The Asia Miner

OCT-DEC 2018

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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Page 8 of 51

the asia miner • volume 15 • issue 4 7 LEADING DEVELOPMENTS The mining sector in Australia derives most of its energy from diesel (41 per cent), natural gas (33 per cent) and grid electricity (22 per cent), with the remainder supplied by a mixture of other refined fuels, coal, LPG, renewables and biofuels. In response to price fluctuaঞons and improved infrastructure, the energy mix in Australian mining is slowly changing, with diesel use in decline and uptake of natural gas and grid electricity on the increase. Fitch Soluঞons, in their report Shi[ to renewables to become a growing trend in mining, predict that share of renewables powering the mining industry is set to rise due to an "increasingly favourable regulatory environment in key mining markets, combined with fast-falling renewable energy costs as well as a growing strategic importance given to reducing costs and improving ESG (environmental, social and governance) standards among miners". The credit raঞng agency believes that countries and companies operaঞng in the Americas are best posiঞoned to lead the way in the adopঞon of renewables in mining, aided by carbon pricing measures and an already significant integraঞon of renewables in key operaঞons. "We expect that Solar Photovoltaic (PV) and wind capacity will dominate the share of renewables favoured by miners moving forward", said Fitch Soluঞons. COST – THE MOTIVATOR The most economical source of electricity depends on a mine's proximity to electricity or gas infrastructure, life of mine, electrical demand, and mine producঞon schedule. Mining operaঞons with a high electricity demand and a long life can support the capital investment required to extend electrical or gas pipeline infrastructure. Remote locaঞons and uncertainty favour the lower capital cost opঞon of establishing self-contained, off-grid electrical generaঞon and distribuঞon infrastructure. According to Fitch Soluঞons, current energy and mines research esঞmates that energy costs "account for up to 30 per cent of miners' balance sheet costs". The agency expects this to increase over the coming years as ore reserves are depleted, forcing companies to adopt more energy intensive mining methods. "In an environment where miners will remain commied to keeping costs down, the use of renewables offers significant cost-reducঞon potenঞal ahead as technology improvements and larger scale being achieved among equipment manufacturers lead to falling prices, while maintenance costs are negligible compared to convenঞonal generaঞon", commented Fitch Soluঞons. SunSHIFT believes that key economic metrics are levelised cost of electricity (LCOE) and capital cost. "On-grid large-scale solar PV and wind are the lowest cost electricity sources on a LCOE basis (

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