New!!

8 Editor’s letter 10 President’s notes

tools of the trade 12 The best in new technology

compiled by Kelsey Rolfe and Chris Balcom

news 14 Industry at a glance 28 Alternative energy sources are

playing a larger role in miners’strategiesBy Kelsey Rolfe

32 The Quebec government movesforward with its revampednorthern development programBy Antoine Dion-Ortega

columns 38 Where did all the gold

money go?By Doug Pollitt

40 Financial innovation onrenewablesBy Arnoldus Mateo van den Hurk

42 The safety to speak outBy Esther Ewing

upfront: metallurgy 44 A new chloride segregation

process could open up ooliticiron reserves globallyBy Chris Balcom

46 Will technological step change oroperational excellence makemines more profitable?By Ian Ewing

50 Terry McNulty is a metallurgicalmastermind with a keen sense ofwhat makes projects succeedBy Correy Baldwin

travel 80 Polkowice, Poland

By Chris Balcom

cim community 82 CIM news from Canada and

beyond

85 Obituaries 87 2015 Calendar of CIM events

mining lore130 The Elsa silver heist: a daring

mining theft in a small YukontownBy Alicia Priest

129 Professional directory

contenufrancophone

6 | CIM Magazine | Vol. 9, No. 9

32

La version françaiseintégrale du CIM Magazine estdisponible en ligne :magazine.CIM.org/fr-CA

35article de fond68 2015 : pleins feux sur

les marchandisesNous examinons 30 métaux etminéraux différents, vous offronsune rétrospective de ce qui amarqué l’année qui vient des’écouler, notamment lestendances de plus en plusrépandues et les événementsimprévus, et explorons ce qui seprofile à l’horizon.

10 Mot du président

35 Le gouvernement provincialrelance son plan dedéveloppement nordiquePar Antoine Dion-Ortega

87 Calendrier des événements del’ICM

91 Répertoire des membrescorporatifs de l’ICM

44

accounting principles) to better comprehend the real valueof NCREs for the mining industry. This new vision shiftsaccounting priorities away from analyzing the value ofNCREs using the income statement (and the focus on prof-its and losses) and instead toward the balance sheet. Simi-larly, the focus should shift towards “cumulative savings” byviewing BAU energy as a long-term liability and NCRE as along-term asset. Therefore I propose the industry adoptnew energy metrics and key performance indicators (KPIs)linked to balance sheets and mining business valuation.

If you propose an NCRE project to many experiencedmining managers or NCRE developers, often the first thingthey will turn to is the income statement. Most operationalmanagers know the income statement is where their per-formance is ultimately recorded in profits and losses. Herethey look for any potential savings from an NCRE projectand may argue that the large upfront capital investment willnegatively affect the company’s credit rating.

D uring the commodity boom, mining companies werefocused on ramping up production and investing innew capital projects to expand supply. It was a time

when the income statement was the key management para-digm in mining economics. Now, however, the global min-ing industry has refocused on cost control and capitaldiscipline. Investors today value firms based less on howmuch they mine and more on how efficiently they do so,and how well they mitigate risk. In this new scenario, non-conventional renewable energy (NCRE) sources such asbiomass crops, small-hydro, geothermal plants, concen-trated solar power mirrors, wind turbines or solar panelscan lower energy risks in mining. Why? Because renewablefacilities act as mining assets whereas business as usual(BAU) energy options such as coal, diesel and gas, and evenconventional hydro, become mining liabilities.

Proponents of NCRE projects need to develop newfinancial intelligence (i.e. knowledge of finance and

Financial innovation on renewablesBY ARNOLDUS M. VAN DEN HURK

40 | CIM Magazine | Vol. 9, No. 9

R E N E W A B L E E N E R G Y

ON BUDGET. AHEAD OF SCHEDULE.WORLD-CLASS SAFETY.

Mining | Processing | Infrastructure | Environment

www.snclavalin.com

Together with our partners, SNC-Lavalin is the proud recipient of the Project Management Institute’s 2014 Project of the Year Award.

Rio Tinto Alcan AP60 Phase 1 Aluminum Smelter Project, Quebec

December/Décembre 2014 • January/Janvier 2015 | 41

– transforms threats into opportunities and perceived liabil-ities into mining assets. CIM

However, if you try giving the same set of NCRE projectfinancials to an experienced Toronto fund investor or a vet-eran board member of a mining company, the first state-ment they will turn to is usually the balance sheet. Herethey look for figures that might prove the value of renew-able facilities as long-term assets (which in turn couldincrease company value), how these numbers may lead to afall in the weighted average cost of capital, and how theprojected value of the business showsan upwards trend to eventuallyimprove a company’s credit rating. Ifthe projections are promising, theywill allocate the upfront capex due tothe attractive return on investmentand the building of long-term share-holder equity.

