R4mining presentation summit_toronto_2014

Measuring the risk of BAU energy and the Value of Renewables for Mining

“To measure is to know. If you can not measure it, you can not improve it.” William Thomson (first Lord Kelvin, 1824-‐1907) 2014 © r4mining.com 15 October 2014

VIDEO SOLON

•  INSERT VIDEO hKps://www.youtube.com/watch?v=gIHY4L3XdN4

Quote in English: •  970 trillion kWh of energy fall to Earth every day •  Good thing we do not see •  Bad if we do not use

2014 © r4mining.com RENEWABLES AND MINING SUMMIT, 15-‐16 October 2014. Toronto

Previous Concepts and Goals Douglas W. HUBBARD (2010): “How to measure everything. Find the Value of Intangibles on Business. Ed. Wiley” •  Uncertainty: The lack of complete certainty, that is, the existence of more

than one possibility. The “true” outcome / state / result/value is not known. –  GOAL 1: Profitable ReducLon of Uncertainty about Renewables for Mining

•  Risk: A state of uncertainty where some of the possibilides involve a loss, catastrophe, or other undesirable outcome. –  GOAL 2: Profitable Decrease of Risk about Energy for Mining

•  Measurement: A quandtadvely expressed reducdon of uncertainty based on one or more observadons. –  GOAL 3: Measure Opportunity Costs & Risks of Energy for Mining based on KPI


REVENUE STREAMS

“Canvas” Business Model

KEY PARTNERSHIPS KEY ACTIVITIES VALUE PROPOSITIONS

KEY RESOURCES

COST STRUCTURE

CUSTOMER RELATIONSHIPS

CHANNELS

CUSTOMER SEGMENTS

bau4m KPI

BAU KPI Metrics on Loss of Prevendon and

Risk Midgadon! MINING Decision Makers!

EPCM, ESCO & Utility Decision Makers!

INVESTMENT Decision Makers!

r4m KPI

Renewables & Mining

Observatory

NCRE KPI Metrics to

Uncertainty reducdon

for Mining

Encourage to

collaborate with KP

I

Observatory on r4m

Figure out Opportunity RISK in BAU Energy for

Mining!

Figure out Opportunity

COST in NCRE for

Mining!

Figure out FEEDBACK

control about RISKS & COSTS!

RENEWABLES AND MINING SUMMIT, 15-‐16 October 2014. Toronto

Customized KPI Analysis & Due Diligence

Book, Surveys & Reports

Training KPI Scenario & Solver

Simuladons

Barter of knowledge Packages

2014 © r4mining

The Territory, the maps and compass •  Renewables for Mining is a “Babel” Territory where …

–  Miners talk on Tones and ounces, energy engineers on KWp and MWh, and Finance professionals about USD, € or debt rates. Furthermore the Public Insdtudons about CO2

•  To achieve our goals we need to use a COMMON LANGUAGE


Power meter

Geologist Hammer

Financial Calculator

r4m Valuadon Approach •  Compass Rose Value Proposidon – new KPI

Income Statement $/ MWh (Min Tn)

Balance Sheet $/MWh (Min Tn)

Business Value $ / Share

JORC Reserves Balance -‐ Tn (oz)

Carbon (GHG) Footprint Co2/Tn

“Diesel Footprint” TOE/Min Tn -‐

MWh

Social Energy Balance Sheet CSR $/kWh -‐

LSoE

Policy Regulatory Balance S. (Derivate)


r4m KPI Accoundng Fundamentals •  Energy Savings are not the best

approach to renewables for mining because in terms of USD, Tn, CO2 or MWh Cashflow works as follows

–  NCRE are Assets –  and BAU energy are LiabiliLes

•  Therefore the energy Net Worth (energy Net Assets Value, or Owner's Equity or Shareholders’ Equity) results on …

–  … the difference between the BAU energy (LiabiliLes) and NCRE energy (Assets).


BAU & NCRE Cashflow PaKerns

Business As

Usual (BAU)

CASHFLOW Paaern:

Non ConvenLonal Renewable Energy (NCRE)

CASHFLOW Paaern:


B A U MODEL CASFLOW PATTERN

r4m KPI Valuadon Fundamentals •  bau4m-‐ 3 & r4m-‐3: BUSINESS VALUATION

–  The technique of Band of Investment Using One Stabilized Year is well applied to esdmate the value for Real Estate facilides linked to economic exploitadon as hotels. Useful on NCRE installadons as well.

