The strategy comprises two phases, with the first phase focusing on power transmission.
OZ received a notice from BHP last year that would see OZ’s access to BHP’s transmission line from Davenport to Olympic Dam terminated from August 2020, forcing OZ to find an alternative power solution.
Under phase one of the plan, the current South Australian assets will remain connected to the electricity grid via the construction of a new high-voltage power transmission line.
ElectraNet will build, own, operate and maintain the 270km line, with SolarReserve to cost share a section of the line’s construction and operation.
OZ has signed a non-binding memorandum of understanding with BHP regarding land access for the new line.
The SA government is supportive of the plan, and discussions with local landholders are underway.
“The new transmission line will enhance security of power supply, reduce line losses and enable the execution of the Prominent Hill mine plan, Carrapateena operations and the exploitation of future optionality for district expansion at Carrapateena,” OZ managing director and CEO Andrew Cole said.
“The cost impact of the new line will be a 3% to 4% increase in Prominent Hill’s life-of-mine all-in sustaining costs from mid-2020 (previously guided at 2% to 5%), offset by a circa 1% cost benefit at Carrapateena.
“These cost estimates are based on SolarReserve’s development of its solar thermal generation and storage facility near Port Augusta.
“The line will have the capacity for other users to draw power or input generation, which will improve the economics for other developments in the region and, as more users connect, OZ Minerals’ operating costs will reduce proportionately.”
Phase two of the power strategy will include procurement, to take place later this year, and generation, which includes cost-saving initiatives and consideration of renewable energy options.
Electricity pricing at Prominent Hill remains fixed until the end of 2018, but OZ said energy prices were trending downwards as new energy sources entered the SA market.
“Our approach to power procurement has vindicated our decision to sign a short-term, 18-month pricing agreement in 2017, as independent agencies are forecasting a downward trending power price market,” Cole said.
“As a result, we have flexibility to commit to short-term or long-term contract pricing, or a combination of both, and consider generation source options as they become more affordable.”
An energy audit conducted at Prominent Hill identified ways to lower power consumption, with linking ventilation fans to smart technology, enabling on-demand usage underground and reducing secondary ventilation energy consumption could save 1.5% of total site usage.
OZ has also received approval for a conditional A$2.5 million government grant to install a solar plant at Prominent Hill.
The company is also considering solar at Carrapateena and wind power at West Musgrave.
Shares in OZ dropped by 1.5% to $9.52.
