THE BUSINESS CASE FOR ZERO WASTE MINING JUNE 8, 2016

Transcription

1 THE BUSINESS CASE FOR ZERO WASTE MINING JUNE 8, 2016

2 DISCUSSION POINTS WHAT DOES A TRANSFORMED MINING INDUSTRY LOOK LIKE? HOW CAN THE INDUSTRY SHIFT FOCUS? WHAT IS THE BUSINESS CASE FOR CHANGE?

3 WHAT DOES A TRANSFORMED MINING INDUSTRY LOOK LIKE? THE ENTIRE MINERALS SUPPLY CHAIN IS FACING A DIFFICULT TIME ALONGSIDE A CONFIDENCE CRISIS WITH THE MARKETS During the last up-cycle, too much money was poured into increasingly sub-par projects low prices in the down-cycle exposed many of these projects to the market, causing a flight of capital down-cycle upcycle the industry still faces low levels of trust and confidence coupled with continued low prices. The industry must find alternative solutions which allow for more efficient and sustainable operations while promoting shareholder value; amidst volatile commodity prices and unpredictable margins

4 WHAT DOES A TRANSFORMED MINING INDUSTRY LOOK LIKE? CONSEQUENTLY, TO SURVIVE AND THRIVE IN THIS INDUSTRY, COMPANIES WILL NEED TO EMBRACE INNOVATION "Everybody is slashing budgets therefore innovation is taking a back seat which is the exact opposite mentality that we should be using Industry Association "I would have to put the mining industry about 20 years behind other industries. We are certainly well back of the oil & gas industry, in how we innovate - Junior What we heard from you "The reality in any business or industry is innovate or die Government organization "Investing now in innovation could lead to huge competitive advantages - Major THE OVERWHELMING CONSENSUS? INNOVATION IS KEY TO THE SURVIVAL OF THE INDUSTRY

5 WHAT DOES A TRANSFORMED MINING INDUSTRY LOOK LIKE? ALIGNED TO MINING EXECUTIVES TOP PRIORITIES Ability to reach ore bodies that are further away faster and in a safe manner Environmental footprint reduction and more effective operations Making continuous mining more economical and efficient Comminution energy reduction Water usage, availability, and efficiency is a challenge Energy management and efficiency Improvements in safety to benefit employees Access to real time data strong drive to improve the ability to make decisions and monitor operations from large data sets in real time Mine planning and better understanding of ore bodies to allow for efficient mining

6 WHAT DOES A TRANSFORMED MINING INDUSTRY LOOK LIKE? THE FUTURE OF MINING IS THEREFORE ONE THAT GRADUALLY ADOPTS INNOVATIVE TECHNOLOGIES TO ADDRESS THESE INDUSTRY CHALLENGES Technology Adoption Key Focus Areas Stage 3 All new: Net zero waste Exploration Increase the current industry wide average exploration value per dollar spent Stage 2 Optimized and advanced: Industry cost-drivers Underground Mining A continued focus to reduce unit costs through increasing labour productivity and mining intensity Safe and reliable: Environmental impact reduction Stage 1 Phase 1 Phase 2 Phase 3 (Years 0-3) (Years 3-5) (Years 5-10) Energy / Processing Environmental Stewardship Reduce energy use in comminution Reduce costs and liabilities for environmental management and regulatory compliance through innovation research and technology commercialization Companies will not be able to make this shift on their own, it requires an open innovation business ecosystem that is the purpose of Towards Zero Waste Mining, to stimulate mining innovation in Canada so as to achieve net zero waste in mining and mineral processing within years

7 HOW CAN THE INDUSTRY SHIFT FOCUS? BUSINESS ECOSYSTEMS ARE CRITICAL FOR THE INDUSTRY TO COLLECTIVELY CHALLENGE EXISTING WAYS OF THINKING In order to achieve this industry vision and promote business ecosystems the following are needed: GET ORGANIZED The major point to make is that for the mineral industry the business ecosystem approach is the only one that's going to work to solve the long term challenges. Industry Association BUILD TRUST OPEN INNOVATION BUSINESS ECOSYSTEM SKILL UP CREATE PLATFORMS We don't create the environment for success if we don't work as an ecosystem - as an ecosystem we share the risk and bring in the new insights. - Major

8 HOW CAN THE INDUSTRY SHIFT FOCUS? CMIC HAS CREATED THE TOWARDS ZERO WASTE MINING THAT WILL BE AN OPEN INNOVATION BUSINESS ECOSYSTEM FOR CANADA The objectives are defined below and correlate to the identified pre-competitive challenges that have been defined by executives. Future State Mining Objectives Zero Waste Mining Issues Increasing Mining Intensity Decreasing Energy Intensity Increasing Labour Productivity Decreasing Capital Intensity Safety, CSR & Environment Exploration Underground Mining Energy / Processing Environmental Management Priority initiatives CMIC will address as part of the TZWM strategy Better Chemistry Equipment Mine Planning Other

