GNS Science Report · Rotokawa). Chloride, sodium, silica and potassium (generally in that order decreasing of concentration) were the most common components of the geothermal brine

© Institute of Geological and Nuclear Sciences Limited, 2016 www.gns.cri.nz

ISSN 1177-2425 (Print) ISSN 2350-3424 (Online) ISBN 978-0-947510-46-6 (Print) ISBN 978-0-947510-47-3 (Online)

1 GNS Science, Wairakei Research Centre, Private Bag 2000, Taupo 3352, New Zealand.

DISCLAIMER

The Institute of Geological and Nuclear Sciences Limited (GNS Science) and its funders give no warranties of any kind concerning the accuracy, completeness, timeliness or fitness for purpose of the contents of this report. GNS Science accepts no responsibility for any actions taken based on, or reliance placed on the contents of this report and GNS Science and its funders exclude to the full extent permitted by law liability for any loss, damage or expense, direct or indirect, and however caused, whether through negligence or otherwise, resulting from any person’s or organisation’s use of, or reliance on, the contents of this report.

BIBLIOGRAPHIC REFERENCE

Climo, M.1; Mroczek, E.1; Carey, B.1 2016. Mineral Extraction from Geothermal Brines in New Zealand: 2016 Update, GNS Science Report 2016/28. 26 p.

http://www.gns.cri.nz/

GNS Science Report 2016/28 i

CONTENTS

ABSTRACT .......................................................................................................................... III

KEYWORDS ......................................................................................................................... III

1.0 INTRODUCTION ........................................................................................................ 1

1.1 THE POTENTIAL FOR A GEOTHERMAL MINERALS INDUSTRY ................................................ 1

2.0 “FROM WASTE TO WEALTH” RESEARCH PROGRAMME .................................... 2

3.0 SUMMARY OF CORE STUDIES ................................................................................ 4

3.1 CHEMICAL COMPOSITION OF GEOTHERMAL FLUIDS ........................................................... 4 3.2 EXTRACTION TECHNOLOGIES ........................................................................................... 6 3.3 MARKET OPPORTUNITIES ................................................................................................. 7 3.4 LEGAL RIGHTS ................................................................................................................. 7

4.0 PROPOSED FUTURE WORK THEMES .................................................................... 9

4.1 FLUID COMPOSITION ........................................................................................................ 9 4.2 TECHNOLOGIES ............................................................................................................. 10 4.3 INTEGRATED PLANT DESIGN ........................................................................................... 10 4.4 MARKET DRIVERS .......................................................................................................... 11 4.5 LEGAL FRAMEWORKS ..................................................................................................... 11 4.6 MANAGING BUSINESS RISK ............................................................................................ 12 4.7 FINANCIAL MODELLING ................................................................................................... 12

5.0 SUMMARY ............................................................................................................... 13

6.0 CONCLUSION .......................................................................................................... 14

7.0 ACKNOWLEDGEMENTS ......................................................................................... 14

8.0 REFERENCES ......................................................................................................... 15

FIGURES

Figure 2.1: Diagrammatic overview of the “From Waste to Wealth” research programme components. ........ 2 Figure 3.1: Geothermal areas in the TVZ and Ngawha discussed in the text. ................................................ 5 Figure 5.1: Interdependence and connections between the success factors for developing a geothermal

minerals industry in New Zealand. ............................................................................................. 13

TABLES

Table 2.1: Elements and anions, included in this study and their chemical symbol/formula.......................... 3

GNS Science Report 2016/28 ii

APPENDICES

APPENDIX 1: ANNUAL FLUX OF MAJOR ELEMENTS ..................................................... 17

APPENDIX 2: FEEDBACK AND QUESTIONS ARISING FROM THE STAKEHOLDER WORSHOP ................................................................................................... 18

A2.1 FLUID COMPOSITION ...................................................................................................... 18 A2.1.1 Data Quality/Quantity ..................................................................................... 18 A2.1.2 International Comparison ............................................................................... 19 A2.1.3 Resource Management .................................................................................. 19

A2.2 INTEGRATED PLANT DESIGN ........................................................................................... 19 A2.3 TECHNOLOGIES ............................................................................................................. 21

A2.3.1 Silica ............................................................................................................... 21 A2.3.2 Lithium ............................................................................................................ 21 A2.3.3 Gold and Precious Metals .............................................................................. 21 A2.3.4 Gases ............................................................................................................. 21 A2.3.5 Biological ........................................................................................................ 21 A2.3.6 Other ............................................................................................................... 21

A2.4 MARKET DRIVERS .......................................................................................................... 22 A2.4.1 Picking Winners .............................................................................................. 22 A2.4.2 Markets ........................................................................................................... 22 A2.4.3 Market Economics .......................................................................................... 22 A2.4.4 Value Proposition ........................................................................................... 23 A2.4.5 Specific Products ............................................................................................ 23

A2.5 LEGAL FRAMEWORKS ..................................................................................................... 23 A2.5.1 RMA vs CMA .................................................................................................. 23 A2.5.2 Ownership ...................................................................................................... 24 A2.5.3 Minerals in Water............................................................................................ 24 A2.5.4 Other ............................................................................................................... 24

A2.6 FINANCIALS AND RISK .................................................................................................... 25 A2.6.1 Commercialisation Funding Gap .................................................................... 25 A2.6.2 Economic Viability .......................................................................................... 26

GNS Science Report 2016/28 iii

ABSTRACT

New Zealand’s geothermal brines offer potential for the extraction of various metals and minerals, given both the fluid compositions and volumes discharged. The realisation of commercial value from the extracted constituents could create new industries, support economic development, and potentially provide additional revenue streams for geothermal energy generation and related industries.

This 2013-2015 New Zealand Government-funded research programme “From Waste to Wealth” (Ministry of Business, Innovation and Employment research contract C05X1307), identified potential processing technologies and sought to develop a greater understanding of the barriers and success factors likely to influence the implementation of such technologies.

This report is the final summary and compilation of this research programme. It summarises the four core studies completed to date and compiles stakeholder feedback on the findings. Also, recommendations are made for New Zealand’s future research and investment in this area.

