Energy and Mines Issue 2

OCTOBER 8 - ISSUE 2

REACHING THE TIPPING POINT:

WHY INVESTING IN HYBRIDS MAKES ECONOMIC SENSE TODAY

RENEWABLES IN MINING:

11 RECENTLY ANNOUNCED PROJECTS

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INTRODUCTION

RENEWABLES FOR MINES The last six months has seen unprecedented activity in the “renewables for mines” market with more mining leaders investing in projects which are reaching new heights in terms of renewables penetration and innovation.

What is driving this surge in activity? Pure economics. Shorter payback periods, better pricing and increased pressure for mines to address energy costs and risks by investing in affordable, reliable and secure power solutions.

Some of these exciting projects are still under-development but we expect more details at the 6th Annual Energy and Mines World Congress this December 10-11 at the Hilton Toronto.

Issue two of the Energy and Mines magazine presents details of new renewables projects for mines in Canada, Chile, Australia, Russia and Zimbabwe. Their sizes range from 120 KW to 300 MW with different technologies including solar, storage and wind; and unique challenges including remote locations and extremely harsh climates.

As these and other projects continue to be implemented across global mine sites, the question is not whether renewables is part of the solution, it’s how big can you go? The 100% renewable energy mine is not as far away as we once assumed, and mines like Goldcorp and De Beers Canada are leading the charge.

“If you are consuming diesel to power your facility, the time to deploy a new solution is now,” comments Vishwanathan Iyer, Head of Business Development, Hybrid and Energy Storage at Sterling and Wilson. This week Iyer shares his global perspective on the evolving economics of renewables in mines, and makes the argument that the storage price curve has reached its most attractive point yet. [see page 4] “While solar plays a major role in decreasing costs for mines, storage is what enables the maximum savings, by interacting with both the solar and the diesel generation,” Iyer notes.

As mines continue to find the right balance between life-of-mine, asset ownership, different technologies, and energy cost savings, the one clear message is that now is the time to move forward and benefit the most from the exciting transformation in energy for mines.

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REACHING THE TIPPING POINT: WHY INVESTING IN HYBRIDS MAKES ECONOMIC SENSE FOR MINES TODAY

By Melodie Michel, Energy and Mines

Vishwanathan Iyer, Head of Business Development, Hybrid and Energy Storage at Sterling and Wilson, shares his views about the evolving economics of renewables in mines, and makes the argument that the storage price curve has reached its most attractive point yet.

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According to Iyer, while price is one of the key drivers to integrate renewables in mines, solar alone is no more the lone influencer.

“While solar plays a major role in decreasing costs for mines, storage is what enables the maximum savings, by interacting with both the solar and the diesel generation,” he says.

In the short term, storage manages the reserve requirement to allow for greater instantaneous solar penetration and increases the diesel fleet’s efficiency.

If the fundamental value proposition allows, storage can also shift solar energy to the evening hours to offset even more diesel. And while solar prices have already dropped significantly, Iyer believes the best economics are yet to come with the addition of storage which will allow mines to further offset diesel without sacrificing power reliability.

“We have seen the cost of storage decline in the past 18 months to levels where this is now a strong value proposition,” Iyer notes. The cost decline is now slowing down to the point where the savings derived from deferring investment no longer outweigh the benefits of the solution, Iyer adds.

“The common wisdom four to five years ago, when the price of storage was declining rapidly, was that the decline in costs would outweigh the deferral of the benefits, and rightly so,” he explains. “However, the present-day scenario suggests that the expected savings from these declines are not sufficient to outweigh the benefits. If you are consuming diesel to power your facility, the time to deploy a new solution is now.”

Additionally, solar and storage can be used as a hedge to protect mining operators from the uncertainty of diesel pricing and transportation costs. As Iyer points, “Solar and storage allow these costs to be both fixed and at a rate lower than diesel which gives 6

REACHING THE TIPPING POINT

these mines a competitive advantage in their respective offtake market.”

CAPEX VS OPEX Beyond the typical fossil fuel-based energy supply, the factors influencing renewables integration can be split into technical and commercial, with the structure of the latter typically driving the economics to a larger degree, Iyer explains. On the technical side, the types of load, number of large loads and how these loads are used and dispatched have an impact on the system’s sizing and utilization.

However, in the case of mines, the future yield and life of the mine is not certain, and neither is the future load growth.

“Conventional mine power solutions are CAPEX light and OPEX heavy, whereas greener and less expensive solar and storage alternatives are CAPEX heavy and OPEX light – just the opposite,” Iyer observes. “Finding the right balance between ownership of assets and contract life is absolutely essential because its impact on the economics of energy far outweighs the technical considerations.”

“We have seen the cost of storage decline in the past 18 months to levels where this is now a strong value proposition.”

Another issue is that mines are typically placed in remote areas with harsh climates and have incredibly demanding load profiles.

