Gold Fields

Energy management

Introduction

Energy markets have been fundamentally redefined by the global drive to minimise contribution and build resilience to climate change. This has affected the types of energy sourced by business, the cost of energy, how energy is procured and how energy is finally used.

The gold mining industry is affected directly by these drivers, given the energy intensity of its processes. Mining and processing of gold is getting more energy intensive given a number of factors including:

• Declining grades
• Longer hauling distances
• Increasing mine depths requiring more pumping and cooling infrastructure
• Increased stripping to expose new ore bodies
• More challenging ore body geologies

At the same time, energy prices continue to increase.

For Gold Fields, energy spend accounts for a significant portion of our operating costs (2017: 17%, 2016: 19%), equivalent to 12% of AISC (2016: 13%). This reinforces the need for increased energy supply security, investing in continuous efficiency improvements, reducing our carbon emissions and adapting to the adverse effects of climate change. Successfully implementing these initiatives contributes to a number of our strategic objectives of operational excellence and demonstrates our commitment to responsible mining principles.

In 2016, we revised our Integrated Energy and Carbon Management guideline to align with ISO50001, the global energy management standard. We started the alignment with the standard in 2017 by integrating energy and carbon management into operational and strategic aspects of the business. Energy awareness and training is provided for relevant staff and contractors, while our energy and carbon emissions data is collated and assured by independent auditors.

The guideline informs our integrated energy and carbon management strategy, which is aimed at strengthening energy security, managing energy consumption and costs, reducing carbon emissions and building operational climate resilience. We have set our 2020 aspirational goals from 2018 to be:

• Maintain energy security outside the top 10 Group risks
• Achieve 5% to 10% energy savings off our annual energy plans each year
• Achieve 17% carbon emission reductions each year up to 2020, equivalent to 800,000t CO₂-eq of cumulative carbon emission reductions over the period
• Ensure that all our operations are ISO50001 ready or certifiable

Group energy consumption

Overall energy performance

• Group energy spend declined by 11% to US$258m (US$115/oz) in 2017 from US$289m (US$130/oz) in 2016, with energy initiatives having delivered just below 9% cost savings, at US$22m (US$10/oz), against an initial target of 8% in the 2017 energy plan
• Total energy consumption increased by 4% to 12,178TJ in 2017 from 11,697TJ in 2016, with 67% comprising fuel usage (8,175TJ) and 33% electricity (4,003TJ), compared to a 63%/37% split in 2016
• Fuel spend accounted for 44% (45% in 2016) of total energy spend, with electricity accounting for 56% (55% in 2016). The impact of lower oil prices kept our fuel spend lower relative to our electricity spend. A table showing Group and regional energy costs and volume impacts can be found on our website at www.goldfields.com/sustainability/environment.php
• Energy initiatives realised 176GJ in savings during 2017, equivalent to 1% of energy consumed (against an initial target of 3% in the 2017 energy plan)
• An estimated 8% of carbon emissions, totalling almost 116,000 CO₂-eq, (against an initial target of 8%) were abated
• Our energy intensity increased to 5.46GJ/oz (2016: 5.27GJ/oz), driven by increased fuel usage
• Our Scope 1, 2 and 3 carbon emissions decreased marginally to 1.959 Mt CO₂-eq from 1.964 Mt CO₂-eq in 2016 (see here)

Regional energy spend

Fuel

• Fuel spend decreased by 13% to US$113m in 2017 (2016: US$129m) despite higher fuel consumption, largely due to lower oil prices for most of 2017 and a number of fuel efficiency initiatives implemented
• Diesel accounted for 83% of our fuel energy consumption in 2017
• Total diesel consumption increased by 3% to 188Mℓ (equivalent to 6,765TJ) from 183Mℓ (6,608TJ) in 2016, due to the vast amount of material moved at the Damang Pit Cutback project, increased TSF construction activities at Cerro Corona and the frequent use of backup diesel generators at Agnew to avoid breaching the grid power limits. This offset the benefits of diesel efficiency initiatives implemented at all operations
• The oil price hedge entered into for the period June 2017 - December 2019 for 50% of Australia's and Ghana's diesel consumption volumes, generated savings of US$2m for the 2017 period of the hedge

Electricity

• Electricity spend declined by 10% to US$145m in 2017 from US$160m in 2016, owing to the 2% drop in the Group's power consumption, lower power tariffs at Cerro Corona, lower gas prices at Granny Smith and St Ives and the impact of energy efficiency initiatives. Furthermore, the new gas turbines at Tarkwa and Damang delivered considerable costs savings at our Ghanaian mines
• Group electricity purchased was 1,366GWh (equivalent to 4,003TJ, allowing for generation losses for Gold Fields' own generation) in 2017, a 2% decrease from consumption in 2016, driven by lower gold production at South Deep and the Darlot divestment in Q4 2017
• For 2018, against our initial energy use estimate of 10,983TJ and our budget of US$326m, we aim to achieve consumption savings of 5% (549TJ), cost savings of US$32m, equivalent to US$15/oz of gold produced, and abating about 155kt CO₂-eq in carbon emissions

