Cost Reduction in Mining Operations

Discussion
Cost Reduction in Mining Operations Discussion

The operating cost structures of mining operations globally have increased significantly over past years.
When raw material prices are high it might appear to be an odd time to be thinking about cost reduction, but in
fact it is the ideal time. History has shown us is that high prices are inevitably followed by a downturn, so it is
better to prepare for this rather than wait. Even if the downturn does not come as soon as expected, mine operators
can still boost profitability and efficiency.
Even in efficient mines, significant cost savings can be made, but it requires an integrated approach and a deep
understanding of mining operations and behaviours. It is no good making savings in one area if you are adding
more cost in another. Cost savings should cascade through the organizational and operational activity and
employee behaviour so that savings are realized and sustained. This is the route to significant and bankable
savings.
There are a number of areas that are good sources for cost reduction where the root causes of waste in ways not
typically considered.
Energy usage and conservation

In operations such as ore drying, where the heavy oil used in the drying furnaces has more than doubled in price,
optimizing furnace utilization and ensuring a consistent feed quality to improve fuel efficiency makes very
significant savings, especially at times when demand is high.
Operational failings can be a big consumer of electricity but this can be hard to identify, for example
overbreaking (in stoping or development) where excess tons need to be cleaned out.
Water control and leaks require pumping to remove water, ineffective pumping can lead to poor working
conditions which requires cleaning up and possibly bigger pumps which all consumes more electricity.
Compressed air is a big consumer of electricity yet it is widely used for ventilation and cleaning where cheaper
alternatives could be used.
When seeking to install an energy aware mindset, people typically think of the obvious, switching off or
utilizing more energy efficient machines. They fail to consider and establish a more holistic approach of
optimizing operations in a way that minimizes the utilization of costly energy resources such as oil and
electricity. Establishing a more energy aware mindset underpinned by a detailed energy efficiency framework
that encompasses the energy strategy, sources of supply, generation and distribution, organizational awareness
and behaviours and energy use, can have a substantial and immediate impact on cost reduction. Failure to utilize
an energy efficiency framework can lead to unanticipated costs elsewhere. For example, there is little point in
buying fuel in bulk to save money if the cost of extra fuel storage eats up the savings.

Optimization of maintenance practices and management

There are a couple of areas that are usually fruitful in achieving cost reduction. Typically, these are reduction of
equipment downtime. For example: reduction of equipment downtime by between 15-25% can increase
contractor productivity by 20-30%. It has been observed, at a recent mine project, there was an increase in
preventative maintenance of 15% that resulted in a decrease in emergency work orders of around 30% and an
unscheduled downtime of 24%.
During a six-month Mastering Maintenance Together project a 20% reduction in work activity standards led
to higher truck availabilities with front line supervisors able to spend a greater proportion of their day actually
supervising work being carried out rather than being diverted to other unscheduled tasks.
Improving logistics and procurement strategies

Some areas where reduction may take place: examples of few real impact include:
An Australian iron ore mine by properly executing logistic management reduced mine-to-port transport cycle
time by 13%; by properly implementing inventory management cut procurement lead time by 35% and by
improved scheduling to drastically reduce contractor and management fees.
A North American iron ore producer reviewed critically its primary ore operations, iron ore processing, product
delivery and maintenance and implemented measures to achieve its targeted 6% reduction in operating costs.
Similarly, by critically reviewing their operation and implementing strict measures, a South American gold
operation improved the productivity of its ore trucks by 12% and of the shovels and loaders by nearly 8%.
Installing systems that will manage change quickly and effectively

Having achieved savings, it is vital to maintain them by installing systems that will ensure improvements are
both measurable and sustainable.
These are just some of the areas that can yield significant savings. What is critical to maximizing cost savings is
a deep understanding of the cascading impact of cost saving measures across the operation as a whole.
CASE STUDIES:
* Increase in mine profits substantially and 30% reduction in costs, by Early In-Pit dumping of overburden
waste

Detailed mine planning and scheduling can allow a mine to more rapidly achieve a situation where the pit mine
can reach final pit depth/limits earlier, and a allow for in pit back filling of waste. This action can massively
reduce truck haul distances and therefore costs, for overburden. Also it can reduce amount of area disturbed expit, and lower overall rehabilitation expenses.

For Example, detailed mine planning and scheduling expertise was applied to one recent case study of a major
coal mine where current haul distances on average were 1.8km one way to ex-pit waste dumps. This study
showed that when in-pit waste dumping could be introduced, truck haul distances could be reduced from 1.8km
down to about 0.9km, and save some $0.40 / Bcm. This could reduce the current overburden rate from $1.25
down to $0.85/Bcm (30% reduction). For a mine with a nominal strip ratio of 6.0 Bcm/tonne, producing 10
million tonnes coal per annum, this reflects in significant extra profit.
Extra profit 6.0 bcm/t x 10 mtpa x $0.40 = $ 24 million per year.
* 40% costs reduction by alternative surface mining methods Direct Dozer Push applications

In the face of significantly decreased coal prices and stiff international competition from Australia and China
etc. Indonesia needs to lift itself up a quantum step in becoming more cost competitive, employing mining
methods and technology that are to international mining standards and best practices.
For certain mine site pit and seam geometries, the application of direct dozer methods can bring about massive
cost reductions. These methods are almost standard practice worldwide, and there increased application into the
Asian and Indonesian coal industry will become more necessary in order to reduce costs and maintain
competitive position.
As an example, typical hydraulic excavator and truck operations in a Indonesian mine cost approximately US$
1.20/Bcm. A direct dozer push operation can reduce costs to some US$ 0.70 /Bcm (40% reduction). There are
some excellent seam conditions in some of Indonesian mines very amenable to direct dozer push methods.
Experienced contractors can carry out such operations on a unit basis $ / Bcm.
* Upgrading to larger size mobile mining equipment gives cost savings of 20 30%

In the Indonesian and other countries coal fields / mines further studies show that when upgrading fleet size
from say the current typical standard of excavator and truck fleet from now predominantly a fleet of 13m3
excavators and 85 tonne trucks to double the size with 25m3 excavators and 160 tonne trucks. As a rule of thumb,
if the fleet size can be doubled then costs can be reduced by some 30%. For at least overburden operations this
should be very feasible, and an obvious step to bring an operation up to world class standards. For a typical large
size mine savings could be approximately;
6 bcm/tonne x 10 mtpa x ($1.25/bcm x 30%) = $ 22 million per annum
* 30% to 50% mine cost reductions by replacing long truck hauls with In-Pit Crushing and Overland
Conveying Systems

In the face of significantly decreased coal prices and stiff international competition from Australia and China
etc. Indonesia must lift itself up a quantum step in becoming more cost competitive, employing mining
methods and technology that are to international mining standards and best practices.
Various systems can be further studied to replace long truck hauls with conveyors. This is a capital intensive
approach, but generally gives massive operating cost savings and rapid pay back times, if volumes are large. For

example case studies have been conducted at several large size Indonesian mines, which show 30% to 50% cost
savings for overburden and coal transportation. Systems are capital intensive, with typical In-Pit crushing and
conveying system costing in the range of US$ 30 40 million; however payback time is rapid, normally within
2 years.
A significant extra benefit of these systems, is if mine costs can be significantly reduced by several dollars per
tonne, then open cut pits can be extended to greater depths, and more reserves recovered, thereby increasing
mine life considerably.