PEOPLE, PRACTICE & PURPOSE QUARTER 2 2015
INCLUDING:
SCM MINERA LUMINA: CASERONES COPPER CHILE
ÖBBINFRASTRUKTUR AG: KORALM HIGH SPEED RAIL
GENEA ANGOLA: CIMENFORT
EXPANDING EGYPT’S HORIZON
TEAM Editorial: Brian Jackson Susette Horspool Mark Mackay Production Karen Hue Jason Olayinka Arantxa Salas Cifuentes Arabella Sansegundo Mulero
Editor’s Note Brian Jackson
Research John Mills Joseph Philips
Editor
Welcome to this quarter’s edition of The Sustainable Business Review! Once again we have a magazine packed full of interesting content, featuring companies who are at the very peak of their game and demonstrating a clear desire to push the boundaries in terms of innovation , commitment , new product development , sustainability initiatives and corporate social responsibility. Our lead story is the next exciting phase of the Suez Canal development, which is an excellent example of how a government,which has a clear vision of how to improve dramatically the welfare of its citizens and the national economy, can work successfully and side by side with private enterprise to ensure the vision becomes a reality. You will also enjoy reading about Caserone’s Mine and the tremendous work they are implementing in terms of driving their business forward, as well as Enaex , First Quantam Minerals Zambia, MEC Panama , LGO , Hydromaule Chile , to name but a few. All in all you will discover senior executives across a wide range of industries, throughout the world, who maximise their experience, expertise and passion to forge ahead with strategy plans enabling their teams , the local and regional communities and the wider economy to benefit from economic progress as well as tangible sustainability and CSR policies. Our team at the Sustainable Business Review is proud to bring you these studies in what we call caring capitalism, showing how all sizes of companies from all parts of the world are able to manage a successful bottom line in a responsible fashion with an eye to long term environmental considerations. If you have a story you would like us to feature in our next edition, whether it be a supply chain initiative, a new business model calculation. An investment in a local school or a new and exciting contract which you have just won-we would love to hear from you! All the best for this quarter from the TSB Review team.
CONTENTS QUARTER 2 2015 SPECIAL REPORT:
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SUEZ CANAL
pROFILE:
18 32 38 50 58 70 80
CASERONES COPPER MINE OBB INFRASTRUCKTUR AG LGO ENERGY PLC CIMENFORT FIRST QUANTUM MINERALS LIMITED ENAEX HIDROMAULE SA
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EVENTS
EVENTS:
18TH BUILD EXPO AFRICA 2015 02 - 04 May, 2015 @ KICC, Nairobi Kenya Buildexpo Africa is the only show with the widest range of the latest technology in construction machinery, building material machines, mining machines, construction vehicles and construction equipment. At the 18th edition of Buildexpo, East Africa’s largest building and construction fair, we bring you exhibitors from over 35 countries who are the finest in infrastructure development. Find what suits you best from about 14.3 million business prospects during the three-day event, with over 10,000 products, equipment and machinery on display across an expanse of more than 10,000 square metres. Last year’s event witnessed international pavilion participation from India, Turkey, China, Italy, Malaysia and Germany. For its latest edition, Buildexpo Africa has seen a 25 per cent increase in demand for participation from international and local industry players. Visit : www.expogr.com
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SOLAR SUMMIT 2015 April 14 – 16, 2015 @ The Wigwam Resort, Phoenix, AZ. USA Now in its eighth year, Solar Summit is Greentech Media’s flagship annual solar conference that attracts leaders from across the solar value chain. Powered by the research and economic analysis of GTM Research’s team, this year’s agenda at Solar Summit 2015 includes thought-provoking panels, engaging debates among the industry’s top thought leaders, and an interactive polling session that will give you the opportunity to see how your opinion measures up against the experts. Visit www.greentechmedia.com
ASIA MINING CONGRESS 2015 25 - 27 May @ Suntec International Convention & Exhibition Centre, Singapore Asia Mining Congress is the leading regional mining investment forum for the Asian commodity market. Covering all of the strategically interesting commodities and with a focus on Asian markets, we showcase the best investment opportunities in the market today. VISIT WEBSITE: www.sustainablefoodssummit.com
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EVENTS
ANNUAL AFRICA ENERGY FORUM 8-11 June @ The J.W Marriot Marquis in Dubai The Africa Energy Forum (AEF) is the only international Forum focussed on power generation for Africa with attendance restricted to stakeholders (investors, consultants, developers, ministries, utilities, regulators etc.) from the power sector. AEF comes to the UAE for the first time to capture the massive potential of Middle Eastern investment, and to learn from a region that has successfully built its gas based economy into a booming global empire. With massive demand for power in Africa and international investors keen to fund power projects, this is the most established African power event that African governments and private sector attend year on year. As a result AEF has become the place to do business and meet new and prospective clients. Held in a different city each year, African Ministries, utilities and regulators return from across the continent meet and do business with prospective investors and power developers from Europe, Asia, Middle East, North America and South America.
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EXPANDING EGYPT’S
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SUEZ CANAL
HORIZON
Egypt is setting the precedent of creating a major, long-term growth project of some kind every century. This century’s national project is the widening and increased efficiency of the Suez Canal (Qanat as-Suways).
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THE SUSTAINABLE BUSINESS REVIEW Egypt is setting the precedent of creating a major, long-term growth project of some kind every century. This century’s national project is the widening and increased efficiency of the Suez Canal (Qanat as-Suways). Egyptian President Abdel Fattah el-Sisi started his announcement of the project in August, 2014 with a prayer, “In the name of Allah, the most compassionate, the most merciful. In the name of the great people of Egypt . . . “ and finished it by saying, “I hope that on this day next year,
God Willing, we celebrate the opening of the new canal.” Anticipating a massive increase in world trade, due to free trade agreements being worked out by Europe, the United States, and the Far East, Egypt is restructuring its sea level Suez Canal to enable two-way passage of giant modern container ships. As part of the project, the country is adding shipping services, manufacturing, tourism, and farming opportunities that will create long-term jobs for the Egyptian people.
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SUEZ CANAL This is not the first time Egypt has tried to connect the Red Sea with the Mediterranean Sea. Connection channels started way back in pharaonic times, in 1874 B.C., with Senausert III attempting to make passage for warships and stone transport from the Red Sea to the Nile River. That canal was abandoned due to silting, but was followed by more ambitious attempts by four subsequent pharaohs, then one by the Romans in 117 A.C., followed by Islamic Amro Ibn Elass in 640 A.D.
The first canal to actually connect the Red Sea with the Mediterranean, itself, opened for navigation on November 11, 1869. It was built by France, Egypt and Britain, in spite of political and economic difficulties with each other. Egypt nationalised the canal in 1956, suffered through twenty years of uncertainty and several closures, then reopened it in 1975. The Suez is now the longest canal in the world without locks at a length of 120 miles. It has comparatively few accidents even though transport is continuous, day and night.
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THE SUSTAINABLE BUSINESS REVIEW
Over the years,
Suez Canal has become one of the
WORLD’S most heavily used shipping lanes. Ships travel from trading centres in the Far East like Hong Kong, Singapore, and Malaysia west around India and up through the Suez Canal to reach European ports. Passing through the canal, a container ship travelling from Tokyo to Rotterdam travels 18,000 kilometres (11,192 miles), saving the 5,335 additional kilometres (3,315 miles) it would have taken to go down around the African Cape. The world’s most heavily used method of transporting goods is maritime shipping - more than
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SUEZ CANAL
The world’s most heavily used method of transporting goods is maritime shipping - more than 80% of goods, representing 72% of the world’s trade value, are transported by container ships. To accommodate the load, ships today average 51 metres wide (167 feet) and 365 metres long (four football fields), with nearly all of that space reserved for carrying cargo. Big ships can carry around 13,350 six-metre (20 foot) cargo containers. Giant dockside cranes stack them 18 to 22 high on the big ships, necessitating that ships have a deep draft. 80% of goods, representing 72% of the world’s trade value, are transported by container ships. To accommodate the load, ships today average 51 metres wide (167 feet) and 365 metres long (four football fields), with nearly all of that space reserved for carrying cargo. Big ships can carry around 13,350 six-metre (20 foot) cargo containers. Giant dockside cranes stack them 18 to 22 high on the big ships, necessitating that ships have a deep draft. The Egyptian government is initiating, designing, financing, and managing the current Suez Canal expansion project to open the canal up to accommodate these larger sizes. Egyptians have already contributed 80% of the £5.6 billion ($8.7 billion) estimated cost, in exchange for a 12% annual return on their investment. The expansion project has four main goals: To facilitate the increase in international trade, to provide essential services to international container ships, to rebuild the Egyptian economy (tolls are an importance source of Egypt’s income), and to give its people jobs for current and future generations.