Energy savings initiatives

Gold Fields' energy management approach has over the years shifted from equipment retrofits to more process related efficiency opportunities. Since 2013, Gold Fields' implementation of the integrated energy and carbon management strategy has realised cumulative savings amounting to 1,274TJ in energy (2% of energy consumption over the period), equivalent to US$63m in cost savings and avoiding 282,900t CO₂-eq in carbon emissions (3% of carbon emissions over the period). Group energy spending over the period has also improved, declining to US$258m (US$115/oz) in 2017 from US$305m (US$153/oz) in 2013.

The next wave of opportunities seeks to deliver further energy savings primarily through the use of new technologies. (Savings from energy savings initiatives are recognised for 36 months before being included in the baseline).

Below are some of the energy savings initiatives that we have implemented in 2017 across our operations:

• Use of diesel additives at Cerro Corona, with trials scheduled for Tarkwa
• Switching from diesel power generators and unstable grid supplies to gas turbines at Damang and Tarkwa
• Switching from satellite diesel generators to low carbon gas generated electricity at St Ives
• Gas and electricity contract renegotiations at Cerro Corona, St Ives and Granny Smith
• Upgrades of gas turbines to increase efficiencies at Granny Smith
• Milling circuit upgrades and improving milling efficiency at Damang
• Haul truck driver training to improve asset utilisation and fuel reduction initiatives at Tarkwa and Damang
• Use of drones to conduct tailings geological surveys, with more accuracy and efficiency at Tarkwa

Regional performance

Americas region

Faced with increases in regulated electricity prices, Cerro Corona successfully renegotiated a new 2027 power purchase agreement with private power company, Kallpa, resulting in a 13% cut in the previously agreed to 2017 tariffs and stable tariffs thereafter. The purchased electricity has the lowest carbon intensity in the Group, with 70% gas- and 30% hydro-generated. Among other initiatives:

• Cerro Corona has started the ISO 50001 certification process
• A new fuel additive initiative has been rolled out at Cerro Corona resulting in lower fuel usage and spend

In 2017, new initiatives contributed 26,8TJ and 747kℓ of diesel to energy consumption savings, equivalent to US$623,000 in cost savings, and avoided 2kt CO₂-eq in carbon emissions.

As part of the feasibility study under way at Chile's Salares Norte project, an initial assessment for solar power has been undertaken. Market responses indicate strong feasibility for solar power to augment base-load thermal power units.

Australia region

All our mines in Australia run on gas-generated electricity. Diesel is used primarily for our fleet of vehicles and machinery. The focus for 2017 remained on implementing a fuel switch strategy and renegotiating gas supply contracts.

The Company hedged part of Australia's oil purchases against a rising oil price. This realised financial gains of US$713,000 in the region during 2017. In 2017, we became the first mining company in Western Australia to successfully auction our carbon emissions and receive carbon credits of A$126,000 from the country's Emission Reduction Fund (ERF). Contracted in April 2016, the Granny Smith 25MW gas power station abated close to 21,000t CO₂-eq, following the conversion of a diesel power plant to gas - 8 000 tonnes more than contracted for the first year, thus earning extra credits. A portion of the additional credits will be used to offset future St Ives carbon emissions.

Following the energy security assessments in 2017, the following energy initiatives/studies were conducted during the year:

• Granny Smith: A feasibility study on power options is under way to extend capacity and potentially include solar power
• Agnew: A feasibility study on power options to increase supply capacity is being conducted with a mix of low carbon energy solutions being considered
• Gruyere Joint Venture: Solar powered pumps are being installed at the bore fields to replace diesel generators

In 2017, new initiatives contributed 21.4TJ and 15kℓ of diesel to energy consumption savings, equivalent to US$3.4m in cost savings (US$4/oz), and avoided 25.8kt CO₂-eq in carbon emissions.

South Africa region

Eskom, the public power utility that supplies South Deep with electricity, generates 90% of its electricity from coal-fired power stations, thus making this the most carbon intensive operation across Gold Fields. Power supply to South Deep has been stable and tariff hikes relatively modest since 2015. However, Eskom's proposed future electricity tariff increases, special tariff increments and lack of clarity of future trends, present operational and planning risks.

