Zero Carbon Mine (McKinsey 1st & 2nd round)

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• Outlook is for 2030 and needs to be taken with a grain of salt when making assumptions about today
  • Costs today are likely much higher today
  • Certain technologies may not yet be ready today
• A total of 100,000 tons CO2 can be abated, which corresponds 100% of the current mine's emission (excluding transport away from mine!):
  • A new mining layout (20,000 tons CO2)
  • A new energy source for mobile equipment (50,000 tons CO2) with various possible solutions that are mutually exclusive i.e. not cumulative
  • Green energy for processing (30,000 tons CO2) with various possible solutions that are mutually exclusive i.e. not cumulative
• New mining layout: There is only one alternative addressing the mining layout, which has a negative cost of -500US$ / ton CO2 abated (i.e. financial gain from implementing solution).
• Mobile equipment: There are various solutions for decarbonizing mobile equipment. The best solution from an economic perspective is electrification via batteries with a negative cost of -450US$ / ton CO2 abated (i.e. financial gain from implementing solution). Other more costly solutions for decarbonizing mobile equipment are deprioritized from a purely financial perspective i.e. pentagraph, hydrogen fuel cell, biofuels, e-diesel.
• Green electricity for processing plant: There are various solutions for decarbonizing electric power supply. The best solution from an economic perspective is electrification via on-site generation through wind + solar with -200US$ / ton CO2 abated (i.e. financial gain from implementing solution). The only other alternative i.e. green energy supply from external provider should be deprioritized from purely financial perspective.
• Total cost for abatement of 100,000 tons CO2 (100% of all emissions) in 2030 is -38,500,000 US$
  • -10,000,000 US$ for new mining layout (-500US$ / ton CO2 * 20,000 ton CO2)
  • -22,500,000 US$ battery powered mobile equipment (-450US$ / ton CO2 * 50,000 ton CO2)
  • -6,000,000 US$ for generation of green electricity (-200US$ / ton CO2 * 30,000 ton CO2)
• Average CO2 abatement in 2030 is -385 US$ / ton CO2 (net benefit per ton from total cost of -38,500,000 US$ / 100,000 ton CO2)
• All forecasts are for 2030 only and have high uncertainty/don't tell us anything about cost and availability of technology today

Candidate must calculate:

1. Number of tons of copper produced to generate one ton of CO2 emissions:
2. Copper premium for green copper per ton
3. Maximum price for abatement of 1 ton of CO2 to still break even

This results in:

• The total average cost for CO2 abatement in the mine must not exceed 640 US$/ton CO2 if the goal is to break even. This figure would allow for costly solutions nowadays compared to 2030, where implementation of most attractive levers actually has a negative average cost of -385 US$ / ton CO2 i.e. financial benefit.
• We don't know anything about the availability and cost of solutions nowadays, which makes it difficult to put the figure into context and deduct whether we have a real business case for green copper that could be executed now.
• Financials don't always tell the whole truth and even if we didn't break even and even made a loss initially, there may still be a case for decarbonization if it sets us up for financial success in the future - especially when considering all the other non-financial aspects e.g. brand image, customer perception, attractiveness for investors, etc.

• Transport:
  • Green copper is only green until the moment it is transported away from the mining site by trucks, rail, ships, etc. and the associated diesel consumption needs to be addressed
  • Responsibility for carbon free supply chain away from mining site may lie with seller or buyer
• Speed:
  • Being a first mover may give GMC a competitive edge to supply to industries that will most likely be interested in green copper e.g. electric car manufacturers
  • Company strategy may need to be revisited to support green copper, which is quite disruptive on a large scale
• Technology:
  • Maturity/immaturity of levers that may or may not be ready in time
  • Complexity/feasibility to implement certain solutions, which could be quite challenging
• Health:
  • This could find huge support among the labor force/unions due to less exposure to exhaust fumes
  • New ways of doing things may introduce new risks to health and the environment
• Climate:
  • Australia and Chile have good potential for sustainable energy production on-site from solar and wind
  • For assets in other countries, this may not be the same