“All of 2017, we started the development process and continue with that. We hit a major milestone in January and announced the preliminary economic assessment, which we are pretty pleased about,” says Dustin.

The preliminary economic assessment demonstrated a net present value (NPV) of about $120 million (all figures Canadian), on a seven percent discount rate. It is about a 38 percent internal rate of return (IRR) and the payback period was just under three years. The mine life is nearly nine years.

The operating economics are very good as well. The cash operating cost per ounce is about $650.00 and the all-in sustaining cash costs are just under $800. The goal for Anaconda is to become a mid-sized company. It has been producing at a modest level for several years, and Goldboro is its first sizable acquisition, helping Anaconda to become a larger producer.

“Once Goldboro gets into production, we are looking to be in the range of about 50,000 to 60,000 ounces per year of gold production. It may still be on the smaller side, but it is a huge step for us,” says Dustin.

Goldboro brings with it a higher market profile for Anaconda and gives more credibility to do transactions to acquire further projects. In building the production profile, Anaconda is getting the word out about what it is capable.

Anaconda’s success is due in part to ongoing efforts to give back to the community and conversations with Indigenous groups. “We have a philosophy that we look at the interests of all stakeholders, not just shareholders, and we think that has long-term benefits to our company and to the surrounding area and to our shareholders,” says Dustin.

Since we last talked over four years ago, Anaconda has done a lot in giving to the local community, such as an annual contribution to the regional swim program in the Baie Verte area of Newfoundland and Labrador. It has also supported the regional hockey rink and a variety of other charitable organizations and events. A few years back it gave a $50,000 donation to Hope Air, a charity that assists with medical travel and a service that people from the area have used.

In the beginning, when Anaconda was a turnaround project, the community, its employees, vendors and the government were all involved and helped during tough times. “We feel like we are a part of the community and need to act as a responsible member, so we do that by giving back, providing employment and being environmentally responsible,” says Dustin.

Anaconda is in the process of drilling at the Goldboro site. The 7,000-metre drill program started in October of 2017 and is going very well. The goal is to demonstrate the ability to expand the known deposit area and do some infill drilling to shore up its mine planning with the preliminary economic assessment (PEA). The testing of the core samples are in line with expectations and, in certain cases, exceeding them.

The mining company has been working for the past eight years at Point Rousse in Newfoundland. Recently, it has been able to demonstrate that there are more mineral resources around the site and approximately four and a half kilometres from the operating mill. One such discovery is called Argyle. In January, it put out the first mineral resource estimate on Argyle that estimated about 70,000 ounces of indicated and inferred resources.

“It’s ‘open pittable,’ as we like to say, and the grade is just over two grams per tonne, which is about a third higher that what it is currently being mined at the Pine Cove pit. We are excited about it because it will add life to the local production,” says Dustin.

The deposit itself is still open in all directions, and Anaconda is performing exploration drilling there as well. It is seeing the ability to expand the deposit area. It has just finished a twelve-hole test drilling program and has announced all of the assay results.

Anaconda is innovative in repurposing its mine waste and rock tailings. Over the last two years, Anaconda sold mine waste from open pit mining operations as a construction aggregate product to a project down in South Carolina. This involved about three million tonnes of waste rock that was in waste dumps and in the ground.

“We did this project with our contract miner who bought a crushing spread, crushed and made the product. A shipping company called Phoenix Bulk Carriers helped ship it to South Carolina,” says Dustin. Then the contract miner created a company called Shoreline Aggregates, and the three entities were part of this venture over sixteen months.

“We shipped about three million tonnes, and it was a fantastic opportunity for us because we were able to generate some revenue off it, and at the same time, lower operational costs, mining costs and more importantly, reduce our environmental footprint,” says Dustin.

Anaconda is on the water and has built a dock facility for this venture that can accommodate 60,000-tonne Panamax vessels. The deep-water port allows Anaconda to ship large quantities. This, along with the current Canadian dollar, has made it feasible to ship rock a far distance.

