I have a background in port, rail and particularly electricity infrastructure. Here is a potential idea I had re the proposed seawall.
For those new to the stock, PLV proposes a seawall that will allow a stage 5 open pit to proceed (15-20mt target), followed by a stage 6 underground (120mt target).
If stage 6 was approved simultaneously with stage 5, then the seawall cost could be allocated across both stages. That is an unlikely scenario and thus the Stage 5 DCF model will carry the entire capital cost of the seawall. This places a greater burden on the stage 5 model, but reduces the burden on the stage 6 model and any subsequent activity beyond stage 6, since the seawall is effectively treated as a gift from stage 5.
Given this, it would make sense for PLV to explore whether any further benefit can derive from the seawall once mining is complete. One example would be to convert the coffer dam created by the seawall into a tidal lagoon for the generation of electricity. This would require replacing some of the caissons that comprise the seawall with a sluice that can be opened allowing the flowing water to drive a turbine. At high tide the sluice is shut and later the water is released again driving the turbine as water flows back out to sea.
Another option is to insert multiple open turbines along the seawall that enables electricity generation without impounding the water. This approach is typically preferred where environmental damage is likely from the prevention of natural flows (not really an issue for Cockatoo).
The vital question is whether a tidal lagoon around 2000m long by 200m wide x 5m high can generate a worthwhile amount of energy. Garret and Cummins, in a paper entitled "The Power Potential of Tidal Currents", provided a formula that I inserted numbers within. You basically multiply 0.22 times the density of seawater (1027kg/m3) by the gravitational acceleration (9.8065 m/s2) times the change in water height times the maximum volumetric flow rate (I calculated this at 46m3 per second). This yields around 1MW of electricity assuming two tides per day and generation on the inflow only. I don’t know what efficiency factors these turbines operate at, but this would need to be accounted for. It's entirely possible I have stuffed up the calculations, so use caution. There are also other bells and whistles that can be added including building a tiered basin within the seawall that drives a low head turbine as the water drops from a higher basin to a lower one. You can also build the seawall slightly higher and have the turbine pump water into a higher basin during the in-flowing tide (thus gaining a greater store of potential energy).
My understanding is that electricity at Derby is generated from trucked LNG and costs around $400-450MW/hr, so a 1MW power plant, while very small, is not to be taken too lightly, especially since PLV is probably running electric plant via diesel generation. A 1MW station would produce around $3.5m of electricity per annum at those prices. Whether or not it is viable will mainly depend on the turbine cost and the cost of running undersea cable to Irvine and/or above ground cable to the mining camp on Cockatoo. There are obviously operating costs, but importantly the fuel cost is free.
It may also be possible to use the hole created from mining the Magazine Schist to create an elevated dam on Cockatoo (weathered schist has clay like properties and might be used to line the dam wall). This would allow the seawall turbine to pump water up the cliff when electricity that is surplus to current needs is being generated. This stored potential energy can then be later released to drive a turbine to create electricity according to demand. It’s a simple matter to add wind or solar to exploit such an elevated dam and circumvent traditional concerns as to whether the wind is blowing or sun is shining. This article covers this aspect:
Personally, I think PLV's expertise is mining, so sub-contracting out any potential electricity generation role makes sense. There appears to be some local expertise that would be interested given how, in mid 2013, the WA government approved the 20MW Derby Tidal project.
If this is a post stage 6 issue why am I raising it now? The main reason is that it would make financing easier if the seawall is shown to yield economic benefits beyond stage 5/6 mining. Any future potential use of the seawall may have requirements that can easily be built in during the current seawall design phase. From a financial engineering perspective, it might also be possible to bring forward a bullet payment by selling the seawall rights today for future use by a third party entity with a PLV offtake. Sliding scale payments can adjust for the final handover date which is hard to predict. Normally you would not be attracted to such an idea since it is messy and you get significantly less this way. However, it might be better than dilution at a low share price.
Sorry for the long post
Cheers Bleasby
Some further reading for those interested:
Ocean renewable energy: 2012-2050 – CSIRO available at http://www.csiro.au/Organisation-Structure/Flagships/Energy-Flagship/Ocean-renewable-energy.aspx
A bit old (2002) on Nova Scotia 20MW Tidal Station http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&cad=rja&uact=8&ved=0CDAQFjAB&url=http%3A%2F%2Felectricalline.com%2Fimages%2Fmag_archive%2F18.pdf&ei=OxwdU731LMa9kAX_94DIDw&usg=AFQjCNELDGaIm2LGoGS9KqpiX2MPZ0cBVg&sig2=LxrQnIjyynT9lPpvc48pZw&bvm=bv.62578216,d.dGI
PLV Price at posting:
9.0¢ Sentiment: Buy Disclosure: Held
