The Latest Mining Industry Trends: An Analysis for 2017

‘Mining will not recover; it will evolve’

Being cyclical, the revival of the mining industry was never a question of ‘if’, but rather of ‘when’ and, more importantly, of ‘what’. When will the industry emerge from the downturn in the face of lengthening cycle times? What kind of mining industry will resurface from the ruins of the recession? In an exclusive interview, Majid Zahid, Group President of the Zahid Group's Energy Division, under which is temporary power provider Altaaqa Global, discusses the crucial role that electricity and technology played in the industry’s observed gradual resurgence.

The mining industry is enduring a period of great uncertainty. In the face of extreme market volatility, stagnant commodity prices, weak demand for products, and suppressed levels of economic growth in established markets, many mining companies around the world are striving to remain buoyant.

In their quest to victoriously emerge from the recession, many miners have implemented cost-cutting initiatives aimed at maximizing customer value with fewer resources. Others have chosen to be cautiously proactive and embarked on exploration programs in a bid to boost long-term profitability. Some have turned to technology to optimize processes and facilitate existing methods.

Part 1: Streamlining operations

Going lean has now become one of the central trends in the industry, as mining companies seek to concurrently reduce manpower, capital, and energy intensity; exploit growth opportunities and maximize the value of their products and services.

“In a highly volatile market”, says Majid Zahid, Group President of the Zahid Group's Energy Division, under which is leading global temporary power provider Altaaqa Global Caterpillar Rental Power, “it is essential for mining companies to strike a balance between controlling costs and capitalizing on growth prospects and profitable opportunities. It is, therefore, imperative for them to ensure the efficient utilization of their working capital.”

Majid Zahid, Group President, Energy Division, Zahid Group

Zahid is of the view that power generation and supply represents an area where mining operations can make significant adjustments to their capital expenditure. “Electricity,” he says, “remains to be the life-blood of mine sites anywhere in the world. However, with the present economic situation, mine operators cannot afford to devote, rather strap, a large portion of their scarce capital to a major expenditure, like a permanent power plant. Considering this, mine operators can instead choose to hire multi-megawatt temporary power solutions.”

A consistent, dependable and sufficient supply of electricity is vital throughout the life-cycle of a mine operation. “Temporary power plants,” says Zahid, “can adequately provide for the electricity needs of a mine site. They can power camp sites during pre-feasibility, feasibility and exploratory stages, and support the establishment of the mine operation after a successful exploration. They can provide power to the machinery and the processing plants, and also to the temperature-control equipment. Obviously, they can also provide the necessary power for expansion.”

“Multi-megawatt temporary power plants could not be more relevant to the mining industry than in these times,” says Zahid, and adds that renting power is a logical decision for any miner looking to effectively streamline its operations.

“For instance, in this economic climate, one cannot overstate the importance of precise allocation of funds and of better management of financial resources. A key benefit of renting power is that payment schedules are fixed and regular over a contracted term. This can help mine operators formulate accurate financial forecasts.”

“Along this line, mining companies should also be mindful of associated costs that come with building or purchasing a permanent power plant.” He calls to mind the cost of spare parts and ancillary, which, he says, are indispensable to the continuous operation of a permanent power plant. “When a mine operator goes for the rental option, all spares and ancillary will be provided by the temporary power company.”

Zahid says that renting multi-megawatt power plants can also prove beneficial for mining companies seeking to optimize their manpower resources. “Mine operators will be happy to know that in hiring power plants, they will no longer need to employ new operators or allocate or re-train existing staff members to manage the plant. Temporary power providers will provide the necessary expert engineering services to ensure the faultless operation of the power station.”

Temporary power plants can also assist in reducing the energy intensity of mine operations. “Hiring power plants will preclude the chances of generators being under-utilized because the capacity of rental power generation equipment can be increased or decreased with respect to the demand of specific mine processes.”

Zahid says that as conventional power plants are usually specified to meet the peak demand of a particular site, they are left under-utilised when the power requirement decreases. “When a power plant is running at part-load, it consumes fuel less efficiently. This will no longer be the case with rental power plants on board, thanks to their flexibility and scalability.”

