A very warm welcome to the South32 Sustainability Briefing. My name is Karen Wood, Chair of South32. We're very pleased to have the opportunity to talk to you today about South32's approach to sustainability, and in particular, the manner in which we are tackling some of the seminal issues of our time, issues that go to the heart of how we are managing your capital. I'm joined today by Graham Kerr, Chief Executive Officer, and of course, someone well known to you all. Graham is joined by four members of his leadership team: Chief Financial Officer, Katie Tovich, Chief Legal and External Affairs Officer, Kelly O'Rourke, Chief Human Resources and Commercial Officer, Brendan Harris, and Chief Technical Officer, Vanessa Torres. Before we get underway today, I'd like to acknowledge the Wurundjeri people of the Kulin Nation, on whose land I am speaking from.
Graham and his team are coming to you from the land of the Whadjuk Noongar people. I pay my respects to elders, past and present, and acknowledge the Indigenous and tribal peoples of all of the lands on which South32 is located, and where we conduct our business around the world. The presentation today has been released to the Australian Stock Exchange and is available on our website. The webcast is recorded and will also be available on the website after the event. We look forward to the opportunity for questions following the presentation, and the instructions on how to do this are on the left-hand side of your screen. Before we get underway, I should also draw your attention to the Important Notices section now on the screen. South32's purpose will be well known to you. It is unchanged from the time of the company's formation.
We believe that when done sustainably, the development of natural resources can change people's lives for the better. Sustainable development is therefore at the heart of that purpose and forms an integral part of our strategy. As we look back on the last financial year, it saddens me to have to start by reporting on the death of Petros Tshebiko in May. Mr. Tshebiko was a contractor at the Klipspruit Extension project at South Africa Energy Coal. As you would expect, we completed an investigation into the incident that was reviewed by the board and shared the learnings across the operations. Importantly, the learnings were also shared with the asset's new owners. In his presentation, Graham will provide an update on the work we're doing to improve our safety performance.
But while we're on safety, I would like to call out the extraordinary work done by all of our people in responding to COVID-19. Throughout the 18 months of this pandemic, the teams have kept our operations running, in some cases, with enhanced safety and production outcomes. In particular, I want to commend the work of the teams in South Africa, in Mozambique, in Colombia, and Brazil. All have done an incredible job, not only in the operations themselves, but in protecting whole communities. Sadly, the pandemic is far from over in many parts of the world, and Graham will touch on our ongoing work on this front, including how we are assisting with the rollout of vaccines. The last financial year was a transformative one for South32, despite the challenges of COVID.
As we reflect on the transformation of our portfolio of assets, including the sale of the South Africa Energy Coal business, the board recognizes two pivotal challenges. One is to meet society's expectations in relation to our decarbonization commitments. The other is to continue our work on the portfolio, consistent with our strategy of focusing on commodities with a future in a low-carbon world. It is for this reason we changed the performance requirements under the long-term incentive plan to include our climate change commitments and our portfolio construction, both of which will operate in conjunction with our relative total shareholder return measure. In today's conversation, we'll provide more detail on those two aspects: decarbonizing our operations and reshaping our portfolio for a low-carbon future.
We will include a say on climate at our annual general meeting in 2022, and we look forward to talking more with you in the coming months to discuss the form that that resolution will take. In addition to these areas, we've also been focusing on a number of other areas that the management team will expand on. We completed a review of our cultural heritage performance in Australia, and are implementing improvement opportunities identified in the review. Similar reviews for our international operations are planned for FY22. We're committed to providing a safe and inclusive workplace. We have made progress on gender diversity, but there is still more to do. I hope you'll find the presentation today informative, and it's now my pleasure to hand you over to Graham. Graham?
Thank you, Karen, and good morning, everyone. As Karen mentioned, the purpose of South32 is critical to who we are as a company, and it is underpinned by our simple strategy that has been in place since day one. Our strategy is built around the premise of optimize, unlock, and identify. If you read the words on this slide, you can see that sustainability is absolutely intertwined in our strategy and how we deliver it, touching on some of those critical points under optimize, such as safely making sure our people go home and well, minimizing our impact, making sure that we get the full value out of our people, and importantly, under identify that we sustainably reshape our business for the future and create enduring social, environmental, and economic value.
Our approach to sustainability focuses on five interconnected pillars that are material to our business and our stakeholders. Each year, we conduct a materiality assessment process with our key stakeholders and internally, to understand the topics that matter most. This approach underlines the ICMM principles and standards and the United Nations Sustainable Development Goals. The most important commitment that we make every day is that our people go home safe and well at the end of every shift to their loved ones. As Karen mentioned earlier, this year, we didn't achieve this, and we are deeply saddened that Mr. Petros Tsibiko was fatally injured in an incident involving the use of an elevated work platform at South Africa Energy Coal's Klipspruit Extension project. We have been completing a global review on how we use elevated work practices.
We have done a deep dive investigation to the fatality and looking at ways we can improve our approach and our systems. We've also been very careful to work through this with the new owner, Seriti Resources, to understand any lessons that they can take forward in their business. This year, 4 of our operations recorded their lowest TRIF result ever. We also had a lower number of injuries than we've actually had before in South32. But despite that, and even with the challenges of COVID-19, there's more that we need to do as an organization to make a step change performance in safety.
We are working currently with a leading global safety practitioner and consultant around safety, and look at ways that we can make a step change in our own, our own approach and our own results, to ensure that all of our people go home safe and well at the end of their shift. It has been a challenging year again, with COVID. We've had a very clear focus on three aspects: keeping our people safe and well, our operations safe and reliable, and supporting our communities. We operate in countries where the impact of COVID-19 has been significant. Places like South Africa, Mozambique, Colombia, Brazil, as well as Arizona. Our operations have done an outstanding job during this time to support our people and the local communities, and there are numerous examples across our group which make me incredibly proud to be part of South32.
