Ph D. Arnold M. van den

Hurk Mir

HOW TO MEASURE RENEWABLES FOR

MINING

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¡  renewables4mining.com (r4mining.com) and renewables4oil .com (r4oil .com) are new independent websites aiming:

To share and transfer knowledge about the Valuation of Business Models on

Renewable Energies for the Mining and Oil Industry … … and minimizing Peak Oil and Climate Change

¡  THE PROBLEM is huge: §  Extractive industries (mining, oil and gas) are the largest energy consumers in the

world and one of the largest generators of greenhouse gases. §  Only Comminution process (crushing and milling) represents the 53% of mine site

energy consumption in global mining demanding up to 3% of total world electricity production §  This figure equals the total electricity consumption of Germany

§  Experts declare there are energy saving opportunities of 420 trillion BTUs/year in mining crushing … §  Which means the total energy consumption of Canada

§  Subsequent beneficiation metallurgical processes of base metals demand even greater needs of electricity.

WHAT IS

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¡  THE APPROACH: The use of the same “ language” for pr ivate and publ ic sectors . The Value proposi t ion is suppor ted by an innovat ive econometr ic language looking for creat ing synerg ies to the whole stakeholder ecosystem inc luding: §  mining (1) and renewable energy companies (2); shareholders (3) and equity/debt investors (4);

administrations and local socioeconomic development entities (5); analysts of multi lateral organizations about Climate Change (6); international agencies and professionals in charge to minimize the Peak Oil (7).

- - - - - - - - - ¡  FIRST CASE STUDY:

§  Mine La Escondida , currently the highest producing copper mine in the world with 1.72 million Tn (2012), represents around the 10% of copper mine world output and the 26% of Chilean production.

§  In order to better understand the magnitude of this demand, let us to illustrate some comparable data: La Escondida needs the same electricity than Sudan, higher quantity than Ethiopia, Tanzania or Macao. Two times the electricity of Senegal, Surinam’s or Cambodia’s. 4.5 times Aruba’s needs, 7.3 times Mauritania and 15 times the electricity demand of Afghanistan.

§  World Copper Mining electricity market demands higher amounts than Hong Kong, Singapur, Colombia or New Zealand …

§  If we want to achieve 10% of this demand by Solar PV for La Escondida the production would be comparable to the 6.5% of Panama’s demand or 150% of the electricity in Afghanistan.

Then we need 200 MWp PV facility to do that … let see how it works

THE VALUE PROPOSITION …

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¡  200 MW PV nominal power facility in the location implies: §  8.52 TWh in 25 years (341.1 GWh/year) solar electricity production

or 9.16% the total 25 years demand in current regime (ore grade). §  A Leverage Cost of Solar Electricity of 11.57 US cents/kWh

§  7.31 US cents/kWh to CAPEX and 4.36 for OPEX (plus financial costs) §  And 25 years LCoE for fossil fuels of 20.56 US cents/kWh §  Then savings would be 8.98 US cents/kWh (798.13 M USD in 25 years)

¡  The model considers a PV Capex of 1.9 USD/watt §  Or 380 M USD in a 80%/20% - debt/equity ratio §  Interest rate 5%, return on equity 12.5%, WACC 10.5% §  Results on Equity IRR 24.78%; Project IRR 11.48%; NPV 140 M USD

¡  Copper production: 1.68 M TMF; 25 years: 42.05 M Copper Tn §  Current year electricity consumption: 3.72 TWh §  25 years with current electricity consumption: 93 TWh (comparable

to the yearly consumption of Malaysia or two times yearly Israel)

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FIRST CONCLUSIONS: CLASSICAL KPI

¡  r4m1: Mining Operational savings of 18,98 USD for every of the 42.05 mill ion Tones (TMF) produced during 25 years §  This KPI could be used in every step of the mining and beneficiation process

developing an specific subgroup of KPI supporting mine management scorecard ¡  r4m2: The average increase for La Escondida company value per tone

produced during 25 years is 235.55 USD §  During year 1 is only 66.23 USD/Tn and during year 35: 438.07 USD/Tn §  e. g. If we have a company of 100 million shares that would mean sustainable

value increase (average) of 3.96 USD/share thanks to Renewables for mining. §  The increase of value in an stabilized year is 396.28 M USD. This value exceeds

the total investment needed for the EPC (380 M USD)!! ¡  r4m3: Rough approach: Increase of 0.35% Mining IRR thanks to the PV

facil ity Operation. DSCR: 1 .96. ¡  r4m4: Increase tax revenue 83.1 USD/Tn; 5.58 M USD/Year

§  Increase in 25 years of 139.67 M USD which means 8.09 / inhabitant ¡  r4m5: Carbon Footprint 83.1 kg CO2 / TMF

§  139.741 Tn CO2 / year – 3.94 Tn CO2 in 25 years ¡  R4m6: Peak Oil : 1 hour 24 minutes 7 seconds

§  Tones Oil Equivalent saved in 25 years: 733.382. §  Savings of 4.61 M barrels in 25 years or 506 barrels of oil every day

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R4M KPI DASHBOARD

FIRST RESULTS: SCORECARD

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¡  r4m1: USD/Tn: KPI express ing energy sav ing renewable energy ext ract ion and process ing operat ion mining / o i l per tone (mineral , ore , metal , etc . ) . These sav ings are t ransformed as increase of prof i ts , bet ter GOP and less WACC values .

¡  r4m2: USD/share (Tn) : Th is KPI is produced by energy sav ing and renewable energy has become increasing business value for equi ty investors , better va lue generated EBITDA , and h igher rate of return , IRR.

¡  r4m3: DSCR & IRR: KPI that represents how energy sav ings of renewable energy can be expressed as a better Debt Ser v ice Coverage Rat io or better IRR for the mining company.

¡  r4m4: USD / Tn (or inhabi tant ) : KPI that shows the increase in soc io -economic development of local communit ies expressed by increased tax col lect ion pubic administ rat ions . This increase comes f rom the greatest benef i ts of mining operat ions by the energy saved by the use of renewable energy.

¡  r4m5: Tn CO2/mineral Tn : reducing the carbon footpr int comes f rom the par t ia l migrat ion f rom foss i l fuels to renewable energ ies to suppor t the mit igat ion of greenhouse gases ( less tons of CO2 / tone ore or metal produced) .

¡  r4m6: “T ime” - O i l Tn/Mineral Tn : KPI that indicates the sav ings in foss i l fue ls by us ing renewable energy. The rat io is a lso appl ied as a delay / lag phase "Peak Oi l " and i ts d isastrous consequences.

APPENDIX: KPI - R4M

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Ph D. Arnold M. van den Hurk

¡  info@r4mining.com

¡ www.r4mining.com

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THANK YOU FOR YOUR ATTENTION

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