renewables and mining industry report...

Published October 2014 by part of Canadian Clean Energy ConferencesPublished October 2014 by part of Canadian Clean Energy Conferences

RENEWABLES AND MINING INDUSTRY REPORT 2014

CASE-STUDIES AND MARKET INSIGHT ON THE USE OF RENEWABLE ENERGY IN THE MINING SECTOR

Adrienne Baker and Andrew Slavin Directors

ENERGY AND MINES

1Renewables and Mining Industry Report 2014

n today’s capital constrained envi-ronment, the global mining sector is increasingly focused on lowering pro-duction costs. With energy account-

ing for 20 to 40 percent of operating expenses, it has become the focus of potential cost savings for mine sites across the globe. As Hatch’s Rob Lydan points out on page 11, “Mining clients are becoming more cognizant on a corporate opera-tions level of the fact that they have energy cost issues that are affecting their operations - there’s a deeper understanding of the challenges out there.” In this environment, the mining indus-try is ready to listen to how renewables can help lower energy costs and provide secure, stable power for remote and grid-connected sites.

“If we can reduce our power costs, we have a very positive impact on our all-in costs for pro-ducing an ounce of gold. In today’s environment, that’s a critical element of our go-forward strat-egy,” points out Steve Letwin, President and CEO of IAMGOLD in his spotlight interview [pp 4-6].

IAMGOLD currently has a 5 MW solar PV project at its operations in Suriname and is exploring options for another PV project for its Essakane mine in Burkina Faso. In this report, Letwin discusses his views on the benefits of renewables including the goal of moving to 15% renewables to power IAMGOLD’s global opera-tions over the next 3-5 years. Further insight on the gold leader’s first PV project is on pp 28-29 in an interview with Ron Halas, Vice President of Commercial for South America at IAMGOLD.

Unless senior management is directly sup-portive, however, the road from exploring power options to choosing renewables can be a long one with mines first looking for solid data on the performance and cost savings of new energy choices from their peers. Others are deciding to test the waters with smaller-scale pilot projects before they consider integrating renewables on a large scale. Renewables for mines is a slow but steady process which requires a detailed under-standing of a particular mine’s energy needs and its internal decision-making processes at

the operational and strategic levels. The Renewables and Mining Report 2014 fea-

tures interviews and case studies with eight global mining companies that are leading the sector’s energy transformation by implement-ing renewables to power their operations. It offers insight into how these mines are assessing their energy options and how new solutions including wind, solar, and energy storage, are fulfilling their need for secure and affordable power.

This report also forms a picture of how mines are thinking about energy and setting broader corporate goals to reduce and diversify their energy mixes. As Mike Aire of Newmont reports, “We don’t want to build our own power plants. We have in the past, but going forward we want partners that will build the power plants, supply our needs for a new mine, and leverage those monies available to enhance the economies of these developing countries or provide renewable energy for developing countries.”

Alongside this candid insight from mining leaders, are interviews with energy experts on integrating renewables into a mine’s energy mix. Hatch, Siemens, Caterpillar, RES, and SunEdi-son offer critical insight into the development, finance, implementation, cost-savings and per-formance potential of renewables for mines. Together these energy service providers are driv-ing this new business segment for renewables on mines sites around the world.

This report is supported by Energy and Mines’ global series of Renewables and Mining Sum-mits which bring together mines and renewa-bles experts to discuss project opportunities and drive new business. By meeting face-to-face and sharing information through interviews and case studies, our aim is to bring together these two sectors to develop solutions for powering mines with affordable, secure and sustainable energy.

Kind Regards,Adrienne Baker and Andrew SlavinDirectors, Energy and Mineswww.energyandmines.com

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About Energy and MinesEnergy and Mines brings together the mining and renewable energy sectors to find cost effective and reliable energy solutions to meet mining’s energy challenges through our global events series, news portal, research reports and awards. A Part of Canadian Clean Energy Conferences, Energy and Mines aims to connect mining energy decision-makers with renewable energy experts to explore cost-effective and reliable solutions for powering mines. For mining and renewables market insight, project details, videos and presentations visit www.energyandmines.com

FORWARD


CEO SPOTLIGHT: IAMGOLD 4-5 | IMPROVING COSTS AND REDUCING CARBON: STEVE LETWIN DISCUSSES THE BENEFITS OF SOLAR Stephen LetwinIAMGOLD

MINE CASE STUDY: RAGLAN 6-7 | RAGLAN MINE: CANADA’S FIRST INDUSTRIAL-SCALE WIND AND ENERGY STORAGE FACILITYJean-Francois VerretRAGLAN MINE

MINE Q&A: NEWMONT 9-10 | DEVELOPING ECONOMIC AND SECURE ENERGY SUPPLIES: NEWMONT’S ENERGY STRATEGYMichael AireNEWMONT

THOUGHT-LEADER INTERVIEW: HATCH 11-13 | SINCERITY AND PATIENCE REQUIRED FOR RENEWABLES IN MINING TO SUCCEEDRob LydanHATCH

MINE Q&A: BARRICK GOLD 14-15 | POWER PARTNERSHIP OPPORTUNITIES AND BARRIERS TO FURTHER INTEGRATION: BARRICK GOLD ON RENEWABLES FOR MINESScott FraserBARRICK GOLD

MINE CASE STUDY: GOLD FIELDS 16-17 | DRIVEN FROM THE TOP: GOLD FIELDS’ ENERGY MANAGEMENT AND CARBON REDUCTION STRATEGIES

INDUSTRY Q&A: SIEMENS 18-19 | THE POTENTIAL FOR RENEWABLE-HYBRID POWER SYSTEMS AT NORTH AMERICAN MINE SITESTill KrumbholzSIEMENS AG

MINE Q&A: GOLDCORP 20-21 | GOLDCORP’S ENERGY STRATEGY - OPERATIONAL AND STRATEGIC CONSIDERATIONS Flyn McCarthyGOLDCORP

INDUSTRY Q&A: CATERPILLAR 22-23 | UPDATED ENERGY SOLUTIONS FOR MINES: CATERPILLAR DISCUSSES CUSTOMIZED HYBRIDS Rick RatheCATERPILLAR

MINE CASE STUDY: AFRICAN BARRICK GOLD 24-25 | AFRICAN BARRICK GOLD: EMBRACING RENEWABLES, STAGE TWO Nic SchomanBARRICK GOLD

INDUSTRY Q&A: RENEWABLE ENERGY SYSTEMS (RES)26-27 | INTELLIGENT FINANCING AND CUSTOMIZED HYBRIDS: RES ON ENERGY SOLUTIONS FOR MINES Douglas McAlpineRES CANADA

MINE Q&A: 28 IAMGOLD 28-29 | MOVING FORWARD WITH PV TO POWER GLOBAL OPERATIONS: IAMGOLD Q&A Ron HalasIAMGOLD

INDUSTRY Q&A: SUNEDISON 30-31 | CLEANER ENERGY AT STABLE PRICES: THE VALUE PROPOSITION OF SOLAR FOR MINES

FEATURE ARTICLE: REPOSITIONING RENEWABLES32-34 | REPOSITIONING RENEWABLES TO MEET THE MINING INDUSTRY’S ENERGY NEEDS

MINE CASE STUDY: ANGLO AMERICAN 35-36 | INVESTING IN GROUNDMOUNT PV TO POWER MINING FACILITIES: ANGLO AMERICAN CASE STUDY Darren HollanderSOLARPOWER

CONTENTS

For case study suggestions or speaker opportunities contact: Michelle De Andea, +1 613 680 2482, [email protected] sponsorship or branding opportunities contact: Adrienne Baker, +1 613 680 2483, [email protected]

The South American mining sector is well positioned to benefit from close collaboration with renewable project developers. With excellent renewable resource, high electricity prices and governments keen to support renewables projects, South America holds great promise for renewable-mining project development. We aim to support and encourage these partnerships by delivering a Summit featuring many of South America’s leading mining companies. Join us in Santiago on April 9-10 2015.

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CEO SPOTLIGHT CEO SPOTLIGHT

Stephen Letwin President and CEO

IAMGOLD

4 5Renewables and Mining Industry Report 2014 Renewables and Mining Industry Report 2014

n July, Energy and Mines caught up with Steve Letwin, President and CEO of IAMGOLD, who is champi-oning the use of renewable energy

as an opportunity for gold mines to reduce costs. The global mining leader is testing this proposition through its Rosebel Gold Mine in Suriname. Although saving money is an imperative for all mining companies oper-ating in the current environment, Letwin is equally convinced that the sector needs to pursue a greener strategy on environmental grounds, “to reduce the carbon we’re burning to produce energy.”

Q. Can you tell us how you assessed and approved the decision to move ahead with a five megawatt PV project to provide power for your Rosebel mine?A. The project started with consideration of the overall energy requirements for the country of Suriname. The Surinamese population is growing, and so demands for electricity/power are growing. The govern-ment was also assessing our needs at the mine. As we move into hard rock at Rosebel, our own power requirements are going to increase.

We worked with the government to come up with a strategy that would involve increasing the power supply in the country. As part of that assessment, we wanted to increase the amount of power coming from a renewable source in the country--which at the time was zero. Jointly, we talked about the benefits of developing a small solar farm and creating five megawatts of solar power available for the grid. Because of the needs of our own mine, it made sense that we’d

IMPROVING COSTS AND REDUCING CARBON: STEVE LETWIN DISCUSSES THE BENEFITS OF SOLAR

build the grid on our site and supply the power into the grid for mine use or general use -- depending on the time of the day.

Q. Is the solar farm in Suriname up and running right now?A. It’s being commissioned as we speak. It’s a sight to behold. It’s an impressive solar farm.

Q. What were some of the key considera-tions at the management and board level when you considered solar as an option?A. We’re all trying to do our best to decrease the use of hydrocarbons. Because the hydro facility in Suriname could not be expanded in the foreseeable future, the obvious alter-native was diesel generation. But we just thought that solar would be a better alter-native to burning hydrocarbons. The major consideration was the “green strategy”: to reduce the amount of carbon we’re burning to produce energy.

Q. I understand that IAMGOLD is assess-ing options for a solar project to help power your Essakane mine, which is in a more remote location than Rosebel. What are your key considerations at Essakane?A. Essakane makes sense for solar power because it’s in the Sahel in West Africa. The rainy season is very short in West Africa and the amount of sun power available at Essakane would be significant.

The challenge at Essakane is the wind blowing the sand. Solar panels have to be clean. If you accumulate any dust or sand on the panels, it has a significant impact on the amount of solar power that’s filtered to

Ithe cells. One of the key considerations is making sure that the panels are kept clean. We’re studying everything to make sure [the project is] cost effective.