KEYWORDS

New Zealand, mineral extraction, geothermal brines, silica, lithium, market drivers, regulatory framework, legal rights, technologies, chemical composition, economic viability.

GNS Science Report 2016/28 1

1.0 INTRODUCTION

This report is the final summary and compilation of an inquiry into the commercial potential in New Zealand for the extraction of dissolved minerals and metals (for example silica, lithium, silver and gold) from geothermal fluids under the Ministry of Business, Innovation and Employment “From Waste to Wealth” research programme (CO5X1307).

All programme reports, workshop presentations and outputs are accessible at: www.waste2wealth.co.nz.

1.1 THE POTENTIAL FOR A GEOTHERMAL MINERALS INDUSTRY

In New Zealand, geothermal fluids are used as a source of heat energy, used directly and for generating electricity. However, the composition and high volume of geothermal fluids discharged in New Zealand also offers promise for the possible extraction of some metals and minerals.

While the mineral and metal extraction opportunity was first identified in the 1960s (Kennedy, 1961), it remains to be realised. Questions remain, such as:

• What are the technical options for extraction from the geothermal fluid streams and what are potential investment opportunities?

• Could economic, social and environmental benefits arise from creating industry around some of these minerals?

• Will New Zealand develop world leading capabilities in processing technologies and in so doing further improve geothermal energy productivity, industry value and open up international opportunities?

There is a need to identify simple, cost-effective processing technologies, and to provide a greater understanding of the economic viability, market drivers and regulatory barriers for implementing such technologies.

http://www.waste2wealth.co.nz/


2.0 “FROM WASTE TO WEALTH” RESEARCH PROGRAMME

New Zealand-based researchers undertook a small study (“From Waste to Wealth”, 2013-2015, Figure 2.1) to provide a starting point for this assessment (Mroczek et al., 2015a). The purpose was to determine the commercial potential and best technical options for encouraging future investment in technologies for the extraction of saleable products from geothermal fluids.

This research programme consisted of four core studies (Figure 2.1):

1. Geothermal fluid composition: A literature review updating and summarising the publically available data on chemical composition of geothermal waters from wells in the Taupo Volcanic Zone and Ngawha, with the aim of characterising the “typical” reservoir water composition for the developed, high-temperature geothermal systems.

2. Technology review: A summary of the mineral extraction work undertaken in New Zealand to date, adding material from relevant overseas studies and the authors’ catalogue of techniques, with a focus on silica, lithium, boron and rubidium and cesium in New Zealand separated geothermal waters (SGW).

3. Market drivers: A market analysis on potential products from geothermal brines, focussing on silica, lithium, boron, caesium, potassium, sodium along with rubidium, magnesium and gold.

4. Regulatory framework: A legal analysis of the rights to minerals that may be obtained in geothermal fluids, including principally the Resource Management Act (RMA), and Crown Minerals Act (CMA).

Figure 2.1: Diagrammatic overview of the “From Waste to Wealth” research programme components.


Recognising that active end user engagement is vital to develop a geothermal minerals industry in New Zealand, the research programme culminated with a stakeholder workshop (July 2015) to integrate and validate the work to date. Over sixty participants attended, with representatives including power companies, regional and local government, independent contractors, universities, crown institutes, Maori Trusts and businesses, engineering companies and central government. The presentation of the core reports was followed by wide ranging facilitated discussion and expert panel commentary. Feedback, ideas and questions were collated from the participants to guide future research direction and investment decisions.

This report summarises the four core studies (Section 3) and compiles the stakeholder feedback on these findings (Section 4).

The elements and compounds of interest in the geothermal fluids are listed in Table 2.1. Generally, in this report the species symbol has been used rather than the full name.

Table 2.1: Elements and anions, included in this study and their chemical symbol/formula.

Au Gold K Potassium

Ag Silver Li Lithium

B Boron Mg Magnesium

Ca Calcium Na Sodium

Cl Chloride Rb Rubidium

Cs Cesium SiO2 Silica

Cu Copper SO4 Sulphate

HCO3 Bicarbonate


3.0 SUMMARY OF CORE STUDIES

The “From Waste to Wealth” programme was proposed as four core studies (Figure 2.1).

Four publically available reports seek to address four underlying questions:

1. Chemical fluid composition: what have we got? (Mroczek et al., 2015b) 2. Legal rights: what permissions are needed? (Barton, 2015) 3. Technology review: how do we do it? (Mroczek et al., 2015c) 4. Market drivers: who wants what we have? (Hill, 2015.)

This section overviews the aims of each core study and the key findings.

3.1 CHEMICAL COMPOSITION OF GEOTHERMAL FLUIDS

The aim of this study (Mroczek et al., 2015b) was to determine the quantities of minerals and metals that are potentially available for extraction from New Zealand’s geothermal fluids.

The chemical composition for each of New Zealand’s developed, high-temperature geothermal systems (Figure 3.1) was updated and summarised using data from wells in the Taupo Volcanic Zone (TVZ) and Ngawha (Appendix 1).

The data used came from published historical data, as well as that released for the study by geothermal field operators. The “typical” reservoir water composition was characterised. Most information was available on the major chemical constituents: Na, K, Ca, Cl, B, SiO2, SO4 and HCO3, but also minor components of Li, Rb, Cs and Mg. These data are available because these constituents are used to monitor the hydrological effects of geothermal production. Limited information was available for trace elements and precious metals (Au, Ag and Cu) as they are of low concentration in surface discharges and rarely analysed

Observations include that the TVZ southern fields (Mokai, Wairakei and Tauhara) are characterised by high chloride and lithium compared to eastern fields (Kawerau, Ohaaki, Rotokawa). Chloride, sodium, silica and potassium (generally in that order of decreasing concentration) were the most common components of the geothermal brine. The remaining components are low in comparison to these four. A notable difference to this trend is at Ngawha, where boron becomes the third highest dissolved solid. Ngawha’s composition is low in silica (as the reservoir temperatures are lower ~ 230°C) but the boron is 25x higher than any of the TVZ fields. The high boron concentrations are thought to arise from leaching from the B-rich basement occurring at low water/rock ratios (Aggarwal et al., 2003).

