Minerals Engineering 39 (2012) 268–275

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Minerals Engineering

journal homepage: www.elsevier .com/ locate/mineng

Economic feasibility and sensitivity analysis of integrating industrial-scalemineral carbonation into mining operations

Michael Hitch a,⇑, G.M. Dipple b

a University of British Columbia, Norman B. Keevil Institute of Mining Engineering, 6350 Stores Road, Vancouver, BC, Canada V6T 1Z4b University of British Columbia, Department of Earth and Ocean Science, 6339 Stores Road, Vancouver, BC, Canada V6T 1Z4

a r t i c l e i n f o a b s t r a c t

Article history:Received 31 March 2012Accepted 9 July 2012Available online 10 October 2012

Keywords:CO2 sequestrationMiningMineral carbonationIndustrial carbon sequestration

0892-6875/$ - see front matter � 2012 Elsevier Ltd. Ahttp://dx.doi.org/10.1016/j.mineng.2012.07.007

⇑ Corresponding author. Tel.: +1 604 827 5089.E-mail address: mhitch@mining.ubc.ca (M. Hitch).

Proposed carbon reduction measures—such as cap-and-trade—appear poised to have a significant impacton the financial feasibility of mining operations as point-source emitters of carbon dioxide (CO2). It istherefore necessary to proactively assess the ways in which these effects may be mitigated. Carbonsequestration through mineral carbonation is well suited for integration into mining operations. Its abil-ity to make use of waste rock to trap and store CO2, given suitable geological conditions, can help to sig-nificantly reduce carbon emissions. This paper presents the first attempt at conceptually integrating ahigh temperature and pressure industrial mineral carbonation facility into a developing minesite. TheTurnagain nickel site, a low-grade, high-tonnage Ni-sulphide deposit, located in Northern BC, containsan abundant amount of Mg–silicate minerals in its waste rock. These minerals have significant potentialfor use in mineral carbonation. In the presence of a mandatory cap-and-trade scheme in North America,there is the potential to produce an additional revenue stream through the generation and sale of carboncredits. Results of financial modeling have yielded a net present value (NPV) at an 8% discount rate of$131.5 million for the integration of mineral carbonation into proposed mining operations at Turnagain,suggesting that the project may be viable from a financial standpoint. Sensitivity analysis has also dem-onstrated that the parameter with the greatest influence on project NPV is the CO2 avoidance ratio. Thisratio, which takes into consideration the amount of CO2 released in the mineral carbonation process todetermine the net amount of CO2 avoided, is critical to maximizing the amount of carbon credits availablefor sale in a cap-and-trade environment.

� 2012 Elsevier Ltd. All rights reserved.

1. Introduction

Global climate change and the need for improved environmen-tal accountability have recently jumped to the forefront of ourattention, both at home and around the world. As a result, govern-ment legislation appears inevitable in an attempt to help achieveemissions targets and progress towards improved environmentalstandards. Current plans suggest that market-based incentives—such as cap-and-trade—are the most effective way to adequatelyreduce greenhouse gas (GHG) levels. Inevitably, these incentiveswill require that regulation be put on the price of carbon dioxide(CO2) (Government of Canada, 2009). Whatever forms these regu-latory changes may take the consequences on the mining industrymay be significant, given the environmental footprint commonlyattributed to mining operations (Norgate et al., 2007).

It is difficult to predict exactly how a carbon dioxide cap-and-trade program might develop. The European Union’s EmissionsTrading Scheme (EU ETS) has set the stage for the development

ll rights reserved.

and implementation of a similar system in North America(Skjærseth and Wettestad, 2008; Karling, 2007; Victor and House,2004). Should a cap-and-trade program similar to the EU ETS comeinto effect in North America in the near future, it would undeniablyhave significant financial ramifications for large point-source emit-ters of CO2 such as mine sites. In addition to the environmental im-pacts that carbon capture and storage (CCS) may be able to achieve,the economic sustainability of its implementation must be demon-strated (Huijgen and Comans, 2005; O’Connor et al., 2004;Zevenhoven et al., 2006). While business decisions based solelyon environmental considerations would be laudable, shareholderaccountability and the financial well being of a company are al-ways a primary concern (Lasher, 2008). This suggests that weigh-ing the costs of environmental stewardship against the potentialconsequences of the alternative is necessary. Environmental ac-tions must be economically and financially viable before theymay be widely and effectively employed.

