Mining requires significant amounts of power to run the various aspects of the overall mining operations. Thu, rental power is the ideal solution for remote mining operations. So, choosing between purchase or rental power options will invariably come down to cost, says Andy Walker, Head of Business Development – Mining and Cement, Aggreko International
It’s no secret that mining requires significant amounts of power to run the various aspects of the overall mining operation. Without access to power, a mine will simply cease to operate. Therefore, in addition to having a valuable resource deposit, the permit to extract it, and the financial and technical capacity to do so, ensuring access to a reliable and constant power supply is just as important to the success and profitability of any mining operation.
We often hear it said that in terms of mining, ‘all the easy locations have already been mined’. The implication of this being that much of the world’s more easily accessible resources have already been extracted and that now miners need to look at more challenging environments in order to carry out worthwhile and financially successful operations.
This presents an interesting paradigm in the industry, with a number of different factors at play. Mineral and precious metals demand continues to grow, pushing commodity prices to unprecedented levels. Despite the recent global economic crisis, the lion’s share of the demand s is being driven by emerging markets, notably China and India. On the other hand, the supply of easily extractable resources from the world’s traditional mining areas is diminishing, which is leading to a greater need for increased exploration in more remote, often hazardous locations.
Also at play is the fact that since the 1990s, the larger mining companies have all but ceased exploration activities in order to concentrate on exploiting maximum value from existing assets, thus cutting exploration costs to maximise profits and shareholder value. However, with reserves diminishing, demand growing and fewer new available sites, the supply pipeline for many of the large mining companies, has started to look decidedly unhealthy. As a result, smaller mining and exploration companies, or juniors as the industry refers to them, have come to the fore, venturing into locations that have otherwise been dismissed due to the logistic challenges they present.
In terms of exploration, juniors now play an integral role in the global mining industry. Their agility, entrepreneurialism and appetite to venture into the parts of the world previously viewed as unsafe, unstable or economically unviable is ensuring access to new and exciting resource deposits essential to meet the growing worldwide demand for minerals and precious metals.
Junior miners are particularly active throughout Africa, Latin America, Asia and the Caucuses. Their operations tend to be located in extremely remote areas, often well away from the infrastructure and manpower required to operate mines. This situation brings a variety of challenges, not least of which is the supply of consistent, reliable and sufficient power supply. With power being a mandatory element to any mining operation, securing its availability and supply is top of the list for any remote mining operation.
Different options are available to fulfil the demand for power. Aside from grid power, which typically needs to be supported with onsite back-up power, the choice is usually between the outright purchase of generation equipment or opting for a rental solution.
Traditionally the mining industry has opted for an outright purchase model, in line with the rest of the plant equipment required to operate the mine. There are arguments both for and against either purchase or rental. The particular circumstances of the individual mine and the company operating it will determine what is right for their needs, yet more and more, when it comes to remote mining operations in the developing world, rental power is becoming an increasingly attractive option.
One of the major arguments for choosing rental is power reliability and the ongoing service offering reputable and experienced providers brings. By using a supplier who can mobilise and support a customised, turn-key power station, mining companies are free from the responsibility of ensuring that the power stays ‘always on’. This in turn mitigates the need for the miner to employ and train dedicated specialist manpower. They also benefit by keeping their capital expenditure down – an avoided cost on the balance sheet that would include expensive generator sets and ensuing specialised equipment in addition to a necessary set of spare parts.
Choosing between purchase or rental power options will invariably come down to cost. Outright purchase will typically involve a large, initial capital outlay which will depreciate over the lifespan of the equipment’s operation. However, there are also hidden costs to consider.
Recruitment and staffing for the power plant’s operation and maintenance, spare parts and other ancillary items as well as refuelling infrastructure all need to be taken into account. Conversely, rental solutions fall under operating expenditure so the provision of the equipment, plus any additional costs are factored into one monthly payment.