It is not only constituent concentrations but also the total constituent mass discharge that will likely determine extraction economics. To reflect this, both the concentration and consented quantity of geothermal fluid for each field were used to calculate the species mass flux. Wairakei had the highest mass discharge of Cl, Li, Rb, Ca, K and Na, while Kawerau had the highest silica flux. Of the minor elements, rubidium at Wairakei and cesium at Mokai have not inconsiderable annual discharges (~143 and ~89 t/y respectively). Appendix 1 – Table A 1.1 lists the discharges from all the geothermal fields considered (Mroczek et al., 2015b).

There are very few studies that have been published on precious metal trace elements, such as gold, silver and copper. Core and scale sample are typically enriched in these trace elements and are not representative of their respective dissolved concentrations. Their concentration in geothermal waters are very low (measurable in µg/kg; ppb) and have generally been measured on water samples collected downhole (Simmons et al., 2016). The downhole concentration does not necessarily represent the concentration of these elements in fluids at the surface, which is often lower due to deposition on well casing or surface piping.


Figure 3.1: Geothermal areas in the TVZ and Ngawha discussed in the text. Fields with compositional data are

in bold font and identified with a red dot.


3.2 EXTRACTION TECHNOLOGIES

This study (Mroczek et al., 2015c) summarised publically available information on mineral and metal extraction work undertaken in New Zealand. Material was also added from relevant overseas studies. The study focussed on options for extraction of silica, lithium, boron and rubidium and cesium from New Zealand SGW.

A number of technologies have been trialled at a pilot scale, but many only at an experimental and laboratory scale. Generally, there were three main types of processes; absorption, concentration and precipitation. Often these are used in series. Specific techniques that have been used include filtration, electrocoagulation, electrodialysis and ion-exchange resins.

Silica is the most principal mineral to extract, as this mineral limits energy extraction efficiency, and hence is the species that has the most research and development to date. Silica techniques reviewed included precipitation as metal silicates (primarily as calcium silicate); precipitation by cationic flocculants; removal by dissolved air flotation; deposition onto seed particles; and ultrafiltration. Given the level of previous trials and testing on silica in New Zealand (including international pilot scale studies), the barrier to extraction of silica is considered not to be technical. Silica extraction from SGW could:

• open up opportunities for additional energy extraction; • offset costs associated with other silica control techniques currently in use; • be a prerequisite to the extraction of other species from the SGW.

Lithium has received the second most focus, after silica. Despite its potential being recognised in New Zealand in the late 1950s (Kennedy, 1961), it is the recent increasing demand for automotive batteries for electric cars that has revived interest for possible extraction from geothermal fluids. Lithium techniques reviewed included co-precipitation with aluminium hydroxide; manganese oxide (spinels) and cation exchange resins; electrodialysis; and evaporation. Few laboratory trials have been undertaken, with none being pilot tested. The low concentration in New Zealand SGW (10-30 mg/L) compared to highly saline brines found elsewhere (200-5000 mg/L) could be an impediment to economic extraction.

Internationally boron extraction has focused on environmental remediation, not economic recovery. There have been no published field trials or pilot tests of boron extraction from SGW in New Zealand. Boron techniques reviewed included precipitation/absorption (e.g., clays, electrocoagulation, chelating resins); and concentration (e.g., ion exchange; reverse osmosis, solvent extraction). There are limitations in the applicability of these techniques to geothermal waters, for example some reagent based extraction processes suitable for high boron concentrations (> 0.3%) are only efficient at temperatures less than 30°C. Technology development is required in this area. In New Zealand geothermal fluids, boron is present at low concentrations (40 mg/L), except at Ngawha (1000 mg/L), so enrichment technologies may also be required.

Cesium and rubidium are minor but potentially valuable components in SGW. No studies have been published on extraction of these constituents from New Zealand SGW. Successive extraction processes to remove silica, lithium and boron will leave the residual water concentrations of these two constituents essentially intact. However, the small market for these metals and adequate world supply means that any process would need to be highly efficient and cheap. Methods for removing these metals include solvent extraction and ion-exchange.

Technologies for extracting precious metals, such as gold, silver and copper, from geothermal fluids have not yet been developed. Their very low concentration in SGW means that extraction is likely to be economically marginal.


3.3 MARKET OPPORTUNITIES

This study (Hill, 2015) undertook a market analysis for potential products from the species present in geothermal fluids. The focus was on silica and lithium, with some information also provided for boron, cesium, rubidium, sodium, potassium, magnesium, and gold. Opportunities identified include dispersed silica for automotive tires, battery grade lithium salts and borate fertilisers.

In principal, each of these elements/constituents has opportunity for high value product. However, the market opportunity is highly dependent on the detailed nature of the downstream product. Some niche products, such as colloidal silica, could command a significant premium over other potential extract forms of silica. Similarly, some forms of organo-lithium command a significantly higher price than battery grade lithium salts. However, the amount of processing required to manufacture a suitable quality product will need careful consideration with respect to relative margin.

The physical nature of the product is important (e.g., purity, morphology). Also geographic market considerations will dictate the applicability of a New Zealand based supply chain. For maximising market opportunity, the aim will be to identify the correct customer/price level within the supply chain for the specific (possibly niche) finished product to return higher margins. Markets are dynamic, and economic feasibility of mineral extraction is anticipated to be driven by the international mineral price and the price path.

3.4 LEGAL RIGHTS

This study (Barton, 2015) undertook a legal analysis of rights to minerals in geothermal fluids in New Zealand. Rights to dissolved minerals and other materials in geothermal fluids are not dealt with explicitly in New Zealand law, so the legal position must be determined by the application of general legislation and the general principles of law. The analysis assumed that a geothermal minerals operation is likely to be ancillary or incidental to a geothermal energy facility.

In New Zealand, the sole right to tap and use geothermal energy, falling short of explicitly conferring ownership, is vested in the Government. Geothermal resources are treated as water, and their use is managed regionally under the RMA 1991.