We've supported government vaccination programs at GEMCO, our operation in Northern Territory of Australia. We've also worked hard to help procure vaccines to places like Mozambique and Colombia, and we've invested another $2.5 million in community investment fund to a total of $7.6 million, to try and support the communities in these challenging times. One of the other things that's critically important for South32 is the belief in building an inclusive and a diverse workplace. I strongly believe that wherever we operate and wherever we have our people, our people should represent the background demographic of where we operate. This year, we continue to target continuous improvement in representation of women and Black people in South Africa.
For the year just completed, in FY21, we maintained our board and lead team objectives in terms of targets, but we have more to be done in meeting our women in operational leadership roles targets, where we had a target of 20% and only delivered 18%. In FY21, 37% of our new hires were women, and 44% of our development roles were offered to women. As an organization that operates in an area that has traditionally been very male-dominated, we are committed to making a difference in this space, and we are a signatory to the 40:40 Vision, an investor-led initiative to achieve gender balance in executive leadership across all ASX 200 companies by 2030. If we move on to climate change, we have maintained a strong focus on climate change since the demerger.
FY21 was an important year in our pathway to net zero. We achieved our first short-term target and set a medium-term target to half our operational emissions by 2035. To achieve these goals, we are decarbonizing our operations, reshaping our portfolio, and partnering with others to support the transition to a low-carbon future. If we start with the portfolio, we have been actively reshaping our portfolio for a low-carbon world. We are doing this from a strong base, with leading positions in alumina and manganese, and a portfolio of base and precious metals operations and growth options. That investment of South Africa Energy Coal and TEMCO has greatly simplified and improved our portfolio and reduced the capital intensity. Our announcement last week of the Sierra Gorda acquisition brings attractive copper exposure, increasing our earnings leverage to the green energy transition.
At the same time, we're investing further in green aluminum, a key metal for the future. Through the acquisition of up to an additional 25% stake in the Mozal Aluminium smelter in Mozambique and the potential restart of Alumar, we continue to add that important commodity to our mix. At the same time, we continue to progress other base metal development opportunities at Hermosa, with Taylor and Clark, and also at Ambler Metals with Arctic. And we have an additional 20+ greenfield exploration opportunities with a bias to base metals. With our high-quality portfolio, attractive commodities, and growth options, we are exceptionally well-placed to create value for shareholders in a low-carbon world. If we take a moment to actually look at our emissions profile and focus on Scope 1 and Scope 2 to start with, four of our operations make up approximately 95% of our emissions.
Our energy-intensive refining and smelting operations in the aluminum value chain and Illawarra Metallurgical Coal are relatively our highest areas. We have identified efficiency, low-carbon energy, and technology opportunities for these operations. These are the operations where we can make a difference, and difference in the type of energy we source is the biggest lever that we can do. For example, if you look at our two aluminum smelters on the screen there, on the left-hand side, you will see the contrast between Hillside, which predominantly relies on thermal coal via the state-owned enterprise, Eskom, to provide power into the actual smelter, versus Mozal, which relies predominantly on hydro. You can see there's a huge difference in our emissions profile. Our approach to climate change is aligned and integrated with our strategy of optimize, unlock, and identify.
Decarbonizing our operations through efficiency projects such as green energy and technology, and also looking at ways we can design our growth projects to be carbon neutral in the future, and continually reshaping our portfolio and partnering with others around value chain emissions and just transition, are a core part of our approach. If we perhaps dive into our decarbonization plans and our operations, we have a three-phase approach to decarbonizing our major exposures. That's, again, the efficiency, energy, and technology. They are providing the levers to achieve our targets. We are targeting $40 million-$50 million of capital over FY 22 and FY 23 to progress short-term projects and complete studies for our larger medium-term initiatives. These are the initiatives predominantly at Worsley and Hillside, where we're looking to actually move to low-carbon energy sources. The capital for our medium-term levers is not expected to be significant.
If you think about the timeframe of 2035 to 2050, you know, we believe that there will be new technology solutions which we are actively looking to solve and work with people on, which will help unlock that future. Let's maybe move into deep diving to some of our operations, starting with Worsley. Worsley is a low-cost, long-life alumina operation that supplies global markets, including our Hillside and Mozal smelters. Our approach there is three phase. We have a pipeline of efficiency projects where we're looking to reduce energy and our carbon emissions. The best example of that is our mud washing project, which is currently in PFS and scheduled to be completed in the second half of this financial year.
The big challenge for us is moving to a low-carbon energy source, with this energy demand driven by steam for the Bayer process, which accounts for roughly 70% of our emissions at Worsley. Moving from coal to gas-fired generation is an interim step, while supporting the development of low-carbon energy markets, such as hydrogen, is our long-term solution. Achieving this shift is not just within South32, it's actually a broader regional response, where we are working with a group of industry participants and government to actually achieve this. Technology will be a key enabler to use green energy in the refining. Study opportunities currently underway include the Heavy Industrial Low-Carbon Transition and Cooperative Research Center Project, where we're looking at the use of hydrogen in calcination. We're also working closely around low-carbon steam production through things like mechanical vapor recompression.
At the same time, in the background, we're very conscious about the transition that needs to occur as you move from coal to gas and ultimately another energy source. So we're working with the government and other stakeholders around the Collie just transition to ensure they're sustainable for the future as energy shifts away from coal. If we move on to Hillside, and Hillside accounts for 58% of our Scope 1 and Scope 2 emissions. It's an interesting one for us, because we absolutely believe that aluminum is expected to play a key role in the green energy transition. And Hillside supplies both international markets and sells roughly 30% of its product downstream to customers in South Africa, which creates many jobs.