The appeal of a CCS project at the Turnagain nickel site lies in itspotential for simultaneous contribution to environmental andeconomic sustainability. Carbon credit trading can result in areduction of compliance costs and/or the realization of additional

M. Hitch, G.M. Dipple / Minerals Engineering 39 (2012) 268–275 269

revenue streams. This paper aims to evaluate the degree to whichthe integration of a mineral carbonation project would impact themine economics of the Turnagain nickel site in the presence of acap-and-trade system. Through an analysis of cost efficiency forvarious mineral carbonation options and their subsequent devel-opment within a comprehensive cost model and discounted cashflow (DCF) model, the long-term feasibility of integrating such aproject was evaluated.

The Turnagain nickel project is located approximately 70 kmeast of the community of Dease Lake in Northern British Columbia,Canada (Fig. 1). By definition, it is a high tonnage, low-grade, Ni-sulphide deposit. Waste rock at the project contains abundantMg-rick olivine, making it an attractive site for implementationof industrial-scale mineral carbonation facilities.

1.1. Mineral carbonation background

Mineral carbonation is quickly gaining recognition as one of themost effective ways of removing excess CO2 from the atmosphere(Rock, 2007; Voormeij and Simandl, 2004; Lackner et al., 1995).First proposed by Seifritz (1990), mineral carbonation takes advan-tage of the natural weathering process of silicate minerals, where-by the alkalinis extracted from silicate minerals throughweathering and water–rock interactions react with ambient atmo-spheric CO2 to produce newly formed carbonate minerals (Huijgenand Comans, 2005; Lackner, 2002). Specifically, the weathering ofabundant calcium (Ca) and magnesium (Mg)-rich silicate mineralsto form Ca- and Mg-carbonates, in the presence of CO2, forms thebasic concept behind mineral carbonation technology. The goal ofmineral carbonation on an industrial scale is to accelerate this nat-ural process, to allow for greater quantities of CO2 to be capturedand stored in a shorter period of time.

The efficiency of mineral carbonation is directly attributable tothe amount of CO2 emitted by the process itself. Estimates byO’Connor et al. (2004) suggest that only �77% of sequestered CO2

can be claimed as CO2 avoided, resulting in a CO2 avoidance ratioof 0.77, as calculated using Eqs. (6 and 7).

Fig. 1. Location of the Tur

CO2 avoided ¼ CO2 sequestered� CO2 emitted ð1Þ

CO2 avoidance ratio ¼ CO2 avoided : CO2 sequestered ð2Þ

It is important to note that the emissions produced, and conse-quently the CO2 avoidance ratio, will ultimately be dependentupon the process conditions as well as the source of energy utilizedin the process. More generalized estimates by O’Connor et al.(2002) have suggested that an energy penalty of 11.5 kWh/t oreprocessed is reasonable for the capture component of CCS. The ex-treme conditions required for efficient conversion adversely affectsthe required amount of energy and the amount of CO2 released, aswell as the process operating costs. These effects indicate a numberof conflicting priorities in the conduct of such research. Whilesome attempts have been made to maximize the efficiency of reac-tion, other studies have sought to minimize costs or reduce processemissions.

1.2. Integration into mining and mineral processing

The availability of Mg-rich minerals worldwide in mineabledeposits, combined with the high MgO content within Mg–silicateminerals—such as olivine and serpentine—make Mg–silicatesappropriate for use as feedstock material in mineral carbonation(Lackner et al., 1995; Yegulalp et al., 2001; Béarat et al., 2002;Cipolli et al., 2004; Goff and Lackner, 1998). In addition, the com-mon association of Mg–silicates with certain mineral deposit typesincreases the feasibility of extraction, both of ore and of suitablefeedstock material for use in mineral carbonation. This benefit isprimarily due to the ability to share the cost of extraction.Kohlmann et al. (2002) and Gerdemann et al. (2004), have outlinedthe importance of integrating the extraction of Mg–silicates formineral carbonation with pre-existing or planned mining activitiesin order to reduce mining and transportation costs. This integra-tion can result in more profitable marginal projects and improvedoverall project economics by lowering the mine cut-off grade andbringing value to otherwise value-less waste rock (Hitch et al.,2009; Zevenhoven et al., 2006).

nagain nickel project.