Part 2: Refocusing on exploration

At the peak of the industry recession, many mining companies dramatically slashed their exploration budgets in the interest of making quick cost savings. SNL Metals and Mining, a global provider of mining information and analysis, supports this observation as it reports that global exploration expenditure declined by 26% in 2014, while exploration budgets nosedived to USD 11.4 billion from USD 22 billion in 2012.

However, industry insiders, like Deloitte, a global provider of financial advisory services, caution that huge cuts in growth CapEx and exploration budgets may have extensive adverse consequences for the miners and the industry at large. Sustained exploration, they say, position mining companies for growth once the market turns. Thus, they warn that foregoing the opportunity to stake early claims may be counter-productive to long-term profitability.

And the industry appears to have heeded their advice, as mining companies and governments have gradually re-focused on exploration activities and identification of new potential assets.
“Exploration”, says Zahid, “is the growth stimulus of the resources sector. Hence, having sufficient power to sustain this crucial activity is fundamental.”

Zahid says that renting power during the exploration stage of a mining operation yields myriad advantages. “By hiring temporary power plants, mining companies will have the freedom to start with a small power plant, and then grow as operations expand. When the long-term prospect of a project is still uncertain, it may not make sense to invest in permanent facilities. Renting power, therefore, protects companies from the uncertain future of mining projects at the exploration stage.”

He also speaks about the latest temporary power technologies which make rental power plants operable anywhere in the world.  “Rental power plants are highly suitable for exploration activities in remote areas because they are containerized and modular, so they are easily transported and installed. The latest-generation temporary power plants have state-of-the-art switching and transformation systems that give them the ability to connect to any location’s grid, regardless of its age, quality or condition. This is possible even without a sub-station, as the same systems allow the power plants to assume the role of a sub-station and connect to available overhead lines or transformers.”

“Temporary power plants also have cutting-edge electric power control and protection systems, which allow them to switch operational mode, from grid to island, to base load or to standby at a push of a button in mere minutes. This is particularly useful for mining companies whose exploration activities take place in areas unconnected to the grid.”

Part 3: Embracing Innovation

In recent years, the mining industry has seen a slew of technological innovations. Technologies once regarded as tangential to the industry are now being tailored to respond to the needs of mining companies. Many of these innovations revolve around automation and the technological optimisation of established processes, primarily in response to the industry’s need to reduce costs and ramp up operational efficiency. And while some mining companies have opted to remain conservative in terms of uptake, many miners are gradually embracing the available technologies in a bid to future-proof their operations.

In a recent interaction with GineersNow, a global engineering magazine, Jean Savage, Chief Technology Officer and Vice President for Innovation and Technology Development at Caterpillar, affirms the crucial role that equipment manufacturers play in shaping the future of mining operations: “Caterpillar has spent over 90 years committed to innovation and technology that help our customers succeed. Most of this innovation has been “in the iron”. Now, our focus has to be on making the iron ‘smart’.”

“Making the iron ‘smart’ means bringing digital solutions designed to improve productivity, efficiency, safety and profitability to our customers. This is not technology for technology’s sake. It is technology that’s focused on solving, and even anticipating, customer problems. We are taking the machines, locomotives, engines and parts we’re so well known for and making them smarter, while also equipping the people who operate them with data that makes them more productive, enhances their safety and improves sustainability.”

Zahid concurs: “Caterpillar believes that be an innovator, a company must be working directly in the service of its customers. As part of the Caterpillar family, we at Altaaqa Global are proud to be well positioned to offer our clients in the mining industry the latest technologies in temporary power generation.”

“For example, it is now possible for our engineers to monitor the status and performance of our engines from any location through Cat Connect. This gives us, temporary power providers, relevant insights on the go, so we can better manage our equipment, optimize their performance or perform preventive maintenance, if necessary.”

“There is also the Cat MicroGrid Solutions, which now allows renewable solar and wind power systems of any size to be delivered to and installed in literally any location on earth. In tandem with our temporary power plants, the solution guarantees a reliable, sufficient and sustainable power supply to any mining operation anywhere in the world.”

