Chapter 4

Mine Planning I:Fundamentals

116 Massmin 2004Santiago Chile, 22-25 August 2004

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1 INTRODUCTION

Mining projects are normally highly expensive, have along lead time and extend mine life for many years. Theactual planning of a project can take considerable time andresources. Because of these factors it is important that aproject moves through various distinct phases prior toconstruction. These phases should ensure that if the projectis not viable, expenditure is curtailed as soon as possible orif viable, then the best possible return is obtained with theminimum risk. These project phases require different mindsets and consequently have different intellectualenvironments. This and the purpose of each phase are oftenmisunderstood which can cause significant problems inbringing a project to a successful conclusion.

For the purposes of this paper, a mining project covers thephases after the ore resource has been defined, either as anextension of an existing mine or as new ore body. Thispaper examines the phases through which a project movesand, should the mine prove viable, to the final constructionand implementation. The paper is more a discussion of thevarious principles and concepts involved rather than adefinitive study.

2 PROJECT CONCEPTION

Most major mining projects will be one, or a combinationof the following• A new ore body has been discovered.• An extension to an existing mine.• An expansion of, or a change to, an existing mine.

Within most mining groups the objective of a project is toincrease the value of the company. In some situations otherfactors may enter the equation. It is therefore important todefine what parameter or parameters the project mustsatisfy. Also the correct environment should be set up toensure that project phases are correctly undertaken.

3 INTELLECTUAL ENVIRONMENT

For the purposes of this paper, two environments will beconsidered. The first being strategic and the second tactical.The following broadly defines the differences between them.

3.1 Strategic EnvironmentThis environment is required when the development of a

strategy is required. The strategy is the broad plan requiredto achieve an objective. This requires "free" or lateralthinking and all possible scenarios, which could lead to theobjective, need to be identified. Normally, for a miningproject, the objective is to obtain the best economics from aparticular resource. In summary "Define the Goal".

3.2 Tactical EnvironmentIn this environment the objective is to develop and implement

the tactics required to achieve a strategic objective. In themining sense this would be the procurement and utilisation ofresources such as capital and labour to achieve the definedstrategic plan. In summary "Achieve the Goal".

The mining industry operates mainly in a tacticalenvironment. A strategy is set and the organisation andmanagement effort is concentrated on the best employmentof the available resources to achieve the strategicobjectives, such as production and construction targets.However, when a new project commences it is important forthe strategy to be first determined and requires that theplanning team shifts from the tactical to the strategicenvironment. This can present various problems especiallyas not all people are strategic thinkers, and even those whoare will require some time to adjust to this environment.

During the progress of a project the environment changesfrom strategic to tactical as shown in the following figure.

Figure 1 Environment over Time

Santiago Chile, 22-25 August 2004

AbstractSignificant projects are often undertaken in the mining industry.These projects can extend mine life by several years andinvolve considerable resources. Such projects are normally developed through several stages from conception toimplementation and each of these stages has a specific function with a particular environment thus requiring differentmanagement and technical skills. In order to correctly manage and staff a project during these stages and also to enablean orderly progression through the project it is helpful to recognise the requirements of these stages.This paper examines a mining project from the delineation of a resource to implementation and attempts to identify theindividual stages, the broad concepts that define them and the management issues that need to be considered. Theviews are based on the author’s experience on several mining projects. It is hoped that the paper may assist a readerin ascertaining their requirements when commencing or during a project execution.

Mine project life cycleRobin M Kear, Independent Mining Advisor

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Strategic issues are most prominent at the start of aproject falling off as criteria are defined. Tactical issues growover time. Expenditure on a project normally follows thetactical curve, that is, increases over time.

The following paragraphs broadly indicate therequirements of each phase and the transition betweenthese environments.

4 PHASE 1 - CONCEPTUAL

The purpose of the conceptual study is to determine ifthere is a potential project and if so justify the expenditurefor a pre-feasibility study. A potential project would be onewhich meets the required selection criteria. Normally theselection is based on economics but could be on otherparameters. This phase will indicate some of the majordesign criteria.