As a consequence, Hillside has played a key role in the economic development of KwaZulu-Natal, and is one of the largest industrial employers in the region, and actually supports the stability of the National Electricity Grid. It is an efficient smelter, operating at technical capacity, and is currently studying AP3XLE as a technology to further enhance its efficiency. The key focus for us at Hillside is securing a green energy solution. Today, it actually takes all its energy transmission from Eskom, which comes from the coal fuel power source. We're working hard with Eskom, government, and other providers to actually look at the ways that they can actually decarbonize their network.
We're seeing some good policy shifts in South Africa, and a lot of interest in how they can actually green the network, but there's still more work to be done. As I mentioned earlier, you can really see the benchmark that Mozal sets around green energy transition. You know, Hillside today, Mozal runs at about 2.5 times when you think about a carbon intensity. The global average is about 10.1, and Hillside's running at about 16.8. For us, it's important to get this right, because again, Hillside supports a lot of jobs, a lot of employment opportunities, and we'd like to see that smelter continue with an energy source beyond the current 10-year contract. If we move on to Illawarra. Illawarra Metallurgical Coal in New South Wales produces a high-quality coking coal for both the domestic and seaborne market.
It accounts for roughly 12% of our Scope 1 and Scope 2 emissions. We see a continued role for high-quality metallurgical coal to meet global steel demand and support carbon emissions reduction targets in the steel sector. We are currently assessing options for the optimal long-term pathway for Illawarra Coal after the IPC's refusal of the DND project. We expect to complete the assessment of the options for Illawarra and DND by the end of calendar year 2021. Our current plans to decarbonize the Illawarra seek to address Appin's high gas and methane content. We believe there's further opportunities to improve gas drainage. Two years ago, we were at 56%. Now, we're targeting to get to 67% by FY 24.
We're also in the process in a trialing with CSIRO of VAMMIT technology, which is expected to be completed by the second half of FY 22. This is a solution for ventilation, air, and methane and would be a major step forward for the industry. If we move on to Scope 3 emissions, we have formed partnerships with our customers, suppliers, and industries to contribute to the decarbonization of our value chain, and we promote the responsible production of commodities needed in a low-carbon world. In FY 21, we joined Responsible Steel, and Mozal joined the Aluminum Stewardship Initiative. Although not a driver of the transactions, divestments materially reduced our Scope 3 emissions and exposure through the exit of South African Energy Coal and also the closure of Metaloys. Illawarra is now our largest Scope 3 exposure, where we are only approximately 2% of the global met coal market.
As I mentioned earlier, we will assess our Scope 3 target once we've determined our way forward to Illawarra, which will be completed by the end of this calendar year, and we will continue to progress with our partnerships to make a difference in Scope 3. If we move on to our capital management framework. Our capital management framework remains unchanged. It is designed to actually prioritize safe and reliable capital. This is where we will invest here in projects that mitigate the physical risks of climate change, such as our water infrastructure projects at Hillside, Mozal, and Worsley. In terms of how we compete for capital, our decarbonization projects compete on a returns and a value at risk basis. Some projects will derive multiple co-benefits, such as low emissions, lower energy consumption, and reduced commercial risk around energy security and approvals.
When we think about our investment evaluations, we use a cost of carbon in all our investment decisions. Long-term, in our base case, we use $40 a ton for both Scope 1 and Scope 2, but we also stress test to $100 a ton in lower than 2 degrees and $160 a ton in a 1.5-degree scenario. Our total decarb capital is expected to be modest relative to their overall group expenditure. As I mentioned earlier, with both Worsley and Hillside, we believe how we really make a difference is around the source of energy that we actually use, which is why we're working hard at Worsley to move from coal to gas and ultimately something like hydrogen, and how we're working hard in South Africa to help green the network.
At the same time, we continue to look at all M&A opportunities, screened through the lens of what a low-carbon future looks like. I'll now pass along to Brendan to talk a little about commodities and how we think about them. Brendan?
Yeah, thanks, Graham. The analysis you can see on this slide stems from a deeper assessment we've undertaken with the support of independent consultancy, Vivid Economics. As you would be aware, our commodities have a wide range of applications across the construction, energy, transport, and consumer goods sectors, and we forecast rising commodity demand in our base case, given an expectation for robust global economic growth and the adoption of clean technologies. With the rapid uptake of low-carbon technologies and stronger policy setting required to limit global warming to 1.5 degrees, we see even stronger demand for the majority of our products. The base metals, nickel, copper, and zinc, benefit from the rapid rollout of electric vehicles, or EVs, and deployment of renewable energy, solar, wind, and in the longer term, hydrogen.
Steel is resilient, given its contribution to renewables infrastructure, although we shouldn't forget the increasing role that recycling, scrap, and EAF production play in a more sustainable world with growing awareness. High-quality metallurgical coals, like those produced by our Illawarra operation, remain an important input into the steelmaking cycle in the decade to 2040. Their strength and broader coking properties are critical for the larger furnaces that drive productivity, and we don't see hydrogen-based steelmaking being scalable in the short to medium term. Moreover, the fleet of existing blast furnaces will not be mothballed quickly. That's also the message we're hearing from our customers. Conversely, lead demand will likely be lower as the internal combustion engine, or ICE fleet, is phased out, impacting traditional lead-acid battery demand.
