QUANTIFYING MINING INDUSTRY ESG METRICS AT THE ASSET LEVEL - AND WHY IT MATTERS

OCTOBER 2021

LEGAL & DISCLOSURE

© Copyright 2021 Skarn Associates Limited, all rights reserved.

Skarn Associates Limited (“Skarn”) has made all reasonable efforts to ensure that the sources of the information provided in thispresentation are reliable and the data reproduced are accurate at the time of writing.

Skarn accepts no liability for any direct, special, indirect or consequential losses or damages, or any other losses or damages ofwhatsoever kind, resulting from whatever cause through the use of or reliance on any information contained in the report. Thematerial contained herewith has no regard to the specific investment objectives, financial situation or particular need of anyspecific recipient or organisation.

This document is not to be construed as advice to the recipient or any other person as to the merits of entering into anyparticular investment. In taking any decision as to whether or not to make investments, the recipient and/or any other personmust have regard to all sources of information available to him.

No part of the report may be reproduced or distributed in any manner without written permission of the Skarn AssociatesLimited entity named on the cover. Skarn specifically prohibits the redistribution of this document, via the internet orotherwise, to non-professional or private investors and accepts no liability whatsoever for the actions of third parties in relianceon this report.

Skarn Associates Limited is a private limited company registered in England & Wales with registered number 10324779, whoseregistered office address Stowegate House, Lombard Street, Lichfield WS13 6DP.

Founded in 2016, based in the UK. Recently refocused and raised equity finance.

Previously key players at Brook Hunt (Wood Mackenzie), S&P Global, CRU and GFMS (Thompson Reuters

Refinitiv). We are specialists in commercialising mine economics data and research, now focused on bridging

the gap between mine economics and ESG research.

Skarn’s mission is to create high quality, independent, forward-looking mining sector ESG analysis. Skarn has

developed unique methodologies and datasets, on an asset-by-asset basis.

Charles Cooper Director,

Strategy & Content

Mark Fellows Director,

Commercial

SKARN ASSOCIATES

Sophie ChungDirector,

Industry Analysis

Martin HollandsDirector,

Environmental Sustainability

Fernando Araya BurchardPrincipal,

Metallurgical Analysis

Martin HallerAluminium Consultant

Thomas Verrept

Mining Analyst

Lucent Nicholson

Research Manager

DIVERGENT (OR DYSFUNCTIONAL?) ESG RATINGS

Ratings agencies differ widely:▪ in the ESG components they include in their rating.

▪ in the weighting they apply to individual ESG components.

▪ In the measurement of components (the “rater effect”).

Example shows a 44% range in normalised ESG ratings between six agencies.

Begs the question – wouldn’t you be puzzled by a 44% difference in company NAV estimate between two equity analysts?

Barrick Gold: ESG Rating by Agency

-3

-2

-1

0

1

2

3

Asset4

Source - Aggregate Confusion: The Divergence of ESG Ratings, Florian Berg, Julian F. Koelbel, and Roberto Rigobon, MIT Sloan & University of Zurich, May 2020.

No

rmal

ise

d E

SG R

atin

g (m

ax =

4, m

in =

-4

)

KLD

THE MINING ANALYST’S APPROACH TO ESG RESEARCH

Forecasting & reconciling

ESG impacts

▪ Asset-by-asset, forward-looking ESG models, based on mine production schedule.

▪ Requires thorough understanding of technical drivers; balancing energy inputs to emissions.

▪ e.g. fuel inputs ↔ consumption rates/tonne ore ↔ fuel carbon intensity ↔ CO2e.

Data consistency

▪ Consistent approach to presenting corporate asset ownership.

▪ Standardised metrics – e.g. production reporting basis – concentrate at mine gate vs refined metal at refinery.

▪ Critical scrutiny of company reported data, CDP etc.▪ Intelligent, flexible and transparent treatment of system boundaries.

Value-add research

▪ Carbon intensity and abatement curves; flexing functionality.

▪ Benchmarking – energy, water, land/rehab costs, ecosystem impact, social indicators.

▪ Capital and operating cost implications; connecting ESG to mine economics.▪ Longer term - Life Cycle Analysis, Scope 3 Emissions, implications for commodity markets.