Q. I know that IAMGOLD is a leader in look-ing at new ways to power operations. Why would you say energy is a top priority for you as CEO?A. Energy represents about 20-25% of our costs. Most of our open pit gold mines have an ore grade of about one gram of gold per tonne, which means that we have to move 32 tonnes of rock to produce one ounce of gold. You also need to crush the rock and that takes a lot of power. So crushing and grinding rock are very power-sensitive parts of our cycle. If we can reduce our power costs, we have a very positive impact on our all-in costs for producing an ounce of gold. In today’s environment, that’s a criti-cal element of our go-forward strategy. If we can reduce power costs, we can improve our economics.

Q. So is cost reduction a main driver in your decision to invest in renewables?A. Absolutely. Another driver is trying to reduce the amount of hydrocarbons we’re burning from an environmental standpoint. We’re very conscious of trying to reduce our hydrocarbon output. We wouldn’t be spend-ing $12 million at Rosebel to build a solar plant if we didn’t think it was going to help our cost structure and also help the envi-ronment.

Q. How do you envision the global energy mix for your operations changing over the next three-to-five years?A. In the next three-to-five years, I’d like to see 15 percent of our power generated by renewables, which is fairly significant.

Q. How would you like to see the renewa-bles industry develop to better meet the needs of the mining sector?A. There has to be more emphasis by the mining industry on the use of renewables. Because of the remote locations of mines, in many respects using renewables is a superior solution as access to power grids or hydrocarbon fuels can be difficult and expensive to achieve. Developing larger solar farms makes sense where mines are already tied into the grid, as excess solar power can be fed into the grid dur-ing the day and drawn back again during the night. The renewables industry has to help mines understand the technology that’s available and then create alterna-tives that can be positively compared to hydrocarbon use.

Q. What is the tipping point at which energy self-generation begins to make sense from your point of view?A. With the improvement in battery tech-nology and solar technology, we’re going to see self-generation become more and more economically attractive. As that occurs, it will make the case for itself.

Part of the problem in the past has been having renewables compete on the same basis as hydrocarbons. But with the improvements of late in solar panels, the improvements in links to the grid, and improvements in battery technology and the ability to potentially store solar energy, all of this contributes to a future where you will see self-generation become more and more prominent.

I’m a believer that self-generation will occur-- and that it needs to occur. Collec-tively, mankind is dumping 100 million tons of carbon into the air every day. Half of that gets absorbed into the oceans and into the plant life, but it’s still a lot of carbon entering the atmosphere. At the end of the day, we’re all going to have to do a better job reducing the amount of carbon we’re dumping into the atmosphere.

“In the next three-to-five years, I’d like to see 15 percent of our power generated by renewables, which is fairly significant.“

MINE CASE STUDY MINE CASE STUDY6 7Renewables and Mining Industry Report 2014 Renewables and Mining Industry Report 2014

he decision to install a three-meg-awatt wind turbine at Glencore’s Raglan Mine came after nearly five years of careful investigation,

assessment, and analysis, says Jean-Fran-cois Verret, Director of Strategy, Projects, and Public Affairs. Because of the Arctic condi-tions at the mining site, which sits on the Ungava Peninsula in Nunavik, roughly 1,800 kilometres north of Montreal, gathering in-depth data was an essential first step.

This summer, Raglan Mine began install-ing its first wind turbine, manufactured by Enercon in Germany. If all goes as planned, Verret predicts that this wind turbine will replace approximately 5 percent of the mine’s diesel consumption - or 2.4 million liters of diesel.

A project like this also holds out the prom-ise of significant cost savings. At Raglan Mine, energy typically accounts for 18-to-23 percent of operating costs. If the wind pilot goes well, Raglan Mine is considering installing additional wind turbines that could generate a total of 9 to 12 megawatts of energy, slashing the mine’s overall diesel consumption by 40%.

The Decision ProcessIn 2009, Raglan Mine launched a study to investigate energy options for its fully die-sel-powered operations. The nickel-copper mine’s remote locale means that it’s impos-sible to connect to the hydroelectric grid or to the natural gas network. Very quickly, says Verret, the study showed that wind was a promising option. Raglan Mine placed wind measurement systems around the

property and began collecting data.Only after simulations and the gathering of concrete data did the mine team approach corporate for approval. Verret emphasizes the importance of having actual numbers to bolster the first approval request, which was made in 2010-2011. “The intention of that request was to inform Corporate that Raglan Mine was sitting on a very inten-sive wind current, and it was worthwhile to study [wind] technologies,” he says.

Next, Raglan Mine conducted a bench-mark study in Alaska, Switzerland, and Scandinavia to observe how wind turbines fare in harsh climates. The company then embarked upon a scoping study, looking at how the investment framework would work with select manufacturers experi-enced at working with Nordic or Arctic parameters.

The company created a financial frame-work in November 2012, which combined government incentives for reducing green-house gases and grants available to com-panies using renewable energy. Once a financial framework was in place, the energy team again approached corporate.

Technology in Arctic ConditionsChoosing to buy from Enercon wasn’t a difficult decision because there are so few manufacturers producing Arctic-class wind turbines, says Verret.

What is truly innovative was the decision to incorporate three storage technologies - a flywheel, batteries, and a hydrogen storage loop with an electrolyzer and fuel cells - in addition to the wind turbine.

Verret explains that wind turbines on

T

Jean-Francois Verret Director

Strategy, Projects and Public Affairs

RAGLAN MINE

RAGLAN MINE: CANADA’S FIRST INDUSTRIAL-SCALE WIND AND ENERGY STORAGE FACILITY

their own might have a wind penetration of 15-20%. “The penetration level for wind tur-bines is very low,” he says. “When the wind blows, it’s good, but when the wind doesn’t blow, you can’t really leverage your assets.”With innovative storage technologies, however, the penetration level of the wind turbine can increase up to 35-55%. The purpose of this first project is to test the three storage technologies in Arctic condi-tions in order to be educated buyers when it comes time to deploy a larger wind farm at the mine site. The 3MW turbine was strate-gically located at the mining site, where it can be isolated from the grid. The objective of the project is to achieve high penetra-tion on this micro-grid within the five-year demonstration period for the storage tech-nologies.

To illustrate the potential of storage tech-nologies, Verret explains that Raglan Mine will use a flywheel to help “smooth the energy curve” because the levels of wind produced in a given area aren’t stable. The flywheel increases and improves upon the wind energy available to the company’s own internal power grid.

Overcoming ObstaclesIn the northern Quebec region where Raglan Mine is based, summer generally lasts just

a single month, and, in fact, construction during this July had to be halted because of snow, says Verret. In addition, the fact that the mine is not linked to roads means that all wind turbine components, which were built in Germany and Quebec, had to be trans-ported by ship. “The construction schedule is very tight so you need to manage the internal project management-- that’s one of the most critical components,” he says.

Once Raglan Mine’s first wind turbine is in operation, the company will embark upon the construction and implementation of the second phase of the project: the three stor-age components. The second stage of con-struction is slated to run from September until March 2015.

Permitting is a key component of the project management timetable. Another challenge is the financial framework. “It’s always a challenge for the mining indus-try to invest in renewables because most of the time the renewables are a little bit more expensive,” says Verret.

Financial challenges are exacerbated by the fact that the mining industry tends to be extremely volatile. For renewables, how-ever, provincial and federal grants help to reduce financial risk, he says. Raglan Mine’s partner TUGLIQ Energy was of great help identifying eligible governmental programs and obtaining the funds.

Start Small and TestRaglan Mine began its shift towards renew-able energy with a pilot involving a single wind turbine - a scaled approach that Verret would recommend to others contemplating similar initiatives. “Design first and then assess,” recommends Verret. “A pilot lets you understand and train your people. And when you understand your risk profile, then you can go with a larger scale.”

One method of storage - using the hydro-gen produced by wind turbines for other purposes - might eventually lead to a wider array of green opportunities at Raglan Mine, says Verret.

He explains that wind energy takes a molecule of water and creates both H2 and O2. By storing the H2 in a tank, the mine can later combine the hydrogen to create energy for running vehicles. “We’d like to test using the hydrogen produced by the wind turbines for our own vehicles instead of using diesel,” he says.

“Design first and then assess. A pilot lets you understand and train your people. And when you understand your risk profile, then you can go with a larger scale.”

MINE Q&A

s Newmont finalizes its energy and climate change strategy, the com-pany is considering various plans, including an 8-10 megawatt solar

plant in Tanami, Australia, explains Michael Aire, the company’s Director of Environmen-tal Corporate Sustainability and External Relations. To meet the goals spelled out in the strategy, Newmont is hoping to forge partnerships with international power com-panies interested in renewable energy pro-jects.

Q: Can you update us on what your organi-zation is doing to address energy cost and supply concerns on both the corporate and operational levels?A: Historically, we’ve done energy efficiency investment in our Australia/New Zealand sites, and have plans to do energy efficiency investment at all of our sites. In Australia and New Zealand, we’ve identified 80 pro-jects and have implemented about 40 for cost savings.

In addition, we’ve just developed a new energy and climate change strategy, which will be finalized this year and implemented next year. The main goals for our strategy are to develop economic and secure sup-plies of energy while balancing our energy demands, energy portfolio, and greenhouse gas emissions -- and to position business for adaptation to climate change.

Q: Currently, what percentage of your oper-ating costs are related to energy?A: We spend approximately $1 billion a year, which is roughly 20% of our operat-ing expenses. And around 18% of what

A

DEVELOPING ECONOMIC AND SECURE ENERGY SUPPLIES: NEWMONT’S ENERGY STRATEGY

we’re spending on energy is on renewables, hydroelectric power and biodiesel mostly.

Q: How far out do you currently project your energy costs as part of operating expenses for a particular mine site? A: We usually do a three-year budget cycle for operations. In our projects, though, when we’re building a new mine, we actually pro-ject life of mine, which could be ten or 15 years.

Q: Do you set targets to reduce costs? And if so, how do you calculate these targets? A: We had loose targets in the past, but we’ve got to develop tighter targets. In the past, we’d engage the regions and the sites to determine what kind of efficiency improvements they could make. Then we’d determine at a cor-porate level what that target could be based on the site information. In the past, our target was a 10% reduction over the next few years, but we’ve got to reevaluate that.

Q: Was that target not ambitious enough?A: It just wasn’t linked in with what the sites could do. It was somebody thinking we could do 10% in the next few years, which is prob-ably realistic but it’s not based on any site information. Part of our new energy and cli-mate change strategy will be to engage the sites and regions with a goal to reduce our energy costs and energy use.

Q: What new energy solutions like renewa-bles integration are you exploring to help address energy challenges?A: Our number one opportunity is solar energy in our Tanami, Australia operations.

Michael Aire Environmental Director

NEWMONT

For case study suggestions or speaker opportunities contact: Michelle De Andea, +1 613 680 2482, [email protected] sponsorship or branding opportunities contact: Adrienne Baker, +1 613 680 2483, [email protected]

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MINE Q&A THOUGHT-LEADER INTERVIEW

We’d like to put in an 8-10 megawatt plant there. The Northern Territories are ideal for solar energy.

