Integrated
Annual Report
2018
2018
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Amid rising energy costs, increasing depth of our underground mines and longer hauling distances for our open pits, our energy strategy focuses on ensuring security of supply, improving energy efficiencies and reducing the cost of energy while, at the same time, minimising our contributions to and building resilience against climate change.
Gold Fields' energy spend, which combines our spending on electricity and fuels, accounts for a significant portion of our operating costs. During 2018, this percentage rose to 22% of operating costs from 17% in 2017, or 15% of our AISC (2017: 12%).
Given the importance of energy to the Group operations, we have set a number of aspirational goals for the year 2020:
Gold Fields has developed integrated energy and carbon management strategies at both Group and operational level that are aligned with the global ISO 50001 energy management system standard. The key pillars of this strategy are to reduce our diesel usage, to switch from diesel-generated electricity to cleaner gas-generated, increasing the use of renewables and rolling out training and awareness programmes. During 2018, Cerro Corona in Peru became the first Gold Fields mine - and the first mine in Peru - to be certified to the ISO 50001 standard, and we aim to have all our operations aligned with the standard by 2020.
Total energy consumption decreased by 4% to 11,628TJ in 2018, from 12,178TJ in 2017, with 69% comprising fuel usage and 31% electricity, compared to a 67%/33% split in 2017. Fuel spend amounted to 52% (2017: 44%) of the total energy spend, and electricity spend accounted for the rest.
Total Group energy spend increased by 17% to US$302m (US$146/oz) in 2018 from US$258m (US$115/oz) in 2017, largely due to an average 23% increase in diesel prices paid by our Ghanaian and Australian mines. This was slightly offset by oil price hedges at our Ghanaian and Australian operations, which realised net gains of US $14m during 2018. In 2018, we invested US$3m in energy initiatives, which delivered 411TJ of savings and resulted in long-term cost savings of US$29m (US$14/oz), compared with US$22m (US$10/oz) in 2017.
With the exception of our South Deep mine in South Africa, which is still heavily reliant on coal-fired electricity, all of our operations are using low-carbon gas, with grid and diesel generators as emergency supply. During 2018, our Group had 134MW in installed gas capacity - about 54% of total electricity capacity - with an additional 16MW of capacity being evaluated. The independent power producers (IPPs) supplying the gas are finalising the construction of the gas pipeline to our Tarkwa and Damang mines in Ghana (77km) and have completed the pipeline to the Gruyere project in Australia (200km). This is a safer and more reliable option for supplying gas than trucking it to these operations.
Renewable energy is also becoming a viable option for our operations, not only due to their positive impact on our carbon emissions but also because the cost of renewables is rapidly decreasing. At present, Gold Fields has 55MW of solar capacity and 18MW of wind capacity under study at our South African, Australian and Ghanaian mines. Two of our Australian mines, Granny Smith and Agnew, are also finalising the construction of battery storage facilities. Our investments in renewables will result in solar and wind being added to our supply mix, initially at our Australian mines, where it is set to reach at least 10% of total energy usage by 2020. Several additional opportunities are being assessed at the rest of our operations. We also remain committed to our target of using renewables for 20% of the energy requirements of new projects over their life-of-mine.
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More details on Gold Fields’ climate change management and carbon emission performance can be found here. |
| Gold Fields’ electricity consumption by source | Group energy consumption | |
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Since 2013, the implementation of our integrated energy and carbon management strategy has realised cumulative savings totalling 1,685TJ, or 2.2%, of total energy consumption over the period. These savings amounted to US$92m and avoided 432kt CO2-e in carbon emissions (6% of our total Scope 1 and 2 emissions over the same period). During 2018, Scope 1 and 2 carbon emissions, totalling 149kt CO2-e, were abated. Our Scope 1, 2 and 3 emissions decreased to 1,852Mt CO2-e from 1,959Mt CO2-e in 2017.
While energy efficiency initiatives have a dual benefit of improving energy productivity and reducing our carbon footprint, a number of our energy initiatives have significant carbon footprint reduction impacts without necessarily reducing energy usage. These include fuel switching from diesel to gas-generated electricity or renewable energy technologies.