There are more opportunities along the eastern seaboard, down into the Caribbean and the Gulf of Mexico. Anaconda has two to four million more tonnes of waste rock, and its partners are looking for more contracts. If successful, this new resource can be shipped, generating revenue.

“It’s not often that you see mining companies do this because the right ingredients are needed. Be close to water and cheap transportation being the most obvious. This is out-of-the-box thinking and not traditional mining,” says Dustin. The company tries to separate itself from the typical junior mining company, and it is just a part of its culture to be innovative and resourceful.

Anaconda also has a plan for its tailings created from the processing facility. It has about two million tonnes of finely ground tailings and has been working with the College of the North Atlantic to experiment to see if it might serve as a fertilizer enhancer. The lab tests have been positive so far, and there is a potential to sell it to the open market. This is a huge benefit for Anaconda because it will be able to generate revenue from the tailings.

The company’s narrow vein mining research and development project is being conducted with Memorial University of Newfoundland in St. John’s, with funding coming from the Atlantic Canada Opportunities Agency, the Research and Development Corporation (RDC) and the Industrial Research Assistance Program (IRAP).

“It has a $3.5 million budget, and the aim is to create a technology to more efficiently and economically mine underground single narrow vein deposits. These deposits are not economically viable using traditional methods,” says Dustin.

This could be a huge advantage for Anaconda as it has a current deposit that cannot be extracted using traditional means. It is only about one kilometre from the mill, and the new technology would enable the company to get at the resource and process the deposit. This would open further opportunities for Anaconda, and it would own the intellectual property, making for the potential to license the technology.

Memorial University of Newfoundland is working on creating the prototype, and in the spring of 2019, it will be field tested on the deposit that sits on the Anaconda site.

“There are a lot of exciting things happening at once, and it’s great because we have the standard gold mining – which is our core business – and all of the other ancillary businesses, ideas and projects that really help drive additional profitability,” says Dustin.

Although a small company that has mined a modest amount of gold to date, Anaconda has found ways to wring every dollar out of its natural resources. Mining on a small scale is challenging to a company, and remaining profitable is even more so. In finding new means to deal with that challenge, it will be better off.

By the end of 2018, Anaconda foresees production at the Rousse site climbing by fifteen percent to 18,000 ounces. It is moving into a new deposit area that has a higher grade product. It will continue drilling and exploration at the Argyle deposit at Point Rousse, and there are also some exciting plans for Goldboro where it is trying to get into production by 2021. Anaconda will embark on a 10,000-tonne bulk sample and bring that ore back to the Pine Cove Mill, before processing it and performing continued drilling.

“We are moving from the preliminary economic phase into most likely a feasibility phase. We want to do more infill drilling to increase the confidence level of the deposit for the area that will be included in the feasibility study,” says Dustin. Anaconda will begin the study mid-2018, and there are a lot of big plans in the wings. It will continue with community engagement and the permitting process to keep its timeline on track.

The post Creating Opportunity in Atlantic Canada<p class="company">Anaconda Mining</p> appeared first on Resource In Focus.

Neil is very passionate about this business and has been involved for his entire career in the industry, having started two other ethanol companies before Pacific Ethanol. One of them, Kinergy Marketing, even became a part of the current entity. He graduated from college in 1981, with a major in government and an emphasis on energy policy.

“That was after the oil shocks, and I travelled to the Middle East knowing that we needed to move quickly to displace oil. I started working for the Department of Agriculture in Sacramento, helping farmers use renewable fuels,” says Neil.

A combination of geothermal, hydroelectric power, wind power, methane digesters, and small amounts of ethanol were being used to help the farmers, and this process gave Neil an idea. He realized that ethanol production was just getting started and could eventually replace oil and gas in the U.S.

“I have committed my entire professional career to making this happen,” says Neil. Pacific Ethanol is part of an industry that now has more than two hundred ethanol plants throughout the country. But Neil’s foray into the industry began much earlier.