EGYPT intends to become AN INTERNATIONAL LOGISTICS CENTRE, Quarter 2 2015 - The Sustainable Business Review
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THE SUSTAINABLE BUSINESS REVIEW Egypt intends to become an international logistics centre, increasing the daily number of transiting vessels from 49 to 97 ships by 2023. The project will streamline transit through the canal by simplifying and increasing the length of its two-lane section to 80 kilometres (50 miles) - 42% of the canal’s 190 kilometres (120 miles) length - and widening and deepening each lane to 24 meters (almost 79 feet). The rest of the canal will be deepened to at least 20 metres (66 feet).
hired instead of local ones, Admiral Mohab Mameesh, chairman of the project, replied that, “such companies own giant dredgers and huge capabilities that are not available locally, however, they shall work side by side with the SCA’s fleet of dredgers.” The new construction part of the canal project includes building dockside ship repair and refuelling facilities and massive container storage yards, allowing Egypt to provide
“History has witnessed the Egyptian’s ability to create miracles. The Suez Canal is one of those miracles … a contribution to human life.” The government has already signed contracts with two international consortiums to carry out the dredging work: One to the joint venture NMDC (Van Orrd, Royal Boskalis N.V.) located in Abu Dhabi and Jan de Nul from Belgium, and the other to the joint venture of Dredging International N.V. and the Great Lakes Dredge & Dock Company LLC. The 1st consortium is constructing a new shipping lane parallel to the existing one, while the 2nd consortium is widening and deepening the existing western shipping lane. Construction began in August, 2014 and will take one year to complete (2015). When asked why foreign companies were being
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essential services to the cargo ships that pass by its six ports. These facilities will also provide container moving, ship repair, fuelling, cleaning, and other jobs for Egyptian workers. To maximise benefits from goods being transported through the canal, the plan will build two industrial parks for manufacturing products - like furniture, glass, textiles, electronics, or cars - and providing valueadded manufacturing of base products shipped through the canal. Electronic communication centres may well be based here as well. On the eastern side of the canal, the project includes construction of miles of fish farming
What about polluted soils?
What about increasing emissions?
What about the rising sea level?
What about disappearing resources?
DEME N.V. Haven 1025, Scheldedijk 30 B-2070 Zwijndrecht, Belgium T +32 3 250 52 11 F +32 3 250 56 50 info.deme@deme-group.com www.deme-group.com
DEME has a leading position in a number of highly specialized and complex hydraulic disciplines. In the next decades, the world will be facing major challenges such as the effects of climate change and scarcity of resources. Through innovative thinking DEME is offering sustainable solutions in response to these future needs in various fields such as soil and sediment remediation, water treatment, coastal protection, development of green and blue energy, offshore dredging of gravel and sand, deep sea harvesting of minerals and creation of land in densely populated regions, ports and industries.
ALEXANDRIA Amreya, Km. 28 Alex-Cairo Desert Road Telephone: 0020 03 4541000 Fax: 0020 03 4481042
CAIRO 30, Lebanon St. El Mohandessen Telephone: 002 02 33004000 Fax: 002 02 33039648 Hotline19266
SUEZ CANAL facilities, with the intent of providing jobs for people in the Sinai and food for the world’s increasing population. Its water discards will be used to fertilise agricultural crops and animals, trees, and drought tolerant plantings.
Economically, with the increase in canal tolls ($130,000 per ship minimum), revenue from providing shipping services, tourism, and all the new jobs created, Egypt expects to increase its national revenue from $5.3 billion to $13,226 billion by 2023 - an increase of 259%. This is
To replace the homes of families moved out of construction areas, as well as provide homes for new workers moving canal-side from densely populated cities, Egypt plans to construct several residential and urban centres in the Canal Zone, the Sinai side of the canal, and neighbouring areas. Desalination plants will provide water for these areas.
a lofty goal. However, the canal’s expansion and its related projects was prompted, in part, by the complaints of the populace that the average person was not benefiting enough from Egypt’s economy. With the completion of the expansion, assuming the country can keep itself politically stable, that complaint should no longer be valid. Egypt could then well become an economic exemplar for other countries in the Middle East.
Environmentally speaking,18 scientists who signed the United Nation’s commitment to preserve the world’s ecological niche’s (Egypt signed too) have been worrying about the inadvertent transportation of organisms from the Red Sea to the Mediterranean ecosystem. Nearly 350 organisms have already crossed over and some have caused serious destruction of Mediterranean habitat over the years. In response to the worry, Executive Secretary of the UN Convention of Biological Diversity, Braulio Ferreira de Souza Dias, requested that Egypt conduct an environmental assessment to prevent foreign organisms from making that transit, still pending.
Indeed, Egyptian televisions are encouraging citizens to stay positive, declaiming over an inspiring theme tune, “History has witnessed the Egyptian’s ability to create miracles. The Suez Canal is one of those miracles … a contribution to human life.” (http://www.csmonitor.com/ World/Middle-East/2014/0917/Suez-Canal2.0-Egyptians-pour-savings-into-president-sambitious-project-video)
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SCM MINERA LIMINA COPPER CHILE
CASERONES
COPPER
MINE
Mining A Difference The Caserones Copper Mine in the Atacama region of Chile is comprised of an open pit mine. It produces copper in both cathodes and concentrates. According to miner SCM Minera Lumina Copper, it features six of the top ten largest copper mines in the world, illustrating the importance of copper mining to the Chilean economy. The geographic conditions at the Caserones Copper Mine are challenging to say the least; as
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with the other SCM Minera mining projects in the Atacama Region in Chile’s north east, Caserones is based in the Cerro Mansion, right in the heart of the Andes Mountains. This means altitudes of 4,000m, 100km winds and temperatures falling as low as twenty degrees below zero.
CASERONES COPPER MINE
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THE SUSTAINABLE BUSINESS REVIEW Despite these conditions, progress made at the mine has been remarkable. Generally, it takes 12 years for a mine to become operational once it has been earmarked; in the case of Caserones – despite the challenging conditions and a relative lack of labor supply in the region – this was cut to approximately 8 years, having begun preparations in 2006. In July 2014, the mines were formally opened. The process involved in bringing the mine to operation in such a relatively short timeframe by industry standards - and in such unforgiving conditions - was inevitably colossal. It involved removing more than 52 million cubic meters
the installation of a dump leach capacity for 300 million tonnes of leachable copper ore. Finally, the communications network included roads and even a tunnel for lamas. The technology installed is all post-2010, meaning that it is of the highest modern specifications. Perhaps the most innovative part of Caserones is how it maximizes its water usage efficiency; most of the drainage is recycled by the plant – management estimate that circa 80% of the waters used by the plant are recirculated by the plant, making it one of the most water-efficient mines in Chile, despite its location.
the most
innovative
part of Caserones is how it maximizes its
WATER USAGE EFFICIENCY; most of the drainage is recycled
by the plant – management estimate that circa 80% of the waters used by the plant are recirculated by the plant, making it one of the most water-efficient mines in Chile, despite its location. of rock and earth for the construction of the platforms and production facilities to be lifted in and the withdrawal of more than 3.4 million cubic meters of extra material for the pre-stripping sterile. Once the mine had been stripped of these unrequired layers, more than 24.4 thousand tons off mining infrastructure was installed. This included a 183km power transmission line of 2x220 kV to provide power, 95km of pipelines to bring water from the valley below as well as
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The region in which Caserones has experienced severe and prolonged droughts, raising understandable concerns about its water demands on the already stretched environment. Management at Caserones worked closely with local irrigators and farmers to improve water sustainability in the basin of the river Copiapó – including signing an agreement with the Board of Vigilance of the Copiapó to establish a second program of improvement and water management of the river and its tributaries.
