Proceedings of the 15th Annual MEMS Conference

Abstracts

Archambeault, Application of Artificial Intelligence to Mine Optimization and Real Option Valuation

This paper describes preliminary research on the application of Markov Decision Processes (MDP) to Real Option Valuation (ROV) and the optimization of mine scheduling. The MDP framework is a novel approach to option valuation and scheduling in mining operations. A learning agent is introduced into the valuation process of an open pit, where prices and block ore grades have probabilistic values. The prices are modeled using a mean reverting diffusion process and the block grades using sequential Gaussian simulation. The agent is asked to learn which production parameters should be used in order to maximize the overall value of the project. The introduction of the agent permits a real option approach to mine valuation, such that the value associated with the robustness of a design to uncertainty can be measured. A simulated example is used in which there are 10 blocks to be extracted under conditions of grade and price uncertainty. Using policy iteration, an optimal policy is generated and the value of production options is found. The potential financial gains from applying MDPs to mine valuation and optimization are substantial and warrant further investigation.

Barta, Renewable Energy & It’s Application to Mining

The development of Renewable Energy projects in conjunction with a new or existing mining project can offer mining companies and operations a potential competitive advantage. Renewable Energy project development can provide a green image, take advantage of existing infrastructure, and possibly offset the cost of power at mining operations. This paper will provide insights into generation development strategy and energy procurement considerations for mining operations. This presentation will focus on mining energy usage characteristics and the adaptability of renewable energy technologies, maximizing the value of existing infrastructure and real estate assets, and securing long-term competitive and reliable energy sources.

Canty, The Mining Industry of the Future

An overview of the U. S. Department of Energy’s Mining Industry of the Future R&D portfolio. The Mining Industry of the Future manages R&D projects focused on reducing the energy consumption in the mining and mineral processing industry. Since 1999, this portfolio has managed 47 cost-shared projects, 146 project partners, 19 academia partners, $27.3 million DOE funds, and $34.8 million cost-share funds.

Carter, Ian, Emissions Trading

A half-day crash course on the principles of carbon emissions pricing and trading. The progress of the EU Emissions Trading Scheme was discussed in detail, and other schemes outside the Kyoto Protocol were covered, specifically the Regional Greenhouse Gas Initiative (USA), the Oregon Power Plant Offset (USA) and the New South Wales ETS (Australia). Overall, a lack of international coordination in terms of project registry, verification, and consistency among measurement units persists. There continue to be new options to limit greenhouse gas emissions.

Sustained energy savings depends on both technical improvements and a systematic, focused, continuous-improvement approach to the way a company manages its energy. Far too many companies looking for energycost savings become victims of the low-hanging-fruit syndrome. They find a few easy ways to create savings in their energy management programs, but they fail to carry the savings onward and outward. The leadership team at Hemlo Mines in Ontario, Canada, decided to take a risk, break from tradition and tackle energy management at its roots. The site team’s enthusiastic commitment to the improvement process resulted in over $1,000,000 in annual savings being identified. The outcome has been that energy management is now an integral part of the site’s business process .

Garrow, Dustin J. – Session Two Speaker Uranium Market Overview

Beginning in late 2002, the uranium price began to recover from single digit levels reaching US$40.00 per pound U3O8 by March 2006 with further increases expected in response to utility demand in both the near-term (spot) and long-term markets. Worldwide production of uranium grew from around 80 million pounds U3O8 in 1999 up to almost 110 million pounds U3O8 in 2005, but still providing less than 60% of annual global uranium needs. Aggregate world uranium output continues to increase but at a relatively slow rate due to minimal expansion capacity at existing production facilities and inherent delays in permitting/licensing and construction. While the global uranium production sector is responding to positive market signals, even more must be done to meet expected growth in uranium demand, particularly in the event that new reactor orders are placed in North America, Western Europe and the Asia/Pacific regions.

A history of the development of nuclear technology and the fact that the global requirements for electricity will increase with technological development. One of the only ways for this need to be met in the context of "sustainability" and lower greenhouse gas emissions, is through nuclear generated electricity. Grandey discussed developments in terms of nuclear power around the globe and indicated that by 2016 500+ new reactors would be required -- today, there are 440 nuclear reactors in the world. In terms of the availability of uranium, there has been little exploration for uranium over the last 25 years, and prices for the last 10 have been depressed. Grandey stated that recyclability is the key to nuclear development - spent fuel retains 95% of the energy of the primary fuel, but the technology is still very expensive. Grandey closed his talk with a reference to recent article in the Washington Post written by Patrick Moore. The founder of Greenpeace and former anti-nuclear activist now supports nuclear generation.

