Energy and Mines Issue 3

OCTOBER 22 - ISSUE 3

DE BEERS CANADA, DUNDEE PRECIOUS METALS, TAHOE RESOURCES AND GOLDCORP

DISCUSS RENEWABLES PLANS THE FINANCIAL AND TECHNICAL CHALLENGES OF

100% RENEWABLES

Photo Courtesy BBA

Photo Courtesy Sandvik 2

DISCUSS RENEWABLES PLANS

DeBeers Canada, Dundee Precious Metals, Tahoe Resources and Goldcorp

DISCUSS

RENEWABLES

PLANS

By John McCloy, Energy and Mines 3

“For new assets that are coming online, we are looking at radically different ways of configuring mine sites.�

Kim Truter, CEO, De Beers Canada

Dicovery Camp. Photo Courtesy De Beers Canada

Coffee Gold.

Photo Courtesy Goldcorp

Cerro Negro. Photo Courtesy Goldcorp 4

DISCUSS RENEWABLES PLANS

Renewable energy is already becoming mainstream for the mining industry but now the key question is: when will high-penetration renewables become business as usual for powering mines? According to Kim Truter, CEO of De Beers Canada, this next step involves thinking about new ways to configure a mine.

Instead of adopting renewable energy piecemeal, The De Beers Group is looking to radically change how they approach the construction of new projects. “For new assets that are coming online, we are looking at radically different ways of configuring mine sites,” says Truter. “We are considering different ways of mining with a much smaller footprint, and we’ve made a lot of progress in that regard.”

“We’ve just acquired an asset up in Baffin Island, which is quite a remote part of northern Canada,” he continues. “Without a shadow of a doubt, that asset will be radically different from the normal mining paradigm in the way we build it and the way it’s eventually run.”

The De Beers group currently has in place Programme Terra, a sustainability target that would see them reduce their overall energy usage by eight percent by 2020. De Beers Canada has already invested in connecting it’s Victor Mine in Ontario to the local hydroelectric gird and using heat capture technology for its Gahcho Kué operation in the Northwest Territories.

As Truter points, the current focus is on new projects and the creation of more energy efficient operations with potential to move to high penetration renewables. “When it comes to remote operations, if you can avoid having to do things like building roads or putting in a whole lot of infrastructure then that’s where the real savings come from,” he adds.

PRICE IS DRIVING APPETITE The appetite for higher penetration renewables is being driven by price. “For the mines who are on a grid, the cost of power can be as much as 10 cents a kilowatt hour and that’s probably going to increase by 10 or 12 percent every year,” notes John Lindsay, Senior Vice President of Project Development for Dundee Precious Metals (DPM). “We’re now seeing some solar providers offering less than 5 cents a kilowatt hour, significantly cheaper than the traditional grid cost, and dramatically lower than any off-grid mine using diesel or HFO fuelled generation.”

In order to take advantage of the cost-saving potential of solar power generation, DPM is currently analyzing solar options for its copper smelting installation in Tsumeb, Namibia which is grid-connected.

“If we were able to exploit renewable energy to reduce our power costs by, say, 50 percent, that could result in an 8 to 10 percent reduction in our total operating costs, which is quite significant,” reports Lindsay. “For [off-grid] mines who are generating their own power, the potential cost savings could be quite a bit higher. They might have the potential to cut their overall operating costs by 20 percent or more by introducing solar or wind generation.”

High-penetration renewables provides mines with an opportunity to hedge against volatile and increasing energy costs. “In the last 5 to 10 years, energy has become a top five cost for mines,” points Bruce Armitage, Energy Manager for Tahoe Resources. “It’s usually second only to labor for most mines and milling facility. A 100% renewable powered operation would cause energy costs to fall out of the top five costs and potentially the top 10 in terms of costings for the mining industry.”

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“The best way to attack the problem is to change the way you set up the mine in the first place, mining companies need to be asking: is there a different way of configuring a mine?�

Kim Truter, CEO of De Beers Canada

Dicovery Camp. Photo Courtesy De Beers Canada 6

DISCUSS RENEWABLES PLANS

PIONEERING ENERGY FOR MINES Canadian gold mining leader Goldcorp is building Canada’s first fully electric underground mine at its Borden Lake project near Chapleau in Ontario. Borden will save about $9 million annually on diesel, propane and electricity.