In 2017, we reached a commercial agreement and are close to signing a 25-year PPA with an independent power producer (IPP) for a 40MW solar photovoltaic facility at our South Deep mine. The IPP will develop, build, own, operate and maintain the plant with commissioning expected in 2019. The plant is expected to generate 100GWh per year, equivalent to 20% of the mine's annual electricity consumption, while avoiding carbon emissions estimated at 100,000t CO₂-eq per annum.

In 2017, new initiatives contributed 26.0TJ (7,245MWh) to energy consumption savings, equivalent to US$458,000 in cost savings (US$2/oz), and avoided 7.1kt CO₂-eq in carbon emissions.

West Africa region

Through an agreement with Genser Energy, an independent power producer, Tarkwa and Damang are now being supplied with gas-fired, on-site electricity. This has significantly improved reliability and the mills' operational efficiencies and contributed to significant cost savings as a result of using less diesel-driven generators. Savings during 2017 were around US$15m, when taking into account improved efficiencies and higher utility tariffs the mines would otherwise have had to pay.

By Q4 2017, all of Damang's and 60% of Tarkwa's power requirements were being met by the gas turbines. Civil works and foundations were completed for the fourth gas turbine at Tarkwa in Q4 2017. Once this is operational - expected by mid-2018 - Tarkwa will also be 100% supplied by gas. Plans are advanced to capture the waste heat from the Genser gas turbines to generate an additional 20MW that Genser could wheel through the distribution network to other clients. This will result in further unit cost savings to our mines.

The Company hedged part of Ghana's oil purchases against a rising oil price. This realised financial gains of US$1,24m in the region during 2017.

In response to the Government of Ghana's challenge for mines to have 10% renewables by 2020, Gold Fields Ghana will commission an options study in 2018 for a combined 6MW solution at the two mines.

In 2017, new initiatives, including the switch from diesel to gas, contributed 102TJ to energy consumption savings, equivalent to US$18m in cost savings (US$25/oz), and avoided 81kt CO₂-eq in carbon emissions.

OUR ENERGY AND CLIMATE CHANGE MANAGEMENT JOURNEY

	Why does energy and climate resilience matter?			Our response – strategic programmes
	Group energy spend			Granny Smith gas plant Commitment by Board and Group Exco Gold Fields implemented an integrated energy and carbon management strategy from 2013 onwards Energy and carbon performance contained in the balanced scorecards of senior and line management Five-year energy security plans developed and implemented in all regions Revised three-year regional carbon emission and energy efficiency targets to 2020 Strategic partnerships with NGOs Commitment to low-carbon and renewable energy mix at all mines. Where feasible, 20% renewable energy for all projects Artist impression of the South Deep Solar PV plant Development of predictive and dynamic water balance models at each operation Commitment to transparency: Carbon Disclosure Project (CDP) participation since 2007 Water Disclosure Project (WDP) participation since 2012 DJSI and GRI submissions since 2010 ICMM collaboration on key climate change initiatives: Piloted a climate data viewer tool Undertook climate change vulnerability risk assessments at all our operations Support the ICMM climate change statement Signed the Paris Pledge for Action
	Group energy costs
	Climate change impacts our water security
	Impacts our carbon footprint
	Technology opportunity and risks Regulations impacting our energy and water resources Severe weather events disrupting our operations

 

	Our response – operational initiatives			Group outcomes to date
	Gruyere camp site			Group energy efficiency Group energy spend Group CO2 emission intensity Group water reuse/recycle
Group	Climate change risk assessment and mitigating actions in all regions Regional water conservation initiatives
	Imminent finalisation of an agreement with an IPP to build and manage the 40MW solar photo-voltaic plant at South Deep. Expected commissioning in 2019.
South Deep	Benefits to South Deep: Reduce reliance on state utility (Eskom), currently supplying 95% of electricity from coal sources Will provide around 20% of South Deep’s electricity Competitive tariffs Reduce our Scope 2 carbon emissions
	Genser Energy gas power plants commissioned December 2016; 33MW gas turbines at Tarkwa and 22MW at Damang
Tarkwa & Damang	Improved security of supply in 2017 – 100% to Damang; 60% to Tarkwa (100% during 2018) Significant electricity cost savings – contributed to the regional US$18m in cost savings in 2017
	25MW Aggreko gas turbines commissioned in 2016 and upgraded to higher efficiency turbines in 2017:
Granny Smith	Estimated energy cost reduction of some A$100,000 per year from efficiency improvements Earned A$126,000 in carbon abatement credits from the Australian Emissions Reduction Fund (ERF) after abating 21,000t CO2-eq
Gruyere	Power purchase agreement signed with APA for 45MW gas power plant to supply the project. To be commissioned in October 2018
Sandton Head Office	128 kW solar panels (commissioned in 2015): Reduced grid electricity consumption by 45% between 2015 and 2017 Reduced grid electricity costs by 44% between 2015 and 2017