Energy and Mines Magazine Issue 16

Issue

16

November

2019

DIESEL DISPLACEMENT FOR MINES

LNG, Nuclear, Green Hydrogen, and Small Hydro INTERVIEW

REDPLOYABLE POWER SOLUTIONS FOR MINES INTERVIEW

RENEWABLE PPAS FOR MINES: A Delicate Balance

interview

REDEPLOYABLE POWER SOLUTIONS FOR MINES Mark Kennedy

Business Development Manager, Wärtsilä MELODIE MICHEL Reporter, Energy and Mines 2

ENERGY AND MINES MAGAZINE

Wärtsilä Modular Block 3

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he availability of new power technologies, combined with increased concerns around environmental footprint and energy sustainability, are driving miners to explore cleaner solutions to power their businesses. This trend is pushing mining executives to investigate power dynamics and efficiencies in ways they never did before. But for those with a shorter mine life, the time and investment required to set up a clean, diverse power system on a remote site is hard to justify.

Wärtsilä has a track record of installing a variety of power systems at remote locations around the world, from the Essakane Mine’s hybrid power plant in Burkina Faso to a diesel, wind, solar and storage microgrid integration that powers an island in the Azores, Portugal.

Earlier this year, the company launched the Wärtsilä Modular Block, a flexible and redeployable solution for sustainable power generation, even in short-life mines.

The plant is pre-fabricated, reducing installation time from several months to a few weeks, and making Wärtsilä’s medium-speed gas and liquid fuel engine technology available where conventional permanent set-ups are not. Energy and Mines spoke with Mark Kennedy, Business Development Manager at the All markets are firm, to get more details on the innovation.

showing interest in incorporating renewables and energy storage into the mix.

Obviously areas where renewable resources are most available are leading the way.

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Energy and Mines: Your modular block solution is redeployable — what does that mean exactly? Is there a defined period that mining customers need to commit to using this technology?

Mark Kennedy: The Wärtsilä Modular Block (WMB) is a pre-fabricated, modular solution that can be installed much more quickly than traditional “stick-build” power plants. Due to the modular nature of the WMB, the civil works and installation ENERGY AND MINES MAGAZINE

CLICK HERE

Essakane Solar Plant

at site are significantly reduced. This enables owners to enter into shorter agreements, and the plant could be redeployed to another location at the end of the term. Wärtsilä is partnering with Aggreko, a world leader in rental and mobile power plants.

The period of time that a mining customer would need to commit to is negotiable but typically is a 5 or 10-year term. This is well suited to mining sites that have a shorter life of mine and do not wish to invest in permanent infrastructure.

E&M: What sort of flexibility does it offer in terms of integrating renewable energy options?

MK: The Wärtsilä Modular Block can provide power using traditional fuels such as natural gas or diesel and combine batteries (energy storage) to provide a hybrid offering. Wärtsilä can provide the software and electronics to integrate solar and wind power.

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One of the key ingredients to a successful hybrid project is to have the software to optimize the mix of energy. For example when there is no sun, the system needs to know to draw power from the batteries or engines. It is a complicated, continuous balancing act, and the Wärtsilä GEMS software is the glue that connects all of the pieces together.

E&M: How does this address the financing hurdle for mines — are you offering flexible power purchase agreements/contracts?

MK: The Wärtsilä Modular Block will be available for rental. This is a big deal in terms of helping mining companies finance projects as they do not have to outlay the capital expenditure during the build.

Wärtsilä is working with partners such as Aggreko on the rental/ leasing side.

E&M: What sort of response have you had so far from the mining community?

Wärtsilä has become a leading integrator – providing thermal assets, with energy storage, whilst using advanced software and electronics to incorporate solar and wind resources.

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MK: The Wärtsilä Modular Block has only recently been released and it has been extremely well received by the mining sector. Adding this to the Wärtsilä portfolio will further establish Wärtsilä as a key power provider to mines. Please note that Wärtsilä already has over 80 mining power plant references around the world. Wärtsilä also built the largest solar power plant at a mine –- the IAMGOLD Essakane mine. The mine gets power from that solar plant (15 MW) and also a 55 MW Wärtsilä thermal plant running on liquid fuel.

E&M: What do you see as the key drivers behind the move to low-carbon energy solutions for remote mines?

