Cost model improves mine cost estimation and forecasting

23rd April 2010 By: Henry Lazenby - Creamer Media Deputy Editor: North America

Mining consulting engineering firm A&B Global Mining (ABGM) has developed a detailed and robust methodology to simulate variable mining cost drivers in a three-dimensional (3-D) mine design and production schedule.

The Centurion-based firm is developing computer software to improve the accuracy of the mining cost estimation processes involved from project feasibility stage through to the operational implementation, planning, monitoring, and decommissioning phases of a project.

ABGM COO Rob Mallinson says that the software enables the client to more accurately estimate and forecast mining costs, operating and capital expenses, and to make more informed decisions on the feasibility and ongoing viability of both surface and underground mining projects.

ABGM’s robust methodology has been tested with great success by a large mining house in South Africa. 
“The mining house has decided to make our software part of its planning methodology. 
“Our software is the first of its kind in South Africa, where detailed SAP information is built into the 3-D mine plan, and additional variable cost drivers can be simulated to account for all possible influences,” he says.

Some variable cost drivers that form part of the model include the distance of the working faces from the processing infrastructure; whether the mining activity takes place in a geologically disturbed area (the model calculates slower mining rates, re-establishment costs, lower labour efficiencies, additional support costs and additional safety, health, environmental and quality management factors); and the depth below the surface at which the mining activity takes place.

Other aspects taken into account in the cost estimation methodology include time-related factors, such as electricity and other consumable cost escalation, equipment use and human resource cost increases. Mallinson says that the software also allows for other generally ‘hidden’ costs, such as those associated with mining technology and research and development.

Although existing mine planning tools have the capability to integrate detailed mining cost parameters, he says that, within the South African mining industry, this facility is not generally used.

“Mine cost planning and forecasting generally decreases in accuracy over the forecast period. Mine plans are developed and handed over to financial departments or cost accountants, who then attempt to add variable cost factors to a static mine plan output. 
“This is why planned costs, when compared to actual costs, rarely match. The reason is that the variable influencing factors on mining cost are not generally accounted for, and this is where it really makes the difference to feasibility studies and budgets,” Mallinson says.

Further, ABGM successfully navigated the effects of the recent recession without any redundancies and is currently expanding. 
An additional two senior mining professionals (geology and mining) join the ABGM team this month. This will enable ABGM to expand its current client services portfolio and capacity, in line with ABGM’s strategic plan. 
Mallinson says that the company also has strong associations and working relationships with several other consultancies specialising in varied mining spheres.

ABGM originally started as a surface mine optimisation/life-of-mine (LOM) planning specialist in 2006. Current services now include, for both surface and underground mines, besides others, mineral resource management, scoping through to feasibility studies, mine design and optimisation, simulation and trade-off studies, LOM planning and scheduling, geological and geotechnical modelling and design, productivity analysis and optimisation, management systems and consulting, economic evaluations and benchmarking.

Mallinson says that ABGM has several exciting internal projects it is working on, including the development of a gold mine in Limpopo province in conjunction with a black economic-empowerment partner.
The new-order mining permit has been granted and the mine will produce the first small-scale quantities of gold by July this year. ABGM is looking for strategic investors/partners in this venture.

The company is also part owner of an active stone quarry, from which stone tiles, paving and other products are manufactured.

The company also has a copper-mining prospect for which a new-order exploration permit application has been lodged with the Department of Mineral Resources.

ABGM has current contracts with greenfield and brownfield mine developers, juniors and large mining houses. 
In-house experience is within the coal, iron, silica, diamonds, gold, platinum, manganese, tantalum, nickel and copper and cobalt global mining industry.

The company’s new slogan, ‘Our insight, your foresight’ aptly describes Mallinson’s belief that the company’s shared experience allows it to fully ascertain and com-prehend the critical issues at hand, resulting in its clients having an increased ability to undertake prudent planning, thereby identifying and quan-tifying the significance and nature of future events yet to occur.