Mine

Mineral Carbonation

Facility

Storage

Disposal

Aggregate

CO2

(Ca,Mg)O

(Ca,Mg)CO3

Fig. 2. Conceptual lifecycle of mineral carbonation (modified after Huijgen et al.(2007)).

Table 1Published cost estimates of mineral carbonation.

Cost Reference

$70/t CO2 Lackner (2002)$50-$100/t CO2 IPCC (2005)$65/t CO2 O’Connor et al. (2005)$54/t CO2 sequestered $78/t CO2

avoidedO’Connor et al. (2004), Gerdemann et al.(2007)

$60-$100/t CO2 Newall et al. (2000)$69/t CO2 Lyons et al. (2003), Penner et al. (2004)

270 M. Hitch, G.M. Dipple / Minerals Engineering 39 (2012) 268–275

The lifecycle of the mineral carbonation process is shown con-ceptually in Fig. 2. Beginning with the mine as a source of reactivematerial, waste rock provides a steady source of feed for mineralcarbonation. A constant input of CO2 is required, derived eitherfrom mine process emissions, outside sources via a pipeline, or acombination of the two. Following reaction, the resulting benignproduct is put to a number of uses, including aggregate or minebackfill to aid in construction or mine reclamation. Alternately,the carbonate can be safely disposed, with little to no need for sub-sequent monitoring.

The mutual benefits of integrating mining and mineral carbon-ation highlight the importance of integrating Mg–silicate extrac-tion with mineral carbonation in order to enhance viability.

1.3. Importance to mining

Successful integration of CCS into the mining industry will re-quire incentives to spur development and increase the likelihoodof widespread implementation across the industry. Incentivestructures to help curb CO2 emissions have already been imple-mented in Europe, through the development of the European Un-ion Emissions Trading Scheme (EU ETS). A similar NorthAmerican initiative seems imminent (Western Climate Initiative,2010; Government of Canada, 2009). These policy structures aredesigned to cap the allowable amount of emissions from a pointsource emitter of CO2. Given the contribution of the mining indus-try to total greenhouse gas emissions (Organisation for EconomicCo-Operation, 2004), it is anticipated that a cap on emissions willcreate a notable impact on mining operations from both a financialand operational standpoint. The degree to which mining opera-tions will be impacted is highly dependent on the imposed green-house gas reduction requirement, in addition to the incentivesprovided through market mechanisms such as cap-and-trade.The imposition of a limit on the total amount of CO2 permittedfor release by a single point source emitter will require emitterseither to change technologically to reduce emissions, or to captureand store emissions that result from operations. Alternately, excessemissions may be offset through the purchase of carbon–offsetcredits. The operational and/or financial impact of carbon reduc-tion mechanisms, such as cap-and-trade, will require carefulassessment as environmental policy continues to develop.

1.4. Estimates of mineral carbonation costs

Previous cost estimates of implementing carbon sequestrationby way of mineral carbonation have yielded a wide variety of esti-mated values, illustrative of the high degree of uncertainty sur-rounding the valuation of mineral carbonation projects. A

summary of sample cost estimates is shown in Table 1. This uncer-tainty is magnified by the inconsistent use of feedstock materialand process parameters employed amongst these estimates. It isalso often unclear exactly which aspects of the lifecycle of mineralcarbonation, including all the components necessary to completethe lifecycle, are included in these cost estimates. Herzog (2002)indicated the need to add �$50-$60/t CO2 for CO2 capture andtransport costs alone, attesting to the significant impact that suchemissions could create in conducting an economic evaluation ofmineral carbonation. The additional need to incorporate other fac-tors into the lifecycle of mineral carbonation, such as mining, pro-cessing and disposal, further delineates the need for improvedclarity in the estimation and presentation of mineral carbonationcosts.

Ballantyne and Hitch (2009) suggest in order for Canada toachieve the published emissions reductions for 2020 (600 MtCO2e) and 2050 (1Bt CO2e) carbon offset prices will reachCDN$200/t CO2e (Fig. 3).