Our second opportunity is HDRD (hydro-genation-derived renewable diesel). HDRD is made from waste and bioproducts -- that would be an ideal solution for our under-ground operations. It’s a very clean fuel and low in particulates. It has no sulfur in it. We’d look at contracting that for our under-ground operations, first in Nevada and then elsewhere.

The third near-term opportunity is micro-hydro in Peru. We have an ongoing study to determine the parameters of our resources to see if they’re good for micro-hydro gen-eration.

Q: Can you tell us more about the process for investigating new energy solutions? For instance, how are new projects approved? A: We formed an inter-functional Global Energy and Climate Change Team, which consists of subject matter experts here in Denver and regional subject matter experts in Nevada, Australia, Africa, and South America. That team consists of about 12 people, and will compile opportunities, assess the opportunities, and then make recommendations on which opportunities we should pursue and when.

We have to develop a business case for

each of the projects we put forward. That goes to our Investment Council, which consists of our CFO and other executive vice presidents and senior vice presidents. They approve the projects they feel should be funded.

Q: When you’re trying to decide on the best energy solutions for your operations, what information is useful for making the right decisions?A: One of our goals for our new energy and climate change strategy is long-term, sta-ble, reliable power supply. What we need are partnerships with international power com-panies that can construct and operate local power plants in developing countries. As part of that partnership, we’d want to lever-age funding mechanisms like the U.S. TVA (Tennessee Valley Authority), which has a program called Power Africa that provides low-interest loans and other funding mech-anisms for renewable energy in Africa.

We don’t want to build our own power plants. We have in the past, but going for-ward we want partners that will build the power plants, supply our needs for a new mine, and leverage those monies available to enhance the economies of these develop-ing countries or provide renewable energy for developing countries. That’s what we really want.

SINCERITY AND PATIENCE REQUIRED FOR RENEWABLES IN MINING TO SUCCEED

Rob Lydan Director

Solar and Wind

HATCH


ob Lydan, Director, Solar and Wind, at Hatch, sees the mining industry finally starting to grasp the attrac-tive business case for renewable

energy. Although renewable developers are accustomed to rapid progress, he urges them to understand that mining companies are enormous entities that change course very slowly. To encourage mining companies to embrace solar and wind energy, renewables developers need to resist the urge to make overly optimistic arguments or downplay negatives, instead demonstrating persis-tence and sincerity in explaining what their businesses have to offer.

Within the past year, the debate over what role renewable energy will play in the min-ing industry has deepened and matured, says Rob Lydan. One sign of this burgeon-ing maturity is which executives within mining companies are analyzing renew-able options. A year or two ago, the head of sustainability or an energy procurement manager might have been the one speaking to renewable energy partners, but today the conversation has moved front and center and is conducted by the head of operations or another key decision-maker.

“Clients are becoming more cognizant on a corporate operations level of the fact that they have energy cost issues that are affect-ing their operations,” says Lydan. “There’s a deeper understanding of the challenges out there.”

The number and types of mines evaluat-ing renewable energy have expanded, too. While in the early days the topic was most pressing for companies with underground,

non-ferrous sites because their energy con-sumption was extremely high, “today we see a broader base of clients interested in the topic,” says Lydan.

What’s more, the types of renewable projects under consideration are growing in scope. Mining companies are no longer confining themselves to pilot projects of roughly one or two megawatts but are con-templating larger and more meaningful endeavors.“We’ve gone from a state where projects were being kicked off on a pilot basis and now we’re going through the evaluation of larger-sized projects,” says Lydan, who notes that because the proposed projects are more ambitious, there are also fewer of them around.

The Economic CaseSuccessful renewable energy companies understand how mining companies are run and how they make business deci-sions. Conversely, says Lydan, “Mining cli-ents have to learn about renewable energy business models and challenging financing processes.”

One solution to this dilemma is partner-ships. Hatch, for instance, recently entered into a teaming agreement with NRG. As an independent power provider, NRG has successfully owned and operated 48 GW of grid-tied thermal, wind and solar plants and is keen to own remote wind, solar and thermal assets, while Hatch, as global leader in consulting to mines, has the expertise to integrate these renewable energy solutions. Decision-making is also affected by the internal dynamics of the mining industry.

R

“What we need are

partnerships with international power com panies that can construct and operate local power plants in developing countries.”

THOUGHT-LEADER INTERVIEW THOUGHT-LEADER INTERVIEW12 13Renewables and Mining Industry Report 2014 Renewables and Mining Industry Report 2014

Lydan notes that mining is no longer in a commodity super-cycle and so “everyone within the industry is waiting to see what happens with commodity prices” before undertaking dramatic changes.

Lydan emphasizes the need for renew-able energy companies to realistically pro-ject costs when presenting their business case. Higher site costs, for instance, do not only affect fossil-fuel companies; they also impact renewable energy providers.

Building and running solar plants or wind farms is a more expensive proposition when shipping to remote locations. “You can’t fly in a wind turbine, so you have to bring it across an ice road in winter. This is more expensive than driving down an interstate,” explains Lydan. “A lot of the capital expendi-ture assumptions are not appropriate in remote locations.”

In order to make sound projections, renew-able energy developers need to consider pos-sible scenarios that lie ahead: “You have to understand the underlying reason for why liquid fuel is expensive in remote jurisdic-tions. That can also affect the capital costs for a renewable power asset,” says Lydan.

He also urges renewable companies to appreciate the complexity of permitting and stakeholder engagement. Too often, he says, “the assumption is that because something is environmentally good, providers will not have to go through the same impact assess-ments they would for anything else. This is just not true.” In some instances, renew-able providers may face lighter reporting requirements but requirements vary by jurisdiction. In all cases, says Lydan, “the amount of diligence needed is the same.”

In a similar vein, renewable providers sometimes tend to underestimate the envi-ronmental hurdles they’ll face in building a plant or installing a turbine beside a mine. Lydan says that just because the mine itself poses environmental risks doesn’t mean that putting up a wind turbine can be accomplished with little or no scrutiny. To the contrary, before installing wind turbines, a company might, say, have to initiate a raptor corridor study to discover where raptors nest and where they find food, and to assess whether the turbines would disrupt these patterns. “From a per-mitting standpoint, you have to go through the same studies to make sure you’re not worsening the environment in any way,”

says Lydan. In addition, he finds that some renewable

developers (falsely) assume governments in foreign markets take a more relaxed approach to environmental issues. He points out that countries like Chile have “a very strong and vocal environmental movement.” And even if the local government isn’t par-ticularly vigilant, NGOs are closely monitor-ing how businesses operate overseas.

Finally, because of the Equator Princi-ples and similar frameworks, renewable energy providers will be asked to adhere to very strict operational requirements - all of which are best understood up front.

Some Lingering MisconceptionsLydan points out that the timeframes for mining companies tend to be far longer than for renewables companies, which pride themselves on nimbleness. “The min-ing business doesn’t go through iterative cycles like the energy business,” he says, and mines don’t make decisions nearly as quickly as renewable energy companies do.

Often, he notes, a renewable energy provider will believe that diesel has “won out” over a solar plant or wind turbines, when, in fact, the company is still evaluating its options and hasn’t rejected renewables at all.

Mining executives, according to Lydan, are not slow to act because they’re inde-cisive but rather because their companies tend to be huge enterprises, with opera-tions in several different countries. “Think of mining companies as a utility,” he says. “Think about how long it takes a utility to change how they do things.”

Many renewable developers don’t fully appreciate the way that mining companies assess the attractiveness of new ventures. Solar or wind developers may get frustrated because they see the decision as simple given that liquid fuel might cost 25 cents a kilowatt hour while solar is just 15 cents a kilowatt hour. Mining executives, however, don’t view the decision purely in terms of commodity costs, but look at all renewables projects as capital investments. “At the end of the day,” says Lydan, “the project has to be compared against all of the other capital initiatives that the client is considering. And for the amount of capital required, there might be something else that has an even better return.” Finally, Lydan emphasizes that renewable-energy developers can do very little to hurry along mining companies. Going forward, decisions may be made faster once the market is better established, but this is not something a renewable developer controls.

One thing that would make an enormous difference to mining companies would be “a well-established mechanism for salvage value,” says Lydan. Because no one knows what a solar farm will be worth twenty years from now, it’s difficult for mining compa-nies to calculate how they’ll unwind these assets once they no longer need them. Once the market matures, however, there may be clearer mechanisms for selling renewable assets at the end of a project. The existence of a salvage value for a solar or wind farm would change the whole equation, says Lydan, noting that over time, these salvage values will be established.

Ways to Advance the CaseLydan finds that many white papers that project the rate at which renewable energy will penetrate the mining sector are “at least 50% too optimistic, not in estimating the

size of this market but in predictions about the rate or speed of adoption.” He believes that this rampant optimism is hampering the progress of renewable developers.

Too often, he says, renewable developers make sunny projections that simply don’t sit well with mining companies. “There are people who believe that if you develop enough momentum in a project, people will just sign off on it, but that’s not true,” he says.

Worse, he believes, is an approach that renewable developers take to try and secure deals by initially presenting all the positives and only explaining the negatives after a deal has progressed. “If at the end of dis-cussing an opportunity, you have not told [the mining company] what you know to be a big impediment, it upsets them,” he says. “You can’t do bait and switch with mining companies. They’re highly sophisticated.”

Therefore, Lydan urges renewable devel-opers to further their own cause by resisting the urge to hide discouraging information: “There is a business case, but exaggerating it through the power of positive thinking and hopelessly optimistic assumptions does nothing to build the credibility of this business.”

He believes that presenting the unvar-nished truth might be one of the best tac-tics for any renewable-energy developer approaching a mining client-- and this is especially true as mining companies start to move beyond pilot projects into larger and more ambitious undertakings. Cheerleading doesn’t work, he emphasizes, adding: “Sin-cerity is what will drive the success of this business.”

Looking to the future, Lydan predicts that it will still be many years before mining companies start developing mega-renew-able plants but the projects they undertake will steadily increase in size. Has the min-ing industry started to alter its course from traditional ways of doing business? “I’m impressed by the amount of interest that has grown in the last year,” he says.Finally, Lydan estimates that the move beyond the pilot stage will take place over the next three-to-five years. “It’s really a good news/bad news story,” he concludes. “This industry takes a long time to mature. But once it does mature and once it begins to be normal for the industry to do things a certain way, than it remains that way for a very long time.”

“Think of mining

companies as a utility. Think about how long it takes a utility to change how they do things.”

MINE Q&A MINE Q&A

cott Fraser, Director of Power Pro-jects at Barrick Gold, describes the various industry pressures, ranging from greater competition

for capital because of lower metal prices to the expense of electrical energy storage, that delay the widespread acceptance of renew-able energy within the mining sector.

Q. What has changed in the last year in terms of Barrick’s interest in renewa-bles and exploration of renewable energy options?The mining industry, in general, is facing lower metal prices, which means renew-able energy projects have to compete with other sustaining capital investments. That becomes one of the biggest challenges for completing renewable energy projects given the strong demands for capital at this point in time.