ENERGY AND MINES MAGAZINE

courtesy of Gold Fields

Wärtsilä Modular Block 7

MK: The key drivers are reducing the cost of fuel and power, and lowering carbon footprint, or achieving lower emissions. The energy demands from miners are all similar: reliable, low-cost power with as little environmental footprint as possible.

However, technology has improved over the last few years, which makes it feasible to tap into renewable energy. The price of wind, solar, and batteries (energy storage) have all come down significantly. In addition, the technology (software/electronics) to integrate these various power sources in a reliable way has also developed significantly.

Wärtsilä has become a leading integrator –- providing thermal assets, with energy storage (batteries), whilst using advanced software and electronics to incorporate solar and wind resources.

E&M: What markets are currently the most active in terms of project opportunities for remote power The Wärtsilä solutions for mines?

Modular Block has only recently been released and it has been extremely well received by the mining sector.

Adding this to the Wärtsilä portfolio will further establish Wärtsilä as a key power provider to mines.

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MK: All markets are showing interest in incorporating renewables and energy storage into the mix. Obviously areas where renewable resources are most available are leading the way.

For example, areas with great sun and wind resources seem to be moving forward with projects. Projects in Africa, South America, Australia, and Asia benefit from the combination of high-priced fuel at remote locations and availability of excellent solar resources.

Energy storage can be deployed to any region, given the modular (containerized) nature of the solutions. Similarly, areas ENERGY AND MINES MAGAZINE

Rows of bi-facial solar panels being evaluated courtesy of Gold Fields

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Graciosa Island Project

that have strong wind resources are looking at ways to reduce reliance on traditional thermal generation. Wind and energy storage projects in the far north of Canada prove that these kinds of projects can be done anywhere.

E&M: What lessons can you draw from your experience, in terms of the ability for mining operators to move to 100% renewable energy — what do you think the timescale and probability is for that milestone to be a reality?

MK: Moving to 100% renewables is an excellent goal. High penetration levels are already possible — the Graciosa Island in the Azores, where we integrated a hybrid microgrid, has already achieved 68%.

Other fuels that can help achieve this are also key to the mix including synthetic fuels (fully renewable), biodiesel, bio-gases, etc. All of this will play out in the next couple of decades. The key is to get on board now.

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Two of our operations are located in remote northern areas and do not have access to grid electricity. Their energy costs and carbon footprint are high, and we would like to find solutions to meet their energy needs and reduce our emissions.�

Our operations are all connected to electrical grids, so we are tracking cost-effective alternatives to either grid supply or 3rd party dedicated supply of lower GHG intensity energy.�

LEAD SPONSORS

Why mines are attending the Energy and Mines World Congress 2019?

Each mine attending the Energy and Mines World Congress is asked to outline their interest in renewables for their operations. The following are samples of responses:

Using renewable energy already and looking to install more at our mines” In Ontario, we would like to transition from diesel underground equipment to electric equipment.”

Our operations are expanding and we are looking at how to incorporate renewables into new operations as well as increase power supply at current operations using grid size storage using renewables instead of powerline upgrades.”

SESSION LEADERS

BARISTA SPONSOR

STRATEGIC PARTNER

SPONSORS AND EXHIBITORS

Champion Iron Mines

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ENERGY AND MINES MAGAZINE

report

Diesel Displacement for Mines LNG, SMALL HYDRO, GREEN HYDROGEN AND NUCLEAR MELODIE MICHEL Reporter, Energy and Mines

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hen it comes to reducing diesel consumption by mines, there are many things to consider. Do you use diesel to power the mine, in your fleet, in your processing? Where is your site and what access do you have to renewable energy? What’s your budget and mine life? While solar, wind and storage solutions are gaining steam, other options can also help mines achieve a more sustainable energy mix, or even increase their renewable penetration.

Some, like liquefied natural gas (LNG) or hydroelectricity, have been around for decades, and are now being modernized or improved to better suit the need of mining clients. Others, such as green hydrogen or small modular reactors (SMRs), are in their infancy, but hold enormous promise among large industry.

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LNG An easy and efficient switch (for most)

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hile still a fossil fuel, LNG is cleaner than diesel; in conventional cars, the US Department of Energy estimates that LNG produces about 10% less GHG emissions than gasoline. In mining trucks, Energir has noted a GHG reduction of up to 25% for vehicles switching from diesel to LNG. Energir supplies Stornoway Diamond with natural gas to power the Renard Mine in Quebec, and there, the LNG solution, combined with a heat recovery scheme, helped the site achieve GHG reductions in the order of 42%.