Financial analysis was undertaken by the authors to determinean estimate of the overall viability of integrating mineral carbon-ation into mining operations at Turnagain. Although project devel-opment is currently only at the conceptual design phase, it is stillimportant that the project economics be carefully considered, todetermine whether or not project development should continue.A relatively high degree of uncertainty—a common condition ofnatural resource projects—is expected throughout development(Park et al., 2001), and must be taken into consideration in theanalysis of the overall project economics. Further model refine-ments will be necessary as more accurate project parameters be-come apparent.

The present financial analysis makes use of a discounted cashflow (DCF) approach for its ability to produce a relatively soundunderstanding of the estimated project value, given the assump-tions made in the base case scenario. While adequate as a preli-minary analysis, it is important to bear in mind that in realityany project will be much more fluid, and project managers moreflexible in terms of expanding, contracting, deferment, or abandon-ment of a project, as the conditions of operation become more pre-cisely known. This flexibility allows for added value in the ability tomitigate losses while maximizing on upside potential (Schwartzand Trigeorgis, 2004).

In order to quantify the uncertainty inherent in this project, aswell as in any deterministic modeling approach to project forecast-ing and evaluation, it was necessary to test the assumptions em-ployed. Sensitivity analyses capture the influence of the mosthighly uncontrollable factors in project advancement and evaluatehow output uncertainty can be apportioned to the uncertainty ofthe model inputs.

2. Methodology

2.1. Cost modeling

The tradeoff of cost versus efficiency for the various mineralcarbonation technologies under investigation is an important

Fig. 3. Carbon offset pricing forecast (Ballantyne and Hitch, 2009).

M. Hitch, G.M. Dipple / Minerals Engineering 39 (2012) 268–275 271

factor when considering how best to proceed with project develop-ment. The benefits of high sequestration efficiency through the useof high pressure–temperature mineral carbonation in an autoclaveare offset by the high costs needed for extensive processing andelevated process conditions. Conversely, low efficiencies of reac-tion associated with engineered heap leach piles or bio-inoculatedpiles (Power et al., 2009) may be justified by minimal costs. This isa critical aspect in the evaluation of mineral carbonation, as thecost of the technology largely dictates its feasibility for implemen-tation on an industrial scale. This tradeoff of cost versus efficiency(shown in Fig. 4) will be highly influenced by the parameters setforth by governmental regulations and/or the carbon managementscheme put into place, namely the cost of carbon and the cap onemissions. It is anticipated that the trace of this relationship willbe a stepwise function, due to the significant change—both interms of cost and efficiency of reaction—that will result from tran-sitioning from more passive technologies, such as heap leaching, tomore active ones, such as agitated tank leaching (autoclavereaction).

For detailed financial modeling, an autoclave reaction was cho-sen for further consideration as the only method proven to store

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Corroborating datapoint:(a)Natural attenuation (Wilson et al., 2006)(b)Heap leaching (Stolaroff et al., 2005)(c) Autoclave reaction (Lackner et al., 2008; this research)

(a)

(b)

(c)

Fig. 4. Conceptual tradeoff of cost versus efficiency for various methods of mineralcarbonation. (See above-mentioned references for further information.)

adequate amounts of CO2, a conclusion supported by considerableresearch to bring it past the proof-of-concept stage. While the op-tion to implement mineral carbonation through engineered heapleach piles is not entirely unreasonable in the future, adequate re-search in this area has not been undertaken to be able to providereasonable parameters and warrant further analysis.

2.2. DCF analysis

Discounted cash flow analysis was able to produce an estimateof project value to aid in the decision making process. While upfront it is relatively simple to evaluate a project in terms of revenueversus cost, it is important to consider the time value of money andthe impact that significant up-front capital costs may have. Finan-cial analysis through DCF modeling is the most commonly usedmethodology in evaluating potential investments for its ability toquantify the added value to shareholders (Lasher, 2008; Parket al., 2001; Campbell and Brown, 2003). Mining operation inputparameters are based on the Company’s 2010 feasibility studywhile those parameter values for sequestration and CO2 transportare based on the work of Campbell and Brown, 2003. Input param-eters used in this study are located in Tables 2 and 3.

