JOHANNESBURG (miningweekly.com) – Studies being undertaken on the future power source for South32’s Hillside Aluminium beyond 2031 are taking place amid awareness of the different energy levers that can potentially be pulled.

The current power agreement of South Africa’s aluminium smelter at Richards Bay in KwaZulu-Natal extends to 2031, which is providing useful time to scrutinise power options at a time when various studies are also being done regarding the changing nature of the South African electricity transmission grid as well as more renewables coming online.

Hillside Aluminium draws 1 140 MW virtually every minute of the day, every day of the week, every week of the year, South32 CEO Graham Kerr highlighted during this week's media update.

Kerr was responding to Mining Weekly while pointing out that a pathway forward for a power contract beyond 2031 is being comprehensively investigated for Hillside Aluminium, which is the southern hemisphere's largest aluminium smelter as well as being the producer of a significant percentage of primary aluminium for South Africa’s value-adding secondary aluminium product producers.

Located at Richards Bay in KwaZulu-Natal, Hillside itself provides jobs for more than 2 300 employees and contractors and the downstream value addition many times more. “We send about 30% of our Hillside products downstream,” Kerr pointed out, which is calculated to support another 27 000-plus indirect employment opportunities.

Regarding collaboration with South Africa’s State-owned power utility Eskom on the post-2031 energy arrangement, Kerr added: “We're doing a number of pieces of study on what we can do around the power source in the future, and we certainly think there’s a number of different levers that can be pulled in that part of the world”, a reference to the area’s wind, sun and sea energy potential.

As Hillside Aluminium is responsible for 94% of South32’s total Scope 2 emissions, ‘greening’ South Africa’s aluminium to the greatest extent would be of major potential price benefit.

The competitive smelter contributes nearly R10-billion to South Africa’s GDP and public-private effort could ensure that the aluminium produced can benefit from the green price premium that is being paid for aluminium that is not carbon heavy.

Mining Weekly: Do you think you could generate some of your own power?

Kerr: We've done a lot of work on renewables, such as solar panels and also wind, because that part of the world gives you that capability. I think the big challenge is we're not like a mine or some other businesses where you basically can turn the power on and off and run at a peaks and lows. We would have to run the smelter virtually 24/7, 365 days a year. Part of the attraction of the smelter for Eskom is our low grid stability and how much we use our load factor’s almost one. So, that provides them with the baseloads and grid stability. But it does mean, when it comes to renewables, you have to have one hell of a big battery to be able to handle and store 1 140 MW at times when there's no light and no wind. In the end, which means the best solution is that you work with Eskom to create a network that has more robustness and a combination of nuclear, renewables via wind and solar, well as traditional and that, I think, will give you the best outcome, not only for Hillside, but also Eskom.

Engagement with government regarding operational and value chain decarbonisation is reportedly positive and emphasised by South32 COO Noel Pillay is that technical studies have concluded that Hillside could be made to work with solar, wind, and backup power.

Mining Weekly: You've got to sea right there. Could you not generate green hydrogen, store it for short and long period, and then, when renewable energy is heading for low levels, convert the green hydrogen into green electricity?

Pillay: We’ve studied that extensively and, to Graham’s point, the most viable option technically is wind and solar. That makes economic sense today. I think it's also worth recognising that we have the benefit of time until this power contract ends, and the technology is also evolving exponentially, so we’ll wait and see how that plays out and test whether the technology provides for an economically viable solution. But at this stage, it's not. We’ve studied gas, we've studied hydrogen, we've studied offshore wind. Right now, solar and wind is technically possible, but to Graham's point, more work needs to be done to make that economically viable, when you consider a blended tariff for backup power and factors like that. But to an earlier point as well, we’re working very closely with Eskom as a joint working group to explore all these options to find the solution for our time.

What about Hillside Aluminium seeking Special Economic Zone benefits?

Pillay: For starters, we're not in the Special Economic Zone, and secondly, the quantum of power that we're talking about is a significant block of power that you need on a continuous basis 24/7. There's no opportunity to stop start and you're forced to have storage facilities. Other industries that can operate differently, have different technical options that might be available to them. We're not in that space at the moment. We’re highly reliant on sun and wind when it's available, but then when it's not, in the hours of darkness, you need the backup. At this stage, the battery technology is not sufficiently developed for us to have that power stored economically, so you're reliant on the coal-fired fleet for that backup. You know, because we're a continuous load demand. For the other industries it’s slightly different both from a technology point of view, but also from a quantum of power point of view.

Kerr: To put in perspective, a typical platinum mine probably uses about 300 MW, but they have the ability to have peaks and troughs. How much power they draw It depends on what they're doing. Hillside, for example, will draw 1 140 MW virtually every minute of the day, every day of the week, every week of the year. So that load factor is incredibly different. It also does mean, while you might shut down, a platinum mine or a gold mine, once you shut down a aluminum smelter, it is incredibly difficult to restart it, because basically, you'll freeze out all the pots, and the cost of sorting those pots out or replacing them becomes massively capital intensive and usually prohibitive of a smelter restarting.

POWER COSTS

How costs are brought under control to maintain competitive power is an ongoing world-wide challenge for smelters.

As the Bank of America Global Research reports, the US has lost three-quarters of its aluminium smelters, China has capped its aluminium production, US consumers are now having to pay the full 50% tariff, South32’s the Mozal aluminium smelter in Mozambique is to be put on care and maintenance in March, and the biggest aluminium production increases are coming out of Indonesia, where, in many instances, it is Chinese operators who are doing the additional smelting outside of China.

Because of its competitive power, smelting capacity is continuing to be built in the Middle East, but heading for care and maintenance next year is South32’s Mozal aluminium smelter in Mozambique.

One-off costs to place Mozal into care and maintenance, including employee separation costs and termination of contracting arrangements, are expected to be $60-million. Ongoing annual care-and-maintenance costs are expected to be $5-million.

Meanwhile, in Australia a rescue effort is under way to keep Rio Tinto's Tomago aluminium smelter operational. The current power contract for Tomago, which is Australia's largest aluminium smelter, expires in 2028.