Unfortunately, it is this conceptual phase that is ofteninadequately undertaken. With a rush for production, majorcriteria can be arbitrarily set to continue with presentpractice or something that has been observed on a visit toanother property. Often a junior engineer is requested to dosome basic calculations and if positive the study leaps intothe detail. What is required is to stand back from the presentsituation and critically examine all facets of the situation. Todo this adequately requires properly experienced engineerswho have had the necessary exposure to the miningindustry. Unfortunately engineers of this type are not toocommon and are often thought to be "too valuable" to"waste" on a study. However, this stage of the project startsto lay the foundations for subsequent work, has the mostimpact on the outcome and is therefore of the utmostimportance.

In order to successfully complete a conceptual study itshould comprise of the following components.

4.1 Identification of Major Design ParametersAll potential options must be looked at such as the mining

method, production rates, major design boundaries andmine elevations. Where possible, constraints should be leftout of the equation. This will enable the costs of theseconstraints to be evaluated when they are later applied.Assumptions should be positive and tests done to evaluatethe effects of varying the parameters between the perceivedconfidence limits. These iterations should identify the majordesign criteria for the project. Various techniques areavailable to assist in these evaluations, one of which is theevaluation or economic surface analysis of the project.

4.2 Develop the EconomicsA cash flow model is required to assist in the evaluation of

the various options. The model should be simple and easilyunderstood. The purpose of the model is to allow for theranking of alternatives rather than for absolute values.Checks should be made on the effect of different selectioncriteria to determine if these affect the choice of an option. Ifso then this should be discussed with the management toensure that the correct selection criteria have been chosen.If the selection criteria are to be economic then it is normallybest, at this stage, to use the Net Present Value (NPV) atthe required hurdle rate rather than say the Internal Rate ofReturn (IRR). There are many views on this and the teammust be sure that they are using the correct parameter forranking of the alternatives.

4.3 List the AssumptionsIn order to complete this stage of the investigation various

assumptions will be made. These will need to be confirmedduring later phases and as such will be required to beincluded in the further schedule and budget.

4.4 Identify Trade off StudiesFrom the assumptions and other parts of the investigation

various alternatives will be identified. These will require tobe further investigated and incorporated into the on goingschedule and budget.

4.5 Develop the Pre Feasibility Scope, Schedule andBudget

If a potential project is identified then the conceptual studyis required to justify the expenditure for the subsequentphase, normally a pre-feasibility study. A schedule and costfor this study must be produced for approval. The scheduleshould show the various trade off studies and data gatheringexercises identified during the conceptual study.

This conceptual phase should not be rushed and thedesign team should be small and comprise of senior staff.The staff should not have routine responsibilities as well asthe project. Ideally the team should vary between thefollowing numbers:-

Some of the disciplines may not be required to be full timebut the team should have access to these skills for particularareas of the investigation.

Routine responsibilities for the team should be asminimum as possible as these are normally tactical whereasthe study is strategic. These modes require differentmindsets and changing from one to the other is difficult. Inthe end neither is completed satisfactorily. A small team isrequired, as a conceptual study is extremely fluid with majorchanges occurring regularly. Each member must be awareof the latest status of these changes. After being involved inseveral projects the author has devised the followingformula for strategic planning

Kears’ Rule of Planning -- C proportional to n^2

Where n is the number of components and C is confusion.

Although this may seem facetious there is some truth inan inverse relationship between numbers and the ability tobe innovative, especially during conceptual planning.

Obviously there should be some form of progressmanagement during the study and the best would appear tobe management by milestones. It is pointless to attempt toidentify every task that must be undertaken, as the tasks inthis stage will constantly be changing. To be continuouslyupdating the schedule to reflect this will require enormousresources and probably all the team’s time. Rather identifythe broad areas that need to be accomplished and whenthey need to be completed. This keeps the schedule simple,preferably on one page or at most two. The individual(s) will

Santiago Chile, 22-25 August 2004

Table 1 Phase One Manning

Position Maximum MinimumNumber Number

Project Manager 1 0

Mining Engineer 1 1

Mech/Elect Engineer 1 0

Metallurgy 1 0

Geotech/Geology 1 0

Accountant 1 0

Secretary 1 0

Total 7 1

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then know at what point these sections must be completedand adjust the investigations accordingly.

