Energy Analysis is a Key for Miner Profitability

"Miners worldwide use a tremendous amount of energy in producing finished minerals for the end user market. In accomplishing this goal, they incur energy costs that can range from 20% to 30% of the total cost of production, so there is fertile ground for cost savings. To unlock this huge value in cost reduction, energy analysis is the key and is broken into several segments: 1. Fuel analysis for power generation 2. Energy supply & demand 3. Opportunity cost for lack of power 4. Backup power 5. Power contracts 6. Energy efficiency 7. Renewable energy 8. Continuous energy management FUEL ANALYSIS FOR POWER GENERATION What is the first thing we evaluate when looking at power supply alternatives for the mining industry’s large power requirements? Is it 1) site, 2) engineering, procurement, and construction companies, 3) independent power producers, 4) turbine vendors, 5) grid connections, or 6) fuel supply, logistics, and infrastructure? In evaluations of power supply alternatives for mining companies with special emphasis in developing countries, there is one over-riding conclusion: reliable fuel supply drives the energy generation economic engine. Evaluating several different fuels including liquefied natural gas (LNG), natural gas, diesel, heavy fuel oil, and liquefied petroleum gases (LPG) among others, the best project outcomes are those where fuel supply, pricing, logistics, and infrastructure are given an extensive amount of time during the analysis stage. In an assessment of the twenty-year costs of generating power from multiple fuels, each fuel’s costs were placed into three separate net present value (NPV) buckets of: 1) capital, 2) operating and maintenance, and 3) fuel. Within a range of 65% to 85% for all fuels, fuel cost was the largest component of the NPV of the life cycle power generation costs. So if 65% to 85% of your life cycle power generation cost is one item, shouldn’t miners spend a corresponding amount of time in the analysis stage fully understanding this key determinant for a successful power project? In developing countries where power generation infrastructure may not exist or does not exist at the same level as is found in North America and Europe, fuel analysis becomes even more important. One of the key questions for fuel importation in developing countries is the draft at existing ports to allow larger vessels to dock at the jetty. Can larger ocean-going tankers dock at the port for off-loading, or is the port’s draft too shallow, thus forcing a Single Point Mooring (SPM) system or Conventional Buoy Mooring (CBM) system to be constructed at substantial capital expense? Once fuel can be imported, sufficient onshore storage capacity should exist, or must be built to off-load the entire fuel cargo from the larger ships. Additionally, the throughput capacity of the pipeline from SPM/CBM must allow a rapid unloading of the fuel from ship to shore to eliminate steep demurrage costs for the project."