Energy & Mining International - Winter 2016 - 18

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REDUCING COSTS | COLUMNS

Outside of capital management programs, the sector has an opportunity
to apply the lessons of other industries
- particularly, the power sector - that
have evolved through deregulation
or other market forces. Historically,
mining projects have been planned as
comprehensive projects with mining
companies serving as both developer
and owner. In many cases, mining firms
have owned not just the production site
but also the port, railways and other
infrastructure that delivered necessary
water, fuel and other resources.
Such strategies may give the operation complete control over the
production chain, but they also place
the entire capital development cost
squarely on the miner's balance sheet.
Such realities make diversification,
and its subsequent shedding of risk, an
important consideration.

Winter 2016

Off-loading infrastructure elements such as power and water supply can take away significant cost obligations and sharing of risk. Rather
than funding, developing and owning
their own mega-infrastructure, mining companies are actively investigating the sharing and outsourcing
of major infrastructure projects such
as water, power, rail and port facilities. This provides the opportunity to
remove these assets off-balance sheet
and improve the project financials.
Alternatives such as long-term power
purchasing agreements (PPA), or the
leasing or rental of large-scale solar
arrays from third-party investors,
could allow mines to reap renewables' benefits without prohibitive
upfront costs.
In some cases, excess electricity
can be sold back to the grid for use by

By outsourcing infrastructure, some operators are improving their long-term financials.

18 emi-magazine.com

nearby consumers. A unique marriage
of renewables and the PPA business
model was recently unveiled in Australia, where Rio Tinto's bauxite mine
at Weipa will be powered by a 1.7 MW
solar array. Under a 15-year PPA, Rio
Tinto has agreed to buy electricity generated by the array. Rio Tinto projects
that energy from the solar array will
save as much as 600,000 litres of diesel
annually and sharply cut greenhouse
gas emissions.
As stock prices decline, new emphasis is being placed on energy efficiency
efforts, significant business restructuring measures and a focus on core,
performing assets. These latter efforts
may include asset sales and the adoption of new approaches to portfolio
development previously implemented
in sectors like power and finance.
Black & Veatch's team of industry
professionals are exploring these
scenarios, and how the industry is addressing resilience as climate change
impacts their business.
For operators, the sheer scale and
time horizon of mining projects creates
a built-in buffer to certain elements of
shorter-term volatility. Given the cyclical nature of the sector, those companies that are successful in improving
productivity and operational efficiencies will drive down costs and be
well-positioned to weather the current
tough downturn.
Though the industry may now
be looking at reducing output and
scrutinizing overheads, its leaders
are looking at what investments are
needed to prepare for the next upswing
and where those investments should
be made. EMI
__
DENNIS GIBSON is chief technical officer
for Black & Veatch's mining business. For
more information, visit www.bv.com.


http://www.emi-magazine.com

Table of Contents for the Digital Edition of Energy & Mining International - Winter 2016

Contents
Energy & Mining International - Winter 2016 - Cover1
Energy & Mining International - Winter 2016 - Cover2
Energy & Mining International - Winter 2016 - 1
Energy & Mining International - Winter 2016 - 2
Energy & Mining International - Winter 2016 - Contents
Energy & Mining International - Winter 2016 - 4
Energy & Mining International - Winter 2016 - 5
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Energy & Mining International - Winter 2016 - Cover3
Energy & Mining International - Winter 2016 - Cover4
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