The article discusses how non-conventional renewable energy (NCRE) sources like biomass, small hydro, and solar can lower energy risks for mines. It argues that NCRE facilities should be viewed as long-term mining assets, while fossil fuels are long-term liabilities. However, many in the mining industry still evaluate NCRE projects based on short-term profits rather than balance sheets. The author proposes a new methodology that analyzes NCRE investments based on balance sheets, viewing renewable energy as assets that increase long-term shareholder equity. This framework could help mining companies better understand the value of NCRE projects.
3. 8 Editor’s letter
10 President’s notes
tools of the trade
12 The best in new technology
compiled by Kelsey Rolfe
and Chris Balcom
news
14 Industry at a glance
28 Alternative energy sources are
playing a larger role in miners’
strategies
By Kelsey Rolfe
32 The Quebec government moves
forward with its revamped
northern development program
By Antoine Dion-Ortega
columns
38 Where did all the gold
money go?
By Doug Pollitt
40 Financial innovation on
renewables
By Arnoldus Mateo van den Hurk
42 The safety to speak out
By Esther Ewing
upfront: metallurgy
44 A new chloride segregation
process could open up oolitic
iron reserves globally
By Chris Balcom
46 Will technological step change or
operational excellence make
mines more profitable?
By Ian Ewing
50 Terry McNulty is a metallurgical
mastermind with a keen sense of
what makes projects succeed
By Correy Baldwin
travel
80 Polkowice, Poland
By Chris Balcom
cim community
82 CIM news from Canada and
beyond
85 Obituaries
87 2015 Calendar of CIM events
mining lore
130 The Elsa silver heist: a daring
mining theft in a small Yukon
town
By Alicia Priest
129 Professional directory
contenu
francophone
6 | CIM Magazine | Vol. 9, No. 9
32
La version française
intégrale du
CIM Magazine est
disponible en ligne :
magazine.CIM.org/fr-CA
35
article de fond
68 2015 : pleins feux sur
les marchandises
Nous examinons 30 métaux et
minéraux différents, vous offrons
une rétrospective de ce qui a
marqué l’année qui vient de
s’écouler, notamment les
tendances de plus en plus
répandues et les événements
imprévus, et explorons ce qui se
profile à l’horizon.
10 Mot du président
35 Le gouvernement provincial
relance son plan de
développement nordique
Par Antoine Dion-Ortega
87 Calendrier des événements de
l’ICM
91 Répertoire des membres
corporatifs de l’ICM
44
4. accounting principles) to better comprehend the real value
of NCREs for the mining industry. This new vision shifts
accounting priorities away from analyzing the value of
NCREs using the income statement (and the focus on prof-
its and losses) and instead toward the balance sheet. Simi-
larly, the focus should shift towards “cumulative savings” by
viewing BAU energy as a long-term liability and NCRE as a
long-term asset. Therefore I propose the industry adopt
new energy metrics and key performance indicators (KPIs)
linked to balance sheets and mining business valuation.
If you propose an NCRE project to many experienced
mining managers or NCRE developers, often the first thing
they will turn to is the income statement. Most operational
managers know the income statement is where their per-
formance is ultimately recorded in profits and losses. Here
they look for any potential savings from an NCRE project
and may argue that the large upfront capital investment will
negatively affect the company’s credit rating.
D
uring the commodity boom, mining companies were
focused on ramping up production and investing in
new capital projects to expand supply. It was a time
when the income statement was the key management para-
digm in mining economics. Now, however, the global min-
ing industry has refocused on cost control and capital
discipline. Investors today value firms based less on how
much they mine and more on how efficiently they do so,
and how well they mitigate risk. In this new scenario, non-
conventional renewable energy (NCRE) sources such as
biomass crops, small-hydro, geothermal plants, concen-
trated solar power mirrors, wind turbines or solar panels
can lower energy risks in mining. Why? Because renewable
facilities act as mining assets whereas business as usual
(BAU) energy options such as coal, diesel and gas, and even
conventional hydro, become mining liabilities.
Proponents of NCRE projects need to develop new
financial intelligence (i.e. knowledge of finance and
Financial innovation
on renewables
BY ARNOLDUS M. VAN DEN HURK
40 | CIM Magazine | Vol. 9, No. 9
R E N E W A B L E E N E R G Y
ON BUDGET.
AHEAD OF SCHEDULE.
WORLD-CLASS SAFETY.
Mining | Processing | Infrastructure | Environment
www.snclavalin.com
Together with our partners, SNC-Lavalin is the
proud recipient of the Project Management
Institute’s 2014 Project of the Year Award.
Rio Tinto Alcan AP60 Phase 1 Aluminum Smelter Project, Quebec
5. December/Décembre 2014 • January/Janvier 2015 | 41
– transforms threats into opportunities and perceived liabil-
ities into mining assets. CIM
However, if you try giving the same set of NCRE project
financials to an experienced Toronto fund investor or a vet-
eran board member of a mining company, the first state-
ment they will turn to is usually the balance sheet. Here
they look for figures that might prove the value of renew-
able facilities as long-term assets (which in turn could
increase company value), how these numbers may lead to a
fall in the weighted average cost of capital, and how the
projected value of the business shows
an upwards trend to eventually
improve a company’s credit rating. If
the projections are promising, they
will allocate the upfront capex due to
the attractive return on investment
and the building of long-term share-
holder equity.
