Reply #78: Miners dig for protection from high energy costs

[54anickel]

Newmont building coal power plant

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20050824/RMINES24/TPBusiness/Canadian

NEW YORK -- Newmont Mining Corp., Phelps Dodge Corp. and Barrick Gold Corp., faced with surging energy costs, are building their own power plants, locking in fuel prices and using bigger trucks to reduce expenses.

Newmont, the world's largest gold producer, is constructing a coal-fired power plant in Nevada to save about $50-million (U.S.) a year. Phoenix-based Phelps Dodge, the biggest U.S. copper miner, is expanding its use of hedging to include fuel used at mines in Chile. Toronto-based Barrick, the No. 3 gold producer, is operating 300-ton trucks to haul more dirt.

"Everybody needs to be focused on being more energy efficient," said Bruce Hansen, chief financial officer of Denver-based Newmont. "We have a team looking at ways to save, from making sure people turn off the lights at night to changing air filters on equipment."

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Energy is a mining company's second-biggest expense after labour and makes up about 10 per cent of operating costs, said Brian O'Shaughnessy, chief executive of Rome, N.Y.-based Revere Copper Products Inc., which bought a $600,000 transformer to "improve reliability" of electricity from the power network. To take advantage of non-peak electricity rates, a night shift was added to run the hot mill, a furnace that needs to heat a copper material to 816 C to produce copper coil.

Profits of some of the biggest mining companies are being eroded by the rising costs, even after demand from China and India sent copper prices to a record and gold prices close to a 16-year high.

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