2.2.1. AssumptionsA wide variety of options exist that allow proposed mining

operations at Turnagain to integrate with carbon management pro-grams in British Columbia and elsewhere. These options primarilyrelate to location and transportation issues, namely a site for min-eral carbonation and a source of sufficient CO2. While many largesources of CO2 exist in heavily populated areas, the primarysources of mineable feedstock material tend to be located in re-mote locations, such as that found at Turnagain. Emissions fromthe mine and the processing plant will undoubtedly be significant,given operations such as the Mt. Keith Nickel Mine (BHP Billiton,2004). However, it is likely that mineral carbonation at Turnagainwill require an external supply of CO2 in order to take advantageof the significant amount of available feedstock. The developmentof a mine may draw point-source CO2 emitters towards the area,and consequently improve CO2 transport logistics. As such, it isnecessary to locate and source potential alternatives in order tosupply sufficient quantities of CO2 to maximize sequestration viamineral carbonation and justify project implementation.

Table 2Cost model input parameters and base case scenario results.

Input parameters Unit Base case value

Throughput tpd 87,000Strip ratio – 0.74Dunite in waste % 20wt.% MgO wt.% 48.54Processing cost $/t feed 8.00Sequestration efficiency % 80Sequestration operating cost $/t CO2 32.39CO2 capture cost $/t CO2 25.00CO2 transport distance km 250CO2 transport cost $/km 0.02

Base case resultTotal operating cost $/t CO2 82.51

Best case scenario $/t CO2 27.98Worst case scenario $/t CO2 237.91

Table 3DCF model input parameters and base case scenario results.

Input parameters Unit Base case value

Capital cost $ 139 millionDevelopment phase duration yrs 2Mine life yrs 24Operating cost $/t CO2 82.51Total sequestered CO2 tpy 2 millionCO2 avoidance ratio – 0.77Site CO2 emissions tpy 1 millionCarbon credit pricea $/t CO2 200CO2 reduction requirement % 20Decommissioning $ 20 millionDiscount rate % 8Inflation rate % 2

Base case resultNPV8 $ 131,449,380IRR % 25.1Simple payback yrs 3.72Discounted payback yrs 4.77

a Ballantyne and Hitch (2009).

272 M. Hitch, G.M. Dipple / Minerals Engineering 39 (2012) 268–275

While it is important to accurately estimate the operatingparameters of a mineral carbonation scheme at Turnagain, revi-sions to these values will invariably be made as further researchand development of mineral carbonation and mining operationsat Turnagain are outlined. For this reason, sensitivity analysis be-came essential in the overall valuation determined through this re-search. It is only through assessing the range and magnitude forthe various inputs can a more complete understanding of the pro-ject economics and viability be achieved.

Table 4Overall sensitivity of cost model parameters.

Rank Parameter

2.3. Sensitivity analysis

Sensitivity analysis was first performed on the cost model in-puts, allowing each input to be delineated in terms of its depen-dent factors. This enabled an analysis of the deviations from thebase case to assess the impact of various factors. The sensitivityof each of these inputs allowed for a more accurate estimate ofthe sensitivity of project value, as determined through DCF model-ing and its respective sensitivity analysis (Saltelli et al., 2004).

1 Sequestration efficiency2 Sequestration operating cost3 CO2 capture cost4 wt.% MgO5 Processing cost6 CO2 transport distance7 CO2 transport cost8 Mine throughput9 Strip ratio10 % Dunite in waste

2.4. Effect of correlation

Correlations are particularly important in this study, given thestrong relationship between the price of carbon and the CO2 reduc-tion requirement. Despite the perpetual uncertainties of marketmechanisms, the principles of supply and demand suggest a strongpositive relationship between these two key parameters.

3. Base case results

3.1. Cost sensitivity

The most sensitive parameter outlined through sensitivity anal-ysis of the cost model was the sequestration efficiency of reaction.Unit changes in this parameter are the most influential on the costof sequestration, primarily due to the requirements and associatedcosts that go into preparing feedstock for sequestration. Maximiz-ing the amount of CO2 sequestered from the input feedstock en-ables costs to be minimized per unit sequestered. Given thesubstantial requirements in bringing input feedstock and CO2 toa suitable state at the site of reaction, the amount of CO2 seques-tered per unit of input is important in determining the unit seques-tration cost in the lifecycle of mineral carbonation. As thedeterminant of the total amount of CO2 sequestered, sequestrationefficiency also directly affects other cost inputs by influencing thesize of the denominator for the calculation of unit cost per tonne ofCO2 sequestered. It is therefore important that this parameter ismaximized in order to minimize the overall unit cost of sequestra-tion. Table 4. Illustrates the overall sensitivity ranking of the costmodel input parameters.

