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The ‘three halves’ of mining

By: Jeremy Clarke

There is a general perception that the large, rich deposits situated in easy terrains in friendly, politically stable and accommodating jurisdictions have all been found. Whether this is true or not, only time will tell. Certainly there is a paucity of good news in the global mining space regarding the opening of new mines or the expansion of existing mines. However, perception is reality in the mining marketplace, and it is therefore time to address the issues that this raises.

There is no doubt that many of the new mining projects that are currently under consideration are either marginal or have low rates of return on investment. These are often also in remote, inhospitable terrains that present difficult logistical implications, from the freezing cold of northern Canada to the deep sands and soaring temperatures of Africa. These environments are also often considered to be politically volatile and risky, which suggests that new ideas and technologies are required to develop these mines.

Recent global economic problems have meant that investment in mining projects has reduced significantly. Funding institutions that are looking to participate in new investment in the mining industry are looking for longevity, maximum financial returns and minimal risks: certainly a case for having one’s cake and eating it. This has mainly been led by the recent record of poor project delivery with ballooning capital expenditure and longer and longer schedule delays that has seriously dented investor confidence. The need to eradicate risk and yet demand high financial returns is not commensurate with the current global situation. So where do we go from here?

Recent work by Paradigm Project Management (Pty) Ltd (PPM) has proven its concept of the “three halves”. This strategy has delivered projects in approximately half the time, for half the capital cost, and for half the current benchmark operating costs of traditional mining projects. This, to many, seems unlikely, yet it has been achieved.

The approach uses strategic value management (SVM) tools that consider what is best for the overall business. It is not driven by aspects such as technical excellence, maximum recovery efficiencies, or industry best practice. Rather, it concentrates on the development of an appropriate solution that maximises the production of dollars per hour. A clean-slate approach is used that considers the most relevant technology – sometimes technology that is not regularly utilised in the commodity that is to be mined, and is even at the expense of lower recovery efficiencies – in order to maximise return on investment.

Practically, how can one approach this?

Four main strategic drivers are applied in the SVM process.

The first is to ensure that the best business case drives the mine design solutions. This moves the focus away from technical excellence and more towards financial delivery.

The second is to use economically appropriate technology: the “fit for purpose” mantra is often quoted, but in reality is not understood in terms of the different implications for each unique project. Even if cognitively understood, it is very rarely applied in new projects.

Thirdly, it is essential to consider “unit process economics”. This concept reviews what each unit process adds to the mine’s profitability, be it in the mining, ore processing/metallurgical, engineering, human resources, or environmental disciplines. Once again the shift is from the technical to the financial.

Finally, it is deemed imperative to minimise the number of power users in the mine. Each electrical drive requires a plethora of additional equipment and services such as operations, control, maintenance, stores, logistics, and working capital. PPM has experience in reducing treatment plant power usage by up to 40% using this philosophy.

What is also required is a realistic review of the application of company standards within a mining organisation in their entirety. Large mining companies especially insist on internal standards as this provides consistency of approach and a level of comfort that things are under control. The control is certainly there, but are they just managing the wrong project extremely well? Recent experiences would suggest that this may well be the case, since the rigorous application of unrealistic standards has seen capital expenditure increase by up to 170%.

PPM’s “three halves” philosophy, driven by its SVM, is a new methodology that can provide answers to the problem of developing the more difficult and complex mines of the future.

Jeremy Clarke is a director at Paradigm Project Management (Pty) Ltd (PPM), a comprehensive project management business with specialist skills and experience in capital projects, specifically within the mining industry.

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