When it comes to understanding processing costs, electric power is an item that can have a substantial impact on operating expenses.
Costmine, a division of Mining Intelligence owned by Glacier Resource Innovation, studied the electricity component of mining costs. The report is remarkable for showing how variable expenses are depending on the region.
In the lower 48 United States, industrial electric power costs can range from 5.6¢ per kilowatt hour (kWh) in Louisiana to over three times that – 19.1¢/kWh – in Rhode Island. In Alaska, the cost of power is solely dependent on access to a grid or the site generating its own power.
On Alaska’s grid, power costs are currently averaging 18.7¢/kWh for industrial use. However, diesel-generated power can be many times that. For example, in the state’s remote locations, power rates are reported to be between 40¢/kWh to more than $1/kWh, most likely with government subsidies.
Base case
Spokane, Washington-based Costmine examined the impact on the operating cost for a tonne of ore processed at a 10,000-tonnes-per-day mill with a single flotation process. The base project was calculated using 6¢/KWh; 8¢/KWh; 20¢/KWh; 60¢/KWh and 80¢/KWh. The average industrial power rate for 2023 in the U.S. was 8.06¢/KWh.
Researchers used Sherpa Mineral Processing software with Costmine’s 2023 electricity data. The commodity used was typical of a massive sulphide deposit using a grade of 3% copper. The company broke out the costs per tonne of processed ore below by major cost type.
The table below shows the comparison between the different electric power rates. Note that labour and supplies do not change and the electric power costs impact both the equipment operation and the miscellaneous categories.
The following charts compare the impact on the relative importance of each cost element as power prices increase from 8¢/kWh to 80¢/kWh. As rates increase, it brings into sharp relief the equipment operating expenses for furnaces, crushers, grinders and other power intensive processes.
Another way to visualize this is to examine the sensitivity of equipment operating expenses to the price of electricity. For our standard single flotation processing facility, operating cost sensitivity due to power price variation is significant but also not surprising. Here we are better able to quantify this sensitivity:
Sensitivity of equipment and miscellaneous operating expenses to power prices
Using Costmine’s Sherpa Mineral Processing cost model to isolate the electric power consumed, the chart below makes it clear that the cost of electricity at mills can make or break many projects. As shown, prices above 20¢/kWh makes power a significant portion of a mill’s operating expense.
Total mill operating expenses, breaking out power and non-power elements
The impact that electric power rates have is significant. As a result, companies are looking at alternative ways to generate power, particularly at remote sites.
Some of the obvious options include using natural gas where local supply is available, as well as wind and solar. Another of the more innovative options is small modular nuclear reactors that can be transported in standard 40-foot (12.2-metre) shipping containers.
Indeed, this last option is being increasingly discussed among Costmine’s clients as an economically viable option for remote and northern mine sites. As the cost of carbon factors into more mines’ operating cost considerations, this option will become increasingly compelling.
In the U.S there are several fees and tariffs added onto the cost of electricity bill to industry customers such as miners that determine the actual cost of electricity. The all-in cost of electricity is what determines financial vaability and profitability and is therefore the cost of electricity that needs to be analyzed. For example, in WV the electricity generation cost may be $7/kwh, but the all-in delivered cost is closer to $11/kwh.