Parallel Products was the first ethanol production company in California and was co-founded by Neil in 1984. It converted waste products from the food and beverage industries into ethanol. It was a real niche business, working with trucks of waste that would come in from companies like Anheuser-Busch. Eventually that morphed into taking packaged goods that were unsellable due to bad marketing or being damaged in transit.

“We were de-casing one million cases a month that would otherwise be considered consumable beverages, recycled all the containers and converted all of the liquid into fuel-grade ethanol,” says Neil.

Parallel Products was sold in 1998, and in 2000, Neil founded Kinergy Marketing to distribute ethanol in the western United States.

Oxygenates are fuel additives that raise the oxygen content of gasoline and are required to be added to gasoline to reduce tailpipe emissions. For years the oil industry’s oxygenate of choice was methyl tertiary-butyl ether (MTBE).

The oil industry found, when added to fuel, MTBE would also meet federal air quality requirements. However, when MTBE was found to be contaminating drinking water, it was banned in California in 2002 and eventually was banned throughout the U.S.

Ethanol is another oxygenate as well as a clean burning fuel that met the earlier federal air quality requirements.

“This was a huge growth boost for ethanol, as it was now the only product that could be used to meet air quality requirements. I founded Kinergy Marketing right when MTBE was being phased out of gasoline,” says Neil.

This spurred growth in the ethanol market. With Neil’s well established relationships with suppliers in the Midwest, Kinergy brought ethanol from the Midwest to California and the other states in the Western United States, where it then distributed the ethanol to oil companies, making for a smooth transition from MTBE to ethanol.

Other than Parallel Products, there was no other entity in the state of California that was producing ethanol at this time of growth. In 2003, Neil, along with former California Secretary of State Bill Jones, founded Pacific Ethanol.

“Bill is a long-time farmer and rancher in the Fresno area. I had the ethanol expertise and a name in that world. He had good name recognition statewide and understood the local agriculture and political landscapes. Together, we formed Pacific Ethanol to take advantage of this market opportunity,” says Neil.

At that point, all the ethanol had been produced in the Midwest and consumed there. With the change from using MTBE, suddenly ethanol was being distributed throughout the entire country. Pacific Ethanol was the first company to move manufacturing to the markets where the end product would be used, rather than producing ethanol in the Midwest where the corn was growing.

There is now a huge ethanol market in California, and what many people do not know is that when corn is made into ethanol, the by-product is a high-quality product called distillers grain that is fed to beef and dairy cows. “The corn is turned not only into ethanol but high-protein feed. In addition, producing our own ethanol and combining it with the oil that we produce in the U.S. to become self-sufficient is a lot better than supporting oil imports from the Middle East,” says Neil.

California has the largest dairy industry in the U.S.; it also has the largest concentration of dairy cows in the world, so corn was already coming to California as feed.

“We just decided to come into that market and got the opportunity to take the corn, remove the energy for conversion into ethanol, and concentrate the balance of the corn into high protein feed. The model is wherever there are lots of cows and cars, that’s where we built the ethanol plant,” says Neil.

One plant was built in Idaho, one in Oregon, and two in California. These four plants have a combined capacity of over 200 million gallons. Kinergy Marketing was purchased by the new company that Neil founded and was integrated into the production side. It was unique to incorporate a significant marketing and distribution company with a production company, and it was also rare to find an ethanol producing facility outside of the Midwest. Pacific Ethanol went public in 2005.

The industry was supported for its agricultural economic development, energy, security, and environmental protection. These and other reasons drove additional policies that in 2005 and again in 2007 resulted in the federal Renewable Fuels Standard. These went beyond simple air quality regulations.

“RFS requires oil companies to be increasing amounts of renewable fuels (ethanol, biodiesel and others) into the mix nationally. That’s been a huge policy driver, and the corn farmers have stepped up by producing incremental corn. Producers have done the same by expanding ethanol production,” says Neil.