“There are also allied technologies gaining traction within the industry. Among these are drones, which can now be used to survey mining sites before breaking ground; 3-D printers, which can now print replacement parts; and augmented reality, which can now be used by technicians to simulate repair cycles. As these technologies are developed in the coming years, we at Altaaqa Global will definitely look into possible ways of integrating them into our systems and processes to further improve our products and enhance the service we deliver to our customers.”

“The list of technologies on offer goes on. And as equipment manufacturers and service providers continue to closely work with their customers to learn more about what they need to drive the growth of their businesses, the number of available technologies will continuously increase.”

The Bigger Picture

Just as the industry went tumbling down on the heels of the boom, industry insiders believe that it is poised for a gradual recovery in the coming months. The green shoots are emerging: Commodity prices are strengthening across the board, commodities has returned to a bull market, and many mining companies are seeing a consistent recovery in value. While the market remains cautious, it welcomes the early signs of the industry’s revival.

But perhaps, ‘recovery’ does not aptly define mining’s next cycle. The recent downturn pushed the industry to redefine itself. In the face of adversity, many mining companies adopted a fresh take on how they operate, allocate resources, engage with technology and seize growth opportunities. What were originally corporate strategies implemented to survive the so-called winter have disrupted the industry and, to a large extent catalyzed its transformation. With miners rising from the downturn stronger and smarter, the next cycle of the mining industry will not only be a recovery – it will be an evolution.


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Sources consulted:
1. “Top 10 Trends for Mining in 2016”. www.australianmining.com. 17 August 2016.
2. “Caterpillar: More than Just a Business”. GineersNow. Issue 9. November 2016.
3. “Big Data for All”. www.caterpillar.com.

Power Leads to Economic Resilience

Africa is intensively pushing to build and grow its economy on the back of increased domestic demand, aggressive infrastructure construction activities and economic interconnection among countries in the continent. In fact, in a recent annual meeting in Rwanda, the African Development Bank (AfDB), presenting its African Economic Outlook 2014, reported that the continent’s economy was expected to grow by 4.8% in 2014 and 5.7% in 2015, approximating its growth figures pre-economic downturn.

The ongoing economic efforts in the continent will, naturally, have to be supported by energy. Gone are the days of organic economies, where economic growth could be achieved through mere human and animal strength. In this day and age, almost all economies rely on power to sustain their activities and produce tangible results. Power has become an integral component of any economy or society that outages and blackouts could bring about devastating consequences.

Africa’s power scenario   
To support Africa’s ambition to achieve economic sustainability, diversity and viability, it will primarily need to boost its infrastructure to support the growth of its various industries. To achieve that, the continent will require massive amounts of power. Does it, however, have enough energy to sustain this power-intensive phase?

The International Monetary Fund (IMF) sounded a warning that an escalating power supply deficiency in Africa may hamper the projected economic growth. It has been documented that some 25 countries in Sub-Saharan Africa were facing an energy crisis, evidenced by rolling blackouts, and that some 30 countries in region had suffered acute energy crises in recent years. While the Key World Energy Statistics by the International Energy Agency reported that electricity generation in Africa rose from 1.8% in 1973 to 3.1% in 2011, the continent still remained to have the smallest share globally, despite being the second most populous continent.

With Africa’s population expected to double to approximately 1.9 billion people by 2050, and with the continent’s industries projected to require power at almost full capacity, the World Bank said that a much higher investment would be needed to at least double Africa’s current levels of energy access by 2030. In fact, it is estimated that the Sub-Saharan region would require more than USD 300 billion in investments to achieve total electrification by 2030.

The power instability: The bigger picture
Sub-Saharan Africa was observed to have absorbed much of the blow of the recent power crisis. Blackout brought cities to a standstill and spelt terminal financial losses to small- and medium-scale companies. Mining, one of the region’s pillar industries, was severely affected, even prompting mining companies to shelve expansion plans and curtail local power usage.

Nigeria, for instance, a country that has three times the population of the Republic of South Africa (South Africa), only has one-tenth of the power generation capacity of the latter, and business in the country are reportedly starting the feel the effects of power interruptions in their daily turnover.

