University of British Columbia Department of Mining Engineering

Economies of Scale in Surface Mining Industry

Presented by E. (Anoush) B. Ebrahimi Supervised by Dr. Robert A. Hall September 2002

Introduction This research attempts to understand the effects of economies of scale and equipment size on costs in surface mines. The research will endeavor to identify equipment size sensitive factors and suggest an approach to quantify their impact. The research considers the process of equipment size selection in surface mines and proposes a rationale for selection based upon consideration of the operating scenarios. The results will be based on analyses of data from operations that have had a variety of sizes of equipment over the last decade. Equipment data from the mines will be used to identify and build models of the equipment size sensitive factors. These models will then be used in conjunction with two different ore bodies to evaluate the impact of designing and mining them for various sizes of equipment. The evaluation tool will be a discrete event Simulator.

Current status and trends for mining equipment Over the past decades mining equipment have steadily increased in size and complexity. For instance the 400-tonne trucks of today are about 10 times the size of the 35-tonne trucks of the 1950s. For every 10 years during this period, there has been a 50% increase in truck payload. Figure 1 illustrates this fact.

Figure 1: Mining haulage truck size evolution (Krause, 2001)

By the end of 2000 there were 253 ultra trucks (capacity bigger than 272 tonnes) Cable shovels now are available in sizes ranging up to 125 tonne capacity Gyratory crushers are operating at up to 5000t/h SAG mills are now operational at more than 13 meters in diameter

Statement of Problem and Justification for work - 1

Difficulties with large-scale equipment: Complexity Lost production The reduction of flexibility Dilution

These difficulties may limit the overall benefit of implementing larger equipment. A few examples of this uncertainty, which are addressed by industry are as follows: 1- Figure 2 is the perspective from Syncrude Ltds point of view, which shows some uncertainty in the lack of knowledge of the cost benefits for the next generation of larger equipment (Krause 2001). 2- The review of mining technology by the RAND institute, questioning whether the size of haul trucks and excavators has reached a feasibility threshold where the economies of scale have peaked? (2001). 3- Conferences in Edmonton, Alberta, on June 2001, Is Bigger Better? and in Tucson, Arizona on May 2002, Haulage 2002

Figure 2: Uncertainty into the Benefits of Implementing Larger Haul Trucks, (Krause 2001)

Statement of Problem and Justification for work - 2

Open pit optimization, which determines ultimate pit limit, uses some assumptions concerning economic conditions (costs and prices), possible excavation geometries, pit slopes, selectivity, production rates, etc. This process must be done prior to final equipment selection, which affects all these design input parameters (Lizotte, 1988). Proper equipment selection lowers mining costs and may even change the optimized pit limits. Consequently, equipment optimization and pit optimization are strongly interrelated. Figure 3 shows the mine planning and design sequence.

Figure 3: Mine planning and design sequence and simulation for equipment evaluation

Equipment Size Sensitive Factors

To size mining equipment there are two types of factors that must be taken in account: 1- Deposit Characteristics 2Operating Scenario. In turn throughout the mine life equipment size has two types of impacts on mine economics, direct and indirect.

Figure 4: Equipment Size Considerations and Equipment Size Sensitive Factors.

Scope of Work and the Work plan

1. Identify the equipment size sensitive factors. (Figure 5) 2. Investigate the effect of equipment size on mine plans using block models and mine design software. Study the relation between the Smallest (Selective) Mining Unit (SMU) and the equipment size. 3. Collect data from mines, 4. Quantify ESSF using collected data. 5. Build Equipment Size Optimizer to model Equipment Size Sensitive Factors (ESSF). To do this, geology model of two mines will be used to design virtual open pit mines. These mines will form the basis of a case study of the equipment size optimizer. 6. Integrate the virtual open pit plans and the equipment size optimizer into a Discrete Event Simulation Model. 7. Perform various simulation scenarios to assess the impact of equipment size on the open pit performance.
8. Define the significance and impact of size in a technical,

productivity, environmental and financial sense.

Figure 5: The equipment size sensitive factors

Dilution in Surface mines, a result of implementing Economies of Scale

Figure 6 shows, that in unevenly distributed deposits, selectivity and dilution are two important factors that need to be considered. In this type of deposits, employing larger equipment may cause either ore loss or some extra mill expenditure due to treatment of unwanted waste. On the contrary for mining waste rocks, productivity is the main factor so in this situation larger equipment may offer more advantages.
Economies of Scales Advantage

Ore Selectivity and Dilution

Waste Productivity

Equipment Size

Figure 6: Equipment Size Advantages in Waste and Ore

Figure 7 shows, how reducing the bench height in an open pit mine results in eliminating waste from the ore block and consequently increasing the run of mine grade and decreasing milling costs.

Waste Rock Waste Rock

Figure 7: The Effect of Reducing Open Pit Bench Height on the Dilution

Simulation a tool for decision makers an example

Modeling and simulation, as a tool, provides dependable inputs for decision makers to better understand and optimize the performance and the reliability of systems. Simulation especially early in the feasibility study and design stage is important because the cost to change decisions increases dramatically later when equipment are ordered and contracts are made.

Figure 8 Simulation of a system of one shovel and 10 trucks

Figure 9 Simulation of a system of one shovel and 8 trucks