The legal analysis concluded that:

• the use of the term “water” in the RMA includes material dissolved or entrained in geothermal water;

• management of water under the RMA includes the granting of rights to such material as part of water more generally;

• a regional council has jurisdiction over the materials in geothermal water, and has obligations to manage them under the RMA; and

• the RMA provides a number of justifications for regional council to look favourably on a geothermal minerals operation.

This conclusion is reinforced by reference to other legislation. Subject to the specific terms on which it was granted, an RMA water permit gives its holder the rights, otherwise vested in the Crown, to take and use water in terms that include the matter and material dissolved or entrained in water. This means that the use of the minerals and other dissolved materials could be included in the RMA permit. Once it comes into the pipe system of the permit holder company, the water (and its dissolved materials) is the property of the company.


Even with close legal analysis it is not possible to determine definitively whether or not the CMA 1991 also applies to a geothermal minerals operation. The CMA uses general words to define “mining” as “to take, win, or extract, by whatever means” a mineral in its natural state in land. This could include geothermal minerals operations. It provides no exception for geothermal minerals, and it provides no exception for a taking of minerals incidental or ancillary to another operation. A court could decide that it should take an integrated view of a geothermal project and not consider a mineral extraction component in isolation. On the other hand, it is also arguable that the purpose and context indicate that the CMA does not intend to catch an ancillary or incidental operation, particularly where it involves lawful extraction of geothermal water bearing minerals dissolved in solution and where the operation cannot be described as taking minerals in their natural state.

If a geothermal minerals operation is “mining” under the CMA, then the consequences are that the company must obtain a mining permit and must comply with other obligations under the Act, as well as complying with the RMA. The CMA’s requirements are notably different in obligations to supply information that will in due course be made public.

The options for geothermal mineral operations are either to test the uncertainty in court, or promote reform of the law to get clarity. As a matter of policy, the uncertainty about the CMA should be removed by law reform in order to reduce risk and improve the level of regulatory certainty.


4.0 PROPOSED FUTURE WORK THEMES

This section summarises the identified gaps, questions and recommendations for future work in the extraction of minerals from geothermal brines. This information arose from integration of the core studies and the feedback gained through the stakeholder workshop (Climo et al., 2015).

The detailed information as received at the stakeholder workshop can be found in Appendix 2. The contained information combines (i) transposed notes from post-it notes contributed by participants in the workshop and (ii) the verbal questions, discussion and comments.

The future work has been summarised into seven themes:

1. Fluid Composition

2. Technologies

3. Integrated Plant Design

4. Market Drivers

5. Legal Frameworks

6. Managing Business Risk

7. Financial Modelling

4.1 FLUID COMPOSITION

The compositional and flux data for New Zealand’s geothermal fields is the underpinning information required to guide the development of geothermal mineral extraction processes and markets. The next step is to fill the identified data gaps, gather more data, undertake international comparisons, and to clarify sustainability.

Positive feedback on the initial study included questions around the robustness of the data and the usefulness of additional comparative analysis.

Suggested new work areas include:

• update data for geothermal fields where the public data is over 10 years old;

• calculate mass flux using actual flows and part-flows;

• investigate the change in species composition and chemistry with time;

• investigate mineral resource sustainability especially given that demineralized waters are re-injected and potentially recycled through a resource;

• look for single wells with unusually high concentrations of selected constituents;

• include other constituents, such as arsenic, mercury, antimony and gases (e.g., carbon dioxide, hydrogen sulfide);

• investigate concentration changes with depth;

• undertake a study to measure trace elements concentrations in surface discharges from wells (not down-hole);

• compare New Zealand data with major geothermal fields internationally and with seawater.


4.2 TECHNOLOGIES

Laboratory, pilot and full-scale demonstration of technologies for geothermal mineral extraction in New Zealand are required. The next step is to develop, test, adapt and/or validate extraction technologies under New Zealand conditions.

The stakeholder workshop was rich with suggestions, such as:

• pilot scale testing of lithium extraction technologies;

• test, adapt and/or develop new technologies for extraction specifically from geothermal fluids, for example boron, cesium, rubidium;

• blue sky research into new technologies for downhole gold and precious metal extraction;

• examine methods for purifying geothermal off-gases (e.g., CO2);

• investigate biological opportunities, such as micro-nutrients and bioremediation;

• examine the opportunities for using novel methods (often untested at large scale) such as nano-materials and biotechnologies;

• determine the techno-economics to make the choice clearer.

4.3 INTEGRATED PLANT DESIGN

Geothermal mineral/metal recovery is most likely to be feasible either by, or in partnership with, geothermal energy production, for both practical and economic reasons. Geothermal plants are already RMA permitted and are experienced in processing, handling and disposing of geothermal fluids.

A cluster of processes, individually uneconomic, may be the catalyst to move the technology from technically possible to be adopted. Also, the implicit assumption is that none of these extraction processes would be viable without ready access to SGW and easy integration into an energy production process. It is assumed that the cost for stand-alone production and disposal of fluid for the express purpose of minerals extraction is unlikely to be economically viable in the next few decades, but a stand-alone operation can be analysed. Whether integration could be achieved with existing infrastructure is a crucial point of discussion and assessment.

The next step is to examine process design options for integration with existing plant facilities, and to determine the economics of integration. Suggested work areas include:

• calculate and compare the economics of a stand-alone operation versus integration with an existing plant;

• examine the synergies possible through access to heat, electricity and extraction;

• examine options for retrofitting extraction methods and existing plant;

• model alternatives for process integration;

• calculate the cost benefit position for silica extraction assisting power generation;

• determine the learnings/outcomes from previous pilot scale trials in New Zealand and overseas.


4.4 MARKET DRIVERS

Geothermal minerals and compounds could have market suitability, based on a matrix of considerations. The physical nature of the product is important, including compound, purity, morphology as is the consistency of supply and product support. The price and value chain needs to be determined, including identifying the entry point and customer and price level to the supply chain. Also, the geographic market considerations must be identified, where New Zealand can be competitive in the supply chain.