In Tanzania, a blackout that lasted for almost a month was experienced in Zanzibar when the underwater cable lines supplying power to the archipelago failed, owing to a huge surge in demand. As a result, residents needed to shell out USD 10 daily to run diesel-powered domestic generators, while businesses requiring refrigeration or heating had to suspend operations until power was restored.

In Angola, the occasional recession of the water level in some of the rivers affects power production, distressing allied services, like water distribution. Luanda’s water supply firm, EPAL, cited that various areas in the city experienced water supply shortage, owing to challenges related to power distribution.

The Democratic Republic of Congo (DRC), touted to be Africa’s biggest copper producer, in May 2014 advised mining companies in the country to suspend any project expansion that would require more power, amidst a power shortage that, the government said, would take years to resolve.

Even the Republic of South Africa, the region’s largest economy, was not exempt from power-related woes. In a communiqué in June 2014, Eskom, supplier of 95% of the country’s electricity, warned residents of a rolling blackout due to load-shedding, which, it said, was necessary to protect the electricity grid from total blackout. Eskom said it had begun scaling down maintenance to prepare for winter, but in the face of a rising energy demand, particularly during peak hours, it appealed to the public to reduce power consumption by at least 10%. If the power demand does not decline, then, the company said, load shedding would be the last resort to avoid a total power shutdown.

At present, solutions are underway – but these, naturally, will not come without a hefty price and cannot be completed within days or weeks. Economic reports indicated that, at the prevailing growth rate of the demand from industries and residents, the region would have to double its power generating capacity by 2025, at an approximate cost of USD 171 billion in South Africa alone.

In order to sustain this projection, the governments in Africa have identified potential sources of funds, such as power rate hikes and foreign investment. Yet, power hikes could stir social unrest and could prompt industrial entities to cut down on operations, putting jobs and production at risk. Foreign investment agreements, on the other hand, could take time to materialize, and the planning, designing, installation and commissioning of permanent power generation projects may entail several years, if not decades.

How temporary power plants can help
Power is indeed a fundamental element for any economy to function, as every sector of the modern society, be it domestic, commercial or industrial, is, in a way or another, dependent on electricity. Nowadays, a power interruption affecting critical facilities, like hospitals, airports, telecommunications towers, data centers, mining facilities and oil & gas installations, has the potential to put an entire country, region or city to a standstill, and in light of globalization and economic integration, the consequences could spill over regional, national or even continental borders.

Hiring interim power plants to bridge the gap between the demand and the supply of electricity yields many advantages, particularly when there is a foreseeable delay in the construction of permanent power generation facilities or while waiting for the permanent power plants to be completed.
When time is of essence, rental power companies, like Altaaqa Global CAT Rental Power, are capable of providing solutions as needed, when needed. Utility companies in the region, like Eskom in South Africa, Kenya Electricity Generating Company, Tanzania Electric Supply Company, the Power Holding Company of Nigeria, the Concelho Nacional de Electricidade in Mozambique, the Empresa Nacional de Electricidade in Angola and the Société nationale d'électricité in DRC, among others, can hire temporary power plants in times when the demand outpaces the supply, when the electrical grid becomes unstable due to a spike in electricity requirement or when power distribution networks are unavailable, like in the rural areas. This will allow them to bridge the supply deficit immediately. Hiring power generators can prove to be a viable solution to power supply inefficiency, bridging the power gap while the permanent power solution is still in progress.

With an immediate solution on hand, the governments and the utility companies can avert resorting to raising the prices of electricity or curtailing the supply of power during peak hours. On a greater scope, an instantaneous resolution of Africa’s escalating energy supply challenges will preclude social and political instability and massive financial losses to businesses and individuals.

The power to go further
The continent that was once regarded as a tail-ender in terms of development, is now making an aggressive move towards economic stability and viability. To sustain the economic growth that Africa is now enjoying, it is imperative that the governments in the continent address the critical issue of chronic power shortage, which could hamper the development of various industries in the countries. The effort that the African governments are putting to address this predicament is commendable, but there exist other entities that can help them to further alleviate the situation. Rental power companies propose solutions that address the issues of urgency, cost-efficiency, reliability, energy-efficiency and environmental safety. It is advisable that utility companies provide for a contingent power solution in cases of power interruption that may lead to operational delays and, ultimately, negative social, political, economic and financial consequences.

