September 01, 2017
In the mining industry, traditional cost analysis and cost modeling have been very similar to a cookbook approach:
1) Get a mine plan from geological model
2) Select a mining method and choose a fleet size
3) Factor in labor and then plan out infrastructure for the whole operation
4) Finally, put all of that into a cost planning sheet to look at costs and revenue from the mine
Many of our customers are doing it almost exactly that way. Granted, not every mine is the same, and different variations of the cookbook apply to different mines. But the reality is, mining has changed significantly over the past few decades. New technology has made it so you can achieve the same production results with a lower number of trucks. Maybe you’ll need more Capex upfront, but the lower Opex over the life of the mine makes the initial investment well worth it. More cost effective initiatives are allowing uneconomical mines to become profitable.
Dump the cookbook for a whole system approach
Now, instead of just focusing on one aspect of a mine at a time, we really have to look at the whole system. There are very smart people in the industry that understand the equipment or infrastructure side of the business, but then struggle to step back and put it all together in terms of the overall finances of the mine. Understanding what will happen in the future due to decisions made today regarding equipment and infrastructure is key. Mining engineers and finance teams have been forecasting costs since the beginning of mining. Nowadays, though, new technology allows for cost modeling much quicker than before.
We’ve heard from a lot of companies that one of their pain points is how time-consuming forecasting is. They’ll forecast based on their current mine plan, and by the time they finish the forecast – months later – the forecast has become useless because everything has changed. A new technology like Alight will allow cost modelers to perform analysis much more quickly than they previously could, be more innovative with the way they are planning and ultimately help them make faster decisions in an industry that’s traditionally moved fairly slowly.
Warfare, manufacturing and mining
One of our engineers recently spoke with a cost planning engineer based in Australia that said something that really resonated with him, and it totally makes sense why. If you look at the planning spectrum, you have war on one end, and manufacturing on the other. Manufacturing always has a plan – everything in a factory just proceeds according to the plan. When it comes to war, however, you may have a plan, and want to proceed with said plan, but once you hit the battlefield nothing ever goes accordingly. Mining is right in the middle. You have a plan, and you follow that plan as much as you possibly can until something breaks. New technologies in mining allow you to handle those breaks easily, and give you the ability to forecast and plan for them so you are able to cover yourself in case it ever happens.
Don’t use a cookbook approach for cost modeling and cost analysis – equip yourself with the technology that will allow you to be better than the rest.
The Alight Mining Solutions team is built on years of mining industry experience combined with the best of the Bay Area’s technological talent. Our experience spans from mining engineering to equipment to finance to metallurgy.