Energy and Mines

Case Studies

The Collahuasi 150 MW RFP – A simulation for potential proposals

The Collahuasi 150 MW RFP – A simulation for potential proposals
November 10
10:31 2016

Doña Inés de Collahuasi is the world’s second largest copper mine. The mine is located at an altitude of  4,000 to 4,800m and is located approximately 200 km from sea. In 2011-12 the mine released another tender for Solar PV with a PPA for 60 GWh/year which was won by the Spanish 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 and approximately 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. The company is particularly interested in non- conventional renewable energy, which in Chile refers mainly to solar and wind power. Collahuasi produced 455,300 tons of copper in  2015 but the current mine is designed to produce an average of 500,000 tons a year. About 86% of this 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

  • A sale and lease back offering a levelized cost of energy of 17.5 USD/MWh is possible over a 25 year period starting 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 hybridized version with one-third solar PPA of 29.65 USD/MWh and two-thirds of grid at current price provides a 25  year price range of 64.99 USD/MWh.

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

  • 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 power needs over the lifetime of the simulation due to: ore degradation, increase in mineral hardness, transportation distance and desalination and water pumping needs. These mine aging problems adversely affects the energy intensity (the energy demand per copper ton). In 2017 Collahuasi will need 4.6MWh for each ton.  By 2042 (25 years) the mine will require 11.67 MWh per Ton.

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

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

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 professionals on November 20th.

 

1.B. Capex Analysis Summary

screenshot-2016-11-10-08-53-15

screenshot-2016-11-10-08-53-35

1.C. Opex Analysis Summary

screenshot-2016-11-10-09-04-55

 

1.D. Financial Costs Loan Analysis Summary

screenshot-2016-11-10-08-54-11

1.E. Investment Analysis Summary

screenshot-2016-11-10-08-54-25

Breakpoint: Year 2

Payback: year 6

1.F. Levelized Cost of Electricity Analysis Summary

screenshot-2016-11-10-08-54-40

screenshot-2016-11-10-08-54-52

Year 26 the CAPEX LCoE = 0

LCoE Year 26 is 16 USD/MWh

1.G. Business Models Options

screenshot-2016-11-10-08-55-12

 

1.H. Valuation Plan and Exit Strategy

screenshot-2016-11-10-08-55-232. MINING ENERGY MODEL

2.A. Mineral Production Analysis

screenshot-2016-11-10-09-19-07

2.B. Copper Energy Demand

screenshot-2016-11-10-09-19-18

2.C. Energy Intensity Copper Production

The energy intensity for Chilean copper mining will increase by close to 300% over the next 25 years due to:

  • The fall of mineral grade
  • The increase in the hardness of the materials to be treated
  • Increasing the distance between the mine and the process plant
  • The needs in desalination and pumping of sea water up to the mine at almost 4000 meters in height

screenshot-2016-11-10-09-19-30

2.D. Energy Total Consumption and Solar PV Share

screenshot-2016-11-10-09-19-41

2.E. Energy Cost Comparison

screenshot-2016-11-10-09-19-52

2.F. Energy Savings Comparison

  • LSoE: Levelised Savings of Energy (USD/TMF)

screenshot-2016-11-10-09-20-04

2.G. Energy Value Increase Comparison

screenshot-2016-11-10-09-20-12

  1. THE BUSINESS INTELLIGENCE MODEL

3.A. Energy Cash Cost 1

screenshot-2016-11-10-09-20-25

3.B. Cash Cost by department

screenshot-2016-11-10-09-20-33

3.C. LSoE (savings) by Mining Department

screenshot-2016-11-10-09-20-43

3.D. LVoE (value increase) by department

screenshot-2016-11-10-09-20-53



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About Author

Andrew Slavin

Andrew Slavin

I am one of the directors of Energy and Mines and am also the curator of this site. I have been involved with B2B communications for the last 18 years including publications, conferences, think tanks and reports.

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