Turning to the aluminum value chain and then manganese, two segments of the commodity space that don't typically capture the limelight when commentators are discussing a 1.5-degree world. With regard to aluminum, it will remain the lightweight, corrosion-resistant metal of the future and be a key ingredient in the EV revolution, building construction, and green energy infrastructure sectors, including with both the transmission and distribution networks. As consumers and downstream processors seek to reduce their carbon footprint, we should see a premium emerge for green aluminum in this decade as green demand grows more rapidly than supply. This premium is likely to approximate the next best alternative, abatement, which in a 1.5-degree world, will be logically more expensive, given a parallel increase in carbon pricing, making the challenge even greater for smelters reliant on coal-fired generation.
From our side, Mozal will be well-positioned, given its links to hydropower and its primary sales destination of Europe, with their large auto and consumer goods companies and more responsive policymakers more generally. Of course, the potential restart of the Alumar smelter in Brazil would also add valuable green ingots to our product mix. And while recycling rates are expected to rise, this is unlikely to be sufficient to meet growing demand, and so primary smelting capacity will also be required. This dynamic will continue to support upstream demand, and our Worsley and Brazil alumina refineries remain well positioned in the first quartile of the global carbon intensity curve, with the benefit of local bauxite supply, rather than distal resources and lengthy shipping rates.
And lastly, to manganese, where we see the 1.5-degree nation rebuilding process supporting a modest increase in steel demand and a trend towards higher manganese intensity use, given an increasing push for quality over quantity and higher tensile strength. Of course, manganese also remains largely immune to growth in recycling and EAF production, as units must be replaced in the steelmaking process. Separately, the rapidly emerging battery market will further support demand, but off a low base. As the largest producer of manganese with a footprint in Australia and the Kalahari, we are uniquely positioned, with expansion potential at Wessels and the opportunity to upgrade logistics infrastructure at Mamatwan. With that, I'll hand over to QE, to Kelly, and I look forward to Q&A. Thanks, Kelly.
Thanks, Brendan. At South32, we are committed, committed to respecting human rights. Not only is it the right thing to do, but it is essential to operating ethically and responsibly. We work to identify and prevent adverse human rights impacts through due diligence processes we have in place for our operations and value chains. We focus on the most material risks to our business and the people most vulnerable to harm. These are health and safety at work and labor conditions, including freedom from slavery, equality and non-discrimination, including gender equality, inclusion and diversity, and transformation in South Africa, access to water and sanitation, impacts of security services on human rights, and impacts on the right of communities that live near our operations, including Indigenous and tribal peoples. Over the past 12 months, we've undertaken some key activities aimed at improving our performance in this space.
We updated our approach to human rights to clearly state how we manage human rights risks, define our expectations of those we work with, improve transparency, and ensure we stay aligned with best practice. We have improved how we use the data we receive from self-assessment questionnaires to inform supplier selection and adopted a supplier assessment platform, EcoVadis, where we map our key suppliers against relevant human rights and sustainability risks. So far, we've mapped more than 5,000 suppliers using this platform. We've worked with more than 50 of our higher-risk or strategic suppliers to complete in-depth supplier scorecard assessments and completed 14 independent audits focused on modern slavery. We run a holistic human rights training program to help employees understand their responsibilities in relation to human rights in the context of their roles. During COVID, we worked to manage increased human rights risks to seafarers.
We undertook rapid human rights due diligence at all the ports that we use, working with others to support seafarers' rights, including through the Sustainable Shipping Initiative and becoming a signatory to the Neptune Declaration. We contributed funding and care packages directly and through the Mission to Seafarers. What is critical is that we raise awareness of human rights risks, including modern slavery, so that our employees and suppliers understand what they are, how to identify them, and how we can all work together to eliminate them. Moving now to how we work with our communities. Wherever we operate, we are passionate about making a meaningful contribution to our communities to create lasting social, environmental, and economic value. We do this by providing jobs, business opportunities, paying taxes and royalties, developing local suppliers, and supporting community programs.
Over the last financial year, our community investment totaled $22.2 million, and it was focused on four key areas: education and leadership, good health and social wellbeing, economic participation, and natural resource resilience. We partner with our communities to ensure our investment reflects their priorities. Recently, we implemented a community investment measurement framework to measure the outputs and outcomes of our investment. We did this to help us understand how our investment is contributing to desired outcomes and make adjustments where we're not seeing the desired results or as well as upscale and replicate successful initiatives, leading to better overall investment outcomes. All of our operations have stakeholder engagement plans implemented by experienced community professionals at each site. An important part of our stakeholder engagement is listening to and responding to any community concerns through local complaints and grievance processes.
As Graham mentioned earlier, we have also been working closely with our communities during COVID. We contributed $7.6 million since the start of the pandemic to support prevention, preparedness, response, and recovery. Beyond this, we make wider economic contributions through taxes and royalties, and conduct our tax affairs in accordance with our commitment to ethical business practice. We released our first tax transparency report in 2016 and have reported on this every year since. I'll now move on to talk about Indigenous and tribal peoples' engagement within our communities and their cultural heritage. We respect the unique cultural and spiritual relationships that Indigenous and tribal peoples have to the land and waters, and their rich contribution to society. We continually work to strengthen and enhance our approach to preserving cultural heritage. Many of the locations where we work intersect areas of cultural significance.
Wherever possible, we avoid impacting any cultural heritage, which includes changing our work practices. However, this is not always possible, and where we do, we minimize our impact in consultation with Indigenous and Tribal peoples. As Karen mentioned, we have undertaken a comprehensive review of how we manage Indigenous and Tribal peoples' cultural heritage, where we advanced our understanding of cultural heritage across our operations, with an initial focus on Australia, but are now broadening out to include Africa, South America, and the US. We assessed our principles, systems, processes, accountabilities, and performance standards, and identified areas for improvement and developed action plans to address these. We initially developed a global approach to cultural heritage, but following consultation with more than 10 Indigenous and Tribal peoples groups across our business, we found that a one-size-all, one-size-fits-all approach just wouldn't work.
