Interesting interview with the third generation of the family now running the Lundin Group. They discussed the group’s role in the energy transition, how they are integrating ESG principles across their businesses, some of the challenges they face and the vision for the next ~50 years. Some brief notes are below; these have been edited/paraphrased and are for personal reference only.

How they are setting themselves up for the energy transition: the Lundin Group is involved across the entire natural resources sector. They will continue to be invested in fossil fuels but increasingly shifting their attention to base metals, and copper production in particular. We are now seeing an energy crisis caused in large part by the war in Ukraine. Where they sit in Europe, the price of gas is unsustainable, and supply is not reaching the demand for petroleum products. People thought it would be easier to transition to a less carbon-intensive form of energy generation, but becoming clear that it won’t happen overnight. The oil & gas sector in particular has taken the brunt of scrutiny. At International Petroleum Corporation, they are setting tangible plans to underpin the reduction of emissions over time. Aim to reduce net emissions intensity by 50% by the end of 2025, using a 2019 baseline of emissions. Will achieve that through a combination of operational reduction initiatives as well as accessing carbon offsets. Several of their group companies on the oil & gas side have disclosed similar emission reduction to the market, now also taking effect on the mining side.

Increasing focus on copper: copper is key to electric vehicles, wind and solar power, as well as the infrastructure that transports and stores renewable energy. People are starting to understand this. Over time, demand for copper will increase much more than the supply coming online. Likely to see a supply shock like we are seeing in the oil business right now. Higher prices might appear to be good for their business but when it goes unsustainably higher, you start to see more global instability which is not a good thing. Part of the reason they are also invested in precious metals and gold, because it is usually a hedge against global instability. In terms of new copper projects, it is becoming harder to find these deposits, permit the projects and mine them from a technical standpoint. All the easy to mine developments have been mined away. They need to look at where the larger scale projects are and set up for the long term, try to develop partnerships with the nations that hold these deposits. Right now, they are talking with Argentina and Chile where they have some of their largest projects. Need to ensure the countries they are setting themselves up in are making it investor friendly for international companies like themselves to come in.

On ESG: they have always focused on sustainable resource development, although their mining companies are perhaps slightly behind their oil & gas companies. Bluestone Resource is developing a gold project in southern Guatemala. Located in a hot springs environment, has the ability to produce geothermal energy. They are looking to offset some of the energy requirements coming from the grid through this renewable geothermal project. Also looking to dehydrate tailings instead of having a traditional tailings dam, which would create a larger environmental footprint. This will come at a cost but it is much more environmentally sustainable. They want to be at the cutting edge of utilizing technology in their operations. At their oil & gas companies, the level of reporting has ramped up. Putting sustainability reports out, TFCD, setting emission reduction goals. Need to demonstrate to investors they are making strides to be an investable and sustainable company. But we also have to be careful with some of the mandates being put up by governments. It is important to reduce emissions intensity substantially within a compressed timeline, but you also need tangible plans to underpin how that is going to happen. Renewable energy are critical going forward but we can’t transition 100% right now so fossil fuels are going to play a key part in the transition.

On attracting the next generation into the industry: need to convince people that the industry can be part of the solution, not part of the problem. The industry is unfortunately in a position today where people think if you are in the natural resources sector, you are in a dirty business. That is not the case. We need minerals to advance society. They are focused on creating more awareness, helping people understand that this is not a dirty business. Also that it is a fun profession – you get to travel the world, work with every type of discipline you can imagine. Mining engineers are only a small % of the actual demographic at a mine site. You need health & safety, environmental, security, HR professionals etc. They are trying to come in at the university level – very engaged with the University of Arizona, UBC etc. At the University of Arizona, they are creating a school of mineral resources and looking to tap in to the breadth that the university has to offer. There is both an opportunity and an obligation to share the facts about what it means to be a resource developer.

On the longer term vision for the group: they are the third generation of a family business that has been in the resource sector for 50 years. They constantly hear how it is the third generation that messes everything up, so that gives them some added motivation! They want to continue to hone in on their expertise in the resource sector. Really eat, sleep and breathe working in the natural resources sector. But they also need to create more awareness, do things in a more transparent manner, tap into the platforms that allow them to reach a broader audience. They need to work more with the broader industry to set up standards and policies that will minimize the risk posed by the business they are in. Also want their competitors to be successful in a sustainable way that will demonstrate that the industry can be responsible. That aside, they are sticking to their guns in terms of the model and platform that has been created. You have to be able to weather the cyclical nature of the business they are in by having competent leadership running the companies as well as focusing on large and high quality assets. Minimizing bureaucracy within the company, having skin in the game have been key differentiators for the group. Also need to make sure everyone is aligned from the board, to senior management and front line workers across the 11 listed companies in the Lundin Group. Important to have a shared vision and develop that culture. This is a complex industry, very labor intensive and requires 24/7 attention – so you want to be having fun as you are doing it. 

What is on their summer reading list: Jack – Inside Delta Force. Will – The World for Sale.