THE CASERONES COPPER MINE
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VALKO
Chilean engineering and construction firm Valko has been in existence for more than 45 years. In this time, the company has company has grown into one of the largest companies in its industry. Its experience in this time has taken in a huge number of projects, encompassing: • 23,000,000m3 of external excavations without explosives • 2,500,000m3 of external excavations with explosives • 23,000,000m3 of compacted fill • 3,000,000m3 of cover produced • 1,500,000m3 of leach heaps in mines • 10,000,000m3 of asphalt paving • 650,000m3 of structural concrete • 50,000m2 of buildings constructed Crovetto July, manager of concessions and mining of Valko, says: “In each of the business areas we operate in, we apply the highest standards of quality to achieve a high level of customers satisfaction. “ This is evidenced by the Quality Management System that the firm has implemented for all of its projects.
The example of water management in the area is just one area in which there were political, economic and social factors that came into play. From the very outset, the project needed to sustainable in order to convince stakeholders (business, community, authorities, suppliers, shareholders) that it was worth undertaking and could create value for all concerned. This was a process that began in 2006 when the mine was conceived. Indigenous communities are invariably a consideration to be taken into account with any
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Valko’s commitment to quality has brought it large government and private clients. Mr. Crovetto continues, “We have a long history in the market that has allowed us to accumulate expertise in different fields as 18 million cubic meters of excavation outside with and without explosives, more than 15 million cubic meters of compacted fills, 1.5 million cubic meters production of cover and install foil to leach, 10 million square meters of pavement asphalt, 650 thousand cubic meters of structural concretes and 50 thousand square meters of building" Some of Valko’s most important mining projects have included the external wall at Minera Los Pelambres and the production of the leach heaps at Radomiro Tomic (Codelco Norte). Currently, the firm is developing roadwork projects for the Nevada Mining Company (Barrick), including the construction of 106km of road through Punta Colorada and 11 kilometres of covered piping to the Caserones copper mine in Chile, owned by SCM Minera Lumina. www.valko.cl
CASERONES COPPER MINE project of this size in Chile and elsewhere. Under ILO Convention 169, Minera Lumina opened dialogue with these communities early on in the process At that time, Lumina possessed just a small team of specialists working in the area. As soon as the sustainability of the project was confirmed, it was a matter for the firm at large to establish an ongoing dialogue, credibility and confidence with the neighboring community. At the core of this is the Charter of Values for Minera Lumina, which outlines the firm’s commitment to both people and the environment. In dealing with the commune of the Tierra Amarilla, the
environment within and surrounding the project site. Through these efforts, we will not only pursue profit, but also strive to be a good neighbor to the local communities by proactively communicating with them.” The ongoing success of the mines is testament to a combination to both the engineering that was involved in construction and the holistic approach mentioned above. The process goes as far as Minera Lumina requesting its suppliers (among them mining giants like Arcadis and Siemens) contract local employees and where possible, source local goods and services. Given the size
Nelson Pizarro, CEO of Minera Lumina has noted, “In undertaking this project, we will implement the COMMUNITY MANAGEMENT PROGRAM, WITH THE THREE PILLARS OF WATER MANAGEMENT, TRANSPORTATION SAFETY, AND REGIONAL EMPLOYMENT. WE WILL ALSO BE FOCUSED ON PRESERVING THENATURAL ENVIRONMENT within and surrounding the project site. local community, Minera Lumina created based on four broad lines of collaboration: promotion of employment, road safety, water management (as discussed) and social development. As Nelson Pizarro, CEO of Minera Lumina has noted, “In undertaking this project, we will implement the Community Management Program, with the three pillars of water management, transportation safety, and regional employment. We will also be focused on preserving the natural
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Generating Solutions... CREATES CUSTOMIZED INNOVATIVE AND STRATEGIC SOLUTIONS Our focus is the project’s success, based on our methodologies, resources and fieldwork experience.
CASERONES PROYECT
ASSURANCE PLAN DEVELOPMENT FOR THE PROJECT’s GO LIVE AND IT’S ROLL-OUT TO OPERATIONS.
www.rippconsulting.com business@rippconsulting.com
RippConsulting S.A Creates value for its customers through strategic and sustainable operational solutions, customized and with high quality during the implementation. For the Minera LuminaCopper Chile’s Caserores Project, we develope the assurance plan for the project’s start up and transition to operation www.rippconsulting.com S.AReview - Quarter The Sustainable Business 24RippConsulting
2 2015
THE CASERONES COPPER MINE
of some of the contracts, this has the potential to provide considerable benefits to the vicinity. In 2013-2014 alone, the amount paid to contractors of Atacama, where Caserones is based, was in the region of half a billion dollars. This included work in electrical fitting, construction, equipment rental, water treatment, maintenance of the flora, fauna and archaeological sites and more. Likewise, other major contracts such as those for transport were agreed with regional companies ensuring investment remains in the area as much as possible. Transparency would seem to have been maximized as much as possible at Caserones; firstly, because as a publicly listed company, Minera Lumina needs to be governed in a
manner befitting of a large CSR-friendly mining firm; and secondly, thanks to the manner in which contracts have been dispersed among as wide a variety of companies as possible – ensuring no one company achieves too large a share of the bonanza. The $511m mentioned above was divided into 87 contracts between 56 companies, for example. Likewise, a further $14m of smaller contracts were divided into 277 orders for 146 companies. These contracts took in everyone from local catering firms to DHL Global Forwarding (Chile) S.A., which handled all logistics associated with the project, Chilean firm Poch Ambiental, which provided facilities for the project’s mining trucks, and construction firm, Constructora Con Pax S.A., which was responsible for various facets
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The 14% Of Global Emissions of
Greehouse Gasses Are Caused By The Transport Sector. As a leading logistics company, DHL has a special responsibility in the global fight against climate change. That’s why DHL aims to improve its own issue, and their subcontractors generating efficiencies with its GoGreen program Deutsche Post DHL being the first major company to set itself CO2 reduction targets. Taking the company’s carbon footprint for 2007 as the baselien, the aim is to improve CO2 efficiency by 30 percent by 2020. DHL Global Forwarding share this initiative with its customers, as was applied in the CASERONES Project, SCM MInera Lumina Copper Chile, the first mining project in Chile under the integrated Logistics mode “Door to Door” service.
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THE CASERONES COPPER MINE
of the project, including operations involving the llamas, the water re-circulation system and sand tank houses. The company has also sought to train marginalized and the unemployed in various mining techniques so that they can benefit in terms of employment from Caserones. In an area which has traditionally been one of Chile’s unemployment blackspots, jobs are now being created. Approximately 55% of the company’s own operators are native to the Atacama region. The trend is maintained when new employment is offered.
Chile is a world leader in mining and this Caserones offers anyone a good example of why
that might be the case. Combined with rich natural resources, the country – through companies like Minera Lumina – is pushing industry standards to new levels through experiences in developing large scale projects in hostile environments like that in the Atacama region. When Caserones was first mooted, the price of copper was on an exponentially upward slope, reaching output of nearly $100bn at one stage but now possesses a future that looks considerably more volatile. Chile is perhaps in a better position to fend off economic headwinds with vast potential for grand scale mining in molybdenum, lithium, iron and even silver. Regardless, the future for Caserones will continue to be challenging, with falling copper prices, tougher laws on minerals and increasing shortages of water, but the firm behind the mine has already overcome all manner of obstacles. The mine has a predicated lifespan of 28 years and given the obstacles which were overcome to bring it to operation, who would bet against it reaching that milestone?