Using LNG instead of diesel also tends to bring financial benefits, since LNG’s pricing structure is not as vulnerable as diesel to commodity price volatility. Guillaume Brossard, LNG business development director at Energir, explains why: “Almost all of the elements of pricing in LNG are fixed, except for the commodity itself that accounts for about 25% of the total price. If the molecule fluctuates a little bit, you almost won’t see it on your final price. On the other hand, if you use diesel, the commodity accounts for 75% of the total price, and it is much more volatile.”

This allows for better budgeting and the maximization of the mine’s financial viability which, in an industry as cyclical as mining, is a real plus. However, in order to calculate LNG pricing, one must think about how the natural gas will get to the site. If the mine is located close enough to a pipeline, connecting to it will be the best options.

In other cases, the natural gas is usually delivered by road.

Champion Iron Mines has reduced GHG emissions by about 30,000 tonnes over the past two years, through energy efficiency projects, including a transition from fuel oil to electricity for steam generation using an electrode steam boiler, the commissioning of a 3.5 km long conveyor for crushed ore material transportation (offsetting the equivalent of two 240-ton haul trucks) and increasing the tailings pumping capacity to reduce handling and hauling operations using diesel-powered heavy equipment. Now, the company is looking to

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go further in displacing fuel oil and diesel, and LNG is one of the options being considered. Alexandre Belleau, general manager of projects and innovation at Champion, points out that the firm could partner with others in the region to bring LNG transportation costs down. “Pricing is really a matter of volume,” he says. “Assuming that we’re the only ones in the region to use LNG, right now the price would be fairly similar to fuel oil and diesel, but as soon as other companies start to use it in our region, it would probably be around 30% cheaper.”

This is because Champion’s mine is located in Quebec, a province with central production and distribution of LNG. That’s not always the case, and even then, getting the gas to remote places can be tricky: Brossard explains that in the far North of Quebec, where road access may not exist, LNG would have to be transported by boat, which can be challenging both in terms of cost and logistics.

But even with easy access to the LNG itself, there can still be obstacles to fuel switching. In the case of Champion, most of the diesel used on site is consumed by the fleet, and while trucks can run on LNG, they require adjustments — and these are not always available.

“Right now the main challenge in using LNG for haul trucks is that the technology to do the retrofitting is limited. Caterpillar has a kit for our trucks, but only for a specific series, which is currently phasing out as it’s reaching its end of life. There is one other market option but that generates some technical support concerns, and would also void the warranty that we have with Caterpillar,” says Belleau.

So while the company continues to look for fuel alternatives for its fleet, it is focusing more on the retrofitting of its remaining diesel boilers. “We could swap 100% of our diesel consumption for heating to LNG, resulting in about 30% reductions in GHG. We’re looking at this right now,” he adds.

Overall, LNG is a solid option for diesel displacement: it’s widely available and brings environmental and financial benefits. And with current investment into renewable natural gas (a type of biogas) picking up pace, mines fitted with LNG equipment could soon be well positioned to switch to 100% carbon-neutral fuel.

summary

GHG REDUCTION: 10% to 40% (with efficiency improvements) FEASIBILITY: High EQUIPMENT NEEDED: Retrofitting kits (available on certain trucks); LNG storage tanks; gas generators for power SAFETY CONSIDERATIONS: Cryogenic, little training required FINANCIAL VIABILITY: Proven 15

GREEN HYDROGEN Standardization and milestone pilots

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here’s been a lot of hype around hydrogen fuel cells in recent years: tier one miners such as BHP and Rio Tinto are investing in research and development, electrolyzer prices are going down, and some governments are actively trying to define standards and regulations for its use as a replacement fuel in trucks. Natural Resources Canada (NRCan) is one such government body, producing guidelines and studies, and organizing tests to determine the conditions under which hydrogen fuel cells can be safest and most productive.

Dr. Marc Bétournay, principal research scientist at NRCan, says his work has been focused mainly on underground applications, since they require more safety and ventilation provisions than on the surface. Since the start of the 2000s, he and his team have set up various mining consortia with names such as Newmont Goldcorp, Barrick, Glencore, Vale, IAMGold and Anglo American, to set up pilot projects and refine Canada’s standardization efforts. Based on this work, NRCan is now involved in developing the mining portion of the Canadian Hydrogen Installation Code (CHIC), a national standard first published in 2007 to regulate surface hydrogen infrastructure.