Once a conceptual study has been correctly undertaken itis often observed that the study has raised more questionsthan it has answered. In fact, this is as it should be asvarious assumptions must be tested and trade off studieswill be required in the following stage.

The conceptual stage is strategic in nature and as suchrequires lateral thinking. Very little is routine and manychanges will take place during this stage.

Should the conceptual phase indicate that there is asuitable prize, under various assumptions it should justifythe following study phase. However, if the project does notappear positive even under optimistic assumptions theproject should be stopped. In this case it is important todocument the work completed and also the major driverswhich could change the outcome. This will make it relativelyeasy to recommence should one of the drivers change, forexample the mineral price.

5 PHASE 2 - PRE FEASIBILITY

This phase of the project is to firm up and or confirm theissues identified in the conceptual phase and to justify theexpenditure for the feasibility and detailed design stage ofthe project. The major design criteria should have beendecided during the conceptual study. However, it is often thecase that some parameters have not been settled due tolack of data, or further investigation is required. Thereforethe pre feasibility study should be done in two stages.

5.1 Pre Feasibility Initial StageThis stage is required to obtain the required data and/or

complete the investigations highlighted in the conceptualstudy. The assumptions made during the conceptual studyshould be tested and updated if required. There are oftentrade off studies to be completed and visits to otheroperations are useful at this point.

A major problem, which may be experienced, is the lackof reliable non mining costs. It is sometimes supposed thata project is a mining project and therefore all the detail andplanning is mining related. However, the design criteria canbe hugely affected by the non mining costs and these needto be properly identified and quantified for the correctdetermination of the design criteria. This first stage remainsstrategic with a few tactical issues being required.

5.2 Pre Feasibility Second StageOnce the assumptions and trade off studies have been

competed it is then required to commence detailing the designcriteria, develop a schedule of resources and budget for theFeasibility stage. More detailed cash flow models are requiredand a detailed justification for the feasibility should bedeveloped. Up to this point study expenditure and manpowerrequirements are normally not high. The exception would bedata capture, for example a drilling program. Once the projectmoves into the following feasibility and detailed design phaseconsiderable resources, both manpower and money, arerequired. For this reason a detailed and reasonable accuratejustification is required prior to committing these resources. It isimportant that all major issues have been resolved at thecompletion of this phase. This second stage has a reducedstrategic component and the tactical issues are beginning tobecome the predominant ones.

At this point the team will possibly expand and typicalnumbers are shown in the following table

Control of this phase can still be on milestones, but thesewill be more specific than in the previous phase.

Basically this phase, collects data that is required,completes trade off studies, confirms that there is a viableproject and if so details and justifies the next phase. Should

the work completed during this phase show that the projectdoes not meet the requirements it should be stopped withsuitable documentation to revisit the study should any of themain drivers change over time.

6 PHASE 3 - FEASIBILITY AND DETAILED DESIGN

The purpose of this phase is to provide an estimate of therequired accuracy to justify the major capital required forconstruction and implementation. Provided that the previousphases have been satisfactorily completed, the project atthis stage should have a comprehensive design criteriadocument. All major decisions should have been made.Decisions, which are required in this phase of the project,should relate to the specific system under design with no oralmost no impact on other systems.

This phase will require considerable manpower, either inthe team or contractors. If major changes are made duringthis stage there is a very real danger that team members willbe working with obsolete design criteria with the possibilityof serious flaws in the design and the associated money andtiming consequences.

If the previous phases have been properly completed thenthis stage is largely tactical. The design criteria having beenset now need to be incorporated into the design. Majordecisions should not be made during this stage but ratherthe effort should be directed at producing the required detailto give an estimate of the desired accuracy. This stage islargely tactical, with the management concentrating onusing the available resources to produce a design to thespecifications of the required accuracy. Continuity betweenthis and the previous phase is required and a properlyconvened steering committee is one technique to ensurecontinuity by the inclusion of the conceptual and pre-feasibility team members.

The high costs of this phase are mainly due to the number ofpersons required with typical numbers being shown below

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Table 2 Pre-FeasibilityManning

Position Maximum MinimumNumber Number

Project Manager 1 0Mining Engineer 2 1Mech/Elect Engineer 2 