–  Business Value = EBITDA / WACC •  the r4m2-‐3 & bau4m2-‐3; DERIVATES BV •  Derivadve “A”: increase EBITDA:

–  If we reinvest in new NCRE facilides as follows

–  P&L NCRE Savings as Equity Invest. (20%) –  Using the 80% of the previous facility value

as Collateral for the 80% debt investment

•  Derivadve “B”: decrease of WACC –  … to cheap energy price (avoiding voladlity

as well) –  … lowering environmental, social and

reguladve risks •  bau4m-‐ 4 & r4m-‐4: JORC BALANCE

–  if we fix constant mining income then operadve costs are the key reladonship between Proven Reserves and Resources Measured

–  The NCRE Model in front of BAU Model derivate in the “mineral cashflow” transformadon from Liabilides to Assets


R4m KPI Triple Accoundng r4m and bau4mining: Environmental (CO2), resilience (TOE Diesel), Social Assets (kWh Social) and the derivate Policy Reguladve


Mapping the mining KPI Territory

MINING ACCOUNTING VECTORS

Opportunity RISK

Opportunity COST

Opportunity FORECAST

Levelised Units

INCOME STATEMENT (P&L) bau4m-‐1 r4m-‐1 h4m-‐1 LCoE -‐ LSoE

BALANCE SHEET bau4m-‐2 r4m-‐2 h4m-‐2 LBSoE

BUSINESS VALUE bau4m-‐3 r4m-‐3 (a) h4m-‐3 (a) LVoE Derivate BUSINESS VALUE bau4m2-‐3 r4m2-‐3b h4m2-‐3b LVoE

JORC BALANCE bau4m-‐4 r4m-‐4 h4m-‐4 LBRoE

CARBON FOOTPRINT bau4m-‐5 r4m-‐5 h4m-‐5 LCFoE

DIESEL FOOTPRINT bau4m-‐6 r4m-‐6 h4m-‐6 LDFoE

SOCIAL E. FOOTPRINT bau4m-‐7 r4m-‐7 h4m-‐7 LSFoE

POLICY / REGULATORY F. bau4m-‐8 r4m-‐8 h4m-‐8 LPRFoE


Case Study Simuladon: KPI for Chilean Copper

•  Solar PV Energy for 1 TMF Copper: –  100 MWp Solar PV as “Amanecer Solar” (SunEdison)

–  Applied to “La Escondida” Copper Mine –  Over 1 million TMF /y

•  Sources of informadon: –  Public SunEdison / CAP data –  Consejo Minero 2012: energy consumpdon / TMF

Copper.


Opportunity Risk, Cost and Hybrid: Chilean Copper: 1 Tn and 100 MWp Solar PV

•  Copper Price (USD /Tn): 6,696.00 2014 © r4mining.com RENEWABLES AND MINING SUMMIT, 15-‐16 October 2014. Toronto

Future Metrics Diversificadon •  Figure out FEEDBACK control about RISKS & COSTS

–  Considering a close collaboradon in developing these KPI, three types of metrics diversificaLon would be possible

•  1. Energy Diversificadon Metrics –  To mining total efficiency (i.e. from ESC ESCO to EPC ESCO) –  To “future” storage integradon with hybrid systems (scenarios)

•  1. Mining Diversificadon Metrics (to Mining Valuadon) –  Geological resource (direct and bypass products) -‐ Mineable reserve -‐

Recoverable metal -‐ Gross revenue -‐ Net smelter return, •  3. Financial Rados, Scenarios and Solver Base Case Modeling:

–  IRR (project & equity) over LSoE, LBSoE, LBVoE “ cashflows –  NPV and ROI based on LSoE, LBSoE, LBVoE cashflows –  How r4m – bau4m – h4m will affect the DSCR, the risk adjusted rate of

return –  operadng Cashflow, cash flow axer capital, net cash flow –  VERY IMPORTANT: WACC trends …. New Mining Energy Risk Radngs –  NAV accredon, cash flow per share (“CFPS”) accredon –  Capital Allocadon Decisions ..


Conclusions •  1. BAU energy for mining is not a quesdon of

engineering reliability, but a challenge about Balance Sheet reliability –  Figure out the LIABILITIES to beaer locate the

OPPORTUNITY RISKS thanks to bau4m KPI

•  2. Renewables for Mining is a challenge of Assets, not a quesdon of Savings –  Figure out the OPORTUNITY COSTS to increase

diverse types of mining assets based on r4m KPI

•  3. Recommendadon for Observatory for Renewables and Mining: –  Figure out FEEDBACK CONTROL –  FUTURE DIVERSIFICATION


Thank you very much for you aKendon Dr. Arnoldus M. van den Hurk Mir

[email protected] www.renewables4mining.com www.r4mining.com www.miningrenewables.com hKp://es.linkedin.com/in/arnoldusmateovandenhurkmir/ hKps://twiKer.com/r4mining hKp://es.slideshare.net/ArnoldvandenHurk/ hKps://www.youtube.com/user/renewables4mining

“Ignorance is never beUer than knowledge. Enrico Fermi, winner of the 1938 Nobel Prize for Physics.” 2014 © r4mining.com RENEWABLES AND MINING SUMMIT, 15-‐16 October 2014. Toronto

R4mining presentation summit_toronto_2014

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