In addition to this groundbreaking project, Goldcorp’s Cerro Negro mine in Argentina has recently signed an agreement with the Province of Santa Cruz to build a wind farm. The company intends the wind-diesel hybrid to enable new industrial investment and development in Perito Moreno region. The project is expected to result in significant energy savings and prevent 296,000 tonnes of greenhouse gases (CO2) from entering the atmosphere.

Goldcorp is also conducting feasibility studies on adding solar to its Canadian operations. “We’re studying a battery storage and solar solution at our Coffee Gold Project in the Yukon,” reports John Mullally, Vice President Corporate Affairs and Energy at Goldcorp. “This is very interesting for the power required in the summertime but not a great solution for the winter so it would need to be supplemented by diesel generation.”

LOOKING AHEAD Mid-tier precious metals company Tahoe Resources is examining the feasibility of using energy storage, in coordination with renewables, to minimize reliance on grid electricity for its Ontario operation during peak time. Tahoe is also considering the use of electric vehicles for future projects.

“The costing for electric vehicles remains three to four times that of their diesel equivalents,” notes Armitage. “That does make it harder for us

to invest in them, particularly in the case of older mines with existing infrastructure. It does not, however, discount the possibility of us investing in electric vehicles for newer mines.”

Pioneering projects such as Goldcorp’s Borden Lake are highlighting the utility of battery-powered vehicles and the maturity of the technology. “The discussions around electrified equipment for mines have been happening for some years,” notes Dale Rakochy, Product Line Manager at Sandvik, supplier of battery-powered vehicles to the Borden Mines. “The fact that Borden Lake has taken the initiative to realize the benefits of an electrified mine has helped other customers start to see diesel alternatives as a viable technology.”

100% RENEWABLE ENERGY MINING “From a technology perspective, most of the technology needed to run a mine on 100% renewable power is already available today,” notes Caroline Hillegeer, Senior Vice President of Strategy, Marketing and Technology at Engie.

“The key questions to be answered are around how scaleable those technologies are and how cost effective it is to deploy them.”

The mining sector’s apprehensiveness to change is another barrier to widespread adoption of high penetration renewables, notes Russell Blades, CEO of E3 Renewables former Director of Energy and Climate Change for Barrick Gold Corporation. “One of the sayings that gets passed around the mining industry is that everyone wants to be first to be second and it’s that kind of mentality that is one of the major barriers to the large-scale adoption of high penetration renewables.”

However, as with the first renewable energy

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“From a technology perspective, most of the technology needed to run a mine on 100% renewable power is already available today.�

Caroline Hillegeer, Senior Vice President of Strategy, Marketing and Technology, Engie

Borden Mine. Picture Courtesy Goldcorp

DISCUSS RENEWABLES PLANS

projects for the mining sector, the next level with high penetration renewables and world-leading energy solutions for mines will be led by individuals with a vision for change. As De Beers’ Canada’s Truter concludes: “The best way to attack the problem is to change the way you set up the mine in the first place, mining companies need to be asking: is there a different way of configuring a mine?”

“In the last 5 to 10 years, energy has become a top five cost for mines.”

Bruce Armitage, Energy Manager, Tahoe Resources

Tsumeb Smelter. Picture Courtesy Dundee Precious Metals

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“THANK YOU FOR ORGANISING SUCH A WELL RUN AND INSIGHTFUL EVENT. I MUST SAY, IT HAS HELPED ME CRYSTALIZE SOME THINKING AROUND HOW RENEWABLES CAN PLAY A ROLE IN OUR POWER SUPPLY MIX.” NEW CENTURY RESOURCES

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100% RENEWABLES

THE FINANCIAL AND TECHNICAL CHALLENGES OF

RENEWABLES

By Melodie Michel, Energy and Mines

Jean-Philippe Castonguay, director of off-grid hybrid power and partner at BBA, shares his views on the growing momentum for renewables integration in mines: how did we get here, what’s lacking for further penetration and what’s likely to change in the next five years.

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From his Montreal office, Castonguay has observed a global shift in renewables interest from mines in the past year. When previously mines looked for advice on how and where to start the journey, today many have already implemented initial solutions, and want to expand their reach into larger penetration opportunities.

In the phased approach so familiar to energy consultants, many of BBA’s clients have reached the second stage. “We’re still at a growth and exploratory period when it comes to renewables, but we’re reaching a second era where a lot of the mines have demonstrated that low penetration is possible, and now they are inching into deeper waters,” he says.