As a result, mines require the most advanced solutions wherein the reliability of the system is paramount. “Either renewable energy or fossil fuel as a silo asset without taking into consideration their operation in conjunction with other assets including batteries is just not enough for mining facilities,” Iyer notes.

TAILORING THE SOLUTION Sterling and Wilson typically works closely with clients to tailor their hybrid solutions to suit the underlying need of each mine. The 7

aim is to achieve optimum asset utilization and maximum renewable energy penetration without compromising on reliability and a credible operation strategy for various assets within the hybrid system.

As Iyer notes, they offer solutions in line with clients’ needs by analyzing the load requirements and future load forecasts, and considering energy and financial models to find the best solution.

Being a $1.5 bn strong business group allows them to bring a lucrative commercial offering to the table, which makes all the difference for a mining project. They also have the ability to offer flexible integration aided financing solutions.

“Unlike either renewable energy or fossil fuel players addressing the mining sector, our approach to hybrid solutions stems from our holistic mindset backed by combined global expertise of having delivered on turnkey basis close to 10 GW of solar, diesel and gas assets, which are a great mix of both fossil and non-fossil fuel-based assets,” Iyer says.

As Iyer points, the company’s range of hybrid and energy storage solutions for mining operators meet the industry’s requirements across the various stages of development including structuring needs to proving feasibility, then onto concept design and project development support, to implementing the solution.

PHASING IN RENEWABLES FOR MINES To avoid impacting operations, Iyer advocates for a phased construction and gradual integration of renewables for operating mines.

“The biggest piece of learning from potential clients is that if you don’t understand their current fossil fuel-based generation and its current and future asset operation strategy (if any already planned), there is no way they will 8

REACHING THE TIPPING POINT

“ While solar plays a major role in decreasing costs for mines, storage is what enables the maximum savings, by interacting with both the solar and the diesel generation.” be comfortable with your renewable solution,” he says. “The good news for us at Sterling and Wilson is that as a diversified solutions provider with expertise in heavy fuel oil and diesel, we fully understand these concerns.”

Geographically, the company has identified parts of Latin America, Canada, Australia and Africa as focal markets. Africa is a particular area of interest, since Sterling and Wilson has over four decades of experience and a strong local presence that allows it to notice opportunities that might otherwise be extremely difficult to track.

“In other geographies such as Western Australia, and parts of Latin America and Canada, our strength of balance sheet plus our market approach and divisional focuses enable us to more than just match up to our capabilities in Africa,” Iyer says.

In Australia, the company is supporting miners in Western Australia and Queensland to solidify their approach towards adoption of hybrids, as well as helping them develop a similar approach for their foreign mining assets. In Latin America and Canada, Sterling and Wilson is currently focusing on renewable integration or fossil asset hybridisation for various mid-tier precious metals mining leaders

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HTTP://WORLDCONGRESS.ENERGYANDMINES.COM EMAIL: ANDREW.SLAVIN@ENERGYANDMINES.COM CALL: +1 613 627 2787

“AS WE MOVE TO ADD RENEWABLES INTO OUR ENERGY MIX, IT’S REALLY IMPORTANT WE AS MINERS COLLABORATE CLOSELY WITH THE INDUSTRY SO THAT COMPETITIVE OFF-GRID SOLUTIONS CAN BE DEVELOPED AND THEN IMPLEMENTED.” FORTESCUE METALS GROUP

SPONSORS

RECENTLY ANNOUNCED RENEWABLES IN MINING PROJECTS

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11 RECENTLY ANNOUNCED RENEWABLES

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• Mining Company: Gold Fields • Developer/Installer/EPC: Aggreko • Mine: Granny Smith Gold Mine, 720KM NE of Perth, Western Australia • Renewable Energy: Solar, Storage • Date: Announced June 26, 2018.

• Details: Aggreko to develop a 7.3MW solar power generation with 2MW/1MW battery system. The system to be integrated with existing 21MW gas power station as a hybrid power station.

The daily power needs of the mine are 24.2MW. 8MW is allocated to the underground mine, the remaining 16.2MW is for the processing plant, associated facilities and mine camp.

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Granny Smith Mine (photo courtesy Gold Fields)

11 RECENTLY ANNOUNCED RENEWABLES

• Mining Company: Agnico Eagle • Mine: Meliadine Gold Mine, Nunavut, Canada • Renewable Energy: Wind, Diesel, Hybrid • Date: Current Feasibility • Details: Currently working with Hatch and

BBA on a feasibility study for 1 to up to 6 turbines for maximum of 21MW capacity.

In parallel, Agnico is also working with energy developers and other partners in evaluating an innovative high penetration wind farm of up to 40MW with large scale storage system. Mining in the arctic costs approximately 2 to 2.5 times more than typical southern mining sites. Cost to produce electricity represents 10% to 15% of Agnico’s operation costs / oz for the Nunavut platform. The upcoming carbon tax will be an additional burden to their operations. Agnico is actively studying many technologies to reduce its reliance on fossil fuel and the deployment of a wind farm is identified as the best promising solution.