GHG INTENSITY CURVES H2O BENCHMARKING CORPORATE ANALYSIS

Available now

▪ Aluminium-alumina-bauxite▪ Copper (Mines & Smelters)

▪ Gold▪ Nickel▪ Iron ore▪ Metallurgical Coal▪ Zinc (Mines & Smelters)

▪ Cobalt▪ Lead

Upcoming

▪ PGMs▪ Forecast future years

Cu Ni Fe Au Co

Launching Q4 2021

▪ Unique asset-level approach to balancing water withdrawal, consumption and discharge.

▪ Groundbreaking application of intensity curves to water.

▪ Overlaying climate, water stress, watershed, hydrology and precipitation data.

Upcoming

▪ Gold Mines H20 Benchmarking launch (November); Copper Mines - January

Launching Q4 2021

▪ Quarterly Review – company targets

▪ Data tool – ESG metrics including emissions, water, safety & others

▪ Reconciliation of reported vs. equity basis

Upcoming

▪ Forecast ESG metrics for future years

Coal

THEMATIC RESEARCH

Regular Analytical Reports

▪ Skarn Mining ESG Bulletin launched November 2020

▪ Periodic whitepapers and thematic reports

▪ Monthly roundtable webinars

ESG PRODUCT ROADMAP Al

SKARN’S E0 & E1 INTENSITY METRICS VS SCOPES 1-3

Source: GHG Protocol, Skarn Associates; E1 GHG Emission Metrics® is a registered trademark of Skarn Associates

Scope 1“Direct”

Scope 2“Indirect”

Self-generatedPower

Fuel Consumed

FugitiveEmissions

Purchased electricity

Purchased heat / cooling

E0

Transport of

Inputs

Waste generatedIn operations

Business travel

Employee commuting

Leased Assets

Fuel and energy-related

activities

Capital goods

Purchased goods and

services

Scope 3Upstream

Scope 3Downstream

Franchises

Leased Assets

End-of-life treatment of sold

products

Processing ofIntermediate

Products

Transport ofIntermediate

Products Investments

Use of sold

products

Asset / Mine / Smelter / Refinery / Company viewpoints

E1

*As defined by the GHG Protocol Corporate

Accounting and Reporting Standard

Emissions to first-saleable product: Mining activities (Scope 1 & 2*)

Ore processing (Scope 1 & 2*)

Fugitive emissions (Scope 1 & 2*)

Transport (Scope 3*)

Downstream processing (Scope 3*)

Emissions by: Asset

Company

Country

Commodity coverage: Aluminium, Alumina, Bauxite

Copper

Gold

Nickel

Iron Ore

Metallurgical coal

Cobalt

Zinc

Lead

0.0

100

200

300

0 500 1,000 1,500 2,000

Cumulative Nickel Production (000 tonnes)

Scope 1 Scope 2 Freight & Port Downstream Processing

0

5

10

15

20

0 3,000 6,000 9,000 12,000 15,000

Cumulative Copper Production (000 tonnes)

Scope 1 Scope 2 Ocean Freight Smelting Refining

0

100

200

300

0 250 500 750 1,000 1,250

Cumulative Iron Ore (dry) (million tonnes)Scope 1 Total Scope 2 Total Freight Non-Integr.Port Non-Integr. Ocean Non-Integr.

Iron Ore E1 GHG Intensity (kgCO2e/t)

NickelE1 GHG Intensity (tCO2e/t Ni eq.)

CopperE1 GHG Intensity (tCO2e/t Cu eq.)

0

5

10

15

20

25

0 20,000 40,000 60,000Cumulative Primary Aluminium Production (kt)

Scope 1 Scope 2 MineRefinery Mine & Refinery Freight

AluminiumE1 GHG Intensity (tCO2e/t Al)

UNIQUE ASSET LEVEL ANALYSIS

E1 GHG Emission Metrics® is a registered trademark of Skarn Associates

COPPER MINERS E1 GHG INTENSITY CURVE

Vale

Sudbury

Copper

Mounta

in

Flin F

lon

Gib

raltar

Hig

hla

nd V

alley

Kid

d C

reek R

ed C

hri

s

Mount M

illigan

Mount P

olley

New

Aft

on

Vois

eys B

ay

Min

to

0% 25% 50% 75% 100%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000

Cumulative Production Percentile (%)

CO

2e

In

ten

sity (

tCO

2e

/t C

u e

q.)