A relevant strength of the California market is the carbon pricing built into the gasoline markets in that state. In 2007, Governor Arnold Schwarzenegger directed the California Air Resources Board (CARB) to create California’s Low-Carbon Fuel Standard (LCFS). This program was created to encourage the production and use of cleaner, low-carbon fuels to address climate change, lower greenhouse gas emissions and reduce the state’s dependence on fossil fuels.

The initiative aims to decrease the carbon intensity of California’s transportation fuels. These reductions include vehicle emissions as well as all related emissions from production, distribution, and fuel used for transport. Pacific Ethanol has invested in many low carbon technologies to reduce the carbon intensity of the ethanol it produces. For instance, Pacific Ethanol took what was arguably already a clean grid in California and built a five-megawatt solar powered system which has zero CO₂ emissions for production of electricity, making it the first ethanol company in the world to incorporate a commercial solar system in a plant.

“If you look at the cost of producing ethanol, the number one expense is the price of corn, followed by the cost of energy, and finally, labor. Energy is a big deal. Natural gas and electricity can affect the bottom line,” says Neil.

In California, the sun shines, generating electricity, so Pacific Ethanol’s electricity requirements are being taken care of while it saves $1 million per year in its electricity costs and gives itself a lower carbon score after installing 5 MW of solar electric production at its Madera, CA facility.

“It’s about the value generated in the lower carbon score and the ability to charge a premium price because of that. The solar system just went online and it is operating at its full capacity, though of course at lower total production during the winter months,” says Neil. When the sun is shining during the summer, it will displace forty to fifty percent of the electricity used.

Initially, the plan was that by 2020, California refineries must reduce the carbon intensity of their fuel by ten percent. CARB recently extended goals to 2030; by that date, it wants to lower the carbon intensity by twenty percent. If you look at what it takes to reduce carbon intensity, these are significant numbers and will shift the way fuels are made and distributed in California.

Adding ethanol is what refineries have been using to meet these requirements. “We are thirty percent to forty percent lower carbon than gasoline, and the refineries buy our ethanol, blend it at ten percent with their gasoline, and that generates the credit. The same is happening on the diesel side, with biodiesels, renewable diesel, and cars that are becoming electrified with plug-in hybrids,” says Neil.

Biogas from dairies is going into compressed natural gas vehicles, resulting in world-leading policy for carbon reduction in transportation. Ethanol plays a very significant role. Pacific Ethanol saw this early on, especially when standing next to Arnold Schwarzenegger as he directed the California Air Resources Board through an executive order to establish the world’s first low-carbon fuel standard.

“This has been a part of our vision. We saw this policy was critical and wanted to develop new policies to supplement policies developing at the national level. The policies had to be more appropriate for our business model,” says Neil. Oregon, British Columbia, and states in the Midwest have adopted or are considering low-carbon fuel standards.

Another example of low-carbon initiatives at Pacific Ethanol was incorporating some membrane technology that reduced its natural gas use by five percent, and it is looking at mechanical vapor recompression (MVR) that could cut natural gas use in half. Natural gas has been relatively cheap, but it has been used more in the ethanol plants than electricity, so reducing its use would make sense. All these initiatives require significant capital.

“We wouldn’t have any reason to invest in these technologies if we were not able to monetize the carbon reduction, and that’s where the low-carbon fuel standard plays a big role. By extending that investment horizon to 2030, we can make larger, more fundamental investments to lower our carbon score. The program is giving us the incentive and security to do it. It’s a policy that is resulting in significant innovation and technological change,” says Neil.

This is an achievable goal, but the U.S. is still importing oil. Ethanol production is a huge issue for the Midwest because corn and soybean crops are grown there and are a huge driver of the economy. It is one of the only growth stories for corn farmers as they are getting more efficient in the production of corn and need new markets. Ethanol support is critical, and if you look at presidential politics, being able to gain the support of the Midwest in the Iowa caucus is a critical component of a successful national campaign.

“Since ethanol is a threshold issue, it makes sense politically that you should be in support of ethanol if you are a true patriot,” says Neil. Ethanol is cheaper than gasoline and fifty percent cleaner.