As a result, we have since published our approach to Aboriginal and Torres Strait Islander peoples' cultural heritage, which will be followed by separate approaches tailored to our other operating locations. We have also reviewed our cultural heritage risk profile and updated the risk registers and management systems for all our operations and non-mining lands. We have rolled out cultural awareness and cultural heritage training globally and ensured clarity of accountability in the business. We have increased our cultural heritage subject matter expertise within the business, engaging a cultural heritage expert who is a qualified archaeologist at the group level, as well as dedicated local indigenous liaison and cultural heritage personnel at our sites. We believe it is important for cultural heritage and mining to coexist, and we are committed to working together with all our stakeholders to achieve the best possible outcome.
With that, I'll now hand over to Vanessa.
Thanks. In managing environmental impact beyond carbon emissions, our three focus areas are water, biodiversity, and tailings. For water, we promote better use, effective catchment management, and improved water security. We have taken action to address our exposure to water risk, especially where we are exposed to water stress. And we have set targets for Worsley, Hillside, and Mozal, and are developing targets for Illawarra and South Africa Manganese. We have invested to improve our infrastructure, such as the desalination plants at Hillside and Mozal, and we are constructing a pipeline to take non-potable water from Wellington Dam to Worsley in Australia. And across the business, we are minimizing our impact through recycling and reuse of water. For biodiversity, we are committed to protecting ecosystems and minimizing impacts where we operate.
We disturbed 2% of our land holdings for operational reasons and have already rehabilitated 1%, half of the disturbance. 3 of our operations, Worsley, GEMCO, and Illawarra, are identified as having material biodiversity risk, and in those, we apply the mitigation hierarchy: avoid, minimize, rehabilitate, and offset, and work towards a no net loss outcome for all major expansion and new projects. Finally, the safe and reliable management of tailings dams is a fundamental part of our license to operate. We have 27 tailings dams across our operated sites, and all of them are managed in accordance with ICMM and ANCOLD guidelines. Our experts provided input to the global industry standard on tailings management, which we are already implementing. We focus on achieving dry and dense tailings to minimize risk, as well as use state-of-the-art monitoring tools with real-time monitoring, drone surveys, and laser scanning.
Thanks, Vanessa. We will soon be opening up the Q&A. If you would like to ask a question, please pause your webcast now and click the audio link. The audio link can be found at the bottom of the homepage to your left. There will be some delay between the broadcast and audio platforms. However, if you experience any problems, then please return to the video broadcast and use the text box to submit your questions. Before wrapping up, I just want to emphasize that sustainable development has been a core focus of South32 since the demerger. We are transparent in our approach and in the challenges we face. We have made some great progress to date and will continue to work hard to drive performance, manage risks, pursue opportunities, and respond to increasing stakeholder expectations. Now I'll open up for questions.
Thanks, Graham. We have allocated a reasonable amount of time to ask questions today, but as a guide, we ask that you limit your audio questions to a couple at a time, so that we have an opportunity to take questions from as many participants as possible. I have a text question from Paul Young, from Goldman Sachs. Paul's question is: with in relation to carbon neutral greenfield mines, conceptually, what additional cost, CapEx, does using electric trucks and renewables add to a project's cost in percentage terms?
Yeah, thanks, Paul. I'll take that question, and that's a good question, Paul. I mean, obviously, we're in a position where we have a number of mature operations, and then we have some new projects, such as what we're doing in Arizona at Hermosa with Taylor. To be honest, it's quite an interesting question, because in some aspects, I think retrofitting technology and changing old plant, in some cases, is actually probably more expensive. I think, look, when you look at Taylor, we're certainly pursuing the opportunities around electric equipment underground. If you look at the power that we'll draw from Taylor, it's going to be 100% renewable, that's coming off the grid in Arizona. And we're also working with people, even such as Tesla, around electronic concentrated trucks.
So while we're in the stage of finishing the pre-feasibility study, I guess my early indication would be that some of these new technologies are moving so fast and so quickly, and some of that new infrastructure that exists actually means it won't drive an increase in actually our operating costs. Again, I think some of our businesses, retrofitting that technology is probably more of a cost. But in saying that, as we spoke about our Scope 1 and our Scope 2 emissions, and if you think about Hillside and Worsley, the big actual change that we need to make is in actually in the energy contracts that we source. And that really is putting other people's money to work, if you like, as the world moves more to that green finance space. Thanks, Paul.
I have a further question, text question from Paul, from Goldman Sachs. In relation to carbon pricing and green premiums, what is South32's base case assumption for internal models for the introduction of a carbon cost, year and timing? And does South32 see LME or commodity markets developing a green market subset for their commodities? That is, when does South32 think green premiums can be captured?
Thanks, Paul. I'll maybe throw that one across to Brendan, to give you a view from the market and also how we think about it from a modeling perspective. Brendan?
Yeah, look, thanks, Graham. Maybe just referring back to the slide I showed earlier. What that implies, Paul, is, relative to our base case in the 1.5-degree world, and we are moving more rapidly towards something like that type of global response, we see a CAGR for primary aluminum demand of around 1.9% to 2050, versus a base case of around 0.7%. That is, in effect, a net increase of, well over 30 million tons of primary aluminum demand. And so whilst we think the market is well-supplied, we'd call it green or low-carbon units today, at least ex-China, we don't see the scarcity right now to drive that meaningful premium. In the medium and longer term, we certainly think that is likely.
