The mining industry has borne the flag for thermal energy, but it is facing its own energy challenges. The industry consumes 11% of the global power. The Australian mining industry in particular consumes as much energy as the whole of Spain. It does not help that the cost of electricity has grown as much as it has over the last couple of years. According to Glencore, electricity prices had risen to a 100% in three years. As a result of this, the mining giant began talking about shutting down operations at some of its main mining operations.
Glencore put Australia’s power grid in the spotlight when the director of its copper business, Aristotelis Mistakidis wrote to the federal lawmakers about the power hikes and how they have negatively affected the mining industry. It has been reported that Glencore may have to close operations of one of its copper mines, Mount Isa Mine because of the high cost of energy. This would lead to a loss of about 2,000 jobs.
Goldman Sachs has taken a closer look at the energy issue in the Australian Mining industry that already spends $3.5 billion per year on electricity. It found that Australian gold miners would spend around $500 million worth of power contracts by 2020. Australia’s energy network might not be enough to sustain mining operations, especially with the closure of some coal- fired power stations and rising gas prices brought on by the increasing exports of liquefied natural gas.
Why is the question of energy supply such a major focus area for gold miners? The decline in the gold ore grade has pushed mines to dig deeper which takes more equipment that use more energy. To meet daily targets, miners need to produce more minerals and to do that, they need more energy on a daily basis. All this has highlighted the need to look closely at renewable energy alternatives.
According to a Deloitte report on the use of renewable energy in mining, miners can drive the cost of energy down by 25% – 50% by incorporating renewable energy in its power mix. The other important consideration for switching to renewables is the reduction in emissions and reducing the carbon footprint.
Goldman Sachs emphasised that if something is not done soon, the mining Industry would suffer greatly. Already mines in New South Wales and Queensland have been determined to be at risk. Gold mines that will see the biggest impact as a result of the inefficiency of the NSW power grid are Cowal, Cadia, Newcrest and Evolution. These mines could take a knock of up to 3% on their earnings if the price of energy rises by as much as 50%.
The global mining industry has been working on the concept of using renewables and not relying on the country’s power grid. Canadian gold mines for instance, use renewables which are more reliable, especially in those mines that are largely in remote areas. South Africa, Ghana, Chile and other countries major gold producing countries are looking towards renewable energy.
The need for investment in renewable energy goes beyond sustainability, but have become an economic reason for mining companies. The good news is that as energy prices rise, the cost of renewables goes down. Renewables are not only more cost effective, but they can ensure uninterrupted power supply, especially in the case of an overloaded power grid or an unreliable one. Mining companies are gradually changing their business models to find an optimal energy mix that includes thermal energy and renewables that are either used as storage or as energy generators. As miners struggle with energy issues, one thing is certain, the mining industry will never be the same.
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