Early on when Trump was campaigning, he made significant commitments and promises to the ethanol industry. One of these was to liberate the market to higher ethanol blends. On the same day as Neil’s FOX interview, October 9, 2018, an anticipated announcement came out from the federal government that directed the Environmental Protection Agency (EPA) to change the rules and regulations to allow for the year-round blending of E15 – the fifteen percent ethanol fuel.

Now, the industry is producing a great deal of ethanol and exporting it at a rapid pace. “As I also mentioned in the interview, with the trade wars, China is becoming a great new market opportunity,” says Neil.

Nearly half of all gasoline in the world is consumed by the U.S., so there is also a great need for all this ethanol at home. The move could result in a thirty percent ethanol blend. Ultimately, what car companies want is to design much higher compression engines that require a higher-octane fuel that only higher blends of ethanol can deliver.

The main challenge is the largest, most powerful single special interest in the world: the oil industry has resisted yielding market share to the ethanol industry but with policy support and because of the positive attributes of ethanol, the oil industry has adapted the way it makes gasoline.

“They produce gasoline that frankly is off spec from an environmental and octane standpoint, until they add the ten percent ethanol. After incorporating the ten percent blends the refining industry drew a line in the sand to say, ‘That’s it, no more market share for you. We have had one hundred percent for over one hundred years, but you can only have ten percent!’ It’s an interesting story from an overall energy perspective,” says Neil.

The oil industry is not happy about the E15 announcement. The American Petroleum Institute (API) voiced its opposition to the proposal, saying the fuel “has been shown to damage vehicle engines and fuel systems, and most cars on the road today are not designed to run on E15.”

“It is patently false and serves to confuse consumers, which slows our efforts. Politically, they are so powerful and are big supporters of Trump, who wanted a deal to be brokered. All we are asking for is equal and fair access to the market,” says Neil.

With open access, consumers buy a product that is cheaper and better. After the sessions were completed, oil companies were asking for more restrictions to keep ethanol out of the market and destroy demand for the product. Prior to the midterm elections, the president backed ethanol. The oil representatives are now deciding what legal recourse they have and are threatening to go through with litigation. The fight is not over.

Solar, hydroelectric, and other sources of renewable energy have not been as successful as ethanol in getting ten percent of the hydrocarbon market. This is a reason to celebrate for Pacific Ethanol, but more can be done. “The hard work continues, but we will get there because of the elegance and the advantage of ethanol to the many farmers, consumers, and the environment,” says Neil.

The post Demand-Driven Innovation<p class="company">Pacific Ethanol</p> appeared first on Resource In Focus.

“We are at a crossroads and are redefining the company as we move forward into the new realm. There will be no more Feed-in Tariff program. Solar has been pushed into the market by the market drivers, as opposed to a policy with respect to a standardized offer program, so it’s going to be very interesting as solar needs to stand more and more on its own,” says Azeem.

The microFIT program for installations of fewer than forty solar panels was put in place by the Ontario provincial government to promote the generation of electricity from renewable sources. Many people are in favour of adopting clean energy like solar but are unable to afford to invest in a system. Ontario’s program helped with that.

“Every year, there is a digression in the feed-in tariff rates; the rate the government offers has lowered each year. When that happens, people have no incentive financially to participate in the program as it is not as lucrative. We will keep the numbers at the same rate as last year through some creative processes,” says Azeem.

Now that the government program is ending, Grasshopper has developed its own: the Grasshopper Guaranteed Funding Program.

The Guaranteed Funding Program offers up to $30,000 toward installing a solar power system to homeowners with a qualified roof. Grasshopper Solar pays for installing the system as well as its maintenance. It will hopefully enable more people to qualify for solar power and is a noteworthy change for the company this year.

The educational campaign taken on by Grasshopper has been difficult. People are still uninformed about solar power options, and some still believe that solar may decrease property values.