And so as we look toward the latter part of this decade, as I mentioned earlier, the next best alternative.
From our perspective, is the most logical way to try and think that through, and that is abatement. And given the intensity of the industry, and the various types of, if you like, power generation that feed the smelters, something in the range of $100-$300 a ton would certainly be reasonable at a price of around $50 a ton. Of course, if we do find ourselves in a 1.5-degree world and moving there more quickly, it could certainly be, again, quite a lot higher than that. From our perspective, we don't currently model that green aluminum premium in our base case.
Albeit, what I can tell you is, it is one of the focus areas for what we call our CPP process this year, as we move towards the back end, or, put another way, our commodity price protocol, convention. Graham?
Thanks, Brendan.
I have an audio question from Akaash Sachdeva, from HESTA. Akaash, please go ahead.
Thanks. Thanks, everyone. My question is about the decarbonization at Hillside, which you've identified as mainly dependent on the energy contracts, which is, again, dependent on the transition in the South African national energy system. I was wondering, what sort of metrics are you assessing in terms of how South Africa is progressing? And what sort of involvement do you have in terms of influencing the government, you know, in the lead up to COP26 and up to 2030, to actually get the changes in the grid that are required? Thank you.
Thanks, Akaash, and it's a really good question, and one we're very passionate about. I mean, Hillside today, I guess there's two aspects, as you point out, that we think about the energy efficiency, the, the energy approach. One is the energy efficiency, and they are on the benchmark when you think about the kind of technology they use. And the rollout of the AP3XLE, which have already started at Mozal, will allow them to be more energy efficient on the pieces they control. The real challenge, as I mentioned earlier, is as to your point, is Eskom, which is a state-owned enterprise, sources most of its power source from actual coal. And certainly, we have a current power block that runs for about another 10 years, that we just announced in July this year.
Beyond that, we've had clear discussions with the government and also the ANC, about that we need that next power block to be green. But maybe taking a step back, as I mentioned earlier, KZN is a part of the country where the smelter underpins a lot of economic development over the last couple of decades. You know, we've probably, directly, indirectly, you know, we probably have about 10,000 people that sort of rely on Hillside. We sell about another 30% of the product domestically downstream, to companies like Isizinda and Hulamin. If you look at the impact they have, it's probably another 50,000 jobs. So this is in a country that, you know, is really struggling to create employment opportunities, particularly post-COVID, but also pre-COVID. So from our aspects, managing that just transition is gonna be critically important.
To your point, how we've been working with the Department of Trade and Energy and Industry for a long period of time, around talking about the benefits of the smelter. But also talking about that downstream processing and where they produce many alloy parts, that actually go into the car making industry in Europe, to ensure the future security of that supply and that customer base, it is important that they transition, if you like, more to a green power source. André de Ruyter, who's the CEO of Eskom, over the last 9-12 months, has been very much out in the marketplace talking about the need to actually move towards green energy. That's something we're certainly supported, both publicly and behind the scenes. At the same time, we've also continued to actually work with the government around other regulations, and there are some good signs.
For example, NERSA, which is the independent regulator of power in South Africa, you know, industry was recently pushing them to move from what they call the 1 MW limit on self-generation or independent power producers. Industry was pushing to get that to 50. The government actually agreed to move that to 100, which I think allows to take some stress off of that network. At the same time, you know, you start to see many, if you like, other parts of the world committing to green finance to actually help South Africa decarbonize, and there's been a lot of press around that. We're actually ready, and standing ready, to actually work with providers on providing them a large, large power contract that would allow them to underpin any kind of investment.
At the same time, we've been running a project in Hillside called Green Shoots, and the Green Shoots project is designed to show that technically, it is actually not that difficult to build the renewable supply that something like Hillside actually needs. It just needs to attract government policy changes, and it needs to attract, if you like, some of that green finance I mentioned. So we're certainly optimistic that working closely with the government, they're understanding the opportunity here, not only for today, but the future for South Africa.
I have an audio question from Stefan Hansen, from Tyndall Asset Management. Please go ahead, Stefan.
Thank you very much. Thanks, Graham and team. Actually, this will follow on from the previous question. I think you answered a lot of it in your response, Graham. But I just wanted to ask or just to confirm, is South Africa, the South African government and Eskom's current emissions reduction goals peak in 2025 and plateau for ten years, which takes us to 2035, and you've outlined South32's target of, you know, significant reductions by 2035. Just wondering, are you expecting a change in South Africa's targets to sort of support that? Just want to get an idea on, you know, how the country's emissions goals align to yours?
Yeah, look, Stefan, I think it's probably fair to say that's still something under development. President Cyril Ramaphosa certainly has a climate change panel that he's put together, and they're still sort of getting all that input into government policy. Certainly from our perspective, when you look at André de Ruyter, again, the CEO of Eskom's presentation, he's very clear about, you know, they've got a 10-year plan to actually decarbonize their network. Now, the challenge, obviously, is in South Africa, 10 years can sometimes take 15 years. So that's where we're trying to work very much up front to look at things like technical solutions, provide a long-term off-take contract.
So, we're working really hard behind the scenes, but I think the next three or four months will be critical as they think about what that target actually looks like, and certainly we're looking to strongly influence that, but we're not alone in that space. It's probably fair to say, you know, certainly in the Minerals Council of South Africa, there's a strong push to decarbonize and also a strong push to give people more of the ability to produce their own power from renewable sources, because, as you're aware, South Africa is in a great position to actually benefit from both wind and solar.
Mm. Yep, no worries. Can I ask a follow-up, please?
Yep. Fine, Stefan.