The next step is deeper and wider market analysis to provide greater detail to inform these considerations. Suggested work areas include:

• determine the strategic advantage and value proposition of extracting minerals from New Zealand’s geothermal fluids;

• identify complementary existing markets and supply chains in New Zealand;

• investigate market segments where niche products could be viable;

• identify correct customer/ price level within the supply chain for the finished product(s);

• calculate the economics of conventional versus geothermal production;

• examine the opportunities that might arise from international geopolitical influences, supply and demand commodity cycles, environmental issues/ reputation and disruptive technologies.

4.5 LEGAL FRAMEWORKS

Clear legislative and legal frameworks are essential to de-risk a geothermal minerals operation in New Zealand. There is particular uncertainty in the application of the CMA, and little information about Maori perspectives on this opportunity. The next step is to clarify the position of the governing Acts and their implementation.

Suggested work areas include:

• clarify the Crown’s stance with regards to the CMA as it relates to geothermal mineral extraction;

• investigate the CMA regards applicability for mining geothermal minerals versus ancillary extraction by an energy company;

• determine whether existing RMA consents authorise the use of geothermal minerals and the position of Regional Councils;

• examine the legal position of previous trial plants in New Zealand for mineral extraction from geothermal fluids;

• examine the kaitiaki obligations for geothermal mineral extraction and Maori perspectives;

• examine examples of international legal positions.


4.6 MANAGING BUSINESS RISK

The path to market must be de-risked for a geothermal minerals industry to be realised in New Zealand. There is opportunity to look for value, other than for energy, from geothermal resources, but a mind-set shift is expected to be needed on risk. It is assumed that a geothermal minerals operation will occur alongside a geothermal energy development, which means connecting two different business risk mind-sets; a more risk-averse utilities company with a mining/commodity-based company with a greater risk appetite. The balance of risk and reward is different for each type of company and its investors.

The next step is to examine risk profiles, explore alternative business models and deliver commercial proof. Suggested work areas include:

• define the role of government, investors, industry and others;

• survey boards, senior management and government to determine their risk appetite for geothermal mineral operations;

• determine opportunities for bridging the commercialisation funding gap to go beyond desktop and pilot scale demonstration to full-scale commercial facilities;

• examine how business decisions influenced the discontinuation of previous pilot scale plants;

• determine why international extraction projects failed or were discontinued;

• assess options for mitigating against commodity supply and demand cycle impacts;

• investigate appropriate business models for use in a geothermal minerals operation.

4.7 FINANCIAL MODELLING

A holistic and integrated approach is needed to determine the economic big-picture for a geothermal minerals industry in New Zealand. Robust financial models are needed to integrate the technology economics data and product pricing. Prioritisation will be necessary, as financial modelling will not be practical for all potential products, with many being a long way from market-ready. However, it will be beneficial to establish a financial modelling framework that can be applied to a range of minerals/products in future.

The next step is to develop/adapt financial models to suit a geothermal minerals operation. Financial models would incorporate data such as:

• market pricing;

• capital and operating costs;

• process yields;

• macroeconomic benefits.

The development of a new geothermal minerals industry is reliant on geothermal industry and others making investment decisions based on these results. A key aspect of this work will be the robustness of the financial modelling. This will rely on the outcomes of other activities, such as the integrated plant design, de-risking and market analysis. Industry “buy-in” to the approach and sound assumptions will be essential.


5.0 SUMMARY

This matrix of future studies builds on the initial four topics, and adds depth in economics, integration and business structure (Figure 5.1). To deliver value future work will be multi-disciplinary, combining and integrating expertise in scientific, engineering, legal, business, economic and social research.

The key to successfully developing a geothermal minerals industry in New Zealand is economic viability. Figure 5.1 illustrates the connections between the technology, economics, market drivers and business risk that directly influence economic viability. In turn, the legal frameworks, technologies, and ultimately the chemical composition of the geothermal fluid in a given location, influence these factors.

Figure 5.1: Interdependence and connections between the success factors for developing a geothermal minerals

industry in New Zealand.


6.0 CONCLUSION

The development of a geothermal minerals industry is a real possibility for New Zealand, leveraging our geothermal resource assets and experience. The market-readiness varies by product, with silica the most advanced, followed by lithium, and then a number of other species and compounds.

The outputs and delivery of the “From Waste to Wealth” research programme are a solid starting point in identifying potential processing technologies, and providing a greater understanding of the barriers and success factors likely to influence the implementation of such technologies. The programme generated significant interest and support from stakeholders.

This research provides a springboard to pursue future funding in partnership with stakeholders, with definition of a forward programme of work that is inter-connected having been developed from informed and robust stakeholder interaction.

7.0 ACKNOWLEDGEMENTS

This work was funded by The New Zealand Ministry of Business, Innovation and Employment under contract number C05X1307.

The authors would like to acknowledge the contribution of all who participated in the stakeholder workshop. Also to those who supported the research studies with data and expertise, and to those who provided feedback on the research reports.

Thank you – your involvement was invaluable and greatly appreciated.


8.0 REFERENCES

Aggarwal, K; Sheppard, D; Mezger, K; Pernicka, E. 2003. Precise and accurate determination of boron isotope ratios by multiple collector ICP-MS: origin of boron in the Ngawha geothermal system, New Zealand, Chemical Geology, Volume 199, 3-4, 331-342.

Barton, B. 2015. Legal rights to minerals in geothermal fluids. Centre of Environmental, Resources and Energy Law, University of Waikato. ISBN 978-0-473-31289-3 (softcover); ISBN 978-0-473-31290-9 (PDF). Also available as GNS Science Miscellaneous Series 75, ISSN 1177 (print); ISSN 1172-2886 (online).

Climo, M.; Mroczek, E.; Carey, B.; Hill, A.; Barton, B. 2015. Mineral Extraction from New Zealand’s geothermal brines: Where to next? Proceedings: New Zealand Geothermal Workshop, Wairakei, New Zealand, 18-20 November 2015. 7 p.

