ultimately creates a much-reduced physical footprint for mining.
WOODSMITH MINE UPDATE
Anglo American’s Chief Executive Mark Cutifani provided an update on progress at its under-construction Woodsmith mine earlier this year. The company expects to invest £440 million in the UK poly-halite mining project in 2022, Mr Cutifani told shareholders during the company’s annual results in February. This follows the company’s previous investment of nearly £390 million in 2021.
“This is a world class fertiliser project and a business segment that we are even more positive about than when we acquired the project,” said Mr Cutifani. “It is a very long-life asset and a product for which we see increasing market interest as the commercial trials demonstrate its crop yield and numerous environmental qualities.”
Construction and investment continues
Development of the project has continued to progress, with capital expenditure totalling $530 million invested in 2021. Excavation of the mineral transport tunnel from Teesside had exceeded 18 kilometres by the end of last year, beyond the intermediate access shaft site at Lockwood Beck.
The Lockwood Beck shaft is also complete, having reached its target depth of 383 metres, and shaft lining is currently underway. At the mine head itself, shaft boring has started in the services shaft, while progress is also being made on the production shaft infrastructure.
Anglo American has also been carrying out a detailed technical review of the Woodsmith mine project since mid-2020. This is to ensure the technical and commercial integrity of the project’s design. Now largely complete, the review has confirmed that a number of design elements would benefit from modification to bring these up to Anglo American’s safety and operating standards. Such modifications would also optimise the the long term value of the asset.
Mark Cutifani provided further details about these modifications. “The Woodsmith team is further developing the engineering to optimise the configuration of the project, recognising the multi-decade life of the mine,” Mr Cutifani said. “Particular attention is on those aspects identified at the outset of Anglo American’s ownership – namely, the sinking of the two main shafts, the development of the underground mining area, and the changes required to accommodate both increased production capacity and the more efficient and scalable mining method of using only continuous miners; such improvements will also require the installation of additional ventilation earlier in the development of the underground mining area.”
More on-farm demonstrations
Anglo American also announced a renewed focus on its crop agronomy work in February. The company is accelerating the number of commercial-scale, on-farm demonstrations. Around 800 of these are either in progress or complete.
“The demonstrations continue to validate the efficacy of the product and the improvements it can deliver to farmers in terms of crop yield, quality or both. In addition, POLY4 has been shown in studies to enhance soil health through resilience to compaction, erosion and run-off, as well as improving nutrient availability to crops, helping to reduce nutrient waste into watercourses,” Anglo American said in the briefing accompanying its annual results.
“POLY4 offers farmers a solution to agricultural efficiency and sustainability challenges, through its naturally low chloride multi-nutrient composition, its suitability for organic use and ultra low carbon profile, generating up to 85% fewer carbon emissions than the equivalent conventional nutrient products, with little to no waste generated in its production,” it added.
Anglo American’s purpose is ‘re-imagining mining to improve people’s lives’ – with its sustainability drive being seen as central to fulfilling that purpose. In the words of Chief Executive Mark Cutifani at a recent sustainability performance call with investors: “It’s about purpose and profit together, not one before the other”.
Since committing to carbon neutral operations by 2040, Anglo American has made significant strides in its ‘green’ energy use, introducing 100 percent renewable energy supply for its operations in Brazil, Chile and Peru. This means that 56 percent of the company’s global grid supply is expected to be sourced from renewables by 2023.
Anglo American also recently pledged to secure 100 percent renewable energy for its South Africa operations by 2030 through a partnership with EDF Renewables. This will involve erecting several solar plants and wind farms to help power its in-country operations and provide green energy for local communities. The company expects these efforts will significantly help it reach its target to reduce greenhouse gas emissions by 30 percent by 2030 (from a 2016 baseline).
Anglo American’s efforts to reduce its carbon footprint also extend to indirect emissions. This includes the ambition to halve ‘Scope 3’ emissions by 2040. Trials are underway to use sustainable biofuel in shipping, part of an ambition to achieve carbon-neutral controlled ocean freight. Meanwhile, a feasibility study launched in Australia is assessing the movement of bulk freight using hydrogen-powered trains. The company is also working to improve steel industry decarbonisation, and develop more carbon-efficient iron ore products, by linking up with its customers and technology partners.
To date, however, it is the trialling of hydrogen at scale which has been the most visible development of Ango American’s sustainability drive. A hydrogen-fuelled mine haul truck was launched in South Africa in May this year – an initiative that is central to a commitment to displace 1.5 billion litres of diesel currently consumed annually by the company’s trucks.
The South African truck scheme is part of a pledge to build a ‘hydrogen valley’ in the country. This would create a regional renewable energy system by developing hydrogen production and storage complexes around Anglo America’s Mogalakwena platinum mine. This system will incorporate the largest electrolyser in Africa and a solar power field. It will generate approximately 140 megawatts of green power, eventually becoming one of many similar complexes that will serve as local and regional hubs for South Africa’s emerging hydrogen economy.
The success of such ambitious schemes – part of efforts to turn an intensive carbon emitting sector into a sustainable, carbon neutral industry – is only achievable with the participation of companies like Anglo American and the other mining majors. Similarly, the growing presence of mining majors in the fertilizer sector will have significant implications for other major crop nutrient producers, by changing ambitions and expectations of what is achievable in the drive for more sustainable food production.
Building the Woodsmith Mine and successfully promoting and selling POLY4 is, of itself, a significant challenge for Anglo American. But doing so while achieving new standards for sustainability and environmental protection demonstrates the breadth of the company’s ambition.
If there is one industry that truly understands what is required to change stakeholder perceptions about sustainability, it is perhaps the mining industry. The return of mining majors to the fertilizer sector will therefore undoubtedly result in significant changes, for both products and behaviours, in the years to come.
