The PFS assumes the use of diesel to generate the power required for the operation and this, in turn, represents between 38% and 42% of the process operating cost for the Project (concentrate only Scenarios).
These points represent clear opportunities to materially improve Project NPV10 through cost and process route optimisation initiatives in the DFS phase.
Is it not part of a Pre-Feasablity Study to find the best and cost effective solution? Or is this part of the DFS?
In our PFS they recommend on Page 26 point 8 the following:
Conduct investigations into the potential for reduction of power costs including the availability and cost of hydro-electric power from Sélingué hydro-electric power station and other potential alternate energy sources;
Why they did not investigate this already in the PFS?
I found an annoucment of Avnel Gold also based in Mali, they reduced their power costs through a Hybrid Power Plant utilizing fossil fuel and solar energy provided by a power provider KPS Africa. Read more here.
Hybrid Power Plant and Contract As part of the optimisation process, Avnel advanced discussions with an international power provider, KPS Africa (Pty) Ltd, to the mining industry to provide an "over the fence" power supply based on a hybrid plant utilizing fossil fuel and solar energy sources. The power provider will fund the project capital and charge the company a rate per kWh. The capital cost, including sustaining capital in the DFS was significantly reduced to provide only for civil works.
For the first 5 years operating cost per kWh will be impacted by the recovery of capital investment. The project predicts that 20% of the power requirements will be generated from the solar plant, leading to significant cost reductions and a lower environmental impact. Project risk is reduced by the power provider being contracted for the operation and maintenance of the power plant, plus the risk of any higher fossil fuel prices.
DRA provided KPS with detailed power requirements to enable KPS to design and cost the hybrid power plant and provide Avnel with a commercial proposal that has been used in the optimisation model.
KPS is a Pacific Energy group business. Pacific Energy Limited (ASX: PEA) is an ASX-listed energy supply business and owns and operates 20 power stations with a total power generation capacity approaching 239MW. KPS has been delivering its resource sector clients, including some of the world's biggest mining companies, 'off-grid' power supply solutions for in excess of 25 years. Detailed contract negotiations are complete subject to legal reviews.
Hummingbird Resources signed a power contract for Yanofila with Aggreko for fossil fuel supply. Benefits are probably no purchase of diesel generators, so less cash needed at the beginning and they don’t have to care about maintenance.
And Hummingbird also thinks about a Hybrid solution for Liberia.
In 2013 we completed a PEA which showed, at a US$1,300/oz gold price, a post-tax IRR of 29% and NPV10 of US$186m for the Dugbe Gold Project in Liberia. Since this study, we have been looking at ways to optimise this project based on the volatile gold price environment. In Liberia, over 30% of our operating costs relate to the cost of generating our own power and we have been conducting extensive studies in this area of the business. In August 2016, we delivered a hydro-electric power pre-feasibility study in partnership with Knight Piésold and funded by IFC InfraVentures (“IFC”). The study showed that hydro was a viable potential solution to power the Dugbe Gold mine and ongoing baseline monitoring is continuing to allow the study to be taken to the next stage.
There are probably a lot more examples.
What are your thoughts about possible power cost reductions?
(20min delay)