The spider plot below (Fig. 5) presents a relative representationof the sensitivity of the cost model elements. Those input parame-ters with the steepest slope represent the inputs with the greatestinfluence per unit of change, as represented by the X axis aroundthe base case value of ‘‘0’’.

Sequestration operating cost was the most second most sensi-tive parameter determined through sensitivity analysis. As themost significant contributor to total cost in determining unit costper tonne CO2, operating cost for the autoclave was found to besensitive, resulting from the significant pressure–temperature con-ditions required and the associated cost of power. Reducing thedependency on extreme conditions will help reduce unit costs,keeping in mind that the sequestration efficiency has a greateroverall impact and must remain the priority for further research.Sequestration costs are essentially the cost of operating the min-eral carbonation facility. Raw material supply is accounted for un-der the mine operation costs. CO2 capture costs are also sensitive,as a result of the significant power and energy requirements forremoving CO2 from flue gas.

The wt.% of MgO in the waste rock was found to be the fourthmost sensitive parameter in cost modeling, as it directly impactsthe amount of MgO available for reaction with CO2. Initially, itwas thought that this parameter would have a greater effect onthe total unit cost of sequestration, as it directly impacts theamount CO2 sequestered, but this was not the case. Similar tothe reasons supporting the sensitivity of the sequestration effi-ciency, a decrease in the amount of MgO in the waste rock resultsin less MgO available for reaction with CO2. This causes a reductionin the amount of CO2 sequestered and therefore decreases the

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% dunite in wastewt.% MgOSequestration efficiencyProcessing costSequestration operating costCO2 capture costCO2 transport distanceCO2 transport costStrip ratioMine throughput

Fig. 5. Spider diagram showing sensitivity of cost model input parameters.

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M. Hitch, G.M. Dipple / Minerals Engineering 39 (2012) 268–275 273

denominator in calculating unit sequestration cost per tonne ofCO2. The opposite effect will occur if the wt.% of MgO in the wasterock increased.

Following in sensitivity of the cost model was the processingcost, and consequently the grind size required in the reaction pro-cess. This has cost implications arising from the power require-ments necessary to obtain finer grind sizes. Carbon dioxidetransport distance and cost are also important to consider in termsof their influence on the total unit cost of sequestration, but less sothan the preceding factors. The majority of the cost in bringing asignificant source of CO2 to the site of reaction is the separationand capture of CO2. However, one major item to consider is theavailability of pipeline infrastructure. Without an available pipe-line network in which to transport significant amounts of CO2, amineral carbonation project will have to rely on the separationand capture of CO2 from flue gases on site, and these will not likelyprovide an adequate supply.

Finally, the least sensitive parameters investigated were thethroughput, strip ratio and percentage of dunite in the waste rock.All three of these parameters were influential in determining theamount of sequestered CO2, impacting the denominator used forcalculating the total unit cost of the process. These factors, how-ever, had only a very minimal impact in terms of sensitivity. Theirprimary importance was in terms of determining the scale of amineral carbonation facility, which will be dictated by the on-siteemissions that need to be offset, plus the availability of waste rockand CO2 supply. These considerations are heavily dependent on theconditions and economic circumstances of mining operations atTurnagain.

3.2. Net present value

Results of the base case scenarios generated a cost estimate of$82.51/t CO2 and an NPV8 of $131.51 million with an IRR of 25.1%for the cost model and the DCF model, respectfully. The positiveNPV of the base case suggests that mineral carbonation at Turnagainmay be a viable development path from the perspective of projecteconomics. It is important, however, to remain mindful of the con-ceptual nature of this investigation and the inherent uncertainty,surrounding model input parameters. As such, sensitivity analysisallowed for a more thorough investigation into the impacts of thisuncertainty on overall project valuation. The results of sensitivityanalysis are discussed below.

