Proceedings of the 15th Annual MEMS Conference

The 2006 Conference in brief -

Lisa Morrison,
Managing Consultant, CRU Strategies
P.O. Box 656, Kennett Square, PA 19348
Tel: (610) 925-1860 Fax: (610) 925-1861 E-mail: lisa.morrison@crugroup.com

Program_____Abstracts____ Speaker bios

MEMS held its 15th annual conference in Golden, Colorado during April 19 - 21, 2006. Departing from the format of the last few years, the conference was built around a single driving force - energy. This turned out to be an even more timely topic than originally planned given the continued high prices of oil and natural gas, ongoing tensions between Iran and the global community and the results of the Canadian elections which have called into question that country's policy regarding carbon emissions.

To kick-off the conference, Ian Carter of the International Emissions Trading Association (IETA) provided 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. But, it is encouraging that there continue to be new options to limit greenhouse gas emissions.

The first session of the conference was focused on what mining companies have done to increase management and use of energy in their operations.

• Laurie Gregg of Falconbridge discussed the energy benchmarking activities at his firm's mines. He indicated that energy use within a mine is an education issue at the operator level but that, in many cases, devices to measure fuel/electricity use had not been installed or were not available for the equipment. Further, "best practice" in terms of fuel/electricity use in the industry has not been universally established.
• Lance Throneberry of Newmont shared his company's experience in attempting to assess the level of energy efficiency within his company. Some of the major issues were creating an operating baseline in terms of energy use and creating performance metrics for measuring accountability.
• Jon Feldman of Hatch presented a case study in implementing an energy efficiency program at Hemlo Gold. The first step was to create an energy audit to measure uses and to find ways of improvement. Then a team to promote the program, headed by the Mine Manager, was put together. The major task was to raise awareness of how to be more efficient, and to acknowledge progress made. Some simple visual tools to measure progress as well as finding areas where improvements could be make quickly and built upon were key factors of success.

The second session of the conference took an in-depth look at the supply potential in the coal and uranium industries

• William Wolf of John T. Boyd Company presented the outlook for coal supply in the USA. Supply constraints are emerging as production potential of the Central Appalachia region declines. The Powder River Basin will require expansion and imports are increasing. The long-term price of coal production is rising due to the high capital expenditures that have been postponed and the fact that grades are dropping. In addition, the other coal reserves available in the US are higher in sulphur content, and will thus require scrubbing technology if these are to be used in electricity production.
• Dustin Garrow of Colorado Nuclear followed with a presentation on the global outlook for Uranium mining. The long-term prospects for nuclear generated electricity are extremely strong, given the size of the potential electricity markets in both India and China. Russia is considering expansion, and in Canada and the USA this alternative is being revisited. In terms of supply, there was overproduction in the industry into the late 1990s which was due, in part, to the availability of secondary material that was recovered from the former Soviet Union weapons that were decommissioned. However, in recent years, those stockpiles have been worked off and mines have been operating at capacity. Uranium prices are expected to remain rather high through 2012.

The third session was devoted to the winners of the MEMS Student Paper Competition.

• Louis Archambault of McGill University was the second place winner of the competition and presented a paper which applied Markov Decision Processes to Real Option Valuations in mine scheduling. His optimization model for mine production created an environment in which the decision agent was able to learn and change production rates in response to prices.
• Juan Ignacio Guzman of the Catholic University of Chile was the first place winner and presented a paper which explored the role of producer cooperation in price stabilization. Price stabilization mechanisms attempt to reduce the volatility of prices, but fixed prices and buffer stocks have been ineffective. However, cooperation among large producers, when less influential producers represent at least 40% of the potential supply, actually leads to an increase in welfare for both consumers and producers. The paper used the example of the International Copper Cartel, which operated in the 1934-1939 period, to illustrate this point

The President's Lunch featured a talk by Jack Schantz, who was the recipient of the 2006 W.A.Vogely-MEMS Award. The audience was treated to a lively retrospective on studies in mineral economics going back to a 1909 book written by Herbert Hoover entitled "Principles of Mining". Jack led us through various seminal works in mineral economics and provided highlights of his career. A treat. This award was created by MEMS in 1995 in memory of Bill Vogely, formerly of Penn State University, in order to honor contributions to the field of mineral economics.

The final session of the first day of the conference was entitled Innovative Solutions in Mining, and featured discussion around unconventional ways for mines to meet their energy needs.

• Amy Jacobsen of Behre Dolbear discussed the potential for mines to use renewable energy sources for power generation - wind, biomass, hydro, geothermal and solar alternatives were explored. While each of these alternatives is promising, there is no single solution, as much depends upon the location of the mine and the particular resource endowment. Mines need to be incentivized to explore these alternatives and public awareness of the resource potential must also be raised to promote implementation of these alternatives.
• Bradley Barta of Shaw, Stone & Webster discussed the potential for mines to work with local power companies to reduce their electricity costs. Building on Amy Jacobsen's discussion, the potential for a mine to become a renewable power generator was explored. Further, mines generally accept the terms and power costs of their local utility. Barta indicated that mines should be more creative in their dialogue with utilities to structure their tariffs to meet the time-dependent requirements of the mine, and also to negotiate bulk power arrangements on a regional basis and in concert with other power intensive operations.
• David Robinson, professor at Laurentian University, presented the case for the potential for nuclear generation to become a low-cost proposition. The sheer amount of electricity that might be required in 20+ years by the populations of China and India raise the possibility for 4th generation nuclear generation stations to become turnkey operations at a mine site.

Flowing very nicely from David Robinson's talk, the banquet speaker was Jerry Grandey, CEO of Cameco. He discussed a history of the development of nuclear technology and the fact that the global requirements for electricity will increase with technological development. And, 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.

The second day of the conference opened with a session devoted to fuel and energy issues in India and China.

• William Wolf of John T. Boyd Company presented a view on the coal industry in China. Coal is the primary fuel for electricity generation in China, but it has contributed to water contamination and poor air quality. The Chinese government recognizes the need for increasing environmental standards and doing 2 things to increase efficiency in the coal industry - phasing out the central pricing mechanism and promoting the shut-down of small, inefficient, and unsafe mines. It is hoped that this will encourage efficient producers to expand production to gain economies of scale and also to increase safety in the industry.
• Venkat Venkataram of the U.S. Department of Energy presented an overview of the fuel situation in India. As in China, coal is the predominant fuel and that is expected to remain the case. India and the USA have cooperated in developing coal washing technologies, increasing power plant efficiency and in the utilization of by-product ash. Venkat indicated that by 2015, 10% of India's electricity could be generated by nuclear power stations.

The sixth session of the conference featured Michael van Aanhout of Stratos, Inc. and focused on emissions trading. Building upon the workshop session run by Ian Carter the previous day, Michael discussed some of the main components of the Kyoto framework. He touched upon the new uncertainty surrounding the regulatory environment in Canada due to the outcome of the Canadian elections. Finally, he provided a list of resources for further information.

The final session on the future of MEMS was facilitated by MEMS incoming President, Tony Hodge. Several weeks prior to the conference, outgoing MEMS President, Patricia Dillon, had sent an e-mail to all members to ask for feedback on how to grow the organization. She shared some of the responses with the attendees. Members of the audience were asked for their opinion on the conference and for any ideas they might have about the future.