The New Gold StandardHow can a mining company continue to improve efficiency and reduce costs?
How can a mining company continue to improve efficiency and reduce costs?
By Andrew Cooper
August 03, 2020
Courtesy of Carolyn Gruske
One just has to do a search online for “mining” and “downgrade guidance” to see the extent of the ripple effect of the 2020 pandemic. As some mining companies experience net losses, they may be looking to improve efficiency and reduce costs without incurring major capital expense.
Energy is an often-overlooked component of operational expense, which has the potential to offer a solution to this question. Over the course of seven years at New Gold’s New Afton mine, we undertook energy performance improvement projects, such as underground ventilation management, flotation blower control and compressed air optimization, which resulted in a cumulative energy savings of more than 10 per cent of the mine’s annual energy consumption.
In 2019, however, when the energy-saving projects in the “stockpile” required significant capital with less than attractive payback periods, we went to the employees. Through the implementation of low- or no-cost energy-savings projects, based on employee suggestions, we were able to exceed our annual energy objective by seven per cent and further reduce annual energy consumption. All this was possible by doing three things: develop, commit and adopt.
1. Develop an energy and GHG management strategy
Energy is, typically, a mining company’s second biggest expense, after employee salaries and benefits. It is also, generally, the largest source of its GHG emissions. An overarching energy and GHG management strategy serves a number of purposes:
Improvement in the financial bottom line as a result of a reduction in energy costs. An eight- to 10-per cent reduction in annual energy costs is feasible through good energy management practices.
A reduction in GHGs as a result of a reduction in energy use or a switch to an alternative energy source. With the increased focus on climate change and GHG emissions, there is growing pressure on mining companies to set GHG reduction, “net zero” or “carbon neutral” targets.
Compliance with recommendations in climate change-related financial disclosures, like the Task Force on Climate-related Financial Disclosures (TFCD), which makes a company more attractive to sustainability-focused investors.
The success of an energy and GHG management strategy depends, primarily on one thing: commitment. Commitment from all levels of management. Commitment from all employees. Even before production at New Afton started in June 2012, the management team was committed to energy management: employing a full-time energy specialist to manage energy and supporting investment in an energy management information system. Over the years, this commitment has held fast with annual energy performance improvement objectives being included in the annual business plan. The employees at the mine understand that “Energy Matters” at New Afton and their commitment was evident in the success of the employee suggestion campaign in 2019. Without this commitment to energy and GHG management being an integral part of the business, the strategy is destined for failure.
3. Adopt an energy management system
How does a company deliver on the strategy? Seldom is there a system and management structure in place for energy management. Protocols and standards for effective energy management systems are out there. The Mining Association of Canada’s Energy and Climate Change Protocol and the ISO 50001 Energy Management Standard are just two examples of excellent tools to help you reduce your energy cost and effectively mitigate your impact on climate change through GHG reduction.
GHG reductions aside, what’s the size of the prize here? Annual energy costs for a mine vary significantly; $300 million per year for a large open-pit operation and concentrator to $12 million per year for an underground operation and concentrator. The one constant, however, is the potential eight to 10-per cent annual avoided-energy cost through the implementation of an effective energy management system. That equates, on the conservative side, to $24 million of avoided-energy costs per year for the large open-pit operation or $960,000 of avoided-energy costs per year for the underground operation. Not chump change, by any stretch of the imagination.
How do you continue to improve efficiency and reduce costs, but without major capital expense? It is a question that all operators need to be asking themselves right now. And the answer is do these three things: develop, commit and adopt. It sounds so simple, and it is. It is an investment in sustainability with an attractive financial payback.
Andrew Cooper, P.Eng, B.Comm, CEM, is a strategic energy management specialist who led New Gold’s New Afton mine to be the first ISO 50001 certified mine in North America. He is an international speaker and a previous winner of the AEE’s International Energy Manager of the Year award.