The foregoing articles was originally published in the October 2014 issue of IMIESA, published by 3S Media, South Africa.

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PRESS INQUIRIES

Robert Bagatsing

Altaaqa Global

Tel: +971 56 1749505

rbagatsing@altaaqaglobal.com

Bringing Power To Africa’s Mining Industry

Experts herald the mining industry as the light of Africa’s future. With the prevailing power deficiency, however, will the roadmap ahead be dim? Robert Bagatsing Marketing Manager; Peter den Boogert, General Manager and Majid Zahid, Strategic Accounts Director, of Altaaqa Global CAT Rental Power provide the answer.

The tenacity that Africa has shown in the face of the recent economic crisis is nothing short of commendable. If numbers from the African Development Bank’s African Economic Outlook for 2014 are any indication, the continent’s future looks bright. Experts forecast growth rates of 4.8% in 2014 and 5.7% in 2015, and financial in-flows in the area of USD 200 billion.

Playing a major role in Africa’s notable economic performance is the mining industry, widely regarded as one of the chief pillars of the African economy – and not without reason. The mineral industry in Africa is one of the largest in the world, riding high on the continent’s vast 30-million-square-kilometer land area. Africa is richly endowed with mineral reserves, including bauxite, cobalt, diamond, phosphate rock, platinum-group metals (PGM), vermiculite and zirconium. Naturally, gold mining is the African mining industry’s bread and butter.

The world sees the enormous size of Africa’s mining territory, but much of the continent’s potential still remains unearthed. Experts say that a considerable percentage of Africa’s precious metal reserves are underexplored, owing to several financial and operational motivations, among which is the observed lack of dependable, viable and sustainable power. For instance, in a recent release, the government of the Democratic Republic of Congo (DRC) has advised mining companies to suspend any expansion plans or contractual modifications that would require extra power until further notice, in an effort to control the country’s demand for energy. The foregoing initiative from the government may have its benefits in the context of energy conservation, but it may definitely create economic and social deviations in the operations of the mining companies.

In light of this recent conundrum, from the prism of transitivity, a shortage in power supply could mean lost opportunities. With the postponement of mining expansion projects, additional mineral reserves, which could mean additional sources of revenue for operators, will remain unexplored for a longer period of time. A deficiency in energy could mean lost time, as plans that took years to finalize have already been chalked up, only to be discarded or shelved. A deficit in electricity could mean lost employment and income, as halting a project could lead to retrenchment.

With mining playing a major role in most of the African economies, an insufficiency in energy, leading to suspended operations, may have catastrophic wide-scale economic repercussions. Looking back in 2008, blackouts in the Republic of South Africa halted Anglo American, Impala Platinum Holdings and Harmony Gold Mining mines for five days – an incident that spelt a notable difference in the companies’ and in the country’s growth rates that year. A repeat of this predicament would imperil South Africa’s present economic projections, and in this day and age when economies no longer exist in a vacuum, particularly in Africa, where there is remarkable interdependence, a slight drop in one country’s economy may set off a domino effect.

The effects of load shedding on mining operations

In a recent communication, Eskom, the largest producer of electricity in Africa, announced that power cuts could potentially take effect if the surge in power demand in South Africa could not be tapered. This, according to industry experts, might bring about negative operational and financial consequences to mining companies. Mining consultants estimated that the rotational load shedding could result in losses in the area of millions of SAR (South African Rand) a day. Though efforts are being taken to ensure that production would continue in most of the mines around the country, studies pointed to the fact that the deepest underground mines, touted to be the largest employers in the mining industry in South Africa, would be most affected by load shedding. While this happened in South Africa, the same adverse effects to mining operations should be expected had the load shedding happened elsewhere.