Q. More broadly, within the last year, what has changed in terms of the energy needs and strategy for your mining operations? A. Where we have our own special-purpose transmission lines for receiving power from the national grid, we are seeing a lot of interest from renewable energy developers in connecting to those lines and transmit-ting their renewable energy to the national markets. Right now, we have interest from multiple solar, and wind developers. But with the increased demand for renewable energy due to government regulations and the

recent cost reduction in renewable energy technologies, those special-purpose lines have now become opportunities for renew-able energy developers.

Q. Where have you seen the greatest inter-est in buying energy from mine-related projects?A. Chile is a very good example. We’re in dis-cussions with several renewable developers at this point in time. We’re seeing demand from developers for both wind and solar projects in Chile, and they’re very actively looking to connect to our transmission sys-tems, which would allow them to market their renewable energy.

S

Scott Fraser Director of Power Projects

BARRICK GOLD

Q. What types of information would you find useful when assessing the potential role of renewables for a particular mine site?A. As we develop an inventory of renewable energy alternatives for either an existing or new mine sites, we are investigating both the renewable energy potential, as well as the opportunities to develop third-party part-nerships for the major capital investments required for these renewable energy projects.

Q. How do you see the energy needs of mines changing over the next five years?A. In general, with declining grades of ore and more sophisticated refining processes, the energy used per unit production is expected to increase further. There’s not as much metal per ton of ore, so we have to pro-cess more ore to get the same production.The penetration of renewable energy into operations is constrained by the variable nature of solar or wind resources. The pos-sibilities for electrical energy storage are increasing, but it is still prohibitively expen-sive. It remains more economical to use die-sel generation versus installing electricity storage devices, such as batteries.

Q. What is the current structure at Barrick Gold for making energy decisions for your operations? Who is involved in the pro-cess for analyzing the various options and securing approvals?A. The energy decisions associated with new developments are integrated into the Life of Mine Planning process. That’s a very

rigorous, long-term planning process. The existing sites continually update their sus-taining capital plans and frequently find it is quite difficult to match the remaining Life of Mine with the payback period required for most renewable energy projects. A specific mine may have a remaining life of seven years, and a renewable energy project might require a payback of twelve years.

Q. Who at your company makes the ulti-mate decisions on energy projects?A. For the existing mines, decisions are made by the corporate energy senior man-ager, who has corporate oversight over the energy planning process. In addition, each mine site has an energy champion. The sen-ior energy manager and the site champion jointly will identify and justify which renew-able energy projects will then be compared to other sustaining capital investments.

Q. Is there a type of information that you wish energy providers could give that would help you determine whether renew-able energy would be feasible for a given mine site?A. I’m interested in knowing about the interest that third-party renewable energy partners might have in working in different jurisdictions. For example, some countries are very attractive for renewable energy developers to invest in. Others, which maybe have a less secure investment cli-mate, may not be of interest to the renew-able energy developers.


POWER PARTNERSHIP OPPORTUNITIES AND BARRIERS TO FURTHER INTEGRATION: BARRICK GOLD ON RENEWABLES FOR MINES

“I’m interested in knowing

about the interest that third-party renewable energy partners might have in working in different jurisdictions.”

MINE CASE STUDY: GOLD FIELDS MINE CASE STUDY: GOLD FIELDS

ohannesburg-based Gold Fields Limited has identified energy man-agement as a key cost driver for the business. Duncan Stevens, the

company’s Vice-President of Group Sustain-able Development, emphasizes that a mine like South Africa’s South Deep, which oper-ates a few kilometers below the earth’s sur-face, “requires a massive amount of energy.” He notes that a few years ago, before the com-pany unbundled its other South African mines, Gold Fields was drawing down a significant portion of the energy grid.

Energy is an increasingly pressing concern because the challenges for mining com-panies are growing, says Martin Sprott, Principal at A. T. Kearney, which has been working with Gold Fields on revising base-lines and targets that were developed as part of its existing integrated energy and carbon management strategy in 2012. “Min-ing companies have exhausted many of the easy to reach ore bodies and so they’re going into more remote, deeper, and often riskier, places. They’re going up mountains and to islands like the Philippines or deep into Africa and the eastern Congo,” he says.

Venturing farther afield often means mov-ing off the conventional energy grid. Sprott points out that as mining companies begin operating in these remote and challenging locales, “renewable energy is probably one of the most effective ways to power the mines.”

A Corporate Structure for Energy Gold Fields is walking its sustainability talk by placing senior management in charge of monitoring, measuring, and reporting on

Jthe company’s energy goals. For instance, Stevens’ corporate responsibilities range from collaboratively setting policies and guidelines for sustainable development to working on the reporting of non-financial data and making sure that investors, ESG rating agencies and other key stakeholders are kept updated on the company’s sustain-ability activities, including energy manage-ment.

Stevens reports to Senior Vice-President for Sustainable Development, Naseem Chohan, who forms part of the executive committee led by group CEO Nick Holland. Stevens says that the company’s energy management decisions are a top priority for the CEO. “Our efforts to be a responsible and sustainable mining company by reducing our carbon footprint and our energy costs are driven right from the top,” he says. “Our CEO is deeply committed to responsible mining, which includes the migration to renewable sources of energy, wherever possible.”

Gold Fields used the global consult-ants A. T. Kearney (ATK) in 2012 to assist with developing an integrated energy and carbon strategy. One of the key premises, emphasizes Sprott, was that “by improv-ing and optimising the performance of the operations, you can improve your CO2 per-formance.”

Assessing PotentialATK began its energy assessment of Gold Fields with a baseline of the company’s global operations. In Ghana, for instance, ATK, together with Gold Fields’ in-house experts, looked at the consumption profile for the existing mines, and then researched

the power grid and the generation possi-bilities for hydro, gas, biomass, as well as wind and solar. In the Philippines, where Gold Fields has a project, geothermal was compared with wind and electricity, and in South Africa, electricity, wind, and gas were assessed.

When considering the challenges for switching to other forms of energy, Stevens emphasizes reliability and energy security by, for instance, obtaining a steady supply of a given type of energy for a decent amount of time and at the right price.

Sprott points out that in some of the coun-tries where Gold Fields operates, it’s impos-sible to underestimate the importance of stability. In remote areas, he notes, the grid tends to be “unreliable” and stoppages are common. “Finding a stable source of power takes a long time,” he says.

Gold Fields is actively involved in nego-tiating with power providers to improve stability. It has, for instance, entered into agreements with Eskom, the sole power provider in South Africa, to furnish a cer-tain number of hours of notice should the power grid be shut down.

Measuring Costs Costs are another challenge. “Energy costs are a key driver for us given that energy accounts for about 18% of our operational cost base and this is likely to rise in a global context of increasing energy demand and constraints on supply,” says Stevens. He added that “although the unbundling of our mature underground mines in South Africa has considerably reduced our energy intensity, this remains a key area of focus in terms of controlling not only our costs, but also our carbon emissions.” He says that the company is trying to imple-ment as many energy-efficiency projects as are feasible.

To understand the full cost equation, Gold Fields looks at LCOE (levelized cost of elec-tricity) for a given power plant. To do this, the company estimates the total lifetime of ownership and then assesses capital and construction costs. Next, the company considers the cost of power generation, any revenue inflows, and which financial mod-els will be used.

When assessing renewables, Gold Fields looks closely at a mine’s life. For example, the South Deep Mine, which supplies 13%

of current production, has a life of mine estimated to be 2060. “In the case of South Deep,” Stevens says, “renewables might be much more viable than some of our other international operations, which have a com-paratively shorter mining life.”

Stevens points out that Gold Fields is seeking proven concepts in renewables. When it comes to assessing solar or PV energy, for instance, the power source isn’t constant and so storage becomes a salient issue. “We’re keeping our eyes on renewable energy, in a fast changing renewables land-scape, to ensure that we’re ready to imple-ment the right solution,” he says.

The Impact of Gold Pricing One of the most significant impacts on the mining industry over the past year has been the decline in the gold price and the subsequent drop in share prices of pub-licly-listed gold companies, says Stevens. He notes that lower share prices mean less capital investment -- making it more com-petitive to obtain capital for funding renew-able energy projects. “Price is thus one of the key drivers of our energy choices at this point,” he acknowledges.

Going forward, Gold Fields is keeping a close eye on legislation. In particular, the pending carbon taxes, specifically those in Australia and those slated to take effect in South Africa in 2016.

Finally, Stevens says that Gold Fields is always scouting for new technologies and ideas that would enable renewables to power different aspects of an operating mine. Even though running an entire mine exclusively with solar or wind might not yet be feasi-ble, Gold Fields is considering whether it might provide in-pit lighting through pho-tovoltaic cells and other smaller solutions. “We’re constantly scanning the market and trying to keep on top of new technologies,” concludes Stevens.


DRIVEN FROM THE TOP: GOLD FIELDS’ ENERGY MANAGEMENT AND CARBON REDUCTION STRATEGIES

“Our CEO is deeply

committed to responsible mining, which includes the migration to renewable sources of energy, wherever possible.”

INDUSTRY Q&A INDUSTRY Q&A

Till Krumbholz Sales manager, Energy Sector’s

Smart Generation Solutions

SIEMENS AG


ill Krumbholz, Sales Manager for the Energy Sector’s Smart Genera-tion Solutions at Siemens AG, dis-cusses the landscape for powering

mines with renewable energy hybrid solu-tions in North America and Europe. He also lays out Siemens’ vision for hybrid power plants with high renewable penetration rates, sometimes over 100%, and its performance guarantee program.

Q. We recently heard from Siemens regard-ing the opportunities and potential for powering African mining operations with 100% renewable energy. How do you see the landscape evolving for powering mines

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THE POTENTIAL FOR RENEWABLE-HYBRID POWER SYSTEMS AT NORTH AMERICAN MINE SITES

with renewable energy hybrid solutions in North America and Europe?A: In the ideal case, high fuel costs for diesel are met with optimal conditions for renewa-ble energy, such as [appealing] wind and sun resources. This is the case in many regions such as Africa.

For Europe, things look a little different as the existing grid infrastructure ena-bles the mining industry to use the local grid for its electricity supply. However, in North America, especially in rural areas, grid availability and stability are an issue. From a mid-term perspective we do see a high potential for our hybrid solutions with mining companies in remote locations as

the cost of oil rises and the cost of renewa-bles and storage decreases. This is a great opportunity for the North American mining industry to closely evaluate “off-setting” its conventional, diesel-generator-based power supply with hybrid power plants.

At Siemens, our optimized layout for a hybrid power plant that focuses on the daily load profile of the mine enables us to power the mining process with a high renewable penetration rate. Here, we have calculated cases where an over-penetration beyond 100% of renewable energy-- together with a battery-- produced the most economical scenario for the remaining lifetime of the mine. We also take the customer’s financial situation and equity costs into considera-tion. So you see, the attractiveness of hybrid solutions depends on local conditions and the desired financial parameters for each customer.

