Cost engineering and construction economist consultancy Mandla Mlangeni Quantity Surveyors (MMQS) is providing cost management ser- vices for JSE-listed Kumba Iron Ore’s Dingleton town-resettlement project, in the Northern Cape.
The residents of Dingleton – a small town near the iron-ore miner’s Sishen operation – will be relocated to the outskirts of the nearby town of Kathu. Construction of the new town started in January, after the project received board approval from Kumba in December last year.
MMQS CEO and founder Mandla Mlangeni explains that the three-year-long project currently has a budget of R1.3-billion for the first two years. He adds that the budget will be reviewed every year until construction has been completed.
Mlangeni notes that MMQS has provided similar services for other Kumba projects, such as the construction of a warehouse under a life-of-mine project at Sishen iron-ore mine. The R1.3-billion construction project was completed in February.
“We have several stay-in-business projects with Kumba that need to be completed for the mining company to stay profitable while it awaits more capital-intensive projects,” he notes.
Mlangeni says cost management at mines focuses on capital control during mine development and expansions.
A cost manager will provide capital cost estimates from the inception of a project, which will be subjected to the three front-end loading (FEL) processes.
“A project will undergo a debt review in FEL-1 and, once it has been approved, the project will move to a prefeasibility study or FEL-2. FEL-2 will provide information on different project design options, each with its own capital expenditure requirements,” Mlangeni explains.
He adds that once the design has been selected, the project will move on to FEL-3, which entails a detailed feasibility study. Finally, the project will receive approval and move on to the implementation phase.
Mlangeni notes that the cost management studies are com- pleted by MMQS in conjunction with information provided by project engineers. He adds that the level of risk for a project is closely associated with the amount and detail of information made available.
“Mining companies will conduct exploration studies and if reserves are discovered, we will determine the cost of the infrastructure needed to extract the mineral reserves, such as mine shafts, conveyors and processing and washing plants. We also assist mines in managing the costs of capital infrastructure projects.”
Mlangeni cites risk mitigation against time and cost constraints as a major challenge. “If the scope of the project is properly defined, then budget risk is at a minimum.
“However, because of the time constraints that mining houses face, there is limited time to adequately define the project scope, resulting in limited information to accurately determine the budget. For example, if 50% of the information is available, then only 50% of the budget can be accurately determined,” he emphasises.
He concludes that engineering, procurement and construction management companies need sufficient time to provide detailed scope definitions so that cost managers can provide accurate budgets.