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ÖBB Infrastruk
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OBB INFRASTRUCKTUR AG
ktur AG Takes Careful Approach to
KORALM
HIGH SPEED RAIL PROJECT
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THE SUSTAINABLE BUSINESS REVIEW
IN 1994, one year after formalisation of the European Union, the new EU government recognised the need for a strong transportation network across Europe. They anticipated that the network would promote stability in Europe, economic expansion, and sustainable mobility.
To that end they developed a basic plan (expanded in 2004) that included an extensive railway network built by member countries. Ten years later, a bottleneck had developed on the Baltic-Adriatic Axis (BAA). The entire line had already proven to facilitate economic growth in Eastern Europe, from Italy up to the north coast of Poland, while also enabling connection to Russian railroads. Therefore, removing the bottleneck, located on the Koralm Railway in south eastern Austria, was critical. And since the new line would run through the Austrian Alps, environmental sensitivity was also critical. Since Austria joined the EU in 1995, it had become the 12th richest country in the world and took pride in its burgeoning green economy. In 2008 alone there were 2,000 new green jobs created, and Styria
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OBB INFRASTRUCKTUR AG
AUSTRIA HAD ACQUIRED THE RICHEST
concentration of clean-tech companies in Europe. Province in the south east of Austria, was home to more than 150 clean-tech companies, including 12 world leaders, which collectively brought in €2.7 billion (US$2.9 billion). The bottleneck was in Styria Province. Rather than upgrade the existing rail line, Austria decided to create a new high speed rail line south of it that would include the country’s second largest city of Graz on its route. They conducted a feasibility study for the new line in 1995. In 2002 they prepared an environmental impact assessment. In 2005 the Koralm project was officially added to Austria’s federal railway construction plans and construction started in 2008. The entire project was designed and is being built by OBB Infrastruktur, a wholly owned Austrian government subsidiary, at an overall cost of €5.4 billion (US$5.8 billion). The new lines reroute the old railway from the north of Graz, through Graz, and west to connect to Klagenfurt. The project consists of 127 kilometres (79 miles) of double line
railway, including the 32.9 km (20 mi) tunnel with an emergency bay in the middle, and two railway stations, all wired for energy supply. The whole system will be operational by 2023, running at 200 kilometres per hour (kmph) or 124 miles per hour (mph), with a potential speed of up to 250 kmph. OBB Infra has been careful to include a number of environmental considerations in its construction plans.
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THE SUSTAINABLE BUSINESS REVIEW
ELECTRIC TRAINS
produce far
FEWER
CO2 EMISSIONS
than any other method of transportation.
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The Austrian government measures rail emissions at just 4% of local truck traffic and 12% of car traffic. It anticipates the new rail line to take an additional 18 million tons of truck traffic off the road, 20-30% of car traffic off the road, and to be competitive with air traffic along the BAA route. The project’s two railway stations are designed to flank the Koralm Tunnel - the Western Styria IC Station on the east and the Lavant Valley IC Station at the western end. Both stations have Park & Ride facilities planned, as well as facilities to receive future regional bus lines. The Lavant Station is being built to support 42 passenger trains and 86 freight trains per day, with a capacity for up to 200 trains per day. It serves as the current base of operations for construction.
OBB INFRASTRUCKTUR AG
THE COMPANY ALSO TOOK STEPS FOR
BIRD
PROTECTION, reducing and monitoring construction noise, directing lights carefully, and placing coverings over welding areas. They are carefully monitoring local woodlands and they’ve set up water monitoring stations, the results of all of which are fed into an extensive database.
To design the actual project itself and make sure it was acceptable, OBB Infra included input from each local community along its route, including political representatives, local authorities, interest groups, citizen action groups and NGOs. In response to community concerns, OBB diverted, rebuilt, and restocked a stream affected by the railway as a pilot project. Fish populations are already higher than before, so the same practice will be followed with other streams.
To design the tunnel route through the Alps, OBB used GIS readings combined with core drills, to determine the nature of rock strata, radial deformation, the location of fault lines, and mountain water conditions. They conducted 130 core drills and mapped over 4,000 streams, springs, and wells.
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Because the water table is shallow and the Koralm Tunnel will be built under it, there is a high risk of water seepage and resulting damage of tunnel walls. The water was tested to find a composition material for the walls that would be resistant - a dense layer of high pressure concrete (gunite), lined with an inner water-proofing shell, with additives that would counteract the wearing effects of the groundwater. OBB designed a special double-wall system that would divert water to drainage pipelines between the tracks, from which it will be tested, depolluted, and released into local waterways. The tunnel will also be lined with noise absorbing materials and fit with air ventilation shafts.
Outside the tunnel, construction noise is measured and minimised. Construction crews use low emission vehicles and machines to reduce air pollution, sprinkle roads and excavation areas to minimise dust, and transport dirt and rocks via enclosed conveyer belts to where it can be sorted and reused. A special sorting procedure ensures that all but 10% of the dirt and rocks dug out of the tunnel and elsewhere can be reused. Whatever material cannot be carried via the conveyor belt is transported by train, not trucks, thereby minimising CO2 emissions further. All of these actions are monitored by GIS and all data inserted into an information website accessible by project participants. The tunnel will also be supplied with an extensive telecom system that includes emergency call boxes, video surveillance, loudspeakers, air current control, fire alarms, radio communications for train control, a cable system for public communication, signalling and tracking systems, and automatic emergency detection. All of this, plus the tracks themselves and the two train stations, will be fuelled primarily by renewable energy sources.
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Once built and operational, the new r cost savings from lower accidents, as 0.1-0.3% per year, including the neig the Baltic Sea to the Adriatic and ba European Union.
OBB INFRASTRUCKTUR AG
railway should result in a sustainable economic increase of 0.3-0.6% per year for Styria Province, including ssuming it follows past trends. The line should also support an increase in the entire region’s economics of ghbouring areas of Slovenia, Slovakia, and Hungary. And it will facilitate a smoother flow of rail traffic from ack, and from Russia to both areas, further enhancing the economic benefits originally anticipated by the
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LGO ENERGY PLC
DELIVERING
GROWTH LGO currently has two fields in Trinidad: the Icacos Field, which was their entry point into the market several years ago, and a more recent purchase, the Goudron Field, which has become the company’s cornerstone asset in the past two years. The company’s remaining wells are located in Spain at the Ayoluengo Field. The Goudron Field is somewhat iconic in Trinidad. It had about 150 wells drilled between about 1927 and 1990. Through new drilling technology, LGO has been able to reuse several of these: at the moment, they’re producing about 60 to 70 of the old wells in total. Last year, they drilled 8 new wells in the field. They’re new not only because they’re in parts of the reservoir which had previously not been drained, but also because the technology of drilling has moved on substantially and so they’re drilling wells which perform far better than the old wells ever could have done.
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LGO ENERGY
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LGO are constraining production levels at Goudron to get the best long-term production management with some suggestion that the recent fall in oil prices has played its part.
OILIS RITSON NOTES,
“
A CYCLICAL BUSINESS, SO YOU ALWAYS PLAN FOR THE NEXT DOWNTURN AND THE UPTURN AFTER THAT.” LGO plays a long-term commercial game which seeks to keep overheads down to avoid the impact of downturns. Because of the manner in which the Trinidad wells are so concentrated, LGO is able to maintain a very low-cost operation. The old wells are “tied back,” meaning there are flow lines back to the production facilities. It’s a simple, compact facility that needs very few people to run it. It’s not as if they’re trying to produce a lot of oil to cover a fixed overhead. Thus, the company has been able to maintain its low overheads but it hasn’t always been straightforward. The Trinidad wells are a jungle operation and access is difficult. They don’t just drill one well per location but rather several wells near to each other. This has involved developing
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LGO ENERGY special pads to hold the rig while it drills the wells sequentially before being moved out again. Two such pads are being built at the moment and are expected to be ready in early April, at which stage the drill rig will be returned to the field. The firm then plans to drill deviated wells from the pads to new points in the reservoir where they know there hasn’t previously been any oil drained. Their reservoir management philosophy is not to produce the wells too rapidly and to make sure they don’t produce water or sand – both by products of excessively rapid production. The sandstones in the area where the drilling is based are sensitive, meaning that if they put too much pressure on them, they can draw in sand to the well bore. LGO is careful to manage those two issues and ensure that the production is as high as it can be, consistent within those parameters. Likewise, the water which is returned to the local environment has to match the chemical balance there. In 2015, the company plans to drill seven more wells in Goudron and continue to work to improve production at its Ayoluengo field in Spain, together with further work the adjacent exploration acreage.