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For more details on our energy management approach, policies and guidelines, visit www.goldfields.com/sustainability.php. |
Gold Fields aims to deliver further energy savings through greater energy efficiencies and the use of new technologies. We implemented 16 new energy saving projects in 2018, which include:
South Deep's electricity is supplied by Eskom, the state-owned utility which generates 95% of its electricity from coal-fired power stations. As a result, South Deep is Gold Fields' most carbon intensive operation.
Eskom remains a critical risk to our South Deep operations, both from a supply reliability and a cost perspective. Eskom's financial and operational viability have significantly weakened over the past few years, given the utility's inability to service its debt obligations and keeping its power plants running consistently and efficiently. Since June 2018, Eskom has issued several emergency notices and initiated rolling blackouts, calling on large power users to reduce demand. Eskom has been plagued with coal shortages at its coal power stations and frequent plant breakdowns, given the ageing fleet whose maintenance has been deferred over the years.
| Regional energy spend |
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South Deep, like other large power users, has a curtailment agreement with Eskom under which the mine is expected to reduce power demand when called upon by Eskom, but preserving a minimum critical load to achieve hoisting of staff and water pumping. As a short-term response, we reschedule our operations by stopping our process plant, when possible, and reschedule hoisting of ore and equipment.
Our medium-term responses include running our own emergency diesel generators to ensure safe operations, but also continue investing in energy efficiency initiatives, to improve our energy productivity, reduce our carbon footprint and save energy costs. Our long-term solution is to increase our own supply capacity, including bringing in renewables into the power mix, including the solar photovoltaic plant currently in the review phase (below).
On the cost side, Eskom tariffs have escalated well ahead of inflation over the past few years and the tariff trajectory going forward remains uncertain. In 2010 a unit of electricity cost R0.36/kWh (in nominal terms); in 2018 the equivalent unit cost was R0.85/kWh for large industrial customers. In March 2019, Eskom received the go-ahead to raise its average tariff by 14% for 2019 followed by increases of 8% and 5% for 2020 and 2021 respectively. These will add significant cost pressures on South Deep and strengthen the case for reduced dependence on the utility.
Regional performance
Regional performance |
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| 2018 | 2017 | ||
| Total energy usage (TJ) | 1,082 | 997 | |
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| Energy split electricity/fuel (%) | 50/50 | 55/45 | |
| Total energy spend (US$m) | 26 | 22 | |
| Energy spend per oz (US$/oz) | 82 | 72 | |
| Energy initiatives savings (TJ) | 34 | 27 | |
| Energy cost savings (US$m) | 0.8 | 0.6 | |
| CO2-e emissions abated (kt) | 2.56 | 2.00 |
2018 KEY DEVELOPMENTS
Electricity to Cerro Corona is supplied by an independent power producer, generated from hydro (30%) and gas (70%), and supplied via a transmission line. This makes it the least carbon intensive electricity in our portfolio.
Cerro Corona energy spend and consumption increased in 2018 compared to 2017, due to greater tonnages mined in 2018 and consequently higher diesel and electricity consumption.
Among efficiency initiatives, Cerro Corona recently upgraded the haulage fleet to higher capacity trucks to improve diesel usage intensity, has been applying a diesel additive in its mining fleet and rolled out an LED lighting initiative for its pit lighting. Cerro Corona is also evaluating battery-operated vehicles for the transport of personnel within the mine. A pilot project was initiated in Q1 2019, and, depending on the results, we will investigate gradually replacing the diesel bus fleet with electric buses.
Regional performance |
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| 2018 | 2017 | ||
| Total energy usage (TJ) | 3,142 | 3,631 | |
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| Energy split electricity/fuel (%) | 41/59 | 41/59 | |
| Total energy spend (US$m) | 78 | 81 | |
| Energy spend per oz (US$/oz) | 88 | 86 | |
| Energy initiatives savings (TJ) | 207 | 21 | |
| Energy cost savings (US$m) | 10,5 | 3.4 | |
| CO2-e emissions abated (kt) | 33.60 | 25.82 |
2018 KEY DEVELOPMENTS
Our Australian operations run on gas-generated electricity. Diesel is used primarily for our fleet vehicles and machinery. To further embed energy management into operational activities, we implemented an energy steering committee during the year.
