10/11/2016 The Collahuasi 150 MW RFP – A simulation for potential proposals | Energy and Mines

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The Collahuasi 150 MW RFP – A simulation forpotential proposals

by Andrew SlavinNovember 10http://energyandmines.com/2016/11/the-collahuasi-150-mw-rfp-a-simulation-for-potential-proposals/

Doña Inés de Collahuasi is the world’s second largest copper mine. The mine is located at analtitude of   4,000 to 4,800m and is located approximately 200 km from sea.  In 2011-12 themine released another tender for Solar PV with a PPA for 60 GWh/year which was won by theSpanish developer  SolarPack who developed the 23.5 MWac    Almonte Solar plant. Collahuasi is carrying out a new private request for bids for 1,200 GWh of annual energy andapproximately 150 megawatts of power, to be delivered starting in the year 2020.

Collahuasi will receive offers until November, and the winners will be revealed next year. Thecompany is particularly interested in non- conventional renewable energy, which in Chilerefers mainly to solar and wind power. Collahuasi produced 455,300 tons of copper in  2015but the current mine is designed to produce an average of 500,000 tons a year. About 86% ofthis metal is copper concentrates and the rest are EW cathodes

The current grid price in the region offers around 88.44 USD/MWh.

The results of the simulations carried out by r4mining suggest the  following possibilities

The hybridized version with one-third solar PPA of 29.65 USD/MWh and two-thirds of grid atcurrent price provides a 25  year price range of 64.99 USD/MWh.

There are two main parts of the simulation carried out by r4mining.

A third, more sophisticated simulation, has been developed that will enable energy providersand miners to estimate cost savings in  terms of levelized saving of energy per ton savings forspecific   divisions within the mine e.g. concentrating plant, desalination plant, services,electro wiring, leaching. This final simulation  will enable potential energy providers to providean extremely  detailed and useful analysis of the specific cost savings generated  by usingsolar PV and specific parts of the copper production process. This business criticalinformation is exactly in-line with the financial considerations all those within mine operationshave to  consider when making production and energy decisions.

Last but not least, the model developed shows the LVoE (Levelized Value of Energy) whichconsiders the increase of value  due to the savings transformed as EBITDA and divided bythe WACC.  This is an easy and fast way to evaluate a business used in other  industrialsectors. It will strongly help the mining finance departments  to link the production of solarenergy with the value of company shares or per ton produced giving an excellent value addto mining shareholders and investors. This technique was published for first time in 2014 inthe Canadian Industry  Magazine (Financial Innovation on Renewables). The LVoEdemonstrates that the increased value due to solar  electricity savings surpass the capexupfront investment for the 150 MWac solar facility. Then, solar is FREE!

A sale and lease back offering a levelized cost of energy of 17.5 USD/MWh is possible over a 25 year periodstarting from 2017. Financial collaterals would rely on very short terms escrowed mining assets.Some PPA financing solutions at different WACC offering a price range of 29.654 to 411.08 USD/MWh.A Joint Venture PPA (mine & IPP) delivering a price of 23.55 USD/MWh

The first, the solar PV model, provides developers with analysis and pricing for a solar PV RFP.The second, the mining power energy model,  explores potential prices reflecting the change in mining powerneeds over the lifetime of the simulation due to: ore degradation, increase in mineral hardness, transportationdistance and desalination and water pumping needs. These mine aging problems adversely affects the energyintensity (the energy demand per copper ton). In 2017 Collahuasi will need 4.6MWh for each ton.  By 2042 (25years) the mine will require 11.67 MWh per Ton.

10/11/2016 The Collahuasi 150 MW RFP – A simulation for potential proposals | Energy and Mines

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Some initial results are presented here. The full analysis  will be presented as part of the pre-Congress workshop – An  essential introduction to mining for renewables professionalson November 20th.

 

1.B. Capex Analysis Summary

1.C. Opex Analysis Summary

 

1.D. Financial Costs Loan Analysis Summary

1.E. Investment Analysis Summary

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Breakpoint: Year 2

Payback: year 6

1.F. Levelized Cost of Electricity Analysis Summary

Year 26 the CAPEX LCoE = 0

LCoE Year 26 is 16 USD/MWh

1.G. Business Models Options

 

1.H. Valuation Plan and Exit Strategy

2. MINING ENERGY MODEL

2.A. Mineral Production Analysis

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2.B. Copper Energy Demand

2.C. Energy Intensity Copper Production

The energy intensity for Chilean copper mining will increase by close to 300% over the next25 years due to:

2.D. Energy Total Consumption and Solar PV Share

2.E. Energy Cost Comparison

2.F. Energy Savings Comparison

The fall of mineral gradeThe increase in the hardness of the materials to be treatedIncreasing the distance between the mine and the process plantThe needs in desalination and pumping of sea water up to the mine at almost 4000 meters in height

LSoE: Levelised Savings of Energy (USD/TMF)

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2.G. Energy Value Increase Comparison

3.A. Energy Cash Cost 1

3.B. Cash Cost by department

3.C. LSoE (savings) by Mining Department

3. THE BUSINESS INTELLIGENCE MODEL

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3.D. LVoE (value increase) by department

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