Of the mines that are still in the development stage, many are very ambitious, willing to install a high amount of renewables, and

Essakane. Picture Courtesy BBA 14

there, BBA becomes a guide, reminding them of what they can realistically achieve without compromising the electrical network’s reliability. “It’s important to learn about your network before altering it with renewable technologies,” comments Castonguay. “Depending on the life of mine, it sometimes makes sense to do it over multiple years and ramp up production and electrical generation as you build up confidence.”

“If you look at Raglan’s recently commissioned second wind turbine for example, that was done in a stepped manner: the first turbine was installed, they saw some positive results, and then they went for the second,” he adds. “By doing that, they were able to minimise risk and not find themselves in a stage where there’s impact on mine processing operations.”

According to Castonguay, this growth and

100% RENEWABLES

change in interest comes from a number of success stories emerging from industry pioneers, who have achieved renewables integration without hindering operations, and with positive results. “It’s generating much more widespread interest, and investments are easier to justify because you’re not the first guinea pig, there’s been a few before you, and they are showing some positive outcomes to the general market,” he adds.

CAPITAL VS. OPERATIONAL SAVINGS Still, a number of issues are hindering largescale progress, namely financial and technical. Financially, Castonguay explains that investments that are highly dependent on subsidies, and that while commodity prices are currently quite low, construction costs remain high, mostly because mines are usually so remote that shipping and labour are expensive.

“We’re still seeing to some degree a hope that installing renewables can help drive down capital investment by reducing the amount of generators that need to be purchased,” he says. “But right now, a full lineup of generators are still required, so capital investment remains the same. These investments are only affecting the operational side, driving the life of mine cost down by driving down annual fuel consumption and maintenance costs.”

In order to overcome those financial hurdles, Castonguay has seen mines leave renewables integration out of their initial plans in order to obtain financial backing to build the site. “They’ll get that financial backing with the necessary power generation installations, and then once they generate funds, they can self-invest into renewables for operational improvements,” he says.

“We’re still at a growth and exploratory period when it comes to renewables, but we’re reaching a second era where a lot of the mines have demonstrated that low penetration is possible, and now they are inching into deeper waters.”

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On the technical side, he explains that mines are still wary of losing reliability, for good reason. “With wind and solar, you don’t have the same energy quality that you would with energy generated from reciprocating engines,” comments Castonguay. “There is equipment that can be added to the network to deal with this, but those are costly which, again, affects the financial viability of your project.

So there’s a risk of affecting operations when you start digging into high penetration rates.”

At this stage, mines can couple these renewables with reciprocating engines, using proper spinning reserves or synchronous condensers, which helps but doesn’t achieve the ultimate goal just yet. If your renewable power is hydro, however, this problem doesn’t present itself, and you could power your mine with 100% renewable energy, observes Castonguay.

Meliadine. Photo Courtesy BBA 16

MEDIUM-TERM OUTLOOK With the speed of progress and maturing of renewable microgrid technology, Castonguay expects the next shift to happen within five or six years. “Already, it’s almost business as usual to put renewables on the table. A lot of the early-movers had a 10 to 15-year payback time, and they’ve been in operation for five or six years, so in the next few years, we’ll have a lot more proven financial results. Depending on how much these organizations share the benefits of their investment, I expect exponential growth in investment in another five to six years,” he says.

But to reach 100% renewable penetration, major installation cost reductions would need to happen to keep projects financially viable, and engineers would also need to tackle the loss of power quality experienced with wind

100% RENEWABLES

“It’s important to learn about your network before altering it with renewable technologies.”

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“If you look at Raglan’s recently commissioned second wind turbine for example, that was done in a stepped manner: the first turbine was installed, they saw some positive results, and then they went for the second.” and solar. “We might have the right technologies available, but in no way would it be financially possible to justify. We’re seeing cost reductions in commodities that are helping and over time will justify digging deeper, but it’s still difficult,” Castonguay points out.

One area that is showing promise is the research into small modular reactors (SMRs) - mini nuclear reactors that are being developed primarily within Canada for the mining market. “There’s been a lot of interest, government backing and development money put toward that, and it’s making some headway,” he says. While nuclear energy is not renewable per se, it is a no-emission solution that produces high-quality power, able to support mining operations.

“I think we’re still 15-20 years away from that, there’s still a lot of work needed to develop the technology and also, importantly, the social acceptance of nuclear, because it’s not necessarily seen as a no-risk operation,” Castonguay explains. “But should that technology take shape, it’s going to be very promising for mining operations, in particular those with power needs of 20 MW and up.”

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100% RENEWABLES

Meadowbank. Photo courtesy BBA 19

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