In addition to the valuation produced through financial model-ing of the base case scenario, consideration must also be given tothe financial consequences of the alternative. Should a cap-and-trade mechanism develop whereby emitted CO2 must be offset

1 The projected carbon price of $200/tonne (2027) is based on Ballantyne and Hitch(2009) projection of pricing relative to Canada’s published emissions reduction target.

financially, this scenario would generate an NPV8 of -$186.6 mil-lion. In this case, the base case NPV should no longer be evaluatedbased on whether or not it is greater than zero, but whether or notit is greater than the NPV of financial compliance. This increasesthe attractiveness mineral carbonation as a means to adapt toincoming cap-and-trade mechanisms and the financial conse-quences that may result.

As proposed cap-and-trade policy is developed and refined, fur-ther consideration must also be given to the penalties that wouldbe imposed in the case of non-compliance. Severe penalties forthose who fail to meet set emissions reduction requirements willbe a significant deterrent for those who chose not to implementadequate emissions reduction measures. The impact of these pen-alties will be an important factor to consider in the evaluation ofalternative scenarios in the context of overall project valuation.

3.3. DCF model sensitivity

Hand in hand with the significant influence of sequestrationefficiency in cost modeling is the sensitivity attributed to the CO2

avoidance ratio in DCF modeling. This parameter is the most sensi-tive for a number of reasons already mentioned, namely that it isimperative to maximize the efficiency at which CO2 is sequestered,given the required inputs both in terms of feed materials and costs.The main difference is the need to balance the ultimate amount ofCO2 sequestered versus the amount of CO2 emitted through thesequestration process itself. In this case, the CO2 avoidance ratiois critical in order to maximize the amount of net CO2 sequesteredand available to sell as carbon credits. If, during the lifecycle of themineral carbonation process, there is an excessive amount of CO2

emitted, the efforts and costs put into the process are negated.As such, ensuring that a minimal amount of CO2 is emitted duringthe mineral carbonation lifecycle will mean that the maximumnumber of carbon credits is available for sale. As a consequence,the CO2 avoidance ratio is the most sensitive parameter in deter-mining the NPV of mineral carbonation at Turnagain (Fig. 6).

Following the CO2 avoidance ratio, the price of carbon creditshas the second greatest influence on the value of mineral carbon-ation. As the sole source of revenue in the mineral carbonation pro-cess, the price per tonne of CO2 available through the sale of carboncredits has significant ramifications for overall project feasibilityby directly controlling the total available revenue. Without a sig-nificant price on carbon, there will not be an adequate source ofrevenue in order to offset the associated costs. This parameter isalso particularly important to consider since it is uncontrollablefrom the perspective of research and development. The decisionsleading to the implementation of a broad-ranging cap-and-tradeprogram lie with government officials, and depend on their posi-tion on the environment. However, the highly sensitive and

Per Cent Change From Base Case

Fig. 6. Spider plot showing sensitivity of DCF model input parameters and theirproportional contribution to the NPV of mineral carbonation.

274 M. Hitch, G.M. Dipple / Minerals Engineering 39 (2012) 268–275

influential nature of carbon price on the feasibility of implement-ing carbon reduction programs may provide significant leveragein order to lobby policymakers in support of research and develop-ment efforts. This point will become increasingly important asmore information comes to light regarding climate change andthe need for drastic carbon reduction measures.

There are a number of other parameters that have a noticeableeffect on the feasibility of mineral carbonation. Operating cost is asignificant factor in determining the feasibility of mineral carbon-ation. Similar to carbon price in terms of importance, the operatingcost directly influences the total available cash flow and conse-quently influences NPV. Following in sensitivity, the total amountof sequestered CO2 is influential in being the denominator of allunit costs; a larger amount of sequestered CO2 is able to morewidely distribute costs, therefore lowering costs on a per tonne ba-sis. Site emissions will impact project feasibility in determining thetotal amount of sequestered CO2 available to sell as carbon credits.This follows the need to first offset site emissions prior to claimingsequestered CO2 as credits to sell in the market. The influence ofthe reduction requirement stems from the same principle of deter-mining the amount of site emissions that are offset before carboncredits can be claimed. By affecting the amount of carbon initiallyrequired for offset prior to receiving carbon credits, both the siteemissions and the reduction requirement are directly determiningthe total amount of CO2 available to be sold and consequently thetotal revenue available.