9 WHAT IS THE BUSINESS CASE FOR CHANGE? THE OPEN INNOVATION ENABLES PRODUCTIVE INNOVATION PARTNERSHIPS BETWEEN MINERS AND SUPPLIERS AND YIELDS MAXIMUM BENEFITS Quantitative Benefits Qualitative Benefits Short-term Long-term Exploration Average exploration value per dollar spent increased by 10-15% Average exploration value per dollar spent increased by 25-30% Pooled resources decreases the risk associated with investments in innovation Underground Mining 20% unit cost reduction through a 200% increase in labour productivity and 20% increase in mining intensity 33% unit cost reduction through further increases in mining intensity Pooled investments create a larger fund to devote towards higher benefit yielding projects Process structure and operating protocols ensure resources are best allocated Energy / Processing Environmental Stewardship 20% energy reduction in comminution 45% energy reduction in comminution 20% cost reduction in cost and liabilities for environmental management and regulatory compliance Access to highly experienced and knowledgeable industry leaders to help address challenges faced by your company Through collaborative effort and extensive access to resources, solutions are generated / implemented faster By networking, opportunities and working groups are able to create environments ripe for idea generation

10 WHAT IS THE BUSINESS CASE FOR CHANGE? FURTHER DETAILS INTO THE POTENTIAL EXPLORATION SAVINGS TARGETS, IF THE PORTFOLIO WERE SUFFICIENTLY DEPLOYED Annual Average Cost Savings ('000 CAD) $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- $307,112 $230,334 $3,071 $153,556 $76,778 $30,711 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CMIC Target Realization Drives innovation by reducing cost of adopting early stage technology Ensures financially affordable production from older mines, reducing the need for shut down Provides opportunities to maximize investments and meet multiple stakeholder needs

11 WHAT IS THE BUSINESS CASE FOR CHANGE? THE FIVE MOST PERTINENT TOWARDS ZERO WASTE MINING TM PORTFOLIOS From Zero Waste Mining issues Exploration to actionable Portfolio Roadmaps Exploration Priority Projects l Accelerated targeting undercover l Near-time data retrieval, analysis, and modeling $18.0 Total Required Investment* $10.0 Government $1.0 $5.0 Industry: Cash Industry: In-Kind $2.0 Partners Continuous Underground Mining Underground Mining l Real-time continuous underground mining $31.1 Total $17.6 $2.2 $11.3 Government Industry: Cash $0.0 Industry: In-Partners Kind Processing (Comminution Efficiency) Energy Efficiency Energy / Processing l Energy efficient comminution through new technology demonstration and waste energy recovery $21.8 Total $10.8 Government $1.5 Industry: Cash $7.2 Industry: In-Kind $2.3 Partners Environmental Management Environmental Stewardship l Closure criteria l Tailings management l Mining industry knowledge hub & sensors l Data management *The split between government and industry investment across portfolios is based on anticipated investment level by industry, given their stated priorities $16.5 Total $9.6 Government $1.1 $3.3 Industry: Cash Industry: In-Kind $2.5 Partners

12 WHAT IS THE BUSINESS CASE FOR CHANGE? THE JOURNEY TO CREATING A SUSTAINABLE OPEN INNOVATION BUSINESS ECOSYSTEM IN CANADA HAS JUST BEGUN Incubators/ Accelerators Cluster Organized Networks Industry Associations Majors Service & Investment Supply Community Industry Innovative Companies Media Juniors Think Tanks Thought Leaders Provincial Community Influencers Government Federal Municipal Programs Educational Institutes Experts Conferences The Towards Zero Waste Mining TM vision is an achievable target, but in order to sustainably operate this way, it will require that companies... configure differently, behave differently, and embrace collaboration!

13 Appendix

14 APPENDIX THE POSSIBLE SAVINGS FROM INVESTMENT IN THE PORTFOLIOS CAN BE QUANTIFIED BASED ON INDUSTRY EXPENDITURES CMIC evaluated the 2014 financial statements of 13 mining companies and applied the expected outcomes to the relevant expenditure items to calculate the possible 10-year long-term ROI figures Portfolio Short-term Outcomes Possible Savings* Long-term Exploration Average exploration value per dollar spent increased by 10-15% Average exploration value per dollar spent increased by 25-30% Annual Exploration Expenditure Range Annual Short-term Savings Annual Long-term Savings Low spenders: $3-8M $0.5 1M $1-2M Medium spenders: $41-80M $6-12M $12-24M High spenders: $ M $37-59M $74-118M Underground Mining 20% unit cost reduction through a 200% increase in labour productivity and 20% increase in mining intensity 33% unit cost reduction through further increases in mining intensity Underground Mining Unit Costs Range Short-term Mining Unit Cost Savings Long-term Mining Unit Cost Savings Base metals: $55-89 / t $11-18 / t $18 30 / t Gold: $800 1,000 / oz $ / oz $ / oz Uranium: $28 / lb $6 / lb $9 / lb Energy / Processing 20% energy reduction in comminution 45% energy reduction in comminution Daily Mine Energy Use Daily Short-term Reduction in Energy Use Daily Long-term Reduction in Energy Use Small Mill Capacity: 11 MWh 2 MWh 5 MWh Medium Mill Capacity: 93 MWh 19 MWh 42 MWh High Mill Capacity: 2,300 MWh 460 MWh 1,035 MWh Environmental Stewardship 20% cost reduction in cost and liabilities for environmental management and regulatory compliance Annual Environmental Cost Range Remediation: $5-20M Rehabilitation: $50-80M Reclamation: $30-200M Annual Long-term Savings $1-4M $10-16M $6-40M *Assumptions and qualifications for the possible savings targets have been identified in the detailed Business Case document