Okay, cool. Just not a follow-up on Hillside, on Worsley. Just on the coal to gas opportunity, I think it, you've indicated there, you know, converting one boiler is about 200,000 kilotons of CO2 removed. So do we sort of multiply that by 6? Is that sort of how we can think about the opportunity for coal to gas of the sort of 3.7 million tons that Worsley contributes to, or contributed to 2020 output?
Yeah, look, I mean, the way I think about it, again, I'd be very clear about the step process there. Today, that steam generation is an important part of the Bayer Process, and we rely on coal today. We're finishing the pre-feasibility studies around doing those conversions, and they account for probably about 70% of the emissions profile out of Worsley. And to your comment, it's probably a factor of around 5. It's probably more the number, but ultimately, you want to move, obviously, from coal to gas and then ultimately another source, such as hydrogen. And, you know, probably the coal to gas is we'll finish those studies around those facilities and have that implemented by 2035, and then sort of move quickly as we can to hydrogen. But that's more of an industry working piece.
We're working with other people in the southwest, 'cause there also needs to be development of some infrastructure. The five times is probably the factor you need to think about.
All right. Okay, thanks very much.
I have a, I have a text question come in from Måns Carlsson-Sweeny from Ausbil. Måns' question is, "Thank you for outlining your approach to human rights. In regards to First Nations people, what were the key reasons behind not adopting a global approach? That is, what were the main local differences that made that challenging?
Probably a lot of them, but maybe I'll let Kelly talk through that.
Sure. Thanks for the question. So like I said, when we consulted with 10 different groups across our operations and projects globally, the feedback from those consultations was very strongly against having a global approach, to the extent even within Australia. As—for example, when we went to Worsley, and we used the terminology, which is an international definition, Indigenous and Tribal peoples, the group there didn't want to actually review the principles with that terminology, and we needed to change it to the local clan name in order to have the engagement. So it was a few things. One is obviously native title is different across all our operations, and also across the world, how rights accrue legally. That was one key reason. Two is how they, how they choose to refer to themselves.
They didn't like the idea of the sort of global definition, which we were fine with. Plus, even things like Welcome to Country. Welcome to Country is a very Australian centric thing, and when we rolled that out, we rolled out, for example, a global Welcome to Country approach, recognizing that particularly during COVID, we're all sort of geographically dispersed and connecting often virtually. And there was a lot of feedback from, even though they were involved in the consultation, but from Brazil, from Colombia, from the US, just to say, look, they felt that that was a very Australian-centric way to open a meeting.
What we did is, as I said, we released our approach to Aboriginal and Torres Strait Islander cultural heritage in Australia, and decided to take more time in our other regions so that we got a set of principles that our communities were comfortable with. That's what we're working on now.
Probably fair to say, though, Kelly, we'd see a lot of commonality around our approach, you know, really driven by around engagement and understanding and shared value.
Right.
But how that pans out into individual terminology, culture, and practices, it's critically important that that's, you know, very location-specific to make sure we get the right engagement with people and naturally show the right respect, because the reality is, we mine other people's resources. If they don't want us there, we can't mine it, and they need to see some of the economic benefits and share in those.
I'm sorry, that's a good point. I think that was one of the key outcomes as well, is that most groups didn't want principles focused purely on cultural heritage. They were looking for a much broader set of principles around indigenous engagement, of which cultural heritage is a subset, and very much informed by the different jurisdictions and operating regions. So that was our commitment at the end of that process, was that we will broaden it out to an approach to Indigenous and Tribal peoples' engagement, with cultural heritage as a subset, but very much tailored to the regions in which we're operating.
I've got a text question, question come in from Glyn Lawcock, from Barrenjoey. Glyn's question is: South32 appears to be relying on technology to achieve the bulk of its reductions in emissions. How is South32 thinking about spend on technology versus waiting for external parties to develop technology? As an example, one mining peer is diving headfirst into developing technology like hydrogen generation as they strive to reduce emissions.
Yeah. Look, Glyn, good question. I mean, obviously, we know who that is. And we think hydrogen will play a part in the future. I guess, the question is, where do we actually think we add value? And to sort of maybe go back to my comment earlier, Hillside today, at 58% of our Scope 1 and Scope 2 emissions, is certainly, if you like, our largest emitter. We've certainly done the work around studies with other parties, around what solar, what wind and battery can do, and we're very confident that that can provide the power need for something like Hillside. So it's actually not about technology in that space, even though we think, you know, battery, solar, and wind will get better and better in terms of efficiency and costs, it's more about public policy and influence, 'cause it can be done.
It's just about having the political will to get it done. So again, in our single biggest area where we can make a difference, Hillside, it's gonna be around policy. It's not gonna be around technology. Now, in saying that, you know, we have been rolling out new technologies, such as AP3XLE at both Mozal and now Hillside. And also, I mentioned we're doing some of the pilot study work with CSIRO in Hillside, not Hillside, sorry, Illawarra Metallurgical Coal, to manage some of those vent shaft emissions. And also working hard on our drilling efficiency at lower levels there. So we certainly are looking at technology, but it's how we work with the government to actually change policies that will have the biggest impact on our, you know, our operations today.
I've got another text message, a text question, sorry, come through from Duncan Simmonds from Wavestone Capital. With technology moving so fast and the investor focus intensifying, how do mining companies, such as yourselves, gain comfort in the reliability of adopting some of these new, unproven, lower carbon systems without compromising the operating performance of your assets?