The updated version of the CHIC with the mining portion will come out in about two years, marking a turn in hydrogen standardization efforts.

Recent research suggests that hydrogen is on the brink of becoming an affordable solution 16

Canada is also working with Australia, South Africa, Chile and other mining countries to make sure the regulations developed in each one of them are compatible with the others. “It’s going to be tough to have the same regulations from country to country but the essentials will be there and we’re working very hard to make sure all countries will have similar mining regulations with respect to hydrogen,” Dr. Bétournay says.

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Once the industry scales up, renewable hydrogen could be produced from wind or solar power for the same price as natural gas in most of Europe and Asia

So what are the benefits of using hydrogen instead of diesel, and why are government and industry working so hard to make it commercially viable? There are three types of hydrogen: brown or grey (made from natural gas, therefore emitting CO2), blue (also made of natural gas but with carbon sequestration and reuse at the production site), and green (which uses renewable electricity as a base). Out of these, green hydrogen is the most attractive, since it is 100% clean, but it is also the most expensive to produce, with the International Energy Agency estimating its price around US$3.90 and US$5.50 per kg (compared to around US$1.70 a kg for brown hydrogen).

However, recent research suggests that hydrogen is on the brink of becoming an affordable solution: in an August 2019 report, Bloomberg New Energy Finance (BNEF) predicted an 80% drop in its cost of production by 2030. “Once the industry scales up, renewable hydrogen could be produced from wind or solar power for the same price as natural gas in most of Europe and Asia. These production costs would make green gas affordable and puts the prospects for a truly clean economy in sight,” Kobad Bhavnagri, BNEF’s head of special projects, says in the report.

Already, green hydrogen is increasingly being considered as part of the energy mix for large greenfield mines: Glencore started producing it about three years ago from the excess energy provided by wind turbines at the Raglan mine. Now, the second part of the project is underway: according to Dr. Bétournay, who has worked with Glencore on the initiative, Hydrogenics is going to build a hydrogen refuelling station on surface at the mine, and the 50-tonne hauling trucks will be retrofitted with hydrogen fuel cells to transport ore from the mill to the port some 200 km away.

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summary Ballard Fuel Cell

GHG REDUCTION: 100% (for green hydrogen) Hydrogen fuel cell provider Ballard is also working with “a major mining company” to build a mining truck transporting material from the extraction site to the processing site. “The idea is to install renewable energy all around the mine, wind and solar, which will meet the entire mining operation’s energy demand,” explains Nicolas Pocard, director of marketing. “If you want to meet peak demand, you have to oversize your renewable production, and as a result you get a lot of stranded renewable energy, which you can convert into hydrogen on site and turn it into zero-emission fuel which can be used on the mining vehicles.” The first truck will be in operation by the second half of 2020, and if successful, the scheme will then be rolled out to the whole fleet.

For now, green hydrogen as a replacement for diesel in mobile equipment is only a solution for mines with a long life and ample renewable energy capacity. Pocard says a holistic approach is needed. “If you just want to do vehicles, that’s not going to be cost-effective, unless you have a hydrogen industry nearby. The right approach is to figure out what is the role of hydrogen in your operation, and how you can integrate it into your overall energy systems,” he adds.

FEASIBILITY: Dependent on renewable capacity or access to centralized production EQUIPMENT NEEDED: Hydrogen storage tanks, retrofitting available on hybrid trucks SAFETY CONSIDERATIONS: Highly flammable, air flow critical to safety FINANCIAL VIABILITY: Improving rapidly 19

SMALL HYDRO From flowing rivers to dirty water

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ater is a well-known power source: in many parts of the world, the utility grid is fuelled by electric dams. But for remote mines, there is a less invasive solution: small hydro.

It consists of turbines that can be installed on almost any body of water near the mine, providing reliable renewable power. Compared to solar or wind power, hydroelectricity generation is more stable and can be used for baseload, though seasonality is a factor.

Mining energy consultancy THEnergy is currently working with two German universities on the SmartH2O Energy Project in Peru, where the feasibility of small hydro solutions to displace diesel in remote mines is being tested. Managing Director Thomas Hillig explains that while hydropower has typically been installed on rivers in the past, the technology is evolving.

“The project is about applications that have never been used before, so for groundwater, process water, water that is in the pit. The system could also be used as an alternative for storage. We’re looking at the technical aspects of that.”