Q. What is the business case for moving to renewables for mines in regions where the price of electricity is of less of concern?A: In these areas, grid stability might still be an issue. You want stable processes through a stable power supply. Depending on the sit-uation and production layout, independence from the local grid can be critical in the case of a power outage.

Further, we see potential in offering ancil-lary services to the grid and selling power reserves or reactive power as an extra rev-enue source. In California, it’s possible to use the state feed-in tariff to sell battery stor-age, more or less using the overload of pure energy to sell energy to the grid.

In places where CO2 abatement is a target, a high penetration from the hybrid solution can also dramatically assist in achieving reduction goals.

Q. What are some of the particular chal-lenges that arise when developing a hybrid solution for a mine in a remote northern region? A: Where rough climates meet low tempera-tures and extremely lengthy and challeng-ing transportation routes, the requirements for a hybrid solution project need to be adjusted. This could be addressed by choos-ing a larger back-up diesel engine when the weather is too extreme to ensure perfor-mance of the plant. Also, a control system and hybrid plant monitoring solution have

to be adopted for alarm management and maintenance intervals.

Q. What additional benefits beyond diesel abatement and energy security do renewa-bles solutions offer? A: Employing the local workforce of a com-munity to build advanced infrastructure is definitely an advantage. Also the abatement of CO2 emissions and a cleaner local envi-ronment are added bonuses.

From a technical perspective, even if renewable energy sources, especially wind, are more volatile on average, they are avail-able all the time and are not affected by damaged roads [that can hamper] diesel transport.

Q. What types of performance guaran-tees are you developing to ensure mines and developers are comfortable with the technology, fuel-savings and operation of hybrid systems?A: Under the conditions for our optimized plant layout, we guarantee either a certain number of megawatt hours that the renew-ables provide into the grid or a specific amount of fuel that will be saved for certain load patterns and weather conditions.

Q. When do you think we will see a wide-spread move from small-scale renewables to larger-scale projects for mines?A: Our solution today does include large-scale renewable energy solutions as we already see a widespread demand for pro-jects of this size. When load and supply grow, the economic benefit of high penetra-tion solutions gets more attractive.

In general, I think that after installing a first industrial large-scale hybrid plant that provides reliable benefits over time, we will see even more hybrid plants become part of the investment planning of our custom-ers. Right now, we have to wait for the first mover really buying, installing, and run-ning a big hybrid plant.

The second wave of demand for hybrids relies on real market feedback. Customers have to rate operational data, economic effects, and the reliability of our technology, which will be seen over time. Once higher and more optimized renewable energy pen-etration rates become common, the trust in our approach and our advanced hybrid solu-tions will grow.

Till KrumbholzSales Manager

SIEMENS AG

MINE Q&A MINE Q&A

Flyn McCarthy Corporate Energy Manager

GOLDCORP


ver the past 18 months, Goldcorp, based in Vancouver, has built the organizational infrastructure to manage its energy demands far

more efficiently, explains Flyn McCarthy, Corporate Energy Manager. He discusses how Goldcorp measures energy costs and the various options under consideration now that renewable energy can compete with grid pricing in an increasing number of locales.

Q. Can you update us on what your organi-zation is doing to address energy costs and supply concerns on both the corporate and operational levels?A. At Goldcorp, we’ve been focusing on energy costs over the last year and a half. The senior management team recognizes that energy is a critical area of focus and it is a top priority in terms of cost-saving opportunities. At the corporate level, we’re building a management program for energy demand and supply and developing our internal capacity around energy supply management. We realize that energy costs are minimized when supply is closely matched with demand. So our critical path has been focused on improving corporate supply management.

At the site level, dedicated energy manag-ers focus on understanding the operation’s demand for power, diesel, natural gas and propane, and ensure supply contracts are best suited to meet the demand. They are becoming more involved with understand-ing the demand profiles and responding accordingly to demand-side management programs. A critical success factor has been

O

GOLDCORP’S ENERGY STRATEGY - OPERATIONAL AND STRATEGIC CONSIDERATIONS

the improvements to our global adjustment program, which is a demand-side program put out by the Ontario Power Authority. The success of this program has motivated us to do more.

Q. Currently, how much of your operating costs is related to energy?A. On a company-wide average, energy is approximately 20% of our all-in costs.

Q. How far out do you currently project energy costs as part of operating expenses for a particular mine? Do you look at the estimated life of a mine or at a business cycle?A. It depends on the mine. In regions where the risk associated with energy is high, we project it for the life of the mine. And in regions where the risk is deemed lower, we typically project five years out.

Q. Do you set targets to reduce costs? And if so, how do you calculate these targets? A. We have company-wide targets of 15% efficiency improvement by 2016. And we calculate that based on a business-as-usual projection. We’ve had those targets since 2011 as part of our energy strategy.

Q. What new energy solutions like renewa-bles integration are you exploring to help address energy challenges?A. All of our sites are grid-connected so renewables haven’t played a large role in our operations to date. We see renewables start-ing to play a larger role in our energy equa-tion because in many of the regions where we operate renewables can now compete

with grid prices. We’re looking at options for wind and solar, primarily in Central and South America.

Q. Can you tell me more about the pro-cess for investigating and developing new energy solutions? Who directs projects like that? And how are new projects approved?A. All sites are reviewed for new energy solu-tions on an annual basis as part of Goldcorp’s energy management program. Once an energy solution is identified, the energy team will work with the project development team to develop the business case for the project. Typically these energy projects are large. We have a global investment framework that we use to guide the process for energy projects.

Q. How do you get final approval?A. It depends on the size. Small to mid-sized projects are approved by the Leadership Team; large-scale projects are ultimately approved by the Board of Directors.

Q. What would help you to ensure the best energy solutions for your operations? What types of information would be useful?A. Case studies are the most useful as they help illustrate the existing potential of vari-ous technologies. Every technology can be an opportunity. We need to understand the performance of the various technologies to help narrow the choices and make the best decisions.


Rick Rathe Global Rental Power Manager

CATERPILLAR

XQC1600


ick Rathe, Global Rental Power Manager at Caterpillar, discusses how capital constraints are chang-ing the energy priorities of mining

operations across the globe. He also offers insight into how Caterpillar has evolved its business to include microgrid solutions for remote mines.

Q: How have you seen the energy-services business for mines change over the last few years? A: Many mines have been working to reduce capital expenditures and are looking more closely at temporary rental or power pur-chase agreements instead of equipment purchases. We’ve seen increased interest in shorter-term, temporary power contracts versus investment in fixed power plant installations.

Q: What have been some of the fundamen-tal changes that have led mines to look at options outside of diesel for remote opera-tions?A: I think the biggest impact has been the rapid decline in the price of renewable energy over the past decade. For many mines, solar and wind energy are now viable options to reduce onsite diesel fuel consumption. Additionally, natural gas and heavy fuel oil (HFO) are viable alternatives to diesel for many mine locations. Q: What is Caterpillar doing to address the changing energy needs of your mining clients? A: In our traditional genset products, we’ve been focused on improving efficiency, low-

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UPDATED ENERGY SOLUTIONS FOR MINES: CATERPILLAR DISCUSSES CUSTOMIZED HYBRIDS

ering the life cycle cost and developing modular, plug and play solutions. A good example of this is our recently announced XQC1600 Power Module. Built off of the Cat 3516C-HD engine platform, this product was designed specifically for optimal fuel efficiency, durability and performance in continuous duty cycle operations like mine sites. The air system and fuel curves on this product have been “tuned” to maximize fuel efficiency and component life at the con-tinuous rating. It is packaged in a 40-foot ISO container and is “ready to run” from the factory. Caterpillar also offers modularized solutions for both natural gas and HFO.

Q: How are you addressing the market demand for hybrid solutions that incorpo-rate diesel with renewables?A: We’ve been working for the past five or six years on smaller hybrid energy solutions and are currently focused on microgrid solutions for remote mines and other applications.

Fundamentally, we are integrating wind, solar and energy storage with our tradi-tional generator set products and turbines into a seamlessly controlled microgrid solu-tion. We’re bringing the best of all technolo-gies together in a microgrid system to lower the overall cost of energy and reduce carbon and gaseous emissions.

All of our projects will start with a site visit and energy audit. One of the best ways

to lower the cost of energy is to reduce energy consumption and peak demand. After we optimize the demand side of the equation, we then use analytical tools to determine the optimal amount of solar, wind and energy storage. These predictive tools allow us to provide the best mix of available technolo-gies for the customer’s specific site.

All of our microgrid solutions will be remotely monitored. We believe that data coming from the sites will help us optimize performance and also allow us to improve uptime and lower operation and mainte-nance expense for the customer.

Q: What response have you had from your mining clients when you discuss renewa-bles, either diesel or gas hybrid solutions?A: The response has been amazing. Our generator sets remain as the core of the sys-tem, providing firm, uninterruptable power to run our customers’ businesses. Our min-ing customers rely heavily on Caterpillar for much of their equipment on the mine site

already, so our ability to integrate these new technologies is just another way we can pro-vide value. The key to all of this is our dealer service network. It’s one thing to integrate the technologies and sell a product; it’s the ability to service it and keep it running for the next 20 years that differentiates us from our competition.

Q: How do you see this market evolving over the next three-to-five years in terms of new energy solutions for mines?A: Today, we typically see PV and wind lowering fuel consumption in the range of 30-70 percent, but it’s limited due to the high cost of energy storage. We typically find 10 to 20 minutes of battery ride through as the optimal points in terms of LCOE and pay-back. We only use energy storage for short term intermittency. As the price of energy storage goes down, we will be able to time shift the excess energy produced from renewables during the day and increase the amount of fuel substitution.

MINE CASE STUDY MINE CASE STUDY

Nic Schoeman General Manager

Technical Services

BARRICK GOLD


frican Barrick Gold, which has three mines in Tanzania and is expected to mine approximately 8 million tons of gold bearing ore

this year alone, has been actively exploring renewable energy options for the past eight years, according to Nic Schoeman, General Manager of Technical Services, and Manfred Hildebrandt, Corporate Manager of Mainte-nance.

In its attempts to move away from diesel generation, African Barrick Gold (ABG) first embraced grid power sourced by TANESCO, the electric supply company wholly owned by the government of Tanzania. TANE-SCO’s energy is greener than diesel because around half comes from hydro with another 40% from nearby gas reserves and 10% from thermal. “Moving our operations from die-sel to grid power ensured that a percentage would be renewable because of the hydro energy,” says Schoeman.

Given subsequent performance problems with grid power, ABG is now reassessing its options. The company is currently explor-ing the possibility of using solar energy for its Bulyanhulu mine.

Schoeman points out that there’s a six-hour window of maximum solar penetration in a given day for its three Tanzania mines: Bulyanhulu, which requires approximately 32 megawatts of energy, North Mara at 16 megawatts, and Buzwagi at 17 megawatts. “If you get solar right, it has the potential to give us nearly 18% of our power needs,” he says.

