An increased number of mining companies are seeking support from contractors for short-term tactical planning, as opposed to only long-term, strategic and life-of-mine planning, says opencast and underground mining consultancy Sound Mining.
However, Sound Mining director Vaughn Duke warns against the complete outsourcing of short-term planning.
“Doing the short-term planning for the client does not necessarily mean that a contractor must take over the planning. Short-term planning should always stay on site at the mine, with consultants used only for assistance – it should never be outsourced completely,” he states.
Duke emphasises that a mine owner should set the tone of the mine plan, while having a buy-in from the contractor who will execute it.
Duke says Sound Mining has assisted some of its clients with legal disputes that arose because of poorly constructed contract agreements.
“It is important that the owners of the mine ensure that these agreements are carefully thought through and tailored to suit the circumstances that are specific to the mining operation in question. These agreements should govern both behaviour and the ‘rules of the game’ when disputes arise, as they commonly do.”
In the event that they use external lawyers to draft mining contracts, Duke advises mine owners to ensure that their lawyers seek advice or consult with experienced production personnel. This will ensure that the contracts are tailored specifically for the operation and its particular circumstances.
“Well drafted contracts will set the tone of the relationship and thus influence behaviour and how disputes will be resolved when they arise.”
Duke tells Mining Weekly that, when starting work on a mine design, Sound Mining first ensures that it gets the business case, mining logic and design criteria right before starting with the necessary detailed design and study work. This approach prevents mines from wasting time and money. “We ensure that we apply our minds early to the asset in the ground to understand it fully, because it is the grade and structural make-up of the geological modelling that will dictate how the ultimate cash flow forecast can be optimised.”
He adds, however, that there is also generally little that mining companies can do about the prevailing economic environment when they plan their mines. “We are price-takers and must accept what is in the ground. Good planning can help the miner to do things differently by packaging what is in the ground properly and sensibly before selling it into the marketplace.”
Tough Operating Environment
Sound Mining is finding the current economic environment to be challenging. Duke says the company’s involvement in feasibility studies has dropped by about a third over the past five months, owing to projects being delayed following last year’s industrial action and the prevailing low commodity prices.
He reasons that mining companies need to postpone expansion programmes and delay projects with the consequence that companies like Sound Mining, which generally help with the design and development of projects, have been asked to hold off and wait until the projects can be continued again, sometime in the future.
Sound Mining has been able to compensate for this reduction in feasibility study work because of an increasing demand for its geological modelling and dimensional mine design capabilities. “We are practised at getting the most realistic and accurate production forecast for our clients,” says Duke, adding that there is no way of predicting when commodity prices or the demand for mineral resources will improve, as “this is subject to the appetite of countries such as China and India”.