LGOis
committed to using environmentally friendly methods which exceed the requirements of the local government, which has granted it an extendable license for up to 30 more wells. The company has been able to achieve all this at the same time as sourcing equipment through the local supply chain and employs exclusively Trinidadian nationals there. It may be that oil prices might not rise for some time, but by maintaining low overheads, using environmentally sustainable practises and innovating where ever possible
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LGO ENERGY
TBSR Q&A WITH
NEILRITSON
1. Outside of Oil and Gas,
which industry do you most admire and why? ANS: Oil and gas is a high technology business, a fact which is often overlooked by outsiders, and therefore we have to look to other hi-tech sectors to get insights. Of late it has been hard to ignore the rapid growth in the telecommunications industry and the consumer electronics that have followed – especially smart phones and tablets - where the rapid growth in capability has driven retail products. How we harness this potential in other business sectors is of great interest just now.
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LGO ENERGY
2.WHAT HAS BEEN YOUR BIGGEST BUSINESS
CHALLENGE TO DATE? ANS:I could look back to major development projects in BP or to resolving the Regal title dispute in Ukraine, but more recently in the small cap world the biggest challenge is always funding the growth business. This is never more difficult than when the oil price turns south and investors flee the sector. Picking the right sources of capital and using them intelligently is key to all successful small businesses. Remaining low cost keeps this challenge more manageable. Oil price is a cyclical so always plan for the next down-turn.
3.WHEN RECRUITING A SENIOR EXECUTIVE TO YOUR TEAM, WHAT ARE THE MAIN CHARACTERISTICS YOU LOOK FOR?
ANS: Number one factor is the cultural fit of the individual to the company’s core values. Obviously we need people with the capability to do the job and to grow into an enlarged role over time. But much more fundamental is how the person will interface with the value set of the existing team and how that drives performance. If the new executive doesn’t share the core values of the organisation then there will eventually be a problem down the road.
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4.WITHIN BUSINESS,
WHO OR WHAT HAS BEEN YOUR
GREATEST INSPIRATION? ANS: This is a relatively easy one. At BP I worked for many years with John Browne, now Lord John Browne of Madingley, and John’s grasp of business was quite exceptional. For a number of years under John’s leadership BP was very much at the forefront of business innovation and performance. There was a very good reason why John was Businessman of the Year, and it was highly instructive to work in the organisation under his direction.
5.
FOR SOMEONE STARTING OUT IN BUSINESS, WHAT WOULD BE THE STRONGEST PIECE
OFADVICEYOU WOULD GIVE THEM?
ANS: The two things that every new startup needs are a clear vision and masses of perseverance. Nothing will come easily, if it does then you have either the one of the one-in-ten-thousand new businesses that has hit the miracle combination or more likely you have not seen the crash coming. The one thing that you must avoid at all costs is litigation. The courts only hand out judgments, not always justice, so no fight is worth the distraction from the business you are trying to build. Always find a way to settle without court litigation and then let it go and move on.
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LGO ENERGY
BIOGRAPHY Mr. Ritson holds a Bachelors degree in Geophysics. He has worked in the energy sector for over 35 years, initially with BP plc, where he held the roles of International Chief Geophysicist, Head of Geoscience Research and Business Unit Leader for both Norway and Alaska Exploration.
NEILRITSON
Subsequently Mr. Ritson managed the international operations of Burlington Resources Inc. and more recently he was CEO at Regal Petroleum plc before founding the Vanguard Energy Group where he was Chairman and CEO. Mr Ritson is an Executive Director of Solo Oil plc and Managing Director of NR Global Consulting Limited. He is also Non Executive Director of Enovation Resources Limited, a Bermudan registered private company active in the UK North Sea. Mr Ritson is a member of the Audit committee. Quarter 2 2015 - The Sustainable Business Review
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CIMENFORT:
Cementing Angola’s RECONSTRUCTION
S
ince the end of its long, destructive civil war in 2002, Angola has been working to rebuild itself, with a national development plan based on three pillars: Stability, growth, and jobs, all contributing to sustainable development. The new government developed oil and diamond industries, built new infrastructure, and invited countries all over the world to help. In 2005 UNICIF, after discovering that 60% of
Between 2001-2010 Angola’s GDP rose an average of 12% per year. All of this reconstruction aided development of a new middle class with additional requirements for infrastructure. Foreign companies looking for ways to benefit from the growing economy started a number of subsidiaries there, one of which was Brazil’s Genea Angola Group, which brought its real estate expertise fairly early on.
“Based On Principles Such As Ethics, Respect And Transparency, And A Result-Driven Philosophy Our Group Brings To Angola A Better Place To Live,” Genea Angola States On Its Website.
Angola’s population were now children, started a “Schools for Angola” initiative to repair or build 1500 schools. In 2006 Angola rehabilitated 105 national roads and several bridges to the tune of $162 million. That year workers and companies from China started building new housing, hospitals, shops, and a utilities infrastructure. In 2012 Angola rebuilt the railroads, at a cost of $3.3 billion.
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“Based on principles such as ethics, respect and transparency, and a result-driven philosophy our group brings to Angola a better place to live,” Genea Angola states on its website. To ease the flow and reliability of materials in Angola’s new economy, Genea Angola made a substantial investment in 2005 by designing their own cement plant.
CIMENFORT
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THE SUSTAINABLE BUSINESS REVIEW Cimenfort Industrial Lda. was inaugurated on August 22, 2012 in Catumbela, Benguela Province outside of Luanda. It was especially positioned to meet the growing cement needs of Angola and its eastern neighbour, the Democratic Republic of Congo (DRC), which was also showing a growing need for infrastructure. The company was built right next to the country’s main transportation rail line. (Benguela Railroad connects the west coast’s Lobito Harbour with the DRC’s border in the east, more than 1200 kilometers away.)
Project Manager, Guilherme Paiva, stated in an interview in February that, “Cimenfort was created to meet the market demand and help on the country’s reconstruction effort.” Angola’s demand for cement is estimated to be 6 million tons per year (2013) and growing at around 8% per year, according to Its Minister of Geology, Mining, and Industry, Joaquim David. In order to meet the demand, Cimenfort needs supplies and workers with the right kind of expertise to help it function well. With the entire construction
ANGOLA’S demand for cement
is estimated to be 6 million tons per year (2013) and growing at around 8% per year
Cimenfort’s managers are aware they are not just there to make and sell cement. They see themselves as contributing to the building of a better Angola, which includes providing jobs, training skilled workers, and increasing the quality of construction in the region.
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industry still new, Cimenfort keeps an eye out for the emergence of high quality, dependable local suppliers and good workers. It currently uses two local companies: Nova Sotecma for tools, and Estpor for electrical services.
The rest of Cimenfort’s supplies and expertise come mainly from two other countries. To acquire bulk materials that allow operations to remain steady day to day, Cimenfort uses a company in South Africa - IMI Europe. For specialised engineering services and machinery, Cimenfort goes to Germany, with companies like Siemens
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and KHG (Humbolt Wedag) that are known world leaders in the cement industry. For steady, reliable production, it’s also important for Cimenfort to have skilled workers, who can keep the machines functioning and output flowing. Currently 85% of Cimenfort’s workers are hired locally, but its most skilled workers and managers come from other countries. This is not unique to Cimenfort. Palva says that local building construction companies “. . . so far have to rely almost entirely on expensive foreign manpower to be able to deliver the required service for the industry sector.”
