Calculating Mining Costs

Mining, or the removal of rock, is the first element of any mining project. Seems reasonable when you think of it. I once gave a presentation to a bunch of oil marketing people who were being pressed into becoming minerals marketing people and wanted to know what this mining was all about. In getting them to understand mining, the most effective slide was a cartoon of an adult sitting in a sand box with Tonka toys. “Ahhh...” Lights came on in all parts of the room. Of course mining is more complex than this but in many ways it just involves bigger toys.

Starting with the computer mine model (described before remember?) which represents the grade and quantity of ore (good bits) in space it now remains to calculate the least expensive way to get those good bits out of the ground. Usually this means moving the least amount of waste (bad bits). Think of the reserve model as a couple of million Leggo blocks which are 25 meters long by 25 meters wide by 10 meters high with a single grade to represent the ore value. Now think of all the ways you can take the blocks apart to get at the good bits. It is a very daunting task and to consider that this can be done in a way that the most inexpensive solution can be found within a lifetime is pretty darn impressive. Time to congratulate our computer science brothers who have created programs to do just that. And in minutes - not lifetimes. In the early days of the development of such programs I was challenged by a Russian friend to see who could design a mine faster - he using pencil and slide rule or me using a computer (a huge IBM connected to my telephone using acoustic couplers - technology has advanced so much). He beat me by a day but when I challenged him to prove that his design was the best design he stalled out. To do a re-design of the mine he needed 3 weeks while I needed one day. We were both impressed actually. He with the computer and me with the fact that I hadn’t completely screwed it up.

Once the mine is designed with all the necessary roads, wall slopes, water drainage systems, power distribution systems and waste dumps it is necessary to create a schedule for the removal of the ore and waste material and the reclamation of the slopes that are left behind. This is an iterative process that starts with the selection of a production rate. To determine the production rate, it is usually sufficiently accurate to take the proven reserves and divide them by either 10 or 15 years. The mine design provides a table of ore and waste volumes for each bench or stope (depending on whether the mine is open pit or underground). With this table it is simply a matter of calculating the waste to be removed to get the required ore for each year (or quarter or month) of the project life. Again there are millions of possible schedules but the human brain is an amazing instrument and it quickly narrows down the real possibilities to a few dozen which can then be calculated - big applause here again to the writers of spreadsheet programs. 

When the production schedule has been prepared then it remains to determine the size and quantity of mining equipment required to meet the production requirements. This is largely an exercise in applying actual experience and lots of factors to a few simple equations . By recording the factors being using on a table they will be remembered for future audits. This table, by the way, is part of a document called the Design Basis Memorandum which is the end product of a feasibility study. More on this later.

With the production schedule and equipment list at hand one can then calculate the annual number of hours for each piece of equipment based on the productivities of the equipment selected. Multiplying the number of hours by the cost to operate the equipment per hour gives the operating cost. Dividing the annual number of hours required by the annual number of hour available for a single piece of equipment results in the number of pieces of that type of equipment required each year. And magically the design of the mine and the cost to build and operate it has been determined.

How do our metallurgical engineering brothers handle their feasibility responsibilities?

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