Hill, A. 2015. Market drivers for commercial recovery of products from geothermal fluids. Hill Technology and Management. 67 p. Also available as GNS Science Miscellaneous Series 81; ISBN 978-0-478-19996-3 (print), 978-0-478-19997-0 (online).

Kennedy, A.M. 1961. The recovery of lithium and other minerals from geothermal water at Wairakei. In: proc. of the UN Conf. on New Sources of Energy, Rome. Paper G/36, p502.

Mroczek, E.; Climo, M.; Carey, B. 2015a. Waste to Wealth: mineral extraction from geothermal brines. Proceedings: World Geothermal Congress, Melbourne, Australia, 19-25 April, 2015. 7 p.

Mroczek, E.; Climo, M.; Evans, D. 2015b. The composition of high temperature geothermal fluids in New Zealand producing geothermal fields. GNS Science Report 2014/68. 25 p.

Mroczek, E.; Carey, B.; Climo, M.; Li, Y. 2015c. Technology review of mineral extraction from separated geothermal water, GNS Science Report 2015/25. 32 p.

Simmons, S.F.; Brown, K.L.; Browne, P.R.L.; Rowland, J.V. 2016. Gold and silver resources in Taupo Volcanic Zone geothermal systems, Geothermics, 59, 205-214.


APPENDICES


APPENDIX 1: ANNUAL FLUX OF MAJOR ELEMENTS

Table A 1.1: Total annual flux of the major elements for producing geothermal fields in New Zealand.

Total annual flux (t/yr)

Consented daily take

(t/d)

Consented annual take

(t/yr) Cl Na SiO2 K SO4 B Li Ca Rb Cs Mg tHCO3

Wairakei (WK) 245,000 89,425,000 132260 80930 41046 12580 2826 1789 850 1270 143 894

Kawerau (KW) 159,680 58,283,200 59915 45985 55602 6936 4022 3322 367 128 41 35 1 18359

Rotokawa (RK) 65,500 23,907,500 26274 15133 27804 4184 311 717 189 53 50 38 2678

Ngatamariki (NM) 60,000 21,900,000 31558 19535 20477 4008 263 504 199 81 35 37 1 2190

Ohaaki (BR) 40,000 14,600,000 9067 7285 6585 1285 276 292 92 10 10 15 6731

Mokai (MK) 40,000 14,600,000 51684 26032 15622 7100 263 584 423 194 72 89 88

Tauhara (TH) 30,000* 10,950,000 14980 8355 5486 1653 252 263 103 84 18 14 416

Ngawha (NG) 25,000 9,125,000 10503 7619 3294 584 256 7619 256 52 3 5 2 4161

* Tauhara has been consented for 213,000 t/d including Tauhara II; however, this consent is yet exercised so, the current take for Tauhara I has been used for these calculations.


APPENDIX 2: FEEDBACK AND QUESTIONS ARISING FROM THE STAKEHOLDER WORSHOP

A2.1 FLUID COMPOSITION

A2.1.1 Data Quality/Quantity

• Chemistry development: robust dataset. • Comparative analysis of fluid chemistry across fields useful.

• The data compiled with the research. What are you going to do with it? How’s this to help with decision making?

• To determine the entire “universe” you need to use SGW flow rather than corrective mass take, due to different steam rates.

• Is total mass flux of any real significance? Isn’t relative concentration more likely to impact economics?

• Why such interest in the total mass flux?

• Need to get more data public for [geothermal] fields. • Chemical analysis of protected and research fields.

• How old is the data and is it still valid?

• Ngawha and Mokai data needs to be updated. • Is there more data about changes in chemistry with time?

• Does one field have a well that has higher concentration [of a constituent] than others?

• Data use for all wells or only production wells data? • Number of samples – are they representative?

• What are the true D/H trace values for each field? One well / field is not necessarily representative.

• Do the data samples we have from each field represent recent changes and new wells? Deep drilling etc @ Te Mihi.

• What is the composition of species in gases/ steam fraction?

• Chemical analysis: arsenic, antimony.

• Should include CO2 flux in the report. • Also should include contaminants – is data available?

• Include antimony, mercury and arsenic in the report.

• Are any specific wells far better than their field average for a specific element? • What is a statistic composition? of average composition. Influence of host rock needs to

be defined. ex Ngawha. • Why not look at hot springs – Te Aroha etc.

• Do you know variations between outflow- inflow? • Depth rates – understand concentrations at depth. If we drill deeper will it make wells

more prospective/ commercially viable? • What is the relative concentration of these constituents relative to seawater?

• What are the concentrations of Au, Ag and Li in geothermal vs seawater? Why is sea water less attractive?


A2.1.2 International Comparison

• Include comparative data from major fields overseas. Answer question: Why has this not been done elsewhere? Who else has done this? International case studies/ ideas.

• Should include overseas geothermal fields – compare with international concentrations.

A2.1.3 Resource Management

• What is the change in chemistry over time? Data over 20 years to understand extraction potential over the economic life of an extraction plant?

• How will long term extraction change the composition of the reservoir? Will this permanently damage the reservoir?

• How sustainable are the stated concentrations following extraction and injection over time? That is, what is the actual magnitude of resource?

• What is the potential for component concentration to change through an extraction process? This will limit economic benefits in the long term if depletion can occur.

• With depleting concentrations over time. How long would a project on a field be economic? How would you potentially build for this?

• Effect of utilisation?

• What environmental effects? if we do nothing...

• What risks are there if we do nothing?

• What will happen once fluids are re-injected without minerals? Will they reabsorb minerals or will it be depleted when it is produced a second time?

• The potential adverse effects on the sustainability of the resource e.g., the field capacity.

• In extracting minerals, what are the environmental effects that need to be considered- positive or negative? (e.g., cultural effects/ contaminants etc.). Unanticipated effects?

• Management of the reservoir in a sustainable manner (pressure/temp). Should mineral extraction be developed to enable greater / longer use of fluid?

A2.2 INTEGRATED PLANT DESIGN

• The last 30 years of technology we mostly have this down.

• Oversupply of power – so opportunity for mineral extraction.