Making a difference with power

Before looking at possible solutions to Africa’s power woes, let us take a closer look at the anatomy of a power deficit. An electricity shortage may be caused by multitudinous reasons, including major planned or unplanned power plant facility refurbishment, a sudden spike in electricity demand, unstable electrical grid, emergency situations, turnaround and peak lopping or shaving, among others. In cases such as these, mining companies may opt to hire temporary power plants such to instantly supply viable and sustainable electricity to their facilities for an uninterrupted operation. Cost-benefit studies conducted across different mining facilities around the world show that the cost of renting interim power generation plants is marginal compared to the economic and financial impact that delays or suspension could bring to operations.

In other cases, mining operations that have localised electricity generation facilities, for instance, may experience energy shortage during summer or winter months, when there is a need to dedicate electricity for climate control. Without supplementary power, mining facilities could not meet the seasonal energy requirement, making the production environment unsuitable for working. Studies show that days with extreme temperature aberration are few in a year, thus mining facilities are discouraged to devote permanent power generation facilities solely for this purpose. This, therefore, makes a strong case for employing rental power plants, which is not as capital intensive as constructing a new, dedicated permanent power generation facility.

Interim power facilities, like the solutions offered by Altaaqa Global CAT Rental Power, a global provider of temporary energy solutions, could spell the difference between lost opportunities and breakthrough. Because Altaaqa Global’s solutions are flexible and scalable, they can be employed in a wide range of applications, be they underground mines, open-pit mines or ore processing facilities. As the company’s products are customizable in size, capacity and, even, in cost, they can be rented by large international mining corporations and smaller regional or local aggregates producers, quarry operators or miners. Thanks to Altaaqa Global’s extensive product range, the company can address any requirement, including the need for standby power, prime power, continuous power, load lopping, peak shaving, or for utility power distribution.

Altaaqa Global’s offerings could spell the difference between lost time and progress. The company has a stellar record in providing interim power generators where needed, when needed, even at a moment’s notice. With Altaaqa Global’s industry-proven experience and reliability, the company has delivered executable, measurable and sustainable solutions to myriad projects across the Middle East and Africa. Owing to the availability of spare parts and expert teams on the ground, Altaaqa Global has proven that it can provide after-sales support to installed and commissioned projects at any given location, at any given time.

Altaaqa Global’s presence could spell the difference between lost jobs and success. The company has an avowed corporate social responsibility program, one of which tenet is to alleviate the social challenges of where it operates through providing job opportunities, extending educational assistance and conducting awareness campaigns on energy conservation and environmental stewardship. Not only could Altaaqa Global’s products ensure the continuous operations of mining projects, thus of one’s employment, the company actually employs competent and talented locals in areas where it sets up its facilities.

The future, electrified 

As one of the cornerstones of the African economy, the mining industry deserves a keen attention, particularly in light of the looming power insufficiency. Experts say that Africa’s future is crucially anchored on the mining industry, and for this reason, stakeholders in the mining industry, including the governments, the operators and the investors, are investing thought, labour and money to keep the sector thriving. Permanent power generation facilities, which could provide a long-term solution to the continent’s power woes, are gaining ground in most parts of Sub-Saharan Africa, but their fruition could take some time. While these are in progress, mining companies could opt to rent interim power generation facilities, which are capable of satisfying urgent requirements in a considerably shorter time, precluding disastrous repercussions of operational delays and suspension.

Post-scriptum: Power Solutions for Power Problems

As a response to the looming power supply instability, governments in the Sub-Saharan Africa are mapping out alternative power generation projects, which end is to supply more energy in the long haul. In DRC, for instance, the Grand Inga hydroelectric project, forecast to add 44,000 MW to the country’s power supply, is said to be underway, while in Zimbabwe, upgrades to the Kariba South hydropower and the Hwange thermal coal plants are well in the pipeline. South Africa is keenly looking at Kusile and Medupi coal-fired power stations, with each plant expected to have a generating gross capacity of nearly 4,800 MW.

*The foregoing article was originally published in the Electra Mining Africa Preview Supplement, produced by Creamer Media, South Africa.*

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PRESS INQUIRIES
Robert Bagatsing
Altaaqa Global
Tel: +971 56 1749505
rbagatsing@altaaqaglobal.com