A Transformative Opportunity for Sub-Saharan Africa

The Power of the Mine

http://www.worldbank.org/africa/powerofthemine

Follow the conversation on Twitter with @WBlive and #Power4Africa

2

Africa’s power deficit is crippling despite

huge energy resources

Hydro potential: 400GWGeothermal potential: 16GWNatural Gas reserves: 329 tcf

Currently, about 1-2 GW of new installed capacity deployed a year. Africa needs 6-7 GW a year

http://www.worldbank.org/africa/powerofthemine

3

Can mines as anchor consumers be part

of the solution?

http://www.worldbank.org/africa/powerofthemine

4

Mining is a key and well-established

industry

Investment in mining accounted for $3.1 billion between 2000 -2012…

0

1,000

2,000

3,000

4,000

5,000

6,000

2002 2004 2006 2008 2010 2012

Mill

ion

Latin America

Africa

Canada

Australia

United States

Pacific region

…and will go up to $75 billion in SSA in pipeline projects

• Mining exports represents over 20% of exports in 18 countries and over 40% in 14 countries.

• Mining fiscal revenues over 20% in total revenues in Botswana, DRC, and Guinea

http://www.worldbank.org/africa/powerofthemine

5

Power needs depend on the type of

mineral and level of processing

Refining

Power requirements

Smelting

Processing

Crushing

0 5 10 15 20

Iron Ore/Steel (t)

Zinc (t)

Platinum Group Metals (oz)

Copper (t)

Cobalt (t)

Nickel (t)

Bauxite/Aluminum (t)

MWh

Basic and intermediate Smelting Refining

http://www.worldbank.org/africa/powerofthemine

6

Mining demand for power can be up to 23

GW in 2020

South Africa = 3.5%SSA, excluding South Africa = 9.2%

Note: CAGR=Compound Annual Growth Rate

5.6

1013.12.5

5.2

10.3

Pre-2000 2012 2020

GW

South Africa SSA, excluding South Africa

CAGR=5.6%

CAGR=5.5%

~ 15 GW

~ 23 GW

~ 8 GW

http://www.worldbank.org/africa/powerofthemine

Highest increase in power demand –Iron Ore and PGM Refining and Smelting

7

Mining demand for power can be

overwhelming in a few countries

Mining and nonmining(residential, commercial,

industrial) demand

48%

50%

52%

64%

74%

84%

97%

135%

294%

326%

0% 50% 100% 150% 200% 250% 300% 350%

Cameroon

Congo, Rep. of the

Congo, Dem. Rep. of

Zambia

Namibia

Niger

Sierra Leone

Mozambique

Guinea

Liberia

Mining demand as % of total non-mining demand

Mining and residential demand

-

50

100

150

200

250

Residential Mining Residential Mining

GW

h

20122020*

15 x

3 x

*If all SSA’s population had access to electricity by 2020 with triple level of today’s consumption

http://www.worldbank.org/africa/powerofthemine

8

Many models of power sourcing by mines

2020

Self-supply

Self-supply + Social

Responsability

Self-supply + sell to the

grid

Grid supply + self supply

backup

Mines sell collectively to

grid

Mines invest in grid

Mines serve as anchor demand

for IPPGrid supply

Intermediate1 3

2

0.9 1.3

5.8

2.4

5.7

15.3

0

4

8

12

16

Self-supply Intermediate arrangements Grid supply

GW

2000

Energy requirements

http://www.worldbank.org/africa/powerofthemine

9

Self supply is a loss for all

Mines: High cost of electricity

Loss of competitiveness

Electricity utility:Loss of large customers

Loss of steady revenue

Loss of opportunities of economies of scale for large investments

Country:Reducing possibilities for access to electricity

Drop in exports and tax revenues

Negative impact on GDP, and fewer jobs

Grid-connected customers

No electricity

Mine generation investments in self-

supply 2012 – $1.3b

2020 – up to $3.3bNo electricity

http://www.worldbank.org/africa/powerofthemine

Source of power generation on grid-based arrangements

10

Mining demand for power can unlock

clean energy in grid arrangements

Including South Africa Excluding South Africa

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Coal Gas Hydro Oil

MW

2012 2020

0

1,000

2,000

3,000

4,000

5,000

6,000

Coal Gas Hydro Oil

MW

2012 2020

http://www.worldbank.org/africa/powerofthemine

• Five gold mines in North East Guinea: Siguiri, Kiniero, Lefa, Tri-K, and Kouroussa

• Three scenarios:

– Mines self-supply (diesel)

– Shared 150MW hydropower plant (HPP) among mines

– Shared 300MW HPP plant also serves neighboring communities Siguiri and Kankan

• Electrification for community 5% of total population.

• Higher capital costs but lower running costs and economies of scale: cost savings for mines around $640 million

• Project cost of $1.4 billion – IPP opportunity

24.5

4.9 5.0

0

10

20

30

Mines Self-supply Shared hydro plant -Mines supply

Shared hydro plant -Mines and towns supplyc/

kWh

Levelized costs per kWh

Mining demand for power can unlock clean

energy in self-supply arrangements - Guinea

11http://www.worldbank.org/africa/powerofthemine

Commodity price volatility can destabilize

mining demand for power

12

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1983 1988 1993 1998 2003 2008 2013

US$

Mineral Prices 1983-2014

Aluminum, $/mt, nominal$ Copper, $/mt, nominal$ Gold, $/toz, nominal$ Lead, $/mt, nominal$Nickel, 10$/mt, nominal$ Silver, cents/toz, nominal$ Tin, cents/kg, nominal$ Zinc, $/mt, nominal$Platinum, $/troz Iron ore, cfr spot $/dry mt

http://www.worldbank.org/africa/powerofthemine

13

Policymakers can support an attractive

enabling environment

Strengthen power sector finances

Strengthen regulatory

mechanisms

Transparent and efficient pricing

Support the operating

environment for IPPs

Mine-financed power projects and carefully

crafted contracts

Integrate mining demand in power

sector planning

Use regional platforms

Source expertise

http://www.worldbank.org/africa/powerofthemine

14

Future can be bright if we use this

opportunity carefully

http://www.worldbank.org/africa/powerofthemine

Thank You

15

Sudeshna Ghosh BanerjeeSenior Economistsgbanerjee@worldbank.orghttp://www.worldbank.org/africa/powerofthemine

http://www.worldbank.org/africa/powerofthemine

A Transformative Opportunity for Sub-Saharan Africa

The Power of the Mine

http://www.worldbank.org/africa/powerofthemine

Follow the conversation on Twitter with @WBlive and #Power4Africa