• Opportunity to improve effectiveness/ reduce costs and reinjection. (Provides low cost solution to adding bottoming plant)

• Do power operators think mineral extraction technologies could be integrated with electricity generation?

• Economics – standalone vs power station; is minerals a resource in its own right?

• What level of interest is needed from power producers to be involved in extraction to improve power processs/economics?

• Combination of silica extraction with power plant production to reduce/ enhance utilisation.

• Should combine power stations with extraction.

• New plant/existing plant. Find the balance point where silica extraction can assist power generation, as this has diminishing returns.


• What level of processing – how much of the fluids makes the most sense to treat?

• Is there value to work closely with geothermal power operators to make this viable? Mineral extraction.

• Silica extraction should be considered as complimentary to power station development.

• Could you process one well only?

• Should calculate financial savings for a power station if silica was dealt with.

• Study relating to retrofitting extraction methods with existing plant/operations.

• Could a well couplet on a single pad that is not in use be economically used, perhaps with injected acid /absorbant’s? NM1/NM8?

• What is the ideal time for changing technologies?

• Cal Energy plants are near end of design life. Can replacement plants be designed to extract minerals?

• What is the economics of an individual well for mineral extraction versus integration with electricity or another use?

• What were the key learning’s / outcomes from the pilot plant done in 1990s? What were the barriers at the time no further work was done?

• Extract within the geothermal bore?

• Extraction for super-critical fluids?

• Does geothermal, as utilised today, offer any complimentary processing elements for mineral processing (for example heat/steam / electricity/water available in bulk)?

• Linking more synergy between direct heat, power industry and extraction. Understanding how these can benefit each other. For example:

• Can replacement plants be designed to facilitate mineral extraction?

• Commercialisation – high heat demand. Secondary processing package with access to cheap heat.

• Mineral extractions from geothermal fluids need to be tied up with geothermal operations efficiency.

• Is it possible to do gold extraction as stand alone? Or node from main flow?

• For downhole sampling for precious metals – should do more than one well in each field; and sample other fields where a well can be flowed.

• If composition of trace elements change as fluid surfaces, where does it precipitate? Is it possible to use mechanical extraction?

• Design plant to acid wash continuously.


A2.3 TECHNOLOGIES

A2.3.1 Silica • Can the particle size distribution of precipitated silica be controlled? • Can silica particle size be controlled – how does this vary the cost and value?

A2.3.2 Lithium • What form is lithium in? What form does the market want it in? • There has not been much said about the form of the extraction mineral. i.e., LiCO3 might

have a different value to LiCl.

A2.3.3 Gold and Precious Metals • Gold @ Wairakei. 1mg/ton x 245,000 ton / day (consent); 245,000 mg/day; 245kg/day?

Any extraction study for Au? • Any high pressure gold extraction methodology to be inserted before power plant? • Future research – supercritical extraction of gold; technologies for downhole extraction. • Technologies for recovering trace metals at depth under pressure? • Down hole extraction of precious metal need new technology or downstream technology.

A2.3.4 Gases • Kraft paper mills could be a market for H2S – they need it. • What are the purity requirements for CO2/H2S for different markets? • Can we capture CO2 from geothermal as NZ contribution to GHG management?

Geothermal is not a clean green technology.

A2.3.5 Biological • Mechanism capture mineral/elements. Further investigation into microbial interaction &

potential as extraction / capture of minerals for commercial operation. • What are the biological opportunities? We have heat and minerals; e.g., trace elements

for farms, CO2 sequestration, bioremediation. • What about microorganisms? • Biological processes – mitigation and precipitation. • Biological – are there any micro nutrients in geothermal waters that might support a

seaweed or fungi growing agriculture venture?

A2.3.6 Other • Can the low melting point metals be extracted as droplets through capillary action? • Clean it up to a point to which you can use it on farm land? water & fertiliser • Is there a benefit in having clean water from geothermal plants? How would this work

with reservoir depletion, field/resource management, pressure control? • Development and research in metal ligand and precipitation – link with recovery to

mineral industry and extraction. • Zeolites, AlPO4s or other cage structures for capture of iconic species? Change cage

size to “select” the captured ion. • We seem to need more information about the extraction technologies that could remove

minerals.


A2.4 MARKET DRIVERS

A2.4.1 Picking Winners

• What comes first – Market or technology?

• Need to know more about the market than the technologies.

• Can we simplify down the method choices in some way? There is no silver bullet but how do we make the choices clearer?

• How do we pick winners? [technologies]

• Techno-economics studies are needed.

A2.4.2 Markets

• What is the size of the NZ market for colloidal/precipitated silica?

• Focus on complementary existing markets e.g., forestry, agriculture, aquaculture and investigate products specifically in these categories.

• Are you aware of any NZ corps companies capable of developing such new markets?

• What about combining market buyers? i.e., glass makers on site/next to the extraction plant. Why are we focused on the energy companies?

• Access to international markets/processing to product. Look at attracting processing facilities etc. to NZ/region – after heat/electricity packages.

• Are there markets here in NZ? Is it sustainable to produce here but incur high cost for distribution?

• What about disruptive technologies such as photovoltaics. These might be a market for minerals.

• What are the other markets we are not seeing?

• Energy in carbon markets – opportunity?

• Geopolitical factors – sovereign risk, critical supply of materials.

• Geopolitical conflict increase – may increase these mineral prices.

• How do supply and demand cycle and changes with time?

• Need to clarify drivers (1) lost opportunity /by product (2) mining for minerals for primary value (3) environmental (e.g., efficiency/cultural) effects (4) efficiency in energy production.

• Market drivers for geothermal mineral use outside of traditional technologies. Is the driver economic gain or is it resource use?

• Are these commercial advantages or disadvantages to products produced from geothermal as opposed to current methods?

A2.4.3 Market Economics

• Comparison needed between conventional production costs and geothermal production costs.

• Transportation – This heavily affects NZ as the market is mostly on the other side of the world. How does NZ get their product to the markets that want it most?

• How is current supply sourced? Costs?