Cimenfort, however, wants to decrease reliance on foreign staffing, so the company started training its own workers in specialised skills internally. In addition, it teamed up with local technical schools to hire their best students as soon as they graduate. The company’s goal is to decrease its foreign staff from 15% to 10% by 2020. The company is also contributing to Angola’s long term sustainability by aiming to produce enough cement in quantity to meet the country’s needs (so it doesn’t have to import), and by raising the quality standards of typical African building materials, so structures last longer.
CIMENFORT, however, wants to decrease reliance on foreign staffing, so the company started training its own workers in specialised skills internally. In addition, it teamed up with local technical schools to hire their best students as soon as they graduate. The company’s goal is to decrease its foreign staff from 15% to 10% by 2020.
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CIMENFORT
As the country’s needs grow, new opportunities allow Cimenfort to grow. Whereas Its first focus was to get itself operational - to organise well, train workers, establish a supply chain, and recruit initial buyers the next stage is expansion. Cimenfort started out two years ago (2012) hiring 150 workers and using two ball mills to produce about 700,000 tons of cement per year for local construction. The company contracted at that time with German KHD (Humbolt Wedag) to supply a roller press for pre-grinding, which is planned for installation in June, 2015. This will double the plant’s production capacity to 1,400,000 tons per year, helping to satisfy Angola’s annual demand of 6 million tons. To meet the increasing demand in quality, Cimenfort developed a specialty cement called Slag Cement. This cement complies with the specialized ASTM and EN standards required for two of the projects the company supplies - the new Lobito refinery project and the upgrade of Cambambe Dam. Thanks to companies like Cimenfort, in 2014 the country recorded a 42% drop in cement imports. In 2014, also, the country enacted a new customs tariff to further discourage imports and support domestic production. In 2015 Angola signed a $13.2 million contract to build a glass processing plant, which will join an existing ceramic tile processing plant, limestone production, and Cimenfort’s own cement production in the country’s budding construction industry, further enabling Angola to meet its growing infrastructure
Where will
CIMENFORT GO NEXT? Palva Says, “Cimenfort Is Not Only Committed To The Angola Reconstruction, But With African Development. We Have Plans Ongoing For Another Grinding Station In Angola And Two In Other Neighbour Countries Over The Next Four Years.”
demands.
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“International Materials Inc. (IMI) works closely with suppliers and customers to uniquely develop high-value, custommade supply solutions that best fit our customers’ needs. IMI always commits to service excellence, thereby becoming the supply partner of choice to support our customer in their growth.”
CIMENFORT
Project Manager, Guilherme Paiva, stated in an interview in February that,
‘CIMENFORT
was created to meet the market demand and help on the country’s
reconstruction effort.”
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FIRST QUANTUM MINERALS LIMITED
FIRST QUANTUM MINERALS LIMITED
SETS AN EXAMPLE IN
AMBIA Quarter 2 2015 - The Sustainable Business Review
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The first, the Kansanshi mine, is the eighth largest copper mine in the world. Its two pits, located 10km north of Solwezi, together produced 270,724t of copper and 167,395oz of gold in 2013. A planned expansion to increase its production capacity to 400,000t of copper is awaiting final approval. Its expansion has already involved two phases, a first phase which increased its oxide circuit capacity by 20% to 7.2 million tonnes, allowing them to easily switch between mixed and sulphide circuits, and the second phase which increased the annual oxide treatment capacity to 14 million tonnes. Phase three involves a SAG grinding mill circuit for treatment of primary sulphide ore. Meiring Burger, also notes that another landmark for the firm is the addition to the mine of a smelter, which just recently produced its first anodes. Its annual production capacity is 1.2 million tonnes of concentrate that can be smelted. This would be noteworthy in itself, but it’s also the first time that First Quantum has taken on a smelting operation. They’re using state of the art technology, which the firm invested around $850 million in. There are several advantages to this for the firm, notes Mr. Burger. For one, there currently isn’t sufficient smelting capacity in Zambia so First Quantum has been stockpiling concentrate production over the past few years. High export taxes make it unprofitable to sell on to foreign buyers but by smelting it to anode, the firm can sell it into the market, dropping unit costs and creating a new revenue stream. In addition it produces sulphuric acid from off gasses, which is consumed in the oxide leach circuits of the Mine’s processing plant. Acid is a significant cost when bought in the market or made by sulphur burning, so another significant saving to be had. The second mine, the Sentinel copper mine, is located approximately 150km west of the Kansanshi operation and is expected to produce between 280,000t to 300,000t of copper each year when it is completed later this year. The total capital costs are expected to reach $2.1bn when the cost of adding a nickel processing plant is taken into account.
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First Quantum Minerals is a
MINING AND METALS COMPANY
which was founded in 1983 and currently has 12 projects under various stages of development worldwide. Two of these are currently in the ongoing development: the Kansanshi and Sentinel mines in the north west of Zambia.
FIRST QUANTUM MINERALS LIMITED
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FIRST QUANTUM MINERALS LIMITED Needless to say, such an operation is quite an undertaking on several levels, not least in an underdeveloped economy like Zambia. Contractors included an international cast of engineering and technical equipment firms ranging from Kone Cranes and ACTOM Power Transformers to FLSmidth and CSA Global. The two mines together represent a total investment of close to $3bn. In a country unaccustomed to such huge one off FDI investments, there is always potential to lose some of the typical knock-on benefits of FDI (jobs, infrastructure development, etc). However, those same knock-on benefits and CSR initiatives played a core part of the overall strategy at the Sentinel mine.
FIRST QUANTUM’S PRINCIPALS FOR
CSR
ARE BASED ON
COMMUNITY
INPUT.
“There is no point building a white elephant that won’t get used, so we conduct regular needs assessments in the local villages to understand requirements. Ideally the community should also contribute in a meaningful way, such as planting the grass for their school fields where the company has levelled the pitch, so that local peoples feel part and parcel of the future of their area. Similarly our CSR is slanted towards the key areas which gel with business imperatives, such as education, healthcare, infrastructure and training and local business development.” Inclusion was an important part of the overall CSR strategy. Tristan Pascall of First Quantum told John Mills of the Sustainable Business Review, “there were people here before and we’re very conscious that if they stand outside the gate looking in, they need to feel that they have access towards training for possible employment and some advancement because of the projects arriving into the area.
Inclusivity THE INCLUSIVITY THAT PASCALL TALKS ABOUT IS TANGIBLE. The North Western Province where the First Quantum mines are located was something of a forgotten area in the decades since Zambia’s independence. Unemployment was high and the skill base was low. When the mines are fully operational, Pascal estimates that around 90% of the workforce will be Zambian, many from the local province.
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A
FIRST QUANTUM MINERALS particular emphasis is also placed by the firm on the inclusion of women. Meiring Burger notes how, during school visits to the mine, girls are shown that there are positions for women in a mine, where traditionally it may have been perceived as a male-only environment. Women are employed at the mines in a number of roles, in a society where teenage brides are all too common.
In addition, the Sentinel mine took on an extensive relocation exercise for local communities located close to the mine. This has been a consensual process and at the time of writing, is nearly complete. In all, some 640 households were moved to a choice of two new areas, further from the mines, with better infrastructure and easier access to either the town or their farms. Before the settlement, in many cases farmers were walking 20km back and forth to their farms every day. Pascall notes, “We did that in a very sensitive manner in that we retained a lot of their traditional structures in terms of the location of individual households relative to their family groups and the community headman and so on. Even though they’ve moved, we’re conscious that livelihoods are improved so we’ve introduced programs such as a conservation farming package. I think we’re up to a 1,000 farmers on that program and on average, we see around a 250% increase in yields that the farmer can deliver from their fields. “ In addition, the fact that there are now many locals employed at the mine that a micro economy has grown up in the area: the farmers’ extra produce can now find a market with miners who have money to spend, which in turn creates a more liquid market for other goods and services. Casava – the local crop – has also improved its output and we are hopeful that it will find new markets such as for sale to the mine processing plant as starch feedstock.
