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.
Denver-based Newmont, the world’s largest gold producer, is constructing a coal-fired power plant in Nevada to save about $50 million a year.
Phelps Dodge, the biggest U.S. copper miner and based in Phoenix, 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 Newmont, in a recent interview. “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.”
Oil reached a record $67.10 a barrel on Aug. 12. Retail diesel prices in the U.S. averaged $2.255 a gallon in the second quarter, up 32 percent from a year earlier, according to the Department of Energy. Newmont’s energy costs have climbed 44 percent in the past year to $130 million, or 25 percent of all expenses, Hansen said.
Energy is a mining company’s second-biggest expense after labor and makes up about 10 percent of operating costs, said Brian O’Shaughnessy, chief executive of Rome, N.Y.-based Revere Copper Products Inc., who spent 21 years in mining, including positions at Kennecott Copper Corp. and Anglo American Plc’s North American subsidiary.
“One of the problems we have is not just the increasing price of energy, but the decreasing quality of energy,” said O’Shaughnessy, whose Revere Copper sells about $200 million of copper parts in the U.S., Europe and Asia.
Revere bought a $600,000 transformer to “improve reliability” of electricity from the power network run by the New York Independent System Operator, he said Tuesday.
“As generators approach capacity on hot August afternoons and all the windmills are shut down because there’s no wind, you drain capacity, and the supply of energy is squeezed,” he said.