Given the recent fall in gold prices, ABG needs to find a renewable solution

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AFRICAN BARRICK GOLD: EMBRANCING RENEWABLES, STAGE TWO

that’s economically attractive. “Solar has improved significantly over the past few years with much better technology, and the capital costs per kilowatt hour have reduced almost threefold,” says Schoeman. “We believe solar is competitive but it’s not a total solution.”

An Evolving Renewable Plan In 2006, ABG started on a strategy to put North Mara and the new project, Buzwagi, on the national grid; at the time, Bulyanhulu was the only mine utilizing grid power. The deci-sion looked simple because the cost of grid power was approximately one third of diesel generation. In 2009, the new Buzwagi plant was commissioned on full grid power and the North Mara plant was converted to grid power.

ABG is structured so that decisions such as this are supported by individuals at many levels of the organization. Schoeman, for instance, heads up a small group of techni-cal experts that support ABG’s three mine sites and any new projects coming on line. Hildebrandt works closely with the com-pany’s engineers and his team reports into Schoeman’s team. “Between Manfred and I, we speak to the site engineering staff and we develop strategies in terms of our power options,” explains Schoeman.

Once a proposal is finalized and the costs calculated, the recommendation goes to the senior leadership team, requir-ing approval from the CEO and the CFO. In some instances, the proposal must also be presented to the company’s full board.

Schoeman emphasizes that power needs fluctuate because the mines themselves change. He notes that as miners go deeper

into the earth in underground operations, the heat increases and more refrigeration and ventilation are needed to provide work-able conditions. As a result, he says, the power demands at Bulyanhulu are growing over time.

Making a ChangeUnanticipated problems from moving to grid power quickly became apparent. Schoeman points out that TANESCO did not meet is own Public Power Plan for increased gen-eration. In addition, TANESCO’s grid stabi-lization project struggled and so the mines were not receiving a reliable energy supply.

Although moving to grid power clearly reduced unit energy costs, Schoeman points out that the costs from lost produc-tion from outages, equipment failures, and capital expenditures for grid protection can also be significant.

After consultations with TANESCO, ABG realized that the grid stability project would not be completed for many years and so it began exploring other energy possibilities. In 2010, ABG decided to ensure “spinning” minimum load power at North Mara by using 2.5 megawatt diesel gensets, as well as by installing full backup power at Buzwagi.

ABG also began revisiting other forms of

renewables. The three mines use roughly 34 kilowatt hours of energy and 0.5 tons of water per ton of ore milled. As a result, the company’s current energy costs for process-ing are over $70 million a year. As part of its investigation into other options, earlier this year ABG put out a tender for a poten-tial solar solution for Bulyanhulu that could take the form of an IPP arrangement.

Schoeman points out that in spite of this setback, ABG’s greener energy plans have advanced in other ways. When ABG built Buzwagi, it designed it for renewable energy systems. Schoeman is particularly proud of Buzwagi’s 75 hectare water catchment area, which collects and stores rainwater in a large, enclosed plastic liner. By harvesting rainwater, the mine no longer pumps water from Lake Victoria and transports that water many kilometers to the mine. In addi-tion, he points out that Buzwagi makes use of energy-saving lighting and solar-powered geysers.

Anticipating a Future with SolarOver time, solar has become more attrac-tive. Schoeman points out that thin film and other panel technologies have advanced significantly, “improving the overall life effi-ciencies and life spans of solar solutions.”

Because solar is potentially so cost effec-tive, ABG is exploring the option of opti-mizing its solar supply, says Hildebrandt. Although he doesn’t anticipate solar being difficult to integrate, he is concerned that the many voltage dips and outages on the TANESCO side mean that the control sys-tems have to function extremely well.

Economic considerations are important as Schoeman points out that renewable pro-jects tend to have “lengthy payback periods” because of the upfront capital investments required. Therefore, in the current capital-constrained environment, any project would have to demonstrate significant oper-ating cost benefits to justify the potential investment.

In the end, Schoeman is convinced that “solar definitely has its place,” but is not the entire solution. Schoeman and Hildebrandt are both enthusiastic about the potential for solar because it could supply more sta-ble energy at costs “more competitive than diesel generation.” In addition, they say, “the environment/carbon footprint reduction advantages are significant.”


Douglas McAlpine Project Manager

RES CANADA


ouglas McAlpine, in charge of microgrids at Renewable Energy Systems (RES), discusses the out-look for hybrid renewable energy

solutions over the coming years. McAlpine believes that mines are beginning to see the potential of renewables and they will start to proactively engage on a significant scale as more projects are built and demonstrate proven reliability.

Q: How would you describe the current opportunity for wind and solar projects with mining off-takers?A: My view is that opportunities currently exist but they are limited and difficult to execute, mainly due to the limited track record of hybrid systems combined with the necessary cautiousness of mines. That said, the future potential is large. Mines are keen for solutions to the increasing pressures facing remote electricity generation. Once they’ve seen that renewables can be reliable, I expect the market will grow rapidly.

Today there seems to be a lack of coher-ence in the industry with many different approaches to delivering projects and no clear preference from the mining commu-nity. This should become more consistent over the next few years as preferred pro-ject delivery routes and structures become established. So limited current opportuni-ties with a large future potential, making it a difficult market.

Q: What particular services and expertise does RES offer for private PPAs?A: We offer a wide range of services: feasi-bility, development, design and engineering,

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INTELLIGENT FINANCING AND CUSTOMIZED HYBRIDS: RES ON ENERGY SOLUTIONS FOR MINES

construction, financing, operations, and asset management. Our experience comes from developing renewable energy plants over 30 years during which time we have negotiated and signed numerous PPAs with both private and public organizations.

Increasingly we are seeing non-utilities sign renewable energy PPAs, such as our recent deal with Microsoft Corporation for the energy produced at the RES developed and built 110MW Keechi wind farm in Texas. Similar to mines, counterparties like Micro-soft are seeking to hedge power price vola-tility and reduce their carbon impact.

One key area of expertise RES offers is the correct sizing of hybrid systems, combin-ing our knowledge of generation and stor-age systems with our financial modeling expertise to maximize project efficiency, both economically and technically. There are a limited number of companies who are able to determine the correct penetration level and actually design, install, and oper-ate that system in a committed-cost model.

Q: I know that RES also provides storage solutions. Can you tell us more about some of the projects you have completed that include storage?A: We developed, built, and currently own and operate two 4MW/2MWh, utility-scale, grid-connected batteries, one in Ohio and one in Ontario. These systems provide frequency regulation services to the grid operator on a 24/7 capacity basis. Some of our storage proposals allow capital investment defer-rals, a useful application for many utilities. We also provided SCADA for the world’s first integrated wind/cavern based compressed

air storage scheme (2MW / 500MWh) in the U.S., and have developed solar ramp miti-gation and energy storage state of charge models. It’s this SCADA and control software, the design of which RES performs in-house, that we see as vital to the success of hybrid renewable systems.

Q: How are the new storage solutions per-forming?A: They’re performing well. These are rela-tively new services that are being offered and so far they are performing as designed. Non-performance means financial penalties so we’re incentivized to get it right the first time. We now have a development portfolio of over 200 megawatts of storage globally.

Q: How could this type of storage solution be applied to a mining operation to help further offset diesel?A: For mines, the key application of stor-age is enhancing reliability and increasing the renewable energy penetration level, or the percentage of renewable energy you are able to inject into a system relative to that system’s total capacity. Storage can be used to smooth the output of the sys-tem so that there is no sudden drop-off in output when a cloud passes over a solar plant or the wind drops. Whilst applica-ble to all intermittent generation sources, it’s particularly effective for wind energy, which has a less predictable output profile. This is important for mines to ensure their operations are receiving stable supply. As penetration levels increase, storage also plays a role in maintaining the frequency stability of the system.

Q: What are some of the main barriers or objections mines have for moving forward with renewables integration? A: In my experience, the first and most fun-damental barrier is the reliability of elec-tricity supply to mines. This can be a vital part of their operations and the last thing they want to see is any disruption to that electricity supply. Mines have become very good at operating conventional fossil-fuel generators, which they’ve been doing for decades. The introduction of a new system is understandably seen with caution.

Secondly, the intermittency of renewa-bles is often perceived as unreliability. With renewables, you can’t control the output as you can with a conventional, fossil-fuel generation plant. But by using renewable energy in conjunction with fossil fuels and the correct control systems, it is just as reli-able. Overcoming that perceived unreliabil-ity remains a hurdle.

Another issue is the lack of proven track record for hybrid renewable plants, particu-larly at a large scale. I believe that once there are a few operational deployments of hybrid systems, several megawatts in capacity and with decent penetration levels, it will make a big difference. Other mines will be able to see these operational examples and the benefits they can bring.

The final major barrier I see is the capi-tal costs required for renewable energy pro-jects. The requirements are much larger than mines are accustomed to budgeting for a diesel generator, and I hope that will be overcome by third-party ownership of hybrid systems and intelligent financing solutions.

Q: How do you see the market for renewa-bles for mines evolving over the next cou-ple of years?A: I see a gradual, relatively slow deploy-ment of hybrid systems over the next cou-ple of years. Some of the smaller mining companies that are more flexible in their approach may be quicker to take on new ideas and new technologies than the larger companies. Once those projects have been up and running for a year or two and have good operational records, then I think we’ll see a significant push in the number of projects being developed or built. I hope that this “second wave” of projects will see projects striving for significantly increased renewable energy penetration levels.

MINE Q&A MINE Q&A

Ron Halas VP Commercial, South America

IAMGOLD


I

MOVING FORWARD WITH PV TO POWER GLOBAL OPERATIONS: IAMGOLD Q&A

n this Q&A interview, Ronald Halas, VP Commercial, South America at IAMGOLD, outlines the main con-siderations and decision making

processes undertaken when mining com-panies address the challenges of powering remote operations.

Q: How are energy decisions made for your various mine sites – how is your energy team organized? A: IAMGOLD does not have a central energy team, but we do have a number of key indi-viduals that meet to discuss the efficiency of the existing and future energy solutions for our operations. Each of our sites has its own unique circumstances. For example, at our mines in Quebec, there is the opportu-nity to receive power at relatively low rates, since the mines are connected to the Hydro Quebec grid.

In the case of our Essakane mine in Burkina Faso, the location is far from the existing national infrastructure, so we self-generate on-site at a high cost. To improve our costs here, our central engineering team in Canada is leading studies into alterna-tives such as solar and connecting to the grid. The ultimate decision for either of these projects would be made by the com-pany’s executive management team with Board oversight of the overall capital budget.