Energy spend at our Australian operations was lower in 2018 than 2017 due to the divestment from Darlot and operational adjustments. These included a 20% decrease in diesel usage as St Ives moved to increased underground operations. Hedging 50% of our diesel purchases during 2018, realised a net gain of US$4.6m in 2018, cushioned the impact of higher diesel prices.
At Granny Smith, we increased the generation capacity of the gas power station’s turbines and started development of a 8MW solar farm with 2MW battery storage facility, due for completion in Q4 2019. Both projects will address growing energy demand from the Wallaby underground mine, reduce gas consumption and cut carbon emissions.
Agnew is investing in a hybrid gas and renewable energy power supply with the capacity to expand to meet future mine growth. The gas supply and base load power plant is under construction and will start supplying energy to the mine in Q3 2019. Additional phases of the project are being investigated, with further development likely to occur during H2 2019.
At Gruyere, the 200km gas pipeline was completed, and gas introduced into the 45MW power plant. We are also piloting five solar power depressurisation pumps around the open pit.
Regional performance |
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| 2018 | 2017 | ||
| Total energy usage (TJ) | 5,709 | 5,647 | |
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| Energy split electricity/fuel (%) | 28/72 | 28/72 | |
| Total energy spend (US$m) | 164 | 120 | |
| Energy spend per oz (US$/oz) | 233 | 169 | |
| Energy initiatives savings (TJ) | 145 | 102 | |
| Energy cost savings (US$m) | 17.0 | 18.0 | |
| CO2-e emissions abated (kt) | 106.61 | 80.94 |
2018 KEY DEVELOPMENTS
Our Ghanaian mines completed their transition from the national grid to an independent power producer (IPP), Genser Energy, during 2018. The IPP commissioned the last of the gas units at the Tarkwa power plant in February 2018 and now supplies 40MW to Tarkwa and 18MW to Damang mine. We maintain nominal grid electricity consumption and our own emergency diesel generators ensure we have sufficient back-up infrastructure. Since the switch over, we have realised operational costs savings and processing efficiency gains.
During 2018, energy spend at our Ghanaian operations was higher than in 2017 primarily due to higher diesel prices. We hedged 50% of our diesel purchases against Brent crude prices, realising a net gain of US$7.9m in 2018. Heavy rainfalls and increased pit dewatering contributed to higher diesel consumption in 2018.
Genser Energy is advanced with construction of a 77km buried natural gas pipeline from the port of Takoradi to our mines, which is expected to be commissioned during Q2 2019. This will enable the IPP to convert both plants from propane to natural gas and discontinue transportation of gas on public roads, minimising road transportation risks.
Assessment for renewable energy is at an advanced stage, in support of the government efforts to increase the use of renewable energy by 2020, especially for mining.
Regional performance |
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| 2018 | 2017 | ||
| Total energy usage (TJ) | 169 | 190 | |
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| Energy split electricity/fuel (%) | 96/4 | 94/6 | |
| Total energy spend (US$m) | 33 | 34 | |
| Energy spend per oz (US$/oz) | 211 | 122 | |
| Energy initiatives savings (TJ) | 24 | 26 | |
| Energy cost savings (US$m) | 0.8 | 0.4 | |
| CO2-e emissions abated (kt) | 6.43 | 7.10 |
2018 KEY DEVELOPMENTS
South Deep’s electricity is supplied by Eskom, the state-owned utility which generates 95% of its electricity from coal-fired power stations. As a result, South Deep is Gold Fields’ most carbon intensive operation.
Total energy usage was down by 21TJ in 2018 due to lower production, primarily due to a halt in production as a result of the labour strike during the fourth Q4. Energy spend, however, did not decline at the same rate due to a high baseload demand profile and an average 5.2% electricity tariff increase during the year. (See Energy management)
Due to regulatory uncertainty around the use of private power purchase agreements, South Deep has delayed the signing of a 25-year power purchase agreement with an IPP for a 40MW solar photovoltaic facility at the mine. We are exploring ways to develop the facility incrementally in line with government’s recent Integrated Resource Plan, which for plants with a generation capacity above 10MW, requires both ministerial exemption and a power generation licence for IPPs.
