Trading coal for clean energy, BHP takes $1b hit at Chilean mines

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Trading coal for clean energy, BHP takes $1b hit at Chilean mines

By Nick Toscano

Australia's biggest miner, BHP, has struck a series of renewable energy contracts to replace the coal-fired power supplying its two copper-mining operations in Chile, a move the company says will slash energy costs there by 20 per cent.

BHP announced on Monday it had signed four contracts to meet power demand for mining sites at Spence and Escondida, the world's largest copper mine, in northern Chile's Atacama desert. The miner is aiming to meet 100 per cent of its Chilean energy demand from renewable sources by the mid-2020s.

BHP runs the world's largest copper mine, Escondida, in Chile's Atacama Desert.

BHP runs the world's largest copper mine, Escondida, in Chile's Atacama Desert.Credit: Reuters

"These new renewable energy contracts will increase flexibility for our power portfolio and will ensure security of supply for our operations, while also reducing costs and displacing CO2 emissions," BHP president of American minerals Daniel Malchuk said in a statement to the stock market.

"Good business considers the financial and social value in making decisions in the long-term interests of shareholders."

The contracts will effectively displace 3 million tonnes of carbon dioxide emissions a year from 2022 compared to the fossil fuel-based contracts they are replacing, according to BHP. The company said it would take a $US780 million ($1.14 billion) charge for the cancellation of its coal contracts, which would be reflected in its December 2019 half-year financial results.

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BHP has emerged as a prominent advocate in the mining industry and corporate Australia for climate change action, and this year unveiled a $500 million decarbonisation scheme to cut its direct emissions and the emissions generated by its customers, such as the still mills and power plants that use its coal and iron ore. But the company was recently forced to defend its carbon credentials in the face of activist shareholders. At its London annual general meeting, critics focused on its ties with influential lobby groups accused of promoting coal policies at odds with the goals of the Paris agreement to limit global warming.

BHP's power switch in Chile is the latest example of the mining sector, a heavy user of coal and gas to power operations, turning to renewable generation, namely wind and solar, in a drive to lower costs and boost efficiency. It follows a similar announcement by global miner Anglo American in July that it would use only renewable sources to power its mine operations in Chile from 2021.

In Australia, Andrew 'Twiggy' Forrest's Fortescue Metals Group, a major iron ore miner, last week announced a renewable energy project expected to reduce carbon emissions by 40 per cent and displace 100 million litres of diesel a year at mines in the Western Australian Pilbara region. Alinta Energy signed an agreement with Fortescue for a 60-megawatt solar facility to supply 100 per cent of daytime energy needs of  the company's Christmas Creek and Cloudbreak mines.

"Reliable and competitive energy generation remains an important consideration for the mining sector in Western Australia," Fortescue chief executive Elizabeth Gaines said. "As a significant consumer of energy, we continue to identify opportunities that have the potential to lower our costs while also improving our carbon footprint."

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