Q: Can you please give me a brief update on your 5 MW project in Suriname – what stage are you at and how are you imple-menting this project (i.e. what have you outsourced etc.)? A: We entered the construction phase in

April, 2014, and are on schedule for commis-sioning during the third quarter of 2014. The project moved swiftly and smoothly from the Preliminary Feasibility Study stage to the detailed design and construction stages. Our in-house Engineering and Construc-tion department have managed a number of American and Surinamese contractors to advance this project. We commissioned Renewable Energy Resources Corporation (a WTEC Company) to do the detailed engi-neering and commissioning plans.

Q: How did you come to investigate solar energy as an option for addressing your energy challenges at this site – what were the main drivers? A: Energy costs make up an increasing proportion of our overall cost of produc-tion, therefore, we wanted to find a means to reduce our operating cost. At the same time, we gain the added benefit of reducing our carbon footprint. We are also aware that

the Republic of Suriname is very interested to see the benefits of renewable energy.

Q: What was the approval process like for this project – who was involved in the approvals? A: This renewable energy project followed the standard hierarchy of approvals for IAMGOLD Capital projects, which involves approvals both in Suriname and at the head office in Toronto.

Q: How are you going to measure the ROI on investment for this project – what particu-lar metrics will you be tracking?A: The key for me will be to confirm the cost per kWh of energy provided by this system. We will share this information with the local utility and university so that other potential solar projects in Suriname can gain from our experience.

Q: Do you have some advice for another mine who is beginning to look at this as an option – what are some of the key les-sons learned? A: As with any type of project, having the cor-rect personnel involved is one of the keys to success. If the right skill sets are not available in the company, then very early in the process, these must be acquired. Having one group involved from the concept stage through to commissioning, and possibly into the opera-tion phase is an important consideration.

Q: What are you beginning to consider for your site in Burkina Faso – what stage are you at in the process? A: The team in Burkina Faso is considering several opportunities to reduce the overall power cost. The installation of a large solar farm is one of the options receiving the greatest attention at this time.

Q: What are the key drivers for this particu-lar site? A: All gold mines are looking to reduce the overall cost to produce gold. As the cost of energy is a significant component, this is an obvious area to improve costs.

Q: How do you see the use of renewables evolving for mine sites over the next 3-5 years? A: The capital cost of the solar panels has dropped significantly over the last 5 years. This helped the economics of the project in Suriname. If the prices continue to drop, I think that we will see even more mines installing solar PV panels.

The next innovation that we need to see to further enhance the renewables indus-try is an improvement in the ability to store power. In our case in Suriname, we are still grid-connected, so that when the solar facility is not providing energy to the operation, then we can rely on the grid. For those more remote operations that are not grid-connected, cost-efficient energy stor-age will be the catalyst that will allow 100% renewable energy use in the future.

Q: What advice would you offer a renew-able energy expert (supplier or developer) who is looking to cater to the specific needs of potential mining clients – what would help your job? A: There are many experts and suppliers available in this market today. For those companies that may not have the in-house expertise and cash available to install the renewable energy systems that they may desire, the key would be someone who can provide a turn-key solution whereby the sup-plier finances the installation, and is reim-bursed on a per kWh-basis.

SUNEDISON SUNEDISON

ichelle Chislett, SunEdison’s Vice President and Country Manager, Canada, describes an evolution in the solar market over the past five

years that is making this form of renewable energy far more attractive to mining compa-nies today.

Q: How do you see the market for solar pro-jects for mines evolving?A: We see a large opportunity. The costs for solar energy are declining globally, and when you compare the costs of solar to other forms of generation that mines use, such as diesel, solar is not only cleaner, it’s less expensive. So, it’s really a no brainer.

Over the last five years, the cost of solar has gone down by more than 50 percent, pri-marily due to the decrease in module costs and efficiencies in the construction pro-cess. SunEdison expects similar declines in cost to occur in the coming years. In fact, it is SunEdison’s goal to have 400-watt mod-ules priced at $0.40 per watt within the next five years.

Solar is easy to deploy across the globe. Our construction timelines, coupled with our expert operations and maintenance team, make SunEdison a cost leader in the industry. Because of these various factors we’re going to see strong global growth in solar deployment in the mining sector.

Q: How is SunEdison positioning itself to deliver solar solutions for mines around the globe?A: First and foremost SunEdison is present on every major continent and we’re well posi-tioned to service global mining customers.

Secondly, SunEdison is a clean energy provider, and we’re capable of creating innovative solutions for mines across the world. Lastly, we’re not only strategi-cally positioned to deliver solar for mines around the world, we’re already doing it with our 100-megawatt plant in Chile. We also recently signed a second mine for a 69 MW project in Chile and that project is cur-rently under construction. We plan to lev-erage this experience to service the global mining industry.

Q: While we have seen a number of three-to-five megawatt projects, large-scale solar for mining off-takers is still fairly rare. Do you think this will change in the near term?A: We’re already seeing that change with our 100-megawatt project. Many of the projects we see around the world are the smaller, three-to-five megawatt projects. The rea-son why we haven’t seen too many larger projects is land availability, or finding land close to the mine that isn’t already slated for future extraction. That’s a big constraint. However, we are starting to see interest in the concept of wheeling power to mines. You could build [a solar plant] 50 kilometers away and wheel the power to the mine, which is a way around the land constraint problem. The wheeling of power is happen-ing in two ways. First, renewable energy companies build where land is available, and then enter into a PPA off-take agree-ment with a mine to supply power at a cer-tain rate. Another less common way to do this is to build wherever the land is available and then connect a dedicated, physical line or feeder to the mine.

Q: When you look at the business develop-ment opportunity for solar for mines, where do you see the greatest opportunities? A: Solar brings a big benefit for mines when they’re off grid. That’s really where there’s a huge opportunity to offset diesel and drive down energy costs. We’re also seeing devel-opment opportunities where grid reliability is an issue. A lot of regions don’t have the power supply stability for their mines. And then there’s the issue of pricing stability. With solar, you know the cost of your fuel is zero for years to come with just minor O&M costs.

Q: How would you describe the value proposi-tion of solar to the CEO of a mining company?A: Solar is beneficial in many ways. Solar is cleaner than diesel, and it helps decrease the energy costs for a mine, which not only increases profitability, but most signifi-cantly, extends the life of the mine. That’s it in a nutshell.

Some of the biggest costs for mines are

their energy costs. Energy constitutes their biggest project life-cycle cost and those costs have the greatest variability. If you can decrease those costs - and provide a meas-ure of stability - that in turn will increase the profitability of the mines and allow them to focus on what they do best: extraction of all sorts of natural resources. Energy costs are front and center. That’s the essence of our message to mining companies.

Q: What do you think still needs to happen for solar to become a mainstream energy option for the global mining sector?A: We talk about this a lot at SunEdison. We need to see costs continue to decrease. Sun-Edison is laser-focused globally on innova-tion; innovation is part of our culture and we devote a great deal of time focusing on it. And our innovation is not just targeted to technologies, but to decreasing costs and being more efficient. Over time, innovation and lowering costs will be the biggest cata-lysts for solar in mining applications.

CLEANER ENERGY AT STABLE PRICES: THE VALUE PROPOSITION OF SOLAR FOR MINES


Michelle Chislett Vice President and Country Manager,

Canada

SUNEDISON

M

SunEdison’s Project Amanecer Solar CAP: 93.7MWAC/101MWDC/2700kWh per kWP/March 2014 (full ramp up).

““We also recently signed a second

mine for a 69 MW project in Chile and that project is currently under construction. We plan to leverage this experience to service the global mining industry.”

FEATURE ARTICLE FEATURE ARTICLE32 33Renewables and Mining Industry Report 2014 Renewables and Mining Industry Report 2014

past, and Popovsky believes that the indus-try has evolved in other ways, as well, so that renewable energy “looks more and more like the mining industry.”

He explains that renewable companies operate within three main business stages, each of which corresponds to a stage in the mining industry. He likens development in renewable energy to the exploration stage of mining, and this is followed by an implementation stage in both industries. As renewable energy concerns increasingly turn to independent power producers (IPPs) to sell energy into the marketplace, what they’re doing corresponds to the final stage in mining in which ore or minerals are sold to different industry players.

Popovsky believes that these business-cycle parallels “should make the renewable industry more digestible, or understand-able, for the mining sector.” At SunEdison, for instance, “We have created a financial product to make renewable energy projects align with the problems that mining com-panies are looking to solve.” Specifically, he says, SunEdison builds solar power plants on mining sites and then sells 100% renew-able power to the mining companies just as

they’d be sold any other type of electricity.Practically speaking, renewables com-

panies are broadening the scope of their businesses to perform energy management functions-- everything from energy storage to the control systems that regulate renew-able energy and fossil fuel sources. McAlpine emphasizes that these new areas are appli-cable to mining. “We’ve been evolving into those areas because we thought they’d be globally significant, not just significant for the mining industry, and it just so happens that these are some of the key things in the mining sector, too.”

t’s increasingly clear that min-ing and renewable energy are two great businesses that belong together - and yet figuring out the

nuts and bolts of getting projects off the ground isn’t always easy.

For many renewable-energy companies, the slow pace of approving projects poses an ongoing challenge. “We have the skills the mining sector needs. The issue is get-ting momentum behind the mining sector to believe in these projects,” says Douglas McAlpine, who is in charge of microgrids at RES Canada.

Mark Bongiovanni, Mining and Met-als Sales Manager for Schneider Electric in Canada, points out that generalizations are difficult to make because each mining company - and even each individual min-ing site - operates under its own unique set of considerations.

He notes that “the diversity of the cost of energy in each country is what’s driving development. In companies where it’s dif-ficult to get energy to the mine site, whether it’s diesel or gas or the electrical grid, obvi-ously, they’re more interested in looking at how to generate power locally.” He contin-ues: “Ultimately, it’s a value proposition that each company -- and, in some cases, each site-- needs to evaluate for its own needs.”

Honing the Key MessagesMcAlpine emphasizes the importance of continuing to clear up misconceptions around renewables.

One key message that still needs to be fully addressed is stability. “We need to overcome

I

REPOSITIONING RENEWABLES TO MEET THE MINING INDUSTRY’S ENERGY NEEDS

the perception that renewables are unrelia-ble,” says McAlpine. As renewable companies become better able to explain how intermit-tency can be managed, mining companies are growing more confident in the potential of wind and solar energy. “The most impor-tant message is that renewables can be a stable source of power,” he says.

Other important messages to convey are economic. McAlpine believes that renewable companies excel at illustrating the benefits of solar plants or wind farms in terms of carbon savings and emissions reduction, but they need to do an equally compelling job of explaining the dollars-and-cents equation for mining companies. He contin-ues: “Renewables are price competitive in a number of areas, particularly in the mining sector in which you have isolated and remote mines.”

Bongiovanni agrees: “Mines want to reduce the cost of energy and they want reli-ability. If they can reduce the cost of energy and improve the reliability of their opera-tions, it’s a very simple decision.”