Cumulative Copper Production (000 tonnes)

Scope 1 Scope 2 Ocean Freight Smelting Refining© Skarn Associates Limited

Source: GHG Protocol, Skarn Associates; E1 GHG Emission Metrics® is a registered trademark of Skarn Associates

NICKEL E1 GHG INTENSITY CURVE – BY COUNTRY

Canada

Austr

alia

Indonesia

Russia

Philip

pin

es

Bra

zil

0% 25% 50% 75% 100%

0.00

20

40

60

80

100

120

140

160

180

200

0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000

Cumulative Production Percentile (%)

CO

2e

In

ten

sity (

tCO

2e

/t S

ale

ab

le P

rod

uct)

Cumulative Nickel Production (000 tonnes)

Scope 1 Scope 2 Freight & Port Downstream Processing

Source: GHG Protocol, Skarn Associates; E1 GHG Emission Metrics® is a registered trademark of Skarn Associates

Anglo American

ArcelorMittal

Barrick Gold

BHP Group

Boliden

Century Aluminum

Chalco

CODELCO

First Quantum

Freeport-McMoRan

Fresnillo

Glencore

Grupo Mexico

KAZ Minerals

KGHM

Newmont Mining

Nornickel

Norsk Hydro

Rio Tinto

Rusal

Teck Resources

Vale

MAJOR COMPANIES – E1 GHG EMISSIONS BY COMMODITY

0

25

50

75

10

0

Alu

min

ium

Co

pp

erG

old

Iron

Percentile position: E1 CO2e Emissions Intensity/Unit Production

25 50 75 1000

E1 CO2e Emissions (Mt CO2e)

5010 20 30 400Source: Skarn Associates

0 10000000 20000000 30000000 40000000 50000000 60000000

Notes: based on equity ownership.

Emissions are for stated commodities only, i.e. exclude oil &

gas, thermal coal etc.

Anglo American excludes stake in Kumba, which is reported

separately.

Chalco excludes Chinalco’s copper assets.

MINE SITE WATER BALANCE – SKARN NORMALISATION

• Entrained• Seepage

• Evaporation• Other

CONSUMPTION

MINE SITE WATER BALANCE

As ReportedGRI Classification

WITHDRAWALS

Mine Boundary

Treated

UntreatedWater Used

Unreported Withdrawal

MINING &

PROCESSING

Recirculation

DIVERSION As Reported

DISCHARGES As Reported

Storage

Water balance normalised from: Withdrawals = Discharge + Consumption + Δ Storage

To: Reported Withdrawals + = Consumption Intensity1 (3 yr rolling average) x Production + Discharge1 Consumption intensity: as reported or benchmarked

Unreported Withdrawal

GOLD MINES WATER BENCHMARKING – ADJUSTED WITHDRAWAL

Ce

rro

Ne

gro

Lo

ng C

an

yo

n

Co

rte

z

Ta

na

mi

Tu

rqu

ois

e R

idge

Ca

rlin

Crip

ple

Cre

ek &

Vic

tor

Ka

lgo

orlie

Su

pe

r P

itE

leo

no

reM

usse

lwh

ite

Ah

afo A

kye

m

Bo

dd

ingto

nP

ho

en

ix (

Ba

ttle

Mo

un

tain

)

Po

rcu

pin

eP

en

asqu

ito

Pu

eb

lo V

iejo

Ya

na

co

ch

a

Me

ria

n

0% 25% 50% 75% 100%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Ad

juste

d W

ith

dra

wa

l I

nte

nsity m

3/O

z A

uE

q

Cumulative Gold Production (koz)

Surface GRI Ground GRI Seawater + Municipal & Used GRI Unreported WithdrawalSource: Skarn Associates

WATER WITHDRAWAL INTENSITY VS. REUSE EFFICIENCY

High Efficiency, Low Withdrawal

Low Efficiency, High

Withdrawal

High Efficiency, High

Withdrawal

Low Efficiency, Low Withdrawal

0

10

20

30

40

50

60

70

80

90

100

1 10 100 1,000

% W

ate

r R

ecy

cle

d &

Re

use

d

Log of Withdrawal intensity (m3/Oz Au Eq)

SAFETY STATS – GOLD MINES TOTAL REPORTABLE INJURIES

Mark Fellows

Director

+44 (0) 20 3290 2492

+44 (0) 79 4114 6081

mark@skarnassociates.com

Skype: mark.fellows66

www.skarnassociates.com

@SkarnAssoc

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