SA’s copper mine’s energy costs was reduced by billions thanks to a partnership with a local SME.
South Africa’s mining industry is facing challenges that range from pressures on commodity prices through to increasing costs of simply getting ore out of the ground. A
primary concern for mining companies is the spiralling costs of energy - and when you have an annual electricity bill that is around R 500 million reducing these costs is key.
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But, where there is a will and the skills to address energy costs, innovative ways to economise can always be found, says Ethel Nyembe, Head of Small Enterprise at Standard Bank, when reviewing a recent episode ofThe Growth Engines, highlighting the Palabora Mining Company’s partnership with local SME, Ensight Energy Solutions.
Working on a contingency basis
“When it comes to an SME supplier selling specialist services to a major mining company, the level of confidence the supplier has in the capabilities and skills of their people is central to winning the business.
"When they are so confident that they work on a contingency basis, with payment only being due once the desired results are achieved, then there is little to no reason that the SME supplier won’t secure the contract. For the Palabora Mining Company and Ensight Energy Solutions, the resulting partnership to reduce energy costs was one created in copper mining heaven,” says Nyembe.
Kobie Naude, General Manager: Asset Management at Palabora Mining Company, says that the mine produces about 60 000 tonnes of copper a year for international markets.
“Mother earth gives you what it has to mine. We cannot control the market or the prices. All we can control is costs. With energy being the second-largest cost in our business, we had little option but to take action on this front,” says Naude.
Getting paid to save money
The decision to appoint Ensight Energy Solutions has seen the mining company save R95 million to date. Palabora Mining Company is looking forward to total savings of close to R200 million over the next three years.
A dedicated Ensight team, working with Palabora employees, generated ideas and projects to save electricity. Instead of just recommending actions, Ensight also became involved with the task of delivering projects and results.
“We work for companies that generally have energy costs of around R 500 million to R 1.5 billion a year, says Rod Welford, CEO of Ensight Energy Solutions. “Our objective is not only to save energy, but also to improve the environmental outcomes of the mining companies concerned.”
Nailing its colours to the mast, payment is only made as a basis of the overall percentage in energy savings achieved by the customer.
There is a perfect storm happening in South Africa when it comes to oil and gas, mining, chemical production and steel manufacturing. From 2011 to 2015 the cost of energy has trebled for every tonne of ore mined or produced.
It is this perfect storm - associated with increasing energy costs, deeper mines and the uncertain costs of commodities that created an opportunity for specialist services designed to intervene in these sectors.
Focusing on a people process
Making changes does not mean changing technologies midstream, Welford says:
“We are technology neutral. We believe that by using existing technologies better, you can transform the way you operate to save energy and costs.”
This is a ‘people process’ which concentrates on examining and changing the way things are done, before retrofitting new equipment and technologies. As such, buy-in from management is essential.
A side-benefit is identifying other opportunities for efficiency in transport, logistics and a range of other ways that can improve the productivity of the companies concerned.
“When negative factors combine to create a difficult operating environment, opportunities are created for those who have the specialised skills to operate within a niche activity and generate solutions. The lesson for business is two-fold; there is always potential in stormy times to improve processes and outputs; secondly, selecting the correct partner can not only improve things in one particular area, but also offer additional benefits.
Related: The risks and rewards of renewable energy projects
In the case of Palabora and Ensight, the obvious benefit is energy savings. Not so obvious, but just as important, is the impact these programmes have on the company being able to adopt other efficient practices and achieve further savings,” says Nyembe.
While The Growth Engines series has concluded on TV, episodes and in-depth articles on key themes explored on the programme can still be viewed by visiting bizconnect.standardbank.co.za or bdlive.co.za/indepth/growthengines.