Andrea Pastori   Cabinet…

Andrea Pastori

 

Cabinet Liaison and Strategic Policy Coordinator

 

Ministry of Energy

 

77 Grenville Street, Floor 6th

 

Toronto Ontario   M7A 2C1

 

RE:  EBR Registry Number: 012-8840 Planning Ontario's Energy Future

 

Dear Ms. Pastori.

 

On behalf of Goldcorp, thank you for this opportunity to share a few recommendations in support of Ontario’s Long Term Energy Plan.

 

Goldcorp is one of the world’s largest senior gold producers and represents more than half of the annual gold production in Ontario.  We employ approximately 3,000 people in Ontario at 3 mining operations and a project, along with a corporate office in downtown Toronto.  Goldcorp continues to invest in the Province - we’re developing the Borden Gold Project in Chapleau and we recently announced the potential of a new, large scale open-pit mine in Timmins.

 

Our mines in Ontario compete for capital with other jurisdictions around the world.  When evaluating the attractiveness of a jurisdiction, the common measure is the All-In-Sustaining-Cost (“AISC”) per ounce.  Goldcorp mines in Ontario tend to have a higher AISC than some of our mines in Latin America but other factors like land tenure, the availability of skills and a stable government and political climate continue to make Ontario an attractive jurisdiction within which to make investments and do business.  However, for the sake of continued reinvestment in Ontario, it’s critical we do everything we can to reduce or at least maintain our AISC.   The escalating cost of energy in Ontario will pose a problem to future investment in large, energy intensive industrial facilities.  Though we remain committed to Ontario so we’re pleased to share recommendations that we hope will help to preserve the competitiveness of mining in Ontario.

 

Goldcorp’s energy summary in Ontario

 

•Energy represents ~ 12% of our total production cost in Ontario.

 

•Between Red Lake Gold Mines (RLGM), Porcupine Gold Mines (PGM) and Musselwhite Mine (MWM), Goldcorp consumes ~ 600,000 MWh per year and paid more than $50 M for electricity in 2015 (average rate ~$85/MWh though one of our facilities pays $40/MWh)

 

•In total, the Global Adjustment represents 50% of our electricity cost or roughly $25 M per year.

 

•Between 2012 and 2016, Goldcorp’s nominal cost of power has increased by over 30%. •Between 2013 and 2015, Goldcorp’s Musselwhite mine reduced GHG emissions by 20,000 tCO2e / year and energy consumption by 100,000 MWh/year through conservation and phasing out diesel generation.

 

•All three sites take advantage of the Northern Industrial Electricity Rebate program which reduces the cost of electricity by $20/MWh though we go above our allocation so not every MWh consumed receives the rebate.

 

•All three sites employ an energy manager through the IESO Industrial Accelerator Program. •Goldcorp’s Borden Gold Project (Borden) represents the ‘mine of the future’ where low carbon energy technologies, digitization, and a focus on partnership and consultation with local communities underpins the viability, sustainability and profitability of a mine. Importantly, Borden is poised to become the first battery powered all-electric mining operation in Canada. Recommendations

 

1.A low industrial rate

 

We recommend the Ministry maintain an Industrial Electricity Incentive (IEI) like program to provide the price certainty and low rate required to attract large capital investments.  The importance of long term certainty cannot be overstated since investment decisions made today don’t result in energy consumed until more than 5 years from now.  An IEI type program would benefit projects like Borden Gold Project in Chapleau which is set to become the first all-electric underground mine in Ontario and will create jobs in a region where they are badly in need an economic boost.  Also, a conceptual study of a ‘Dome Century Project’ in Timmins is underway to test the potential of a new, large-scale open pit mine in Timmins.  Dome Century would be a huge consumer of electricity and would be a massive win for the community considering the town’s economy has recently been contracting.  To illustrate the importance of a low price, consider a highly automated and large industrial electric open-pit complex with a demand load profile of 60 MW coming online in 2022, like the potential open pit.  If in 2022 the NIER program is fully subscribed and load shedding for an enormous gold processing facility is not an option and electricity customers pay the full price of carbon, the price of electricity will be a significant deterrent to the planned Dome Century Project.  We expect the price in 2022 could reasonably reach $150/MWh or more- $80/MWh today + $20/MWh for NIER + $10/MWh for carbon and attach a historical increase of 6% per year over the next 6 years = $156/MWh.   Without an industrial incentive, a 60 MW industrial facility would pay $82 M for electricity per year.  The price and its uncertainty will be significant barriers to this project.

 

2.‘Green Electricity Program’

 

To better align environmental and industrial incentives, the Government must ensure that significant electricity loads consumed in favour of fossil fuels are priced competitively.  One of the most significant opportunity to cut emissions is through fuel switching – generally from diesel mobile equipment to battery electric vehicles (BEVs) and mining conveyance, automation and other electric systems.  A competitive industrial price for electricity will significantly incentive companies to adopt BEVs, automation, conveyance and generally do our part to phase out fossil fuels and transition to a low carbon economy.  The potential large 60 MW mining complex in Timmins could either be designed as a ‘mine of the future’, highly reliant on electricity but with the $82 M per year cost, or designed as a standard mine with a fleet of large diesel trucks consuming 60 Million liters of diesel per year.  Over a hypothetical 20 year life of mine that is 1.2 Billion liters of diesel or more than 3 Million tons of CO2.  To the extent, we will reduce the carbon footprint of our operations and we see a competitive price for electricity in doing so.  We recommend considering a program that would guarantee a lower electricity price for companies who make large fuel switches in favour of electricity and that lead to significant and sustainable decrease in GHGs.

