Blanket Mine currently uses grid power as its primary source of electricity augmented by standby diesel generators to cover periods when grid power is either interrupted or the voltage is unstable.
In 2020 the Company raised $13million through an ATM fundraise to fund a 12MW solar project. It will take around 12 months to construct and, once constructed, will provide around 27% of Blanket’s total electricity demand.
Proposed Zimbabwe Solar Project
The bulk of the grid power in Zimbabwe is usually generated by the Kariba hydro power plant on the Zambezi and by a coal-fired power station at Hwange. However, low water levels in the Zambezi have substantially reduced the generating capacity at Kariba and maintenance issues have also reduced the power generated at Hwange.
To make up the shortfall in local power generation, Zimbabwe imports electricity from South Africa and Mozambique. However, the difficulties in the South African power supply sector have been well publicised and exports from South Africa to Zimbabwe are suspended during periods when South Africa is unable to satisfy its own domestic requirements. Imports have also been adversely affected by late payment for historic deliveries.
The combined effect of low domestic generation and unreliable imports means that power consumers in Zimbabwe experience frequent and prolonged power outages, although gold producers were largely protected from prolonged outages until early July 2019.
Since mid-August 2019 Blanket has participated in a scheme whereby gold producers pay in advance (in US dollars) for imported power which is ringfenced for use by the scheme participants. In general, this scheme has operated well other than during periods when South Africa is unable to export electricity.
In addition to interruptions to supply due to lack of generating capacity, the grid supply to Blanket also suffers from variations in the voltage which have caused frequent interruptions to normal production at Blanket.
To minimise the adverse effect of power interruptions, Blanket has installed diesel generators with a capacity of 18.4MWa which is sufficient to maintain full production and to continue development and capital projects during power outages. Diesel generators have recently provided approximately 3% of Blanket’s total consumption. However, Caledonia recognises that the use of diesel generators is not a long-term solution: diesel-generated electricity is expensive and environmentally unsustainable and there may also be difficulties in securing the prompt supply of sufficient diesel.
Caledonia is evaluating the potential to install a solar plant to supply Blanket. The eventual size of the solar plant is anticipated to be up to 17.5MVA, which could provide all of Blanket’s power requirements during daylight hours. Once installed, it is envisaged that Blanket will run off solar power during daylight hours; at night it will run off a combination of grid power and diesel power in conjunction with a small energy storage system.
It is currently envisaged that the solar project will be implemented in three phases:
- Phase 1 would be limited to the construction of a PV installation of approximately 6.55 MWp to meet the minimum demand of Blanket Mine. All generated power from phase 1 would be consumed by the mine and no excess power dispatched to the grid.
- Phase 2 would comprise the construction of an additional 6.55MWp PV capacity to meet Blanket’s current peak power demand. Excess power generated by the plant would, subject to the conclusion of a “banking agreement” with the utility provider, be metered and dispatched onto the grid with excess kWh “banked” or “credited” against Blanket’s monthly utility account. The “bankability” of the banking agreement is therefore critical for the success of Phase 2.
- Phase 3 would comprise the construction of the remaining 6.55MWp capacity which would be sufficient to meet Blanket’s anticipated future peak demand.
It is proposed that the Solar plant will be owned and operated by Caledonia (and/or a third party, as discussed further below) and the company which owns and operates the Solar plant will sell power to Blanket. The Solar plant would be located on a 40-hectare site which is close to Blanket and is part of Blanket’s leased mining area.
The operator of the Solar plant will require a generating licence to be issued by the Zimbabwe Electricity Transmission and Distribution Company (“ZEDTC”); Caledonia has applied for the generating licence through a subsidiary special purpose vehicle and the licence will be transferred to the eventual operator of the plant (if this is not Caledonia). Caledonia has also commenced negotiations with ZETDC regarding the banking agreement which will be required before work can commence on phases 2 and 3.
In 2019 Caledonia ran a process to identify the parties who have been invited to tender for the award of an Engineering, Procurement and Construction (“EPC”) Contract for the solar project or to participate as an independent power producer (“IPP”) to Blanket Mine. Caledonia has appointed Ingenia Solar Engineering and Solareserve as its advisers in the bidding and design process for the project. Bids from the shortlisted parties are expected at the end of January 2020, after which there will be a period of evaluation prior to the award of the project.
It is envisaged that the total cost of the project will not exceed US$18 million, spread equally across each of the three phases of the project. Caledonia has embarked on a process to source debt funding for the project. Alternatively, the timing of the implementation of the project will be matched to the availability of internally generated cash.