“We have to continue our efforts by tirelessly educating customers through different channels. Yvonne (Yvonne Villeneuve, marketing), has been championing that with various videos, and reaching out to a host of realtors, helping them to understand the value of solar,” says Azeem.

Ontario’s not-for-profit Municipal Property Assessment Corporation (MPAC) is an independent corporation that assesses the value of all properties in the province for tax purposes. MPAC will be examining all property transfers that have a Grasshopper solar energy system to see if the system affects property values. So far, about two hundred such properties have been sold.

“We rarely had a situation where the sale is incomplete or something happened as a result of solar. In fact, that never happened,” says Azeem.

MPAC’s current stance is that rooftop solar panels do not affect the assessed value of a property or its taxes. In the future, Grasshopper hopes that MPAC will see that solar adds a specific value to the property. It will take time to implement this as enough data and analysis must be performed.

“The short-term goal is with MPAC validating the fact that solar has a value. The impact of this is long-term because we are in twenty-year contracts,” says Azeem.

When we last spoke, the company was planning a solar program to be made available to commercial and industrial properties in which Grasshopper would own, install and maintain the infrastructure. Properties that sign up would see the benefits of solar power without any of the risks of investing in it. The project is now operational, and Grasshopper has been installing quite a few commercial projects. By the second quarter of 2018, there should be an estimated $250 million in operating assets, making this the largest project of its kind in Canada.

Throughout the summer, Grasshopper is preparing to go on the road with barbecues and parties to attract whole neighbourhoods and educate residents on the merits of solar power. The hope is to get mayors and city representatives invested in face to face conversations.

“It’s a very real thing we are doing. We are the largest residential company in Canada. We want to have real conversations and talk to people about their concerns. We want people to build a better life by helping them save money on their hydro bills. We are currently planning that road show,” says Azeem.

Grasshopper is actively looking to expand into the Northeastern U.S. as well as California, and Azeem believes that Grasshopper can bring a lot of value to these areas. The solar energy sales model is certainly going to change because now it will be financed via consumer credit rather than government incentives. There are no standard programs, but rather power purchase agreements (PPAs) and lease contracts between electricity sellers and buyers.

“The value of operating it from the engineering procurement construction (EPC), with asset management on the back end, will remain fairly consistent. But, the way we originate and develop projects will be different and somewhat of a logistical nightmare,” says Azeem.

The challenges may vary, but they have not increased. The main thing to note is that the market in the U.S. is significantly larger and energy prices are also higher than in Ontario. This translates into more motivation in particular areas to explore alternative energy options, with the expectation that the U.S. will move quickly on solar.

In the past year, there has been a substantial price drop in the cost of solar panels. “When we spoke last year, panels were going for seventy cents per watt. Today we are able to get a similar panel for forty-five cents per watt, which is about a thirty-five percent to forty percent decrease in pricing of the solar panels. It’s tremendous to see this happen,” says Azeem.

New policy is currently being discussed, especially in Ontario and the U.S., that should make solar more accessible. In fact, Azeem is in talks with the Ministry of Energy about what is known as community solar or virtual net metering. This involves generating electricity on commercial rooftops, near a community of people who can sign up for shares of solar power without the panels being mounted on their homes. Subscribers receive credits on their energy bills of the amount generated by their share of the installation.

“There is a lot of work going into crafting that policy, as it essentially allows anybody to participate and brings in economies of scale. This will further reduce the cost of solar with that policy construct,” says Azeem.

For the future of the industry, the community solar idea shows tremendous promise because many energy consumers who will be hardest hit by rising energy costs live in condominiums, smaller homes or townhomes, where solar power installation on the rooftops is not possible.

“By creating this construct with the community solar, that discrimination in the way that happens goes away. It’s a very important measure that the government needs to be looking at, and we need to be talking about as an industry. We want to try and bring this to fruition for everyone in Ontario,” says Azeem.

The post Bring Solar Home<p class="company">Grasshopper Solar</p> appeared first on Resource In Focus.