In 2018, Gilkes installed a hydropower system at Anglo Gold’s Sadiola Mine in Mali. It is made of a containerized turbine that replaces the function of a pressure-reducing valve, Compared to extracting energy from the raw water supplied to the mine and village. Because large hydro of its small size and ability to be packed schemes, small into a shipping container, the system hydro doesn’t was mostly built before being installed require big on site, reducing installation time.

construction work or human displacement.

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“That was a very small project, around 150 kW,” says Gilkes head of sales Andy Eaton. “They put it in because they were ENERGY AND MINES MAGAZINE

pumping water from a reservoir some 100 km away. They realized they could put a small hydro unit on the end of it, and that’s what we did.” He adds that in this case, water quality does not matter, because the turbine installed can handle sand and filthy water. This means that in the future, mines could even use their tailings to produce electricity.

It’s actually more expensive than solar per kW capacity, but then you get more stable generation

“The tailings are more rocks than actual water, but again, we believe that the Turgo Impulse machine would be a good solution for that. In order to bring it to market, we would need to trial it, put it on a mine and see how it works, so we need to do a partnership with somebody to move forward with it,” Eaton says.

Compared to large hydro schemes, small hydro doesn’t require big construction work or human displacement. While each site is specific, Eaton notes that payback varies between two and seven years, and can displace diesel completely throughout the mine life.

In fact, the long-lasting character of small hydro could even be seen as an obstacle by miners: “With the limited lifetime of the mine, there can be a bigger conflict than for solar or wind power, that’s the downside. But there’s already a good business case today. It’s actually more expensive than solar per kW capacity, but then you get more stable generation,” Hillig points out.

Of course, a thorough environmental assessment must be conducted, and hydropower is more site-specific and may require more planning than other renewable options. But it could be a worthwhile investment, replacing diesel as the baseload power provider and even presenting storage capacity.

Hydroelectricity has suffered a drop in interest in the past few decades, but as miners start to focus more and more on holistic and sustainable energy generation, small hydro schemes could become instrumental in the journey to zero-emission power.

summary

GHG REDUCTION: 100% FEASIBILITY: Highly dependent on location EQUIPMENT NEEDED: Hydropower turbines SAFETY CONSIDERATIONS: Low risk FINANCIAL VIABILITY: Proven 21

SMRs Modularity and reliability The last diesel replacement option this article will explore brings back a clean but somewhat controversial type of energy to the table: nuclear. Small modular reactors go from 5 MW to 300 MW in size, more than three times smaller than regular nuclear reactors, and a lot of hopes are pinned on them. In Canada, NRCan has developed an SMR roadmap to help these systems reach commercialization.

Diane Cameron, director of NRCan’s nuclear energy division, explains that there are three key reasons for the strong interest in SMR applications as diesel replacement for remote communities and mines. The first is cost: “The analysis indicates that SMRs could provide a 20 to 60% cost reduction compared to diesel,” she says.

The second is logistics: “Diesel supply chains are very complex and prone to disruption. Some SMR units can come pre-fuelled for 20 years and function like a battery. At the end of its life you remove it for decommissioning at a central location by nuclear experts and you plug in a new one. The promise of much simpler logistics would provide Part of the greater energy security,” she adds. And promise of SMRs of course, there is the fact that SMRs is that they can produce zero GHG emissions.

integrate with renewables: the models in development are being designed to integrate as seamlessly as possible with variable renewables, such as solar.

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This solution’s biggest strengths are its reliability and modularity. “Nuclear reactors supply very reliable generation output as well as stability in pricing with a fixed-cost model with an offtake contract, allowing for certainty around costs. With the modular aspect of it, if you realize that in the end you need to add to the size of your electricity production, you could put in a second module. And if at the end, you have figured out a way to extend the life of your mine and need power for longer, again, you could bring ENERGY AND MINES MAGAZINE

Whiteshell Nuclear Laboratory

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Canadian Nuclear Laboratories, Chalk River

in another module,” says Eric McGoey, Ontario Power Generation (OPG) director of remote generation development.

OPG has partnered with SMR developer Global First Power to construct and operate a commercial demonstration unit at Canadian Nuclear Laboratories’ Chalk River site in Ontario. The proposed 5 MW electrical, 15 MW thermal reactor will serve as a model for the future — to demonstrate the viability of the technical and commercial application of the Micro Modular Reactor (MMR) design. Additionally, it will be the first time an SMR has gone through the environmental assessment and licensing processes in Canada.