Nevertheless, at present, many
NCRE project promoters at mining
companies do not analyze investment
opportunities using a balance sheet.
Therefore they see the large initial cost
and want to avoid financing the
upfront investment counterbalance;
consequently the projects end up
being abandoned.
In order to accurately communicate
the value renewable facilities have,
everyone must speak the same lan-
guage. The first step toward accurately
comparing BAU energy and NCRE is
to keep other operational variables
affecting the profitability of the mine
constant (e.g. commodity prices, min-
eral ore grade and any other
expenses). The second is to account
for the expected increase in price for
the BAU model based on international
standards set by the International
Energy Agency. These are the funda-
mentals of the methodology I employ
for evaluating NCRE projects. These
metrics are designed to help NCRE
project proponents, mine managers,
investors and directors of companies
understand the projects they are
working on from the same point of
view. Renewable energy options in
mining will grow along with the
volatility of diesel prices. Demand for
space and capex are the main handi-
caps for renewables in other indus-
tries. However, in mining, space is not
an issue, and financial intelligence –
by developing innovative financial
models such as the one described here
columns
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that are delivering cost savings.
Arnoldus van den Hurk, PhD, is the founder and CEO of r4mining.com, an
independent blog about financial innovation on renewable energy in the mining
and oil and gas industry. Van den Hurk has extensive professional experience in
geology, mining engineering, finance and renewable energies. He recently
presented his r4mining methodology at the Renewables and Mining Summit
and Exhibition in Toronto. Info @r4mining.com, www.r4mining.com.
6. 14/12/2014 Renewable Energy
http://magazine.cim.org/en/2014/December-January/columns/Renewable-Energy.aspx 1/2
0 0
Dec '14/Jan '15
Renewable Energy
Financial innovation on renewables
By Arnoldus Mateo van den Hurk
During the commodity boom, mining companies were focused on ramping up production and investing in new capital projects
to expand supply. It was a time when the income statement was the key management paradigm in mining economics. Now,
however, the global mining industry has refocused on cost control and capital discipline. Investors today value firms based less
on how much they mine and more on how efficiently they do so, and how well they mitigate risk. In this new scenario, non
conventional renewable energy (NCRE) sources such as biomass crops, smallhydro, geothermal plants, concentrated solar
power mirrors, wind turbines or solar panels can lower energy risks in mining. Why? Because renewable facilities act as mining
assets whereas business as usual (BAU) energy options such as coal, diesel and gas, and even conventional hydro, become
mining liabilities.
Proponents of NCRE projects need to develop new financial intelligence (i.e. knowledge of finance and accounting principles)
to better comprehend the real value of NCREs for the mining industry. This new vision shifts accounting priorities away from
analyzing the value of NCREs using the income statement (and the focus on profits and losses) and instead toward the
balance sheet. Similarly, the focus should shift towards “cumulative savings” by viewing BAU energy as a longterm liability
and NCRE as a longterm asset. Therefore I propose the industry adopt new energy metrics and key performance indicators
(KPIs) linked to balance sheets and mining business valuation.
If you propose an NCRE project to many experienced mining managers or NCRE developers, often the first thing they will turn
to is the income statement. Most operational managers know the income statement is where their performance is ultimately
recorded in profits and losses. Here they look for any potential savings from an NCRE project and may argue that the large
upfront capital investment will negatively affect the company’s credit rating.
However, if you try giving the same set of NCRE project financials to an experienced Toronto fund investor or a veteran board
member of a mining company, the first statement they will turn to is usually the balance sheet. Here they look for figures that
might prove the value of renewable facilities as longterm assets (which in turn could increase company value), how these
numbers may lead to a fall in the weighted average cost of capital, and how the projected value of the business shows an
upwards trend to eventually improve a company’s credit rating. If the projections are promising, they will allocate the upfront
capex due to the attractive return on investment and the building of longterm shareholder equity.
Nevertheless, at present, many NCRE project promoters at mining companies do not analyze investment opportunities using a
balance sheet. Therefore they see the large initial cost and want to avoid financing the upfront investment counterbalance;
consequently the projects end up being abandoned.
In order to accurately communicate the value renewable facilities have, everyone must speak the same language. The first
step toward accurately comparing BAU energy and NCRE is to keep other operational variables affecting the profitability of the
mine constant (e.g. commodity prices, mineral ore grade and any other expenses). The second is to account for the expected
increase in price for the BAU model based on international standards set by the International Energy Agency. These are the
fundamentals of the methodology I employ for evaluating NCRE projects. These metrics are designed to help NCRE project
proponents, mine managers, investors and directors of companies understand the projects they are working on from the same
point of view. Renewable energy options in mining will grow along with the volatility of diesel prices. Demand for space and
capex are the main handicaps for renewables in other industries. However, in mining, space is not an issue, and financial
intelligence – by developing innovative financial models such as the one described here – transforms threats into opportunities
and perceived liabilities into mining assets.
Arnoldus van den Hurk, PhD, is the founder and CEO of r4mining.com, an independent blog about