No other significant cost factor varies so widely as electricity – internationally, more than 800 per cent variation in the price of electricity from one jurisdiction to another is accepted as normal. So what can miners do to turn such risks into opportunities? The cost of electricity is generally the second biggest cost factor that miners face. Only the workforce costs more. In Canada alone, miners (excluding coal) spent $2.4 billion on energy costs in 2012, according to figures from Natural Resources Canada.
That was up from a 2011 tally of $2.2 billion that included coal. At the same time, no other significant cost factor varies so widely – internationally, more than 800 per cent variation in the price of electricity from one jurisdiction to another is accepted as normal. So what can miners do to turn such risks into opportunities?
“If you’re sitting in northern Quebec and you have access to the hydro grid, there’s nothing that will beat Hydro Quebec’s rates,” says Steve Letwin, CEO of Toronto-based Iamgold, which owns mines in Quebec, Suriname, Mali, and Burkina Faso. Letwin says Quebec’s electricity costs 3.5 cents per kilowatt- hour (kWh), compared with off-grid Africa, where Iamgold relies on diesel and heavy fuel oil, and costs can reach 30 cents per kWh.
The recent decline in oil prices has knocked those off-grid costs down to around 21 cents per kWh, which Letwin says translates into cash cost savings of around $200 per ounce. At Iamgold’s Essakane mine in northeast Burkina Faso, currently operating with costs of around $1,000 per ounce, Letwin says halving the mine’s power costs would bring cash costs down to about $800 per ounce; it is roughly the same impact as doubling the grade.