Technologies in renewable energy sources such as wind, solar, hydroelectricity and bioenergy are improving, making them cheaper and attractive. However, lower commodity prices and tighter margins are among the barriers miners face when adopting these alternatives, panelists said at the recent Energy and Mines summit in Toronto.
Stephen Letwin, Iamgold’s (TSX: IMG; NYSE: IAG) president and CEO, noted the company’s operations in West Africa and South America depend largely on expensive hydrocarbons, but with the recent drop in oil prices, those costs have also fallen.
He explained the upfront costs for renewables are high, especially for solar and wind projects, and at times may not be justified if a mine has an eight- to 10-year life.
Letwin added that the improvement in technology provides an incentive for Iamgold to continue its research and drive towards renewables. Iamgold’s 5-megawatt solar facility in Suriname — where it operates its Rosebel gold mine — has been a “tremendous success,” he said. Even with the low hydrocarbon fuel generated prices, Iamgold aims to build a solar facility in Burkina Faso for its Essakane gold mine.
Sunil Kumar, Kinross Gold’s (TSX: K; NYSE: KGC) director of energy strategy, revealed Kinross spends $400 million a year on fuel and electricity, and added his team has looked at several renewable technologies to reduce operating costs. However, like other components of a project, renewables need to compete for capital, Kumar says. With the gold price coming down, there is a “smaller pool of funds” available.
Bill Allemon, global vice-president of energy management and electrical asset integrity for AngloGold Ashanti (NYSE: AU), has focused on the company’s operations in Africa’s tropical belt, where a decade-long drought and higher power demand have affected hydropower generation, leaving the field open for hybrid energy solutions. However, he said, in some cases renewable energy projects and storage sites may not fit on project sites.
Elaborating on these space constraints, David Clarry, Hudbay Minerals’ (TSX: HBM; NYSE: HBM) vice-president of corporate social responsibility, explains that all of Hudbay’s Canadian operations are connected to the grid, except for its shortest life asset, the Reed copper mine in northern Manitoba, which runs on diesel due to its location. Reed is within the boundary of a provincial park, where Hudbay minimized the mine’s physical footprint to lower its impact on the local caribou habitat. This shows how “competing interests and competing objectives can sometimes work against renewables,” Clarry said.
Given renewable projects would require environmental studies before being permitted, they would complicate the permitting process of a mining operation, Clarry added. “In any mine development, we are conscious of timelines. We are conscious of permitting complexity, and adding renewables increases the complexity.”
He suggests jurisdictions should develop models of how integrating renewables in mining projects can simplify or expedite permitting timelines.
Another hurdle to adopting renewables include the sensitivity to risk, said Allemon, who will assess how other industries have implemented renewable projects to create low-cost energy strategies.
However, given the improvement in technologies for renewables, Kumar stressed if commodity and oil prices were at the highs seen two to three years ago, Kinross would have approved more renewable projects. “Unfortunately, with capital being constraint and oil prices where they are … the commercial issue and the payback are not good enough today. Will it change in the future? Probably.”