The return from many mining
operations has been continually undermined by mine plans which either can’t be
implemented or when implemented simply don’t provide the expected
results. There are some amazingly smart, technologically-advanced
tools available for mine planning but they are being rendered useless by a poor
approach to data and knowledge. Remember from a previous blog; data is
your most valuable strategic resource. Think about that comment for a
minute. A strategic resource is something you can make money out of.
In previous blogs I have
discussed the poor standard of data analysis provided by equipment suppliers
and why mines must take responsibility for the really important strategic skill
– analysing data. This blog is about mine planning.
Mine planning is a
multi-facetted science. This simply means that despite the
technologically advanced tools there are still multiple places where it goes
wrong. The key driver of this is a poor approach to knowledge
management. We have really, really smart tools and they are hungry for
knowledge input, however, at best they are malnourished and normally they are
comatose through starvation. How long has your planning engineer been in
the role? How does your mine planning process determine equipment rates?
It is now known that the best practice for large mining trucks is 112% higher
than average or best practice for excavators is 168% higher than average, or
124% in shovels or 32% with draglines, etc. Worse still, the average
drill delivers only a quarter the annual metres drilled of the best practice
drills. The data is available but most mines don’t use it. Despite
this huge variation many mine plans assume rates which are higher than best
practice and simply have no chance of being achieved. As an example the average
dragline in Australia underperformed plan by 7% in 2008. Not bad, but the
average shortfall in coal uncovered was 25%. Clearly there is something
wrong with the planning and/or the execution of the plan. What is the
impact on a mine’s bottom line when the price of commodities are relatively
low? Finally, do you have improvement built into your mine planning and
do you have a process in place for the operators to deliver it?
We have demonstrated the
performance of P&H4100XPC shovels in the northern part of Australia's Bowen
Basin. Best practice was 17.9MBCM per annum and median 14.1MBCM per
annum. The project team was under pressure from Executive Management to
budget 25 MBCM per annum because in their opinion, “That is what that model is
capable of.” The GBI database indicates the P&H4100XPC shovel is
capable of moving 25MBCM per annum, however, only one machine in 40 from around
the world will achieve this level and none from the northern Bowen Basin.
In this case the use of 25MBCM in development models would make a huge
difference in terms of predicted ROI and approvals for financing but is most
likely going to end in the company not meeting their forecasts for the proposed
development.
Now a “competent person” will
sign off on this and the deposit will be presented as economic, open cut
reserves. Financiers and shareholders will feel comfortable (they are
after all one of the largest mining companies in the world) but industry
standards suggest they haven’t demonstrated economically mineable, open
cut reserves. Maybe they are economically mineable, underground reserves,
but they haven’t been demonstrated as economically mineable open cut reserves
because the inputs into defining them are extremely doubtful by industry
standards.
Substantial underperformance is
rife and it will continue to be a feature of our industry as long as mine
processes fail to use the knowledge which is available. This starts with
mine planning. Site planners and mining consultants don’t have the data /
knowledge so they are happy to keep guessing. Why do you think many
operators treat mine plans as a joke? Probably because they are.
Effort is needed to help these amazing, technologically-advanced tools produce
exceptional plans by facilitating the acquisition, absorption and application
of knowledge which is available and is being generated on a daily basis.
It is about the use of information; and in particular the conversion of that
information to knowledge and most importantly – innovation (change) on the
ground.
The purpose of this blog is to
highlight an area where very simple but extremely useful data exists but many
people are not using it. The mining plan requires estimates of productivity and
costs which feed into the production plan and schedules. It is the
productivity and costs which are a real key to the DCF analysis but are
normally done with minimal input from outside the potentially subjective
opinion of the person doing the planning. However, this information is
available in great detail from around the world. The question is posed,
“Why do people not use the information available to improve the outcome?”
I will expand more on this and
provide more specific examples in my next blog.
Remember.......The right
data. No speculation.
Graham Lumley
BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ
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