 

3.Conservation

 

We’d like to congratulate the Government on programs and incentives that effectively help Goldcorp manage the cost of electricity like the Industrial Conservation Initiative (ICI), Northern Industrial Electricity Rebate (NIER), Industrial Electricity Incentive and Industrial Accelerator Program (IAP).

 

•The Northern Industrial Electricity Program has been a very helpful program in managing our energy expenditures.  But we are not refunded the $20 for every MWh so we’d like that the program be expanded to cover all existing industrial operations with minimum loads and further expanded to make room for new projects like Goldcorp’s Borden Gold and the Dome Century Project. •We recommend extending the IAP’s Energy Manager Funding program or extending its mandate and consolidate reporting across any programs that exist.

 

•We recommend the IAP recognize the merits of conservation projects and de-risk the projects by committing capital up front.

 

•As mentioned above, we strongly urge the Gov’t to ensure a low industrial rate for major investments like the IEI like program.

 

•While the ICI is a very effective program for some, it’s not good for facilities that must run 24/7 to remain competitive.  There must be other programs for Class A because absorbing the full annual Global Adjustment leads to rates as high as $110/MWh like at RLGM and PGM.

 

4.Impact of Cap and Trade on electricity

 

Notwithstanding the government’s commitment to apply Cap & Trade Program proceeds to the electricity, that commitment only lasts during the first compliance period (2017-2020). Industry needs to know what comes next. If some form of price mitigation is not included post-2020, Ontario’s industrial loads will experience a step-change increase to their already steadily increasing electricity bills. In light of the need to remain globally competitive, it will be even more important as Ontario’s price disadvantage gets worse.

 

5.Natural Gas

 

We support the existing Natural Gas Access Loan, the Natural Gas Economic Development Grant and the commitment to use up cap and trade proceeds for introduction of renewable natural gas.  We invested $20 M to run a gas pipeline to Red lake and the benefits of displacing baseboard heating with natural gas have been massive both for the community and Goldcorp.   Similar access across the north into communities like Chapleau will be helpful.

 

6.Solutions to address infrastructure in the North

 

From ongoing improvement efforts, we’ve managed to find efficiencies at our mines and drive significant savings.  For example, three years ago our Musselwhite Mine was one of our least productive mines and was struggling to attract new capital.  Musselwhite has turned it around and now operates as one of the most efficient mines in Goldcorp’s global portfolio having reduced its All in Sustaining Cost by 30%.  This has meant investment in new opportunities like a recently approved $100 M Musselwhite expansion project which will further reduce operating costs by handling more ore more efficiently.  The expansion will add approximately 3 years to the mine life which means an additional 840,000 Oz. in gold production.  It also increases our rate of production from 4,000 to 4,300 tons per day, unlocks exploration potential for long term growth and increases employment for local, remote First Nations.  Currently 22% of our 811 employees are from local First Nations communities.  The project will lead to increased royalty payments as part of our Collaboration Agreement and more business opportunities for First Nations.  Even after a huge effort in Energy Conservation and reduction in diesel fuel, the mine is grid constrained at 19.5 MWs off the Ear Falls TS.   Goldcorp has conducted a study that suggests that an increase of 2 or 2.5 MWs is feasible without risk to the stability of the system.  Considering the importance of Musselwhite Mine for the North and this project to extend the life of the mine, Goldcorp would like the IESO to revise planning for the E1C and M1M based on more realistic assumptions for weather and or at least consider a load rejection scheme of up to 2.5 MW over and above our current allocation.

 

Northern communities have less infrastructure than the south for obvious reasons.  In Red Lake Hydro One was unwilling to expand transmission so Goldcorp built a 10.7 KM transmission line from Harry’s Corner to our Balmer facility.  The concept of an ‘enabler’ for infrastructure would help meet the challenges of a lack of ROI on infrastructure for private or public actors.  Although infrastructure in the North generates GDP, sets the stage for economic development, and has multiple social and environmental benefits, it rarely meets the public use test.  Instead, Goldcorp was left holding the bag for a critical piece of infrastructure that will lead to increase of supply to the region.  An ‘enabler’ model would defray upfront costs because it would take into account these challenges.  This concept has been used in the development of renewable energy in the Province.  The OPA supported the OEB’s initiative to address obstacles facing development of remotely located renewable resources through an enabler concept and subsequently made changes to the Transmission System Code.

 

Goldcorp would be pleased to discuss this further in a face-to-face meeting with the Ministry.

 

Sincerely,

 

Wade Bristol

 

Senior Vice President

 

Goldcorp Canada Ltd.

 

Cc: Honourable Michael Gravelle, Minister of Northern Development and Mines

 

[Original Comment ID: 207191]