Thanks, Duncan. A good question. I mean, look, I would say in that space, and I'll get Vanessa in a second to talk about how we scan the technologies and how we keep up to date. But again, I'd come back to the point, many of the technologies we're rolling out, such as electric vehicles underground, we're trialing at Cannington, or the solar panel system at Cannington, or the studies we've done around Hillside, the technology actually works, and it works pretty well. It's just how you actually get it out there and deployed with government policy. But in saying that, there is new technology coming all the time, and we expect that to continue to rapidly develop. And maybe, you know, Vanessa can talk a little about Innovate32 and how we sort of keep track with some of those new technologies.
Thanks, Graham. So our approach, in terms of technology, is really to link our investment towards the challenges we have. So it's not about the technology itself, but about the problems we want to solve. And in Innovate32, our big focus is on partnering with people who are either developing their technology or are going to be suppliers. And for instance, an example is electrification of mines, for us, is absolutely critical. So for underground mines, we are a partner of the Electrification Consortium, and through that, we're working with the main suppliers of mining underground equipment, for instance, to develop those solutions. Some of them, we expect to be able to apply even to Hermosa.
And then for open pit large trucks, for instance, we are partner of the Charge On Consortium, of which most of the, you know, large mining companies that have very, very huge haulage trucks are investing as well. So through partnerships, we believe we can tap into those, but in the end of the day, it's how we create a proposition where we can move the industry and together with our peers, create a market, and the suppliers then will need to come up with the technology. The basics of technology is already there. The thing is to make it economically viable and at scale.
I've got a text question from Amos Fletcher, from Barclays. Has South32 framed the potential range of capital requirements for its 2035 decarbonization target that may need to be funded by South32 itself, as opposed to externally financed?
Thanks, Susie. I'll get maybe Katie to talk a little about how we make our decisions around capital investments and our framework, and particularly what the short-term targets look like. I'd be very clear, again, when you think about the medium to long-term target, you look at our Scope 1 and Scope 2 emissions, you know, 56% come or 58% come from Hillside. About 11% actually comes from Illawarra, 17% comes from Worsley. So we continually push along. That's the area that we can make a big difference. Some of that is around energy contracts, and we spoke about that in terms of coal to gas, to ultimately something like hydrogen at Worsley. And we talked about decarbonizing or greening the actual network in South Africa. You know, we will provide long-term power contracts.
I don't see us putting our own capital at work in that space, because other people have costs of capital and expertise around the technology, but we can underwrite that with long-term contracts. Now, as we do today, recently signing a 10-year contract with Eskom, the next 10-year contract should be green. Maybe, Katie, about the capital allocation in the short term?
Yeah, thanks, Amos. Look, I mean, in the short term, we've talked to a spend of $40 million-$50 million over the next two years. And that really talks to the delivery or the focus that we have on efficiency projects and infrastructure upgrades, and also some of the study work we're undertaking. We do expect that spend to increase over the next decade, as some of those studies and projects move into execution phase. But certainly the spend will remain relatively modest compared to our total group capital expenditure. And certainly, as Graham noted, we don't intend to put our balance sheet at risk, in terms of, as we think about capital allocation in relation to decarb CapEx.
And as you think about our high energy intensive facilities, such as our smelters and refineries, but they really present an attractive energy offtake option for third-party providers. And we will look to work with those third-party providers to ensure that we can deliver the outcomes that we're looking for in terms of our decarbonization strategy.
If you'd like to ask a question, please pause your webcast now and click the audio link, or use the text function. I have a text question from Paul Young, from Goldman Sachs. "At Worsley, what is the duration of the coal contracts, and therefore, when could you replace with gas? What absolute carbon emission reduction would this achieve?
So maybe I'll get Brendan to talk a little about the nature of the contracts down there, because there's two, but there are other implications around, you know, what we spoke about, the just transition around coal. Brendan, maybe you take the first part.
Yeah, look, thanks, Graham, and thanks, Paul. Look, I'll keep it brief, because you can imagine the contract has quite a degree of commercial in confidence about it. But we do have two contracts there with Griffin and Premier Coal, and we have that for good reason. It means that we've got diversity of supply, but also contingency in the event that there's supply disruption with one or the other party. Certainly, we don't see those contracts inhibiting our ability to decarbonize, you know, with that, call it, intermediary, transitionary fuel of gas in any of the time frames that we would envisage towards the middle and latter part of this decade. Graham?
Thanks, Brendan, and maybe taking a step back, if you think about the power sources at Worsley, we rely on coal, diesel, gas, and biomass. We've been trying for a couple of years. Biomass is probably limited by scale of what you can do, but roughly, if you think about scope of emissions, 75% will come from steam generation, 20% come from calcination, and about 5% come from the mining and other costs, to sort of put it in perspective.
Graham, I have no further questions.
Look, I'd just like to take the opportunity to thank everyone today for participating. You know, obviously, as we spoke about earlier, sustainability is critically important to myself, the lead team, the board. It's part of our purpose. It's part of our strategy. We've been on the journey since we started the demerger. We certainly have some challenges ahead, but we think the opportunities far outweigh the challenges. Certainly, you know, we're working closely with our key stakeholders to make a difference in the places that we can. Again, we come back to the fundamental belief that our purpose is driven by the fact that we believe if mining is done well, it's good for the world. You know, we mine other people's resources.
We need to be able to share those benefits with people, and as part of that, we also need to ensure that we don't have a large impact in the places where we operate. You know, we expect expectations in this area to continue to increase, and that's actually a good thing for us, and it's a good thing for the industry. But I wanted to thank everyone for the questions today. Karen, I'm not sure if you had any closing remarks you wanted to make.
Thanks, Graham. Just to reiterate, thanks for joining us today. As Graham said, this work is central to everything we do at South32 and certainly central to all of the deliberations of the board. So thanks again for your participation.