Typically, mineral markets are governed by boom and recession periods characterized by high price volatility. The extreme variability of prices, which causes a multiplicity of problems, for both producers and consumers, has encouraged a wide variety of studies of price stabilizing mechanisms. However, most of them have aimed at creating commodity buffer stocks between producers and consumers, with the UNCTAD s Integrated Program for Commodities during the decade of the seventies as the clearest example. The problem with this type of approaches is that they are more focused on setting prices on their mean values rather than on controlling their instability, which is precisely the target of price stabilization. The alternative view that I present explains how while allowing cooperation (explicitly or tacitly) among few large producers which pursue profit maximization in the presence of a sufficiently large competitive fringe, a price stabilization mechanism results as an outcome of this cooperative behavior. This can be illustrated by considering that during recession periods, each member s strategy should consist of either production cutbacks or stock holdbacks while in boom periods, the best strategy of firms should be an output expansion with the objective of restraining the entry of the competitive fringe. Consequently, a theoretical trigger price mechanism is derived, which is more likely to be successful than other previous stabilization mechanisms, as the preceding schemes do not consider profit maximization in order to keep low price volatility. As a matter of fact, many commodity buffer stocks have failed because this condition

Renewable Energy has had a history of fits and starts in its role in the supply of energy in the U.S. Once again, we are seeing resurgence in the interest in Renewable Energy as the result of the passing of the Energy Bill of 2005, an increasing interest in sustainable development, and the lasting effects of Hurricane Katrina which will spark a greater desire to reduce our nation‚s dependency on fossil fuels and foreign oil. But Renewable Technologies are inherently different than traditional energy generation technologies. Factors such as resource dependency, dispatch and grid stability, technology maturity, project size and capital cost, incentives, public perception, and energy markets create a different universe for the financing and completion of Renewable Energy projects. This paper will compare and contrast these factors for several Renewable Technologies and will identify specific questions that must be understood as well as some of the challenges and potential requirements for successful development and financing of these projects.

Can Current or Fourth Generation Reactors Help Solve Mining’s Power Needs and Emission Problems? What could nuclear power do for mining? Can current or fourth generation reactors help solve mining’s power needs and emission problems? An economist discusses the potential economic and environmental gains for the mining and smelting industries from the small fourth-generation reactors that are under development. Mining is a major power consumer, and in many cases is threatened by rising power costs. Some mining operations are also power suppliers. Power generation and transmission systems are among the most significant ways mining impacts the environment. There is a compelling environmental case to be made for “the least popular option”, as it has been called. The talk is based on consultation with mining companies and Canada’s Atomic Energy Corporation Ltd.

India’s coal reserves provide a secure resource to economically generate electricity and meet the energy demands of the steel, cement, and manufacturing sectors, which currently consume 56% of the nation’s commercial energy. The Government of India is undertaking an ambitious plan to supply “Power on Demand” to all Indian citizens by 2012. To meet increasing demand for electricity and to bridge the significant gap between supply and demand, India plans to double its current installed capacity of 108,929 MW. The costs of this anticipated capacity addition and the associated transmission and distribution systems have been estimated to be US$160 billion. Coal will continue to provide the mainstay of electric power in India for the future, and accordingly India has significant strides to make in overcoming various issues that constrain production of this abundant, indigenous resource. This presentation will provide an overview of India’s energy issues, compared to several other countries, provide some focused insights into areas of concern in the Indian mining arena, provide information on coal utilization and mining related activities that have been supported in India by the U.S. Agency for International Development, and lastly, provide a high-level overview of the status of bilateral activities under the U.S.-India Energy Dialogue.

 

In this presentation the dramatic changes which have occurred in the US coal industry will be explored. An overview of the demand side factors within the US will be presented, highlighting the major market drivers including future electricity generation, environmental issues, and international demand. From the supply side, ideas discussed will address the issues faced by US coal producers including: • Constraints on new supply development • Labor issues • Changes in the industry size and implications on productivity • Changes in intraregional supply and the associated market dislocation We will also focus on the changing cost structure within the US coal industry and its effect on coal pricing going forward.

As China’s economy continues to boom, its demand for energy also continues to climb. Among all energy resources being employed in China, coal has played a dominate role. In this presentation, the basic Chinese energy composition will first be introduced. Emphasis will be given to the analysis of China’s coal mining industry. Due to the uniqueness of China’s economy and government management system, the mining industry in China has shown a very different view from other nations. Information regarding China’s coal mining industry will be provided including its coal reserves base, overall scale of the industry, coal mine distribution and ownership, work safety issues, coal consumption and the domestic and oversea market. Based on this information and combined with the international market situation, further analysis will be conducted on the evolution of China’s mining industry, how the mining operation has impacted China’s environment and will be managed in the future, and what the government has done to improve the mining industry’s productivity and safety. The outlook for the industry’s future as defined by the government’s future planning efforts will be introduced. Finally, some potential solutions to the problems the industry is facing will be discussed and prediction about the mining industry’s future development will be given.