by Steve St. Angelo, SRSrocco:
While the gold mining industry reports energy as only 15-20% of its total production costs, the total amount consumed by the industry is much higher. The market underestimates the amount of energy consumed by the gold mining industry because of the way it is listed in their financial statements. Thus, it takes a great deal more energy to produce gold than the market realizes.
Due to the complex supply chain system that we depend upon, most of the energy that is consumed in the production of goods, services, materials, metals, and commodities is hidden from plain sight. For example, a gold mining company will list “Tire Costs” in their Financial and Sustainability Reports. However, even though a tire cost is listed as a material cost, the majority of a tire’s production cost comes from burning energy… in all forms and in all stages.
For example, Barrick Gold consumed nearly 25,000 tons of tires in 2013 on its mining operations. According to the Rubber Manufacturing Association, it takes roughly 7 gallons of oil to produce a standard car tire. And from the article, This Is What A $42,500 Tire Looks Like, stated the following
One of the many unique aspects of the Cat 797 are its tires: More than 13-feet-tall, weighing 11,860 pounds, each Michelin or Bridgestone 59/80R63 XDR tire costs $42,500 and that’s when you buy the full set of six required by each $5.5 million truck.
Contains nearly 2,000 pounds of steel, enough to build two small cars and enough rubber to make 600 tires to put on them.
If the Rubber Manufacturing Association says it takes 7 gallons of oil to make one standard tire, and this article claims that the 13-feet-tall tire used by the Caterpillar 797 haul truck contains enough rubber to make 600 tires, then it takes 4,200 gallons of oil to make one of these giant tires. If we take a more conservative estimation of a smaller mining truck tire, it would likely consume at least 2,000 gallons or oil, or nearly 50 barrels of oil.
Furthermore, Barrick consumed 25,000 tonnes or roughly 50 million pounds of tires in 2013. How many large mining tires did Barrick use in its mining operations in 2013? Well, if we use a more standard mining tire called the Bridgestone size 40.0057, that is 11.5 feet tall, it weighs 8,500 lbs. Thus, Barrick consumed nearly 6,000 of these tires in 2013 (I am using 2013 data because Barrick stopped listing its tire usage in later sustainability reports).
Regardless, Barrick lists its tire costs as a material cost. However, if we take the time and dissect the entire “haul truck tire manufacturing and supply chain,” we will see that energy was the overwhelming cost in manufacturing one of these large haul truck tires. Even though it takes 50+ barrels of oil to make one of these large tires, this does not include the steel, other materials, the electricity and labor used in their production. We must remember, all the materials that were used in making a large haul truck tire was a result of a tremendous amount of energy all the way down the manufacturing and supply chain.
Goldcorp’s Production Costs: Don’t Report Full Amount Of Total Energy Consumption
Goldcorp, the fourth largest gold mining company in the world, published a breakdown of its production costs for 2018. According to their Jan 2018 Presentation, labor (including contractors) were the largest cost at 46%, followed by consumables (15%), energy (14%), Maintenance parts (9%), Site costs (5%), Explosives (3%), tires (2%) and other additional costs (6%):
Goldcorp stated their labor costs were 27% and contractors at 19% for a total of 46%. Goldcorp also broke down its energy costs to 7% for fuel and 7% for power (electric generation costs). Even though energy is only 14% of Goldcorp’s total production costs, the majority of the other items listed received their value from consuming energy down their entire manufacturing and supply chain system.
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