Nevertheless, at present, manyNCRE project promoters at miningcompanies do not analyze investmentopportunities using a balance sheet.Therefore they see the large initial costand want to avoid financing theupfront investment counterbalance;consequently the projects end upbeing abandoned.

In order to accurately communicatethe value renewable facilities have,everyone must speak the same lan-guage. The first step toward accuratelycomparing BAU energy and NCRE isto keep other operational variablesaffecting the profitability of the mineconstant (e.g. commodity prices, min-eral ore grade and any otherexpenses). The second is to accountfor the expected increase in price forthe BAU model based on internationalstandards set by the InternationalEnergy Agency. These are the funda-mentals of the methodology I employfor evaluating NCRE projects. Thesemetrics are designed to help NCREproject proponents, mine managers,investors and directors of companiesunderstand the projects they areworking on from the same point ofview. Renewable energy options inmining will grow along with thevolatility of diesel prices. Demand forspace and capex are the main handi-caps for renewables in other indus-tries. However, in mining, space is notan issue, and financial intelligence –by developing innovative financialmodels such as the one described here

columns

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Arnoldus van den Hurk, PhD, is the founder and CEO of r4mining.com, anindependent blog about financial innovation on renewable energy in the miningand oil and gas industry. Van den Hurk has extensive professional experience ingeology, mining engineering, finance and renewable energies. He recentlypresented his r4mining methodology at the Renewables and Mining Summitand Exhibition in Toronto. Info @r4mining.com, www.r4mining.com.

14/12/2014 Renewable Energy

http://magazine.cim.org/en/2014/December-January/columns/Renewable-Energy.aspx 1/2

0 0

Dec '14/Jan '15

Renewable Energy

Financial innovation on renewables

By Arnoldus Mateo van den Hurk

During the commodity boom, mining companies were focused on ramping up production and investing in new capital projectsto expand supply. It was a time when the income statement was the key management paradigm in mining economics. Now,however, the global mining industry has refocused on cost control and capital discipline. Investors today value firms based lesson how much they mine and more on how efficiently they do so, and how well they mitigate risk. In this new scenario, non­conventional renewable energy (NCRE) sources such as biomass crops, small­hydro, geothermal plants, concentrated solarpower mirrors, wind turbines or solar panels can lower energy risks in mining. Why? Because renewable facilities act as miningassets whereas business as usual (BAU) energy options such as coal, diesel and gas, and even conventional hydro, becomemining liabilities.

Proponents of NCRE projects need to develop new financial intelligence (i.e. knowledge of finance and accounting principles)to better comprehend the real value of NCREs for the mining industry. This new vision shifts accounting priorities away fromanalyzing the value of NCREs using the income statement (and the focus on profits and losses) and instead toward thebalance sheet. Similarly, the focus should shift towards “cumulative savings” by viewing BAU energy as a long­term liabilityand NCRE as a long­term asset. Therefore I propose the industry adopt new energy metrics and key performance indicators(KPIs) linked to balance sheets and mining business valuation.

If you propose an NCRE project to many experienced mining managers or NCRE developers, often the first thing they will turnto is the income statement. Most operational managers know the income statement is where their performance is ultimatelyrecorded in profits and losses. Here they look for any potential savings from an NCRE project and may argue that the largeupfront capital investment will negatively affect the company’s credit rating.

However, if you try giving the same set of NCRE project financials to an experienced Toronto fund investor or a veteran boardmember of a mining company, the first statement they will turn to is usually the balance sheet. Here they look for figures thatmight prove the value of renewable facilities as long­term assets (which in turn could increase company value), how thesenumbers may lead to a fall in the weighted average cost of capital, and how the projected value of the business shows anupwards trend to eventually improve a company’s credit rating. If the projections are promising, they will allocate the upfrontcapex due to the attractive return on investment and the building of long­term shareholder equity.

Nevertheless, at present, many NCRE project promoters at mining companies do not analyze investment opportunities using abalance sheet. Therefore they see the large initial cost and want to avoid financing the upfront investment counterbalance;consequently the projects end up being abandoned.

In order to accurately communicate the value renewable facilities have, everyone must speak the same language. The firststep toward accurately comparing BAU energy and NCRE is to keep other operational variables affecting the profitability of themine constant (e.g. commodity prices, mineral ore grade and any other expenses). The second is to account for the expectedincrease in price for the BAU model based on international standards set by the International Energy Agency. These are thefundamentals of the methodology I employ for evaluating NCRE projects. These metrics are designed to help NCRE projectproponents, mine managers, investors and directors of companies understand the projects they are working on from the samepoint of view. Renewable energy options in mining will grow along with the volatility of diesel prices. Demand for space andcapex are the main handicaps for renewables in other industries. However, in mining, space is not an issue, and financialintelligence – by developing innovative financial models such as the one described here – transforms threats into opportunitiesand perceived liabilities into mining assets.

Arnoldus van den Hurk, PhD, is the founder and CEO of r4mining.com, an independent blog about