Tingo Hydroelectric PlantTrevali Renewable Energy Inc., a fully owned subsidiary of Trevali Mining Corporation, will provide the Santander Mine site with a cheap and reliable power supply, with additional excess power being available for sale to third parties under long-term power purchasing agreements.
Trevali's acquisition of the formerly producing Santander Mine, west-central Peru, included the Tingo run-of-river hydroelectric power station located some 17 kilometres to the Southwest of the mine site.
The Company is undertaking a major upgrade of the Tingo power station from its present production capacity of 1.6 MW to approximately 8.8 MW (or 10 MW during the wet season). As mine production at Santander is estimated to require approximately 4--5 MW power consumption, the excess power can be sold to third parties via the Peruvian national energy grid to generate potential additional cash flow to Trevali.
Overview of the Peruvian Power Industry
The Peruvian economy has expanded rapidly over the past decade, particularly during the last five years. Industrial end-users---of which the mining industry is the largest customer accounting for approximately 50--55% of supply usage---have found it increasingly difficult to obtain cheap reliable power. Given the approximately US $41-billion of mining investment in large-scale mining operations (copper and gold primarily) anticipated over the next five years, it is an understatement that power demand and pricings are anticipated to remain robust in the medium- to long-term. In the last 12-month period, there have been three long-term bids (up to 15 years) to purchase energy from new hydroelectricity plants (large and small plants), organized by the Peruvian Investment Agency (ProInversión) and the Energy Regulator (Osinergmin) with all-in prices ranging between US$ 55/MWh and US$ 74/MWh.
The most recently available information indicates that the current average cost of energy ranges from $0.10 to $0.15 per kilowatt hour, with the majority of end-users paying significantly above the officially regulated price.
Furthermore on a sector basis, the mineral industry's average cost of power is in the upper quartile of all Peruvian end-users. These data show that power costs are a major operational expense for the majority of mining operations, in particular underground operations. Clearly, having access to cheap, reliable power is a major economic advantage for any mining company.
Trevali expects that following the upgrade of the new Tingo hydroelectric plant, it will produce a kilowatt hour of power at an operational cost of $0.01 to $0.015, substantially below the price currently available. Importantly, the facility's advantageous location with year-round water supply will allow Tingo to have an online availability of 95%. This is in contrast to the majority of Peruvian hydroelectric power plants, which have an industry average availability of 60--70% due to seasonal water flow in their catchment areas.
Presently, the Company continues to advance engineering studies at-site, including:
• Outright purchase of the Tingo power plant and associated infrastructure
• Ongoing permitting, including archaeological studies, preparation of environmental impact assessments, water rights, community consultations and negotiations of power-line rights-of-way between the Santander site, the Peruvian national grid and the Tingo power station
• Engineering studies of the contemplated Tingo power station upgrades
• Peruvian power-market analysis
• Ongoing liaison and due diligence with a Peruvian bank, Interbank Peru, who are contemplating providing debt financing of a portion of the capital expenditure requirements for the above work.
Upgrading of the Tingo station will occur in two-phases:
Phase 1: A connection between the Santander Mine site and the national grid
Phase 2: Tingo power station upgrade and reconnection of Tingo to Santander Mine site