Cannington Mine (photo courtesy South32)

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Meliadine Mine (photo courtesy Agnico Eagle)

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Mining Company: South32 Developer/Installer/EPC: SunShift, EDL Mine: Cannington Silver/Lead/Zinc underground Mine, Queensland, Australia Renewable Energy: Solar Date: Currently under construction. Commercial operation 2018.

Details: Off-grid gas, solar, hybrid power plant. 3MW of solar PV from SunShift integrat-

ed in to the current pipeline supplied EDL gas power station. Average power demand of 22MW. 15

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• Mining Company: Polymetal • Developer/Installer/EPC: Hevel Group • Mine: Khabarovsk Region, Eastern Russia • Renewable Energy: Solar • Date: Announced April 2018 • Details: The 1MW off-grid solar PV plant will generate 1.2 GWh annually for this remote Russian mine.

Hevel off-grid plant (photo courtesy Hevel)

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• Mining Company: New Century Resources • Developer/Installer/EPC: SunShift • Mine: Century Zinc MIne, Queensland, Australia • Renewable Energy: Solar • Date: Announced November 2017 • Details: The SunShift 120KW array will supply

power to the mine and zinc processing site for less than $120/MWh under a flexible power purchase agreement. New Century are currently paying $400/MWh to run diesel equipment.

The company is looking at installing up to 15 MW of solar over the next few years.

Photo courtesy SunShift

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11 RECENTLY ANNOUNCED RENEWABLES

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• Mining Company: Goldcorp • Mine: Cerro Negro, Santa Cruz, Argentina • Renewable Energy: Wind • Date: Agreement signed August 2017 • Details: A Goldcorp Wind/Diesel project with a large community component. The Cerro Negro mine will lead the construction of a mixed energy farm (wind and diesel) and will complete the educational hub in Perito within the framework of the UNIRSE Program, a trust between the Province of Santa Cruz and mining companies to finance social investment and health programs and projects which contribute to the sustainable development in the province.

(Photo Stock)

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• Mining Company: Image Resources • Mine: Boonanarring Mineral Sands Project, Western Australia

• Renewable Energy: Solar • Date: Announced April 2018 • Details: Sunrise Power to construct and

Photo courtesy of Image Resources

operate a 3-4MWac PV plant to provide 25% of total electricity requirements for mine and processing operations. The solar project will connect to the embedded network at the mine with no export to the grid.

The expected savings from the project are A$75K-100K per annum per MWac installed. Image Resources will purchase the power and the LGCs (Large-scale Generation Certificate) from the solar farm.

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• Mining Company: GMA Garnet • Mine: Port Gregory, near Kalbarri, Western Australia • Renewable Energy: Solar and Wind • Date: Announced July 4th 2017 • Details: GMA Garnet signed a long term

PPA with Advanced Energy Resources (AER) to construct a 3MW wind and solar farm in Western Australia. The project will initially supply nearly 70 per cent of the mine’s electricity requirements and transition Perth based GMA Garnet into becoming supplied by 100% renewable energy.

It will be the first grid connected wind and solar farm with battery storage in Western Australia

Port Gregory (photo courtesy GMA Garnet)

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• Mining Company: ENAMI • Mine: All operations in the regions of Antofagasta, Atacama and Coquimbo, plus the Fundición Hernán Videla Lira foundry

• Renewable Energy: Wind and Solar • Date: Announced July 3rd 2018 • Details: The National Mining Company of

Chile (ENAMI) awarded ACCIONA Energía its electricity supplies from renewable energy sources starting in April 2018, under a long-term deal. The PPA contract will cover 100% of the electricity consumption of ENAMI’s plants, for which ACCIONA will build a new photovoltaic plant in the north of the country.

Photo courtesy of Acciona

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11 RECENTLY ANNOUNCED RENEWABLES

10 • Mining Company: Antofagasta/Barrick Gold • Mine: Zaldívar Copper Mine, Northern Chile • Renewable Energy: Hydro, Solar, and Wind Date: Announced July 2018 • Details: Scheduled to be 100% renewables

by 2020 the Chilean mine has signed a 10-year agreement with Colbún, a Chilean electric power utility company to supply renewables.

(Photo Stock)

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• Mining Company: Karo Mining • Mine: To be located in the Mhon-

doro-Ngezi platinum belt of Zimbabwe

• Renewable Energy: Solar • Date: Announced July 2018 • Details: This newly announced mining

project is to include a 300MW solar power plant. Operational date set for 2020. After discussions with Zimbabwean government, the company will build the solar power plant near its operations instead of a 600 MW coal-fired plant as initially announced.

(Photo Stock)

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