2
solutions may prove to be crucial to secure the license to
operate in the coming decades.
Phased Tailings Storage Facilities (TSFs) raises and
expansions using conventional deposition methods have
been the standard for decades. However, converting an
existing tailings management system to a more sustainable
deposition method during the operation of a mine may
incur considerable operational and financial risk. When
considering the feasibility of implementing a more sustain-
able tailings handling methodology, the common approach
is to calculate the break-even period based on reduced,
direct, operating costs. In many instances this traditional
approach does not provide favorable results. Consequently,
most operational mines continue using their conventional
tailings management methods. While considering not only
power, but also direct and indirect water costs and emis-
sions, alternative pump technologies, such as positive dis-
placement (PD) technology, become more economically
feasible.
In this paper, the payback period for the conversion
to a high-density tailings handling system is analysed on a
holistic basis for an iron ore operation, taking into account
the uncertainty in environmental (carbon tax, indirect
water costs) and utility costs (power, direct water cost).
METHODOLOGY FOR FEASIBILITY
ASSESSMENT
The total cost of ownership (TCO) is assessed, assuming
the upgrade of the pumping technology is offset by a reduc-
tion in operational costs. Traditionally, in these assessments
the main driver in the cost reduction is the assumed cost of
energy. An initial conventional assessment of the pumping
technology upgrade returned a payback period of approxi-
mately nine years, which was not deemed favorable. It was
then assessed that the benefit of the upgrade was in future-
proofing the operation by mitigating the payment of car-
bon tax in the near future. With this in mind, the upgrade
was assessed as follows:
1. Model the current situation.
2. Model the upgraded pumping scenario(s).
3. Assess the capital cost of the upgrade(s).
4. Assess the difference between the scenarios in:
– Absorbed power.
– Water consumption.
5. Assess the reduction of power and water costs.
6. Assess (potential future) carbon tax reduction
based on reduced power usage.
7. Assess payback period of the system upgrade.
8. Assess the sensitivity of the payback to variations
in:
– Carbon tax.
– Power costs.
– Water costs.
CARBON TAX
In the quest to drive down global emissions, taxation is
believed to offer a cost-effective way of reducing green-
house gas emissions (Ye, 2021). The advantage of an emis-
sions tax over cap-and-trade policies is that it offers a higher
level of cost certainty and is therefore favorable for model-
ling the financial effect on project feasibility of sustainable
investments.
Several states in the US have already implemented tax-
ation schemes for carbon emissions. Currently, no federal
taxation policy has been implemented in the US, but this
may change in the foreseeable future. In January 2021, five
federal carbon pricing proposals were introduced, which
would establish a carbon tax when implemented. Jason
Ye provides a good comparison of the proposed acts (Ye,
2021).
At the start of this study, it was assumed that the carbon
tax, when introduced, would be the primary driver behind
investing in more efficient pumping technologies. The fact-
sheet on the proposed acts shows initial taxes in the range
of $15 to $59 per ton of CO2 emitted (Ye, 2021). These
values are in line with the required minimum taxation as
proposed by the International Monetary Fund (IMF) in
2019 (IMF, 2019).
For this study, it is assumed that a carbon tax of $30
applies, which according to the customer’s estimation may
escalate to $150 per ton of CO2 emitted when targets are
not met within the life of the project.
TRUE COSTS OF WATER
In areas with (seasonal) wet climates, water is commonly
considered an almost free commodity. It is common prac-
tice to reclaim water from tailings ponds for use as process
water. This water may require treatment or dilution before
use in ore processing. When the water is readily available, it
can be pumped from the tailings pond or nearby lake. The
costs associated with the supply of water can be considered
direct costs and are made up of, but are not restricted to:
• Pumping and filtration of pond or lake water.
• Water rights.
• Water purchases.
Independent of location, water is lost through seepage.
Seepage can have both geotechnical and environmental
solutions may prove to be crucial to secure the license to
operate in the coming decades.
Phased Tailings Storage Facilities (TSFs) raises and
expansions using conventional deposition methods have
been the standard for decades. However, converting an
existing tailings management system to a more sustainable
deposition method during the operation of a mine may
incur considerable operational and financial risk. When
considering the feasibility of implementing a more sustain-
able tailings handling methodology, the common approach
is to calculate the break-even period based on reduced,
direct, operating costs. In many instances this traditional
approach does not provide favorable results. Consequently,
most operational mines continue using their conventional
tailings management methods. While considering not only
power, but also direct and indirect water costs and emis-
sions, alternative pump technologies, such as positive dis-
placement (PD) technology, become more economically
feasible.
In this paper, the payback period for the conversion
to a high-density tailings handling system is analysed on a
holistic basis for an iron ore operation, taking into account
the uncertainty in environmental (carbon tax, indirect
water costs) and utility costs (power, direct water cost).
METHODOLOGY FOR FEASIBILITY
ASSESSMENT
The total cost of ownership (TCO) is assessed, assuming
the upgrade of the pumping technology is offset by a reduc-
tion in operational costs. Traditionally, in these assessments
the main driver in the cost reduction is the assumed cost of
energy. An initial conventional assessment of the pumping
technology upgrade returned a payback period of approxi-
mately nine years, which was not deemed favorable. It was
then assessed that the benefit of the upgrade was in future-
proofing the operation by mitigating the payment of car-
bon tax in the near future. With this in mind, the upgrade
was assessed as follows:
1. Model the current situation.
2. Model the upgraded pumping scenario(s).
3. Assess the capital cost of the upgrade(s).
4. Assess the difference between the scenarios in:
– Absorbed power.
– Water consumption.
5. Assess the reduction of power and water costs.
6. Assess (potential future) carbon tax reduction
based on reduced power usage.
7. Assess payback period of the system upgrade.
8. Assess the sensitivity of the payback to variations
in:
– Carbon tax.
– Power costs.
– Water costs.
CARBON TAX
In the quest to drive down global emissions, taxation is
believed to offer a cost-effective way of reducing green-
house gas emissions (Ye, 2021). The advantage of an emis-
sions tax over cap-and-trade policies is that it offers a higher
level of cost certainty and is therefore favorable for model-
ling the financial effect on project feasibility of sustainable
investments.
Several states in the US have already implemented tax-
ation schemes for carbon emissions. Currently, no federal
taxation policy has been implemented in the US, but this
may change in the foreseeable future. In January 2021, five
federal carbon pricing proposals were introduced, which
would establish a carbon tax when implemented. Jason
Ye provides a good comparison of the proposed acts (Ye,
2021).
At the start of this study, it was assumed that the carbon
tax, when introduced, would be the primary driver behind
investing in more efficient pumping technologies. The fact-
sheet on the proposed acts shows initial taxes in the range
of $15 to $59 per ton of CO2 emitted (Ye, 2021). These
values are in line with the required minimum taxation as
proposed by the International Monetary Fund (IMF) in
2019 (IMF, 2019).
For this study, it is assumed that a carbon tax of $30
applies, which according to the customer’s estimation may
escalate to $150 per ton of CO2 emitted when targets are
not met within the life of the project.
TRUE COSTS OF WATER
In areas with (seasonal) wet climates, water is commonly
considered an almost free commodity. It is common prac-
tice to reclaim water from tailings ponds for use as process
water. This water may require treatment or dilution before
use in ore processing. When the water is readily available, it
can be pumped from the tailings pond or nearby lake. The
costs associated with the supply of water can be considered
direct costs and are made up of, but are not restricted to:
• Pumping and filtration of pond or lake water.
• Water rights.
• Water purchases.
Independent of location, water is lost through seepage.
Seepage can have both geotechnical and environmental