• Costs to extract compared to other sources/suppliers? Where do we need to get to, to be able to get into an existing market?

• The global prices of resources are very volatile. How will the rise be mitigated, especially seeing any new technology investment we have, high upfront capital expenditure?

A2.4.4 Value Proposition

• What is the strategic advantage of extracting minerals from geothermal fluids? Why are we doing this? Need to do competitor analysis and value proposition in each case.

• Package data together for marketing brochures – create interest in commercial studies.

• No carbon dioxide ETS values/forecasts – needs to be.

• Social / market advantages of using green supply of product.

• Environmental issues – what are the opportunities?

• Who pays for marketing? Government = Early stage analysis: de-risking entry. Commercialisation gap? Industry?

A2.4.5 Specific Products

• Lithium batteries are recyclable. Natural market ceiling?

• Does lithium have a ceiling due to recyclable batteries?

• No pure CO2 market prices or pure H2S values.

• Could hydrogen sulphide be a commercial product?

• Sulfuric acid production from H2S – need analysis of H2SO4.

• Magnesium – are customers shying away from the pigeon process? An opportunity for geothermal sources?

• Batteries – what is next on the horizon to compete with lithium?

• Can we do it yet? Silica on par with international supply; others not yet – on par with venture technologies.

• Silica – you could do this now; given energy costs and production advantages.

A2.5 LEGAL FRAMEWORKS

• The legal summary is a great set of work. It would be great to see this go further.

A2.5.1 RMA vs CMA

• RMA – how does this fit with expectations of the RMA?

• If not a backend of power station, does CMA take over more than RMA?

• Is ancillary likely to apply to a different extent, depending on the mineral targeted?

• RMA question. What influence, if any, would regional plans have on mineral extraction from geothermal?

• If you inject a foreign object into a reservoir, does it become a crown owned mineral?

• What effects would justify regulation (s5 RMA)?

• Is there a difference between a well used for extraction and well used for ancillary purposes?


• What is the difference between producing silica from a waste versus gold (for example) for a revenue stream?

• Would silica be viewed differently under the CMA if it was waste sold to a third party who process and sell it?

• CMA means publishing of data to public. RMA doesn’t. Should it?

• Need to get clarification on Governments stance.

• Does RMA or CMA apply? Case to court? CMA amendment.

• Law reform needed.

• Does the [CMA] law apply when it is not applicable?

A2.5.2 Ownership

• Who owns them?

• At what point does defining water as waste become a key legal term when considering iwi claims for water ownership?

• What are the legal rights of landowners over minerals? How should this be represented in agreements with resource consent holders?

• Knowledge gap: The desire to work/engage with Kaitiaki.

• Satisfying Kaitiaki obligations.

A2.5.3 Minerals in Water

• Do existing consents authorise use of minerals in water?

• Geothermal hot spring/bath use dissolved minerals in brine as a selling point. Isn’t that the same thing?

• Geothermal mud or water “consumed” or sold by tourist centres. Where do they sit in the legal framework?

• What is the view of the RMA for a water permit – where is the line where absurdity is created? What about people who sell geothermal muds, market geothermal mineral pools?

A2.5.4 Other

• How valuable is a letter from NZP&M stating this is outside their views; useful but doesn’t change the law.

• International legal positions would be good to include – useful reference for NZ.

• What was the legal position for the trial plants that have been established in New Zealand?

• How do we de-risk the legal uncertainty?

• Need to sort out the legal issues sooner rather than later. Before the technology becomes valuable and high profile.


A2.6 FINANCIALS AND RISK

• Boards – revenue decreasing in power generation so opportunity to look for other value from geothermal resources – but a mindset shift needed on risk.

• Can we quantify the risks?

• What is the role of government vs investors?

• How do we go further to be well established?

• What are investor expectations?

• Financial structuring is an issue.

• Need to strengthen financial markets in NZ.

• Silica looks to be the first priority – with benefits/risk mitigation for managing geothermal fluids; and it allows access to other minerals.

• Other constraints (e.g., equipment) in geothermal power generation – what is the optimal point of decreasing return? Where is the balance point?

• Mindset shift? Do we want mining companies that harvest heat or utilities companies that seek resources? The balance of risk and reward changes for each type of company.

• Does the business model need to change?

• How do we de-risk the path to market? Involve producers in the project...

• Buy in from big companies.

• Should do economic assessments as standalone operation too.

• Holistic concepts from the start are the right approach – complementary and integrated. Economics – is likely to need power to provide payback and viable economics. Blend objectives with electricity production.

• Surely power companies want a beneficial revenue stream.

• Capital cost.

• Survey geothermal boards senior management to understand their risk appetites for this sort of activity. Specifically relating to their operations, not just in general.

• Shareholders demand for certainty – will it mitigate against innovation and progress?

• Why did Simbol Mining Lithium Plant fail?

A2.6.1 Commercialisation Funding Gap

• Challenge of financing to get from pilots to commercial sector to prove processes.

• Commercial proof is needed – who makes this investment?

• There is gap in commercialisation funding in NZ.

• We need some research funding, possibly to pilot stage. How would commercial proving be funded?

• This takes us back to where we were in the 1990s in NZ? How do we raise funds to take this beyond desktop and pilot scale?

• Gap: Technology to transfer these technologies to reliable and maintainable installations to give more certainty to operating costs and return.


A2.6.2 Economic Viability

• Need a holistic approach to business models and financial analysis to get the economic big-picture.

• Is the goal of mineral extraction from geothermal brines for environmental or economic drivers?

• Need to get a better handle on the economic numbers.

• Expand the economic aspect of the research. Greater focus on potential user/outputs. Identify and talk to them about updates their needs/wants/ barriers.

• Economic modelling software development – price have a massive effect on viability. Integration of extraction logistics/market into models. How do others do it?

• Be cautious – that far ahead is uncertain; disruptive technologies can do you in.

• Economics is key but need to understand environmental impacts.

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Other Locations

Documents

GNS Science Report · Rotokawa). Chloride, sodium, silica and potassium (generally in that order decreasing of concentration) were the most common components of the geothermal brine