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Healthcare An unfortunate trend which is prevalent among new mining enterprises in under-developed countries is that the AIDS virus rises in line with the new influx of temporary workers. The mine at Kalumbila has seen a welcome curb in this growth. As Pascall points out, “health-based studies in 2010 show that the prevalence (before First Quantum arrived) was 2.7% and the prevalence now is still under 3%. We obviously hope we can maintain this good record into the future operations of the mine” Malaria presents another serious health issue in Zambia. To date, First Quantum has protected over 6,300 houses around the Sentinel mine with spray and anti-mosquito nets. There’s been an emphasis on providing education and knowledge in preventative health in tandem with that for the business and construction training. At the end of 2012, it was the recipient of a “Business Leader in Zambia” award for its campaign work in malaria prevention.
Conservation The company has also been active in conservation. They have signed a five-year agreement for the protection of the West Lunga National Park and the Game Management Areas around it and maintain an ongoing dialogue with the Department of Forestry for two of Zambia’s largest forests, which they’re keen to see extended into a similar MOU arrangement. Housing and home ownership Less than 4% of Zambia is covered by leasehold title, and the country is short of perhaps 2 million housing units. Mortgage rates in Lusaka are between 2530% per annum, and loan tenure averages around 5 years. Consequently the housing market in Zambia is undeveloped. First Quantum has established a home ownership program, that subject to release of leasehold title at both Sentinel and Kansanshi, will allow employees to own their home. The program includes a subsidised loan rate of around 8.5% and tenure of
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FIRST QUANTUM MINERALS LIMITED
12-15 years, which greatly improves the affordability of housing for workers. The program is aimed at improving employees’ living standards, as owning the family home improves the likelihood of education within the family, increases the possibilities for starting new businesses and encourages savings for retirement.
Power lines into North Western Province As part of the planned developments (and included in the capital cost numbers) at Sentinel and Kansanshi, First Quantum is investing upfront $198 million in new transmission line infrastructure for the state power utility ZESCO Limited. The new double circuit 330kV transmission lines will close a loop on the established power infrastructure into Copperbelt and North Western Provinces, and provide redundancy to the system. ZESCO will repay 50% of the capital costs for the line from future power invoices to First Quantum. And
the lines will bring possibility of main grid connection to outlying villages in the area through the the Rural Electrification Authority.
Looking to the Future Buy-in for both the mines, as is typical, hasn’t always been easy but the social, economic and environmental indicators from First Quantum’s first years in Zambia are positive. They have established foundations, namely the Kansanshi Foundation and the Trident Foundation, whose aim is to continue a three-way discussion between the company, communities and government. It’s just another part of the holistic strategy that the firm have taken to their mining operations in Zambia. As Pascall says, “Our total CSR package to date at Sentinel without producing an ounce of copper or a dollar of revenue is in the order of $20 million including the resettlement program; we’re keen that when you come back here in 5, 10 or 15 years that there’s a legacy of good planning and good CSR activities which are aligned with both community and business imperatives.”
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Enaex
Ammonium nitrate, a natural-based chemical used extensively in agriculture, can also be used to make explosives. Enaex S.A. is the only company in Chile that manufactures it, selling it locally and internationally as a raw material for the production of several types of explosives.
Enaex is a world leader in the rock fragmentation industry, focusing on open pit and underground mine blasting. In addition to currently producing over 775,000 tonnes of ammonium nitrate per year at its Prillex Complex in Mejillones, the 95 year old Chilean company manufactures blasting
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ENAEX
x
SERVICE DRIVEN
products at two other plants and provides mining-related logistical services. It produces both low and ultra low density ammonium nitrate, and prides itself on developing innovative solutions that increase efficiency and safety in mining operations for its customers. As a result, Enaex has become the world’s third largest provider of low-density ammonium nitrate. In addition, in 2013 its exports of high-density explosives exploded, growing 26% in one year to US$16.6 million. Quarter 2 2015 - The Sustainable Business Review
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In spite of the fact that
AMMONIUM NITRATE can now be synthesised, Enaex has become the
WORLD’S THIRD LARGEST PROVIDER of low-density ammonium nitrate. In addition, in 2013 its exports of high-density explosives exploded, growing 26% in one year to
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ENAEX
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With every new acquisition, Enaex draws in new customers. According to Josefina Diaz, who heads the company’s sustainability department,
“ITS HIGH QUALITY, HIGH DURABILITY AMMONIUM NITRATE
is valued and demanded by major companies across the globe.” By 2014 the company owned five production plants and employed more than 1,700 people.
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ENAEX Enaex sells its products to over 40 countries worldwide, and has an operational presence in Chile, Peru, Colombia and Argentina. In Argentina it recently built a bulk emulsions plant, in Colombia a cartridge emulsions project, and in Brazil civil explosives and initiation systems through the company Britanite. Its Chilean plants operate in Mejillones, Calama and La Serena. With every new acquisition, Enaex draws in new customers. According to Mr. Juan Andrés Errázuriz, Enaex’s CEO, “Its high quality, high durability ammonium nitrate is valued and
demanded by major companies across the globe.” By 2014 the company owned three production plants and employed more than 1,700 people. Enaex was founded in November of 1920, but it wasn’t until the early ‘80s that the company started producing its own ammonium
nitrate, building Prillex América in Mejillones. This enabled the company to independently supply itself with the main raw material in its explosives. In 1993 Sigdo Koppers bought the company and built more production plants, expanding Enaex’s capacity to produce nitric acid and ammonium nitrate. In 2006 it applied for its first carbon credit project, eventually becoming Chile’s national leader in CO2 reduction and emission of carbon credits. The government of Norway now supports Enaex’s CDM projects, providing resources for continuing the projects and
financing community social projects developed by Enaex. In 2012 Enaex started reworking its image, updating its headquarters and developing a new working model based on innovation. In 2013 they started producing new innovative products, like Hidrex that controls slopes
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and buffer blast. They also recorded the highest sales in the company’s history, with a clear profit of US$93.9 million. That year the company captured 90% of the tons of explosives put out for bid in the Chilean market. Per Errazuriz, “Understanding client needs and maintaining a socially responsible vision are at the core of Enaex’s quest to become the world’s most prestigious supplier of high quality ammonium nitrate and rock fragmentation services.” This includes acting on climate change and sustainability issues.
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In Chile Enaex is recognised as one of ten leading companies in climate change management. The Chilean Ministry of Mining named them the “Chilean Company that Best Represents the Mining Industry,” according to Errazuriz. The most noteworthy of its sustainability initiatives resulted in an annual reduction of nearly one million tons of CO2. Enaex works hard to develop innovative new processes for its customers as well, in areas such as security, sustainability, and infrastructure. Fragmentation control, reduction of mining fines, stability of mine walls, and saving energy are all concerns
ENAEX
that Enaex works to improve in the blasting process. A change in its composition of high powered explosives, for example, created more finely fragmented rock, which then reduced energy needed downstream for crushing. Safety has long been a major concern in the mining industry, which in 2007 was valued at US$962 billion worldwide. Many of Enaex’s innovations are designed to increase safety, including its modification of blasting components, explosives powders, and machines like the new Milodón truck (produces explosives onsite) and the Blast Site Watch system, which customers like Anglo American, Escondida, Codelco, and Minera Los Pelambres allowed Enaex to test onsite. The CEO of Enaex Servicios, Edmundo Jimenez, says that Enaex creates a win-win relationship with its customers by keeping three main principles in mind:
1. Efficient operation and reliability in the manufacture and delivery of its own products and services. 2. Reducing the cost of extraction and processing for customers via innovation of new, more efficient supplies and equipment. 3. Helping customers balance income generation with safety needs, sustainability, and production efficiency. The company increased electrical selfsufficiency by 45% at its Prillex Complex by using surplus steam to replace energy from the grid. In 2013, after many years of working on safety measures, the company reduced its accidents rate to just 2.01, meaning an average of 0.02 days lost per worker - one of the lowest rates in the industry. Working toward the company’s own sustainability was a major contributing factor.
