Mines can be �anchor customers� for power producers
Brian Benza | Friday February 13, 2015 15:12
In a report released at the ongoing Mining Indaba in Cape Town on Monday, the World Bank called on mining companies in Botswana and other mineral-led sub-Saharan African countries, to work closely with electricity utilities in the region, in order to meet the growing energy demands.
While the economic and business case for the power, and mining sectors integration is strong, the report shows that this opportunity has largely been undeveloped. The report also reveals that the mining sector’s demand for power in sub-Saharan Africa is likely to triple between 2000 and 2020 to more than 23 000 MW. This could overtake non-mining demand for power in some countries. The report argues that miners, which often generate their own electricity rather than buying it from a public utility, could save hundreds of millions in costs by doing so, while helping to bring energy to impoverished African nations.
The report, entitled ‘The Power of the Mine: A Transformative Opportunity for Sub-Saharan Africa’ advocates for integration of power and mining as it can bring substantial cost savings to mines, electrification to communities and investment opportunities to the private sector.
“Over 2000–20 the option of ‘mines invest in the grid’ has been used mainly in Botswana, where mines frequently work with the public utility, Botswana Power Corporation, and in Mozambique, where Kenmare’s Moma ilmenite mine works with the utility, Electricidade de Moçambique (EDM), to ensure the mine’s access to the grid,” reads the report in part. According to the report, Botswana has an estimated average 20 mining projects between 2000 and 2020 consuming upto 134 MW. Of these, four are copper projects, which are estimated to consume more power (70 MW) than the estimated seven diamonds mines (25mw).
The report further states that another 10 GW of electricity will be added by 2020, to meet demand for power in the mining industry in Africa. This is projected to come from ‘self-supply’ arrangements costing mining companies up to $33-billion.
Electricity costs contribute significantly to Botswana mining companies’ overheads with projects such as Discovery Metals’ Boseto copper mine suffering from high diesel costs while plans to establish a coal-fired 20MW power station at the mine have been crippled by the prohibitive costs of about $60 million.
Currently, three coal mining companies, African Energy, Jindal and Shumba Coal, have made significant progress in exploration and developments of proposed mines for coal exports and power generation for both domestic and regional consumption. Government has also invited Independent Power Producers (IPPs) to help boost power generation by a further 600MW in anticipation of the second round of power shortages expected in 2017.
After ignoring a 1998 white paper issued by Eskom of a looming power shortage, Botswana has been experiencing power shortages since 2008 which were expected to last until end of 2012 with the full operationalisation of the 600 MW Morupule B power station. At least three new mines have started operations in the past four years, which include Discovery Metals’ Boseto mine in Maun, the mothballed Firestone Fiamonds in Tsabong and Karowe mine near Orapa.
In the next two to three years, some base metals are also expected to start operations in the North West part of the country as well as Khoemacau Mining Company in Gantsi. Uranium mines could also be starting work in the next few years, with Australian Mining company A-Cap expected to apply for a mining licence in the first half of 2015.
Government has funded the construction of two diesel power stations - one in Orapa the other at Matshelagabedi - which will together generate 160MW from a diesel consumption rate of 292 000 litres and 50 000 litres respectively for a maximum of eight hours a day that the power picking plants may run for. According to the World Bank, an encouraging development is sparking across sub-Saharan Africa, with mines self-supplying and selling to the grid or serving as anchor customers for independent power providers.
The report shows that the mining industry in Sub-Saharan Africa has been sourcing power in innovative ways - some involving national utilities and some not. The self-supply arrangement imposes a loss for everyone - people, utilities, mines and national economies. Since 2000, mines in Africa have spent around $15.3 billion to cover their own electricity investment and operating costs, and have installed 1,590 megawatts of generating capacity. However, none of this power made it onto a national grid.