A Meeting of the Minds?Oleg Popovsky, Global Business Develop-ment Director for SunEdison and board member at American Vanadium, notes that renewable energy went through an identity crisis in its very earliest days. “Renewable energy is this big, interesting animal. Is it going to be part of the technology sector? Or the clean-tech sector? Or part of the tra-ditional energy sector? What is it?” he asks. “Well, it’s all of the above.”

Renewable energy providers are less frag-mented now than they were in the recent

“We have the skills the mining sector needs. The

issue is getting momentum behind the mining sector to believe in these projects.”

Douglas McAlpine RES Canada

Mining companies are undergoing a transformation of their own. Schneider Electric’s Bongiovanni points out that ten years ago, the largest mining companies dominated the industry out of a prevailing belief that “bigger was better.” Today, he says, “better is better,” meaning that those mining companies able to innovate and produce at a lower cost are going to wind up being win-ners. Given this new dynamic, the mining industry is now far more ready to listen to how renewable energy companies can help lower energy costs and solve other problems that mines might be facing.

Along similar lines, Till Krumbholz, Sales Manager for the Energy Sector’s Smart Gen-eration Solutions as Siemens AG, has found it helpful to delve into the financial situation of the mining industry in order to provide solutions that are mutually beneficial. Spe-cifically, he notes that mining companies are keen to reduce their project risk, and therefore are highly appreciative of the per-formance guarantee solution that Siemens offers.

Chris Matthews, New Business Manager at Mainstream Renewable Power, notes that the business model set forth by purveyors of renewable energy has changed because mining companies have balked at investing in generation equipment.

The solution? Instead of selling mines a wind farm, companies like Mainstream realized that it was far more appealing to sell them a power purchase agreement, or PPA. “Nowadays,” explains Matthews, “developers are approaching mining com-panies and saying, ‘We’ll build it for you, and we’ll finance it. But you have to agree to buy the power.’” He continues: “That’s a much more appealing prospect for a min-ing company, particularly nowadays when mining companies want to keep things off the balance sheet.”

“Generalizations are difficult to make because each

mining company - and even each individual mining site - operates

under its own unique set of considerations.” Mark Bongiovanni SCHNEIDER ELECTRIC

FEATURE ARTICLE MINE CASE STUDY34 35Renewables and Mining Industry Report 2014 Renewables and Mining Industry Report 2014

Matthews also sees renewable provid-ers changing to adapt to a behavioral issue characteristic of many mining companies. Because most mining companies make decisions slowly, Mainstream has found that for renewable projects, especially hybrid pro-jects in Africa, it often makes sense to wait for the mines to come to the renewable com-pany, rather than the other way around.

Finally, David Willick, Commercial Direc-tor in North America for GE Mining, is seeing “a risk-sharing appetite” from mines uneasy with the idea of assuming the full capex burden of installing and commissioning a renewable-energy solution. “They’re looking for a third party to put up a power generation system-- so they can essentially buy power by the hour.”

This desire for partnerships comes out of the fact that mines are, by definition, temporary ventures that will eventually be depleted. Given this central fact, it’s no won-der that mines are concerned about invest-ing in renewable energy when they may not be working at a given site long enough to reap the full return on investment.

Willick therefore sees potential in part-nering with local communities: “If we start working together and there’s some type of cost- and risk-sharing, the neighboring com-munities can benefit longer term. And that could make it more attractive for the projects to proceed in the shorter term.”

What the Future Will BringMany experts are convinced that energy storage is a critical component for improv-ing renewable penetration at a mine site. Wil-lick notes that General Electric has an energy storage solution that allows mines to put power into a storage facility when the wind is blowing or the sun is shining but the mine is consuming less energy than the power sys-tem is generating -- and then draw from that power later, when energy is needed again.

He also points out that technological innovations will help make the renewable equation even more attractive for mines. “Mines operate in challenging geographi-cal locations with significant obstacles to overcome, whether it’s extremely high rock face temperatures or extremely cold ambi-ent temperatures,” says Willick. He points out that technology advances will prevail to increase the renewable penetration rate and drive down costs for mines.

That renewable energy companies have been able to quickly evolve to meet the needs of mining companies suggests that larger renewable energy projects within the min-ing industry will come to pass in the not-too-distant future.

McAlpine, for instance, is sanguine about the prospects of larger-scale projects being commissioned in the next two-to-three years. “Mines looking at these types of projects want to install larger projects. The desire is there,” he says. He therefore believes that 10-megawatt projects will start to be built soon instead of the one-or-two-megawatt pilots generally seen today, although he expects the initial rate of uptake for these sizable projects will be moderate.

This positive momentum will also help with the chicken-and-egg situation that has delayed progress for quite some time: mining companies are reluctant to invest in renewable energy projects without a proven track record, and renewable-energy provid-ers can’t demonstrate success until mining companies start to take the plunge and try their solutions.

“One of the big problems has been how the mines perceive renewable energy,” con-cludes McAlpine. “Once they can visit and take a look at these plants operationally, they’ll be a lot more confident proposing them for their mine sites. They’ll start to understand the risks and won’t be so con-cerned.”

“For renewable projects, especially

hybrid projects in Africa, it often makes sense to wait for the mines to come to the renewable company, rather than the other way

around.” Chris Matthews MAINSTREAM RENEWABLE POWER

“Technology advances will

prevail to increase the renewable penetration rate and drive down costs

for mines.” David Willick GE MINING

INVESTING IN GROUNDMOUNT PV TO POWER MINING FACILITIES: ANGLO AMERICAN CASE STUDY

R

Darren Hollander CEO

SOLARPOWER

Timing is everything, a lesson driven home to SolarPower Africa when it made a cold call to Anglo American in early 2012 and suc-

cessfully landed a meeting. From that single phone call, SolarPower Africa was invited to make a presentation to all of the company’s various heads of energy at its different mines, says the company’s CEO Darren Hollander.

At roughly the time when SolarPower Africa rung up Anglo American, the mining giant was exploring different forms of renewable energy for its across-the-board projects. After Anglo American verified that SolarPower Africa was a reliable provider of photovol-taic power, it was asked to go to one of Anglo American’s South African coal mines and analyze its electricity accounts. After this analysis, which took place in the summer of 2012, the company decided to investigate ways to add extra power to its internal grid.

Headquartered in London and listed on both the London and Johannesburg stock exchanges, Anglo American is one of the world’s largest mining companies. The com-pany, which posted $2.7 billion in earnings for 2013, is the world’s fourth largest iron ore producer. And in South Africa, Anglo Ameri-can not only mines iron ore but it also mines thermal coal, platinum, and diamonds.

Breaking into a New Market “In South Africa, solar power is relatively new,” explains Hollander. “People are con-cerned when it comes to solar because they haven’t seen many projects completed.” He points out that while mining companies are intrigued by renewable energy, they’re jit-

tery about “the unexpected.”Adding to the difficulty of convincing

mines to try solar is the fact that a few early projects by SolarPower Africa’s competitors haven’t worked out as planned. “Some com-panies overpromised on performance and then under-delivered,” says Hollander. He notes that well-publicized problems have “given solar a bad name in South Africa.”

To allay the fears of mining companies, SolarPower Africa offers its clients perfor-mance guarantees. Typically, it guarantees a minimum of 80% of the annual yield that the system is supposed to produce. Hol-lander points out that this type of guaran-tee is “the industry norm,” and guaranteeing 100% isn’t feasible given that in some years, the weather is terrible and the sun rarely shines. That said, Hollander points out that to date, his company’s PV plants have uni-formly over-performed on yield.

Hollander notes that this mining leader had carefully studied results from overseas plants and had a true grasp of what solar power can accomplish. He is convinced that Anglo American will benefit by being viewed as a leader when it comes to “paving the way for other mining companies in South Africa.”

When Anglo American decided to embrace solar energy, it wasn’t hoping to solve a specific problem. Its main goal was to grapple with the general challenge that all mines are facing: the industry is extremely energy intensive and the cost of energy in South Africa continues to rise.

Getting Solar Up and RunningAnglo American decided to hire SolarPower Africa to build a solar PV plant that would

“We have created a financial product to make renewable

energy projects align with the problems that mining companies are looking to solve.” Oleg Popovsky SUNEDISON

MINE CASE STUDY 436 Renewables and Mining Industry Report 2014

“This is an exciting market and we are seeing the scale

and appetite for projects with mines increase significantly as they become focused on the need to drive down power costs. The question is no longer whether renewables will play a role in powering mines but, rather, how and how big?”

Adrienne Baker, Director, Energy and Mines

For mining and renewables market insight, project details, videos and presentations visit www.energyandmines.com

generate 241.92 kilowatts of energy at peak. The plant uses polycrystalline solar mod-ules and produces 413,000 kilowatt hours of energy each year.

SolarPower Africa purchased only top-tier solar panels for Anglo American. Although it used its own technology when building the solar plant, it did have Schletter, a Ger-man company, build the mounting struc-tures that SolarPower Africa designed. In the end, SolarPower Africa used just under 1,000 285-watt solar panels made by China-based E. T. Solar.

Building and implementing the PV plant, which is currently in operation, went very smoothly, recalls Hollander. The greatest challenges for getting Anglo American’s solar plant up and running were adminis-trative. Hollander notes that the South Afri-can bureaucracy for the mining industry is extremely cumbersome. In addition, South African mines face a set of hurdles when it comes to meeting labor requirements. Before a mining worker is allowed to set foot on site, he or she must complete days of induction courses, as well as a two-day, mine-specific medical exam that is held at a local hospital.

“Mines are different from the normal commercial environment,” says Hollander. “We do whatever it takes to ensure the safety of our workers. You can never be too careful.”

Reaping the BenefitsSolar energy provides numerous benefits, the greatest of which is adding internal energy to the grid in an environment of skyrocketing energy prices. “The cost of

electricity is rising so much in South Africa at the moment,” says Hollander. “In the long term, Anglo American will definitely save a lot of money.”

Another key benefit is the boost to repu-tation. Hollander points out that mining companies are frequently faulted for dam-aging the environment. Using solar energy - especially before one’s competitors have done the same - gives mines a chance to burnish their public image. “This creates a lot of publicity and has got a lot of people talking,” says Hollander. “The publicity and the going-green image for this mine are big.”

By using solar power, Anglo American offsets 290,000 kilograms of CO2 each year. Hollander points out that this is the equiva-lent of planting 81,938 trees. “Anglo Ameri-can,” he says, “is a leader when it comes to putting back into the environment what they take out.”

Over time, Hollander anticipates that solar energy could prove a real boon for the African mining market, especially because the entire continent tends to get plenty of sunlight. He notes that “a lot of mines are running off diesel generators and diesel is very expensive.” In addition, mines are usu-ally located in rural areas, and so bringing in diesel fuel and then properly maintain-ing diesel generators are costly and difficult propositions.

“Solar can help reduce the load of diesel generators and save millions and millions of dollars in fuel,” concludes Hollander. “Africa is so rich in resources and there are mines all over. When it comes to mining I think there’s opportunity in every single African country.”

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