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Out in the community, the company holds regular meetings to gather feedback about the impact they are having locally. That information is relayed back to the company’s steering committee, led by Enaex’s CEO. There the committee seriously considers the community’s suggestions for positive improvement. Improved education is a constructive impact the company hopes to have on its communities. In Mejillones, the Prillex America plant offered an eight month internship for eight local students in 2013. “One of the company’s social commitments is to provide ongoing support for education and technical-professional training in the community,” states Jimenez. During the next 5-10 years, Enaex sees two main trends emerging in the industry, both of which will require innovation: An increase in the scale of operations of open pit mining, and the increasing depth of underground mining. Deeper mines, lower grades of ore produced, high energy costs, and greater sustainability requirements are all related issues Eneax is already starting to deal with. Jimenez believes that the company’s focus on innovation, of which it is justifiably proud, will help it meet these requirements, thereby furthering its position as a leader in the mining industry worldwide. He states, “In both ways Enaex is acquiring all the necessary know-how and partnerships for being well prepared for the upcoming future.”
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HIDROM
Run-of-River Plants Help Powe
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HIDROMAULE SA
MAULE SA
er Chile Through Energy Crisis
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Hidromaule, Inc., a non-conventional hydropower producer in Chile, sees
renewable energy technologies as a good thing for the country, with a continuing future for hydropower in the mix.
With the restriction of Argentinian exports of natural gas starting in 2006, the country had to quickly adapt to find an alternative power supply, throwing Chile into a severe energy crisis. First approaches to solve this crisis came through diesel powered plants, including the conversion into diesel of existing natural gas fired plants. At that time, no solar or wind alternatives were yet operating in the grid, and the system was lacking the expertise and data needed to develop these technologies. Investment costs were higher than other alternatives, such as hydropower or coal.
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Because of its natural and geographic characteristics, Chile has always been heavily dependent on hydropower technology. With the introduction of lowcost natural gas in 1997, however, developments of hydropower technology were practically stalled. Natural gas was priced at barely $US2 per MBTU, making hydropower plants noncompetitive. Once the grid matrix was forced to adapt to allow a higher share of diesel, existing hydropower and coal projects in the pipeline became slowly available again. The 2009 escalating energy prices, a five year drought, and the increase of diesel
HIDROMAULE SA for Chile, but not the only one. Chile has considerable potential for renewable energy production with its multiple river systems, the most irradiated deserts in the north, windy regions, and many geothermal possibilities all along the los Andes Mountains. However, the integration of new power alternatives in the system requires a revamping of Chile’s energy grid and energy legislation, which Hidromaule’s Business Manager, Jose Manuel Contrado, appreciates. In an interview this month, he described the government’s work to help new energy producers solve their PPA engagement for intermittent resources, via the regulated supply hourly bids. There is still a lot to be done with system coordination, increasing limited transmission lines, and solving the ever-present environmental concerns.
prices worldwide combined to provide new opportunities for the development of small hydro, solar and wind power projects. Chile also passed a non-conventional energy law in 2008, subsequently modified in 2013, that obligates electric companies to deliver up to 20% of all of their energy sales from renewable sources by the year 2025. The playing field immediately opened up from three main players to include many smaller ones.
Hidromaule, itself, is located in San Clemente, halfway down the length of Chile in the lower side of the Maule region. It was formed by the Italian green energy developer, Sorgent.e Group, and Austral Andina Company, a Chilean investment group, each owning around half of the company. So far the company has built three plants in the Maule region, each using water rushing downhill through irrigation channels to produce energy: Lircay, Mariposas, and Providencia.
The new renewables mix includes run-ofriver hydropower plants like Hidromaule, Inc. and Besalco Energía (introduced in the last issue). Hidromaule, Inc. is one of the pioneers of Non-Conventional Renewable Energy (ERNC) certificates in Chile. It has three plants operating in the Maule region, all run on irrigation canals. Run-of-river plants are one of the best renewables options currently possible Quarter 2 2015 - The Sustainable Business Review
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THE SUSTAINABLE BUSINESS REVIEW One of the biggest agricultural regions in the country, the Maule basin sports a vigourous irrigation canal system that feeds crops for near 2,200 farmers of the Asociación Canal Maule (ACM). With this association Hidromaule formed an agreement in 2006 to use their water and canals to produce electricity, without affecting the irrigation at all. Hidromaule’s run-of-river hydropower plants utilise gravity to pull irrigation water through turbines from high elevations to lower ones. Built in 2008, the Lircay plant has a capacity of 19 megawatts (MW) of power production. The 2012 Mariposas plant produces 6.3 MW and the 2013 Providencia plant can generate 13.8 MW of power. Power from the second two plants is routed through electric lines to a substation at the Lircay plant, which then forwards the combined power to the Chilean Central Interconnected System grid via a 27 kilometre (17 miles) transmission line. Together the three plants produce an average of 220 gigawatt hours (GWh) of energy per year. In 2011 the company joined with other local energy generation companies to form GPM-AG, a union association for medium and small energy generators. The GPM-AG group aims to help members with technical, operational and regulatory matters, promoting a competitive market and long-term rules for system development. The group is actively participating with government authorities to create better rules and access to local energy markets. Not only are the three power plants built to create power without harming the environment
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or the local community, but they also help lower carbon emissions in the air. Hidromaule contributes a total average emissions abatement of 124,000 tons of CO2e per year. Under the United Nation’s Clean Development Mechanism (CDM) program and the Verified Carbon Standard (VCS), this enables the company to offer carbon offset credits for sale in the international markets. Hidromaule’s production helps the local community too. The ACM agreement works
two ways. Hidromaule utilises ACM’s irrigation waters and channels for power production and pays an annual fee to the association, which helps the association maintain its channels and cover operational and administrative costs. Hidromaule also provided, finance, labour and design expertise to improve the water distribution system, which has helped mitigate the impacts of recent and extended drought.
HIDROMAULE SA Alconza Berango from Spain. Within the community, itself, Hidromaule encourages educational and cultural development, starting with rebuilding a local school after a devastating fire in 2009. Ever since, the company has concerned itself mainly with student needs - providing infrastructure, educational tools, and support. It works especially with a local program that improves school performance and interpersonal relationships between its artistically talented students. Hidromaule hires mainly locally for both technical and non-technical jobs, including mechanical and electrical technicians and auxiliary personnel. And it purchases regionally, including engineering, construction, and supervision services, and some electrical and mechanical equipment. According to Business Manager Contardo, “Being all reputed local suppliers, there was no other abroad company that could better fit the required supply quality and delivery timings during project execution.” Hidromaule contracted with ICAFAL to construct the power plants, Transnet S.A. allowed the connection of the plants to the existing power grid, the power transformers were built by RHONA S.A., water gates by INAMAR, and transmission line supports were provided by BBOSCH. The turbines and generators, the heart of the power plants, were supplied by Austrian supplier Andritz Hydro, Ingeteam’s Indar from Italy, and
On the financial end of it, the World Bank’s International Finance Corporation (IFC) granted a Project Finance Scheme for the Lircay plant, after Hidromaule proved it could meet their environmental, labour, and community health standards. And Zurich Emerging Markets provided a pioneering insurance policy that allowed Hidromaule to obtain early financing from future emission reduction production. After the Lircay experience, local banking gradually started to create project finance schemes, thanks to the CORFO and KFW agreement. The second two power plants were financed locally through BICE for Mariposas and BCI for Providencia. Recently other renewable technologies have presented themselves as viable alternatives, thereby increasing competition for Hidromaule and other run-of-river hydropower projects. However, Contardo believes that, “All renewable energy contributions are a good news for the country, as long they can demonstrate a sustainable and low cost alternative for the system development.” Solar and wind power projects have yet to prove their economic viability in Chile and their ability to reduce the use of carbon-producing supplementary power. Contardo notes that there are still technical and economic barriers affecting their performance, such as transmission restrictions and intermittent power production, where diesel powered backup systems are required, translating into peak system energy prices and higher average CO2 emissions. At the same time, Contardo acknowledges that there are no current legal restrictions for new players to enter the market, and he believes that Chile will find solutions that allow the development of an adequate balance of future energy supplies.
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