Factors of less significant influence include the mine life, capitalcost, development phase duration and the cost of decommission-ing. Mine life did not have a significant impact on the feasibilityof mineral carbonation, due primarily to the impact of the time va-lue of money. Although an extended mine life will impact cashflow, when discounted back to the present time the effect of minelife is minimal. Capital cost, while initially thought to have a great-er influence on project valuation, due to the front-loaded nature ofthe cash flows, does not significantly impact project valuation. Thecapital cost required may have a more dramatic impact on the abil-ity to secure project financing, either through debt or equity. Whilethis does not necessarily impact project valuation, it may have animpact on project feasibility in determining the ability to generatefunding for project construction. Similar to the impact of capitalcost, the development phase duration also does not have a signif-icant influence on NPV, primarily due to the subdued impact ofcapital cost combined with the effect of the time value of money.Finally, decommissioning costs had a relatively insignificant influ-ence because of the cash flow timing far in the future. Again, thetime value of money is extremely influential in negating the effectsof this parameter. However, the required decommissioning of sucha project may have alternative effects in the need for significantenvironmental bonds to be held prior to project commencement.

The significance and contribution of each of the individualparameters investigated through this research cannot be ignored,but their ranking in terms of sensitivity has provided a means bywhich to prioritize further research and focus efforts on parame-ters that will results in the greatest influence on project valuation.

4. Summary and conclusion

It is becoming increasingly evident that governmental bodiesaround the world are searching for meaningful ways in which tohelp mitigate and reduce atmospheric levels of CO2. It is likely thatthis will come in the form of a cap-and-trade mechanism, given itsability to provide adequate incentives to spur innovation and effectchange. As such it is imperative that point source emitters of CO2

prepare for the potential adverse effects that may result from putt-ing a price on carbon. This is particularly important in the mining

industry, where mine economics may be significantly impacted bythe financial implications of cap-and-trade. Carbon sequestrationthrough mineral carbonation may be a viable option in order to off-set mine emissions and potentially generate an additional revenuestream through the sale of excess carbon credits. The implementa-tion of mineral carbonation, as opposed to many of the other sug-gested forms of carbon sequestration, has the advantage ofproducing a stable by-product with a reduced risk of CO2 leakage,as well as the potential for a more accurate verification processquantifying the amount of CO2 sequestered.

This research has produced a preliminary analysis of the finan-cial feasibility of integrating mineral carbonation into proposedmining operations at the Turnagain nickel site in Northern BC.Through the initial development of a conceptual cost model forthe lifecycle of mineral carbonation, an operating cost of $82.51/tCO2 was determined. This was necessarily due to the wide arrayof cost estimates in the literature, and the inconsistent inclusionof all the necessary steps in the lifecycle of mineral carbonation.This research has therefore attempted to generate a more compre-hensive and all-encompassing estimate of the cost of mineral car-bonation, in order to more accurately approximate input costs forfurther financial modeling. A preliminary financial model using adiscounted cash flow approach was then developed, generating abase case NPV8 of $131.5 million and an IRR of 25.1% in the pres-ence of a cap-and-trade program (N.B. based on a projected 2027Carbon price of $200/tonne). This suggests that project implemen-tation may be viable from a financial perspective. However, consid-eration for the conceptual nature of these analyses required acomprehensive sensitivity analysis. From the cost model, the mostinfluential parameter was found to be the sequestration efficiencyof reaction, whereas the most influential parameter in DCF model-ing was found to be the CO2 avoidance ratio of reaction. The impor-tance of these two parameters reinforces the need for a balancebetween maximizing sequestration efficiency and minimizingCO2 emitted during the mineral carbonation process.

These results have a direct impact on continued research effortsin the field of mineral carbonation. In the future, the developmentof mineral carbonation technologies and methodologies will needto take the net amount of sequestered CO2 into primary consider-ation in order to maximize efforts towards the development of afeasible process. Previous efforts have been aimed towards themaximum sequestration efficiency of reaction, but this researchhas demonstrated that this is not the best course of action whenconsidering the overall feasibility of mineral carbonation. Focusingon the CO2 avoidance ratio and net sequestration effect will notonly be beneficial from an environmental standpoint, it will alsoresult in a process that has the greatest value for investors. By max-imizing the value of the process, the likelihood of implementing amineral carbonation scheme on an industrial scale is greatly in-creased. It is this aspect of mineral carbonation that should there-fore be the focus of further research and development.

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