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With TSX listed Chilean energy company
Rame Energy plc, the international energy consultant, engineer and power generator, has signed a memorandum of understanding including indicative terms with Compañia Minera Cerro Bayo Limitada to supply power to the isolated electrical grid system of the Cerro Bayo mining project in Chile owned by TSX listed Mandalay Resources Limited.
This MOU builds on Rame’s established international energy consultancy business, which supplies power generation solutions to the industrial, mining and utility sectors and is in line with the Company’s strategy to become an independent power producer in Chile.
Under the terms of the MOU, which is to be converted into a power supply contract within a maximum of 90 days from signing, Rame will provide power at an agreed price per MWh to Cerro Bayo for a minimum of five years from commencement of commercial operations and thereafter on a rolling one year contract at Cerro Bayo’s option. Commercial operations are expected to start by April 2015.
Rame will provide the power from its own wind farm with an installed capacity of up to 1.8MW, to be located, at no charge to Rame, on the Cerro Bayo property. Rame has been undertaking wind and feasibility studies at the site for the last 12 months and completed its initial technical analysis in Q2 2014, which led to a power supply proposal to Cerro Bayo and subsequently the agreement on terms for the MOU.
It is expected that the wind farm will contribute approximately 6,250 MWh of electricity per year to the power supply of the mine (albeit that Rame does not guarantee any minimum power delivery) and the project will work in parallel with Cerro Bayo’s existing diesel generating system, located a few hundred metres away from the proposed site for the turbines. The capital costs for the wind farm are expected to be c.US$4m. The project requires no environmental permitting studies and Rame will carry out the entire construction of the project to minimise build costs and execution risk.
The Cerro Bayo gold and silver mine is located in Southern Chile, 130km south of Coyhaique, the capital of Region XI. It is owned by Mandalay Resources Limited, which is listed on the TSX with a market capitalisation of C$323m. Mining restarted in September 2010 and it produces c.1,400 tonnes of ore per day.
No grid power is available at the site and to date power has been generated on site by diesel generators. The addition of the wind farm is expected to deliver significant cost savings to the mine whilst reducing the environmental impact and logistical challenges to maintain a secure diesel supply to the mine.
Tim Adams, Rame CEO, commented: “This MOU with Cerro Bayo will, when converted to a formal contract, mark another milestone in our move towards becoming an independent power producer in our own right and we are delighted to now be progressing towards adding a clean, cost effective energy solution to the isolated diesel power generation at Cerro Bayo. This project is the first of a number of off grid IPP opportunities in wind and solar power we expect to develop, using our previous off grid experience and expertise.
“Our power supply proposals to off grid industrial customers offer environmental, logistical and economic benefits to these remote sites and, in doing so, lock-in Rame’s revenues from the power supply contracts for the life of the mines, providing good visibility on our expected returns and payback. We will look to secure and execute additional power supply contracts in tandem with the rollout of our wind power projects in Chile, the first two of which are due to commence operations by the end of 2014.”