Further West, a small town in Manitoba is also working on a commercial demonstration site for SMRs. Pinawa is the site of the former Whiteshell nuclear laboratory, which is being decommissioned but still holds a nuclear licence. “This gives us a huge advantage in hosting one or more demonstration reactors at our site,” says Mayor 24

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Blair Skinner. “Remote communities and mining companies are interested in the possibility for an SMR to provide the power they need, but they don’t want to be the first to have one. There needs to be a working demonstration to show that the technology is safe and reliable, that the estimated costs are as forecast, and that it’s able to follow the load: those kinds of issues need to be tested in real life, and that’s where we come in,” he adds.

Part of the promise of SMRs is that they can integrate with renewables: the models in development are being designed to integrate as seamlessly as possible with variable renewables, such as solar.

When the solar panels are generating electricity, the reactor could slow down, and when it gets dark at night it can increase power to compensate. “Because there’s been so much investment in wind and solar around the world, this is a strong advantage, because not only will these investments not be wasted, but they will actually be maximized as SMRs would compensate their variability. And the more power you produce with solar and wind, the longer you extend the life of the fuel in the reactor, so it’s a win-win,” says Skinner, adding that wind and solar providers in Manitoba are interested in partnering in the Pinawa project.

According to Cameron, mining executives are extremely interested in the solution; in fact, many have indicated that they would already buy it now if it were available. But while SMRs have been used for decades in military applications, commercial interest is recent and requires more testing and fine-tuning, which is why demonstration plants such as Chalk River or Pinawa are crucial. And even though they are rare, high-profile nuclear accidents such as Chernobyl or Fukushima may increase the need for community engagement — though a recent poll conducted by Abacus Data shows that public acceptance is high, at least in Canada: only 13% of the people surveyed expressed opposition to them being used as a replacement for fossil fuels.

SMRs are a potential game-changer in the world’s clean energy transition, but it is likely to take another five to ten years to see the first commercial units deployed on mine sites. Stay tuned.

summary

GHG REDUCTION: 100% FEASIBILITY: High EQUIPMENT NEEDED: Small modular reactor SAFETY CONSIDERATIONS: Safety training required, decommissioning and waste disposal critical FINANCIAL VIABILITY: Yet to be determined, but expected to be high 25

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interview

RENEWABLE PPAS FOR MINES:

A DELICATE BALANCE

Clément Faure

Head of Business Development, Mining and Hybrids, MELODIE MICHEL Reporter, Energy and Mines 27

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orporate Power Purchase Agreements (PPAs) are increasingly popular for miners looking to power their operations with renewable energy because they enable a competitive and clean energy supply without capital investment. They structure a long-term relationship in a balanced way for both the miner and the Independent Power Producer (IPP), while ensuring renewable generation does not compromise the high reliability expectations inherent to mining operations.

Total Eren owns over 2,600 MW of renewable energy assets around the world and has another 2,000 MW of projects in the pipeline.

In 2018, and together with Africa Energy Management Platform (AEMP), its strategic development partner for the mining sector in Africa, Total Eren started operating the 15 MW Essakane solar hybrid plant in Burkina Faso. Essakane Solar is the largest project of that kind in operation to date, enabling IAMGOLD to displace 6 million liters of diesel per year on site.

While the company’s reach to the mining sector has concentrated in Africa so far, Total Eren is now expanding to other mining markets such as Australia, Latin America and Central Asia, leveraging its existing asset base and teams in these countries as well as the privileged reach of the Total Group with international mining companies and international corporates in general. Energy and Mines spoke with Clément Faure, Head of Business Development, Mining and Hybrids at Total Eren, about the delicate exercise of drafting a renewable PPA for a mine.

Energy and Mines: How has the conversation around renewables integration in mining shifted in recent years?

Clément Faure: The shift has become notable from two angles.

Economically, a few years ago, the relevance of unsubsidized renewable energy still had to be confirmed, but that’s no longer a question.

Renewables have become an obvious source of low-cost energy for the mining sector in the same way they did for utilities across the globe. Energy storage follows the same cost reduction trend, enabling further optimized solutions not financially viable at the time of Essakane. As an illustration, I hope we will be able to announce one if not several new projects by the time those lines get printed.

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Contractually now, the conversation revolves around the best strategy for a mine: should the mine invest its own capital or outsource its renewable energy supply as a service? When purchasing a grid connection or a thermal power plant, a mine secures its ability to operate with reliable baseload power supply. But renewables are all about energy: cleaner and cheaper, but available only as and when there is sun or wind. While yearly energy yields can be predicted accurately with statistics and weather models, the intermittency requires a balancing source of power. You can’t have it all, and the balance is hard to find.

For that reason, while investing into baseload capacity is a necessary capital outlay for a mine to guarantee the operability of its broader mining investment, outsourcing renewable energy supply to a trustworthy IPP partner with a demonstrated track record enables a mine to focus its capital, operational resources and management attention to its core business.

E&M: What should miners keep in mind when starting a tender process to find supply renewable energy?

CF: Having participated in nearly 30 tenders for mines over the past five years, we can observe that less than a handful of projects have materialized. What looks good on paper is not always deliverable in reality due to technical constraints, unrealistic schedules, or lack of financing. And this is not specific to projects for mines: in Africa, nearly 75% of public renewable energy projects with PPA signed in 2016 were yet to reach financial close in H1 2018. To bring a feasibility study or even a winning bid from paper to reality, a lot of value comes from the development and from the cooperation between the mine and the IPP partner. You cannot put all what it takes in a tender.

Size-wise, undersized projects do not achieve optimized economics but oversized projects compromise operation stability: expertise and studies will eventually ensure convergence. Price-wise, large price gaps in original bids tend to converge as discussions progress and shortcuts are eliminated. Finally, when size and price are getting right, the most important is still to deliver. Time is the enemy to realize savings over a limited life of mine and financing and permitting are two classic sources of delays or failure in delivery, while 29

long-term performances and aligned interests are instrumental to ensure smooth operation over time.

The right technical and commercial risk allocation is always the fruit of extensive discussions and has to be tailored for and with each mine, depending on its risk appetite and site environment. If there are obvious benefits to well structured and well managed tenders to get clean and comparable data for discussion, there is also a lot of value in a trustable partnership, something you cannot always assess through a tender.

E&M: What are the benefits of behind-the-meter renewable contracts compared to the grid?

CF: Leveraging shared grid infrastructures generally delivers better energy prices but comes with strings attached around the availability and reliability of an infrastructure that you don’t control. When it’s behind the meter, you have more certainty but you may not get all the benefits you would get through the grid. The decision often depends on the location and availability of the grid, as mining operations settle where there are the mineral resources, with generally not as many power supply options as non-extractive industries.

Total Eren has major references in both behind-the-meter and wheeling projects : our Essakane project is the largest unsubsidized IPP project successfully implemented for an off-grid mine in the world and our 256MW Kiamal Project in Australia serves, each with a different agreement, no less than 5 counterparts with solar energy wheeled through the grid.

Renewables have become an obvious source of low-cost energy for the mining sector in the same way they did for utilities across the globe 30

One thing remains for sure, whatever energy supply configuration the miner elects, power reliability is at the top of the agenda and competitive renewable energy will come second in our approach: here again it is ultimately a trade off with the value provided by intermittent but competitive renewable energy.

E&M: How can the PPA’s length be made optimal according to life of mine?

CF: Renewables are almost all CAPEX with very limited OPEX: the longer the PPA the better, as the value is delivered over the long ENERGY AND MINES MAGAZINE

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term. Yet, life of mine considerations can drive mining operators to seek PPAs shorter than the useful life of the assets. There is no issue as long as renewables create value, which all depends on the existing power set up, the location, etc. Thanks to our experience, we can assess fast and with a very good level of accuracy if we can create value for our mining customer or if we will end up wasting their time.

Again, it is all about the flexibility built within the contract through provisions for early termination around degraded mine life scenarios. The balance is hard to find, between ultra-flexibility, which always comes with a price tag on both costs and efficiency, similar to what exists in the conventional generation space, and the ability for these technologies to deliver the best of their value over the longest term possible.

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ENERGY AND MINES MAGAZINE

We have very extensive discussions with our customers, flexibility on PPA terms, flexibility on the way the mine handles its power supply and how renewables would disrupt that, and flexibility on the optimal cash and resource allocation. These are discussions we look forward to having with many mining companies.

One thing to keep in mind is that contrary to a developer or a contractor, an IPP never takes a short-term view on earnings, and rather comes with a motivation to deliver promises over the PPA duration. We do not promise what we cannot deliver, simply because we recoup our investment over the long term without exit or sale strategy, aligning our interests with the mine as an off-taker. At the end of the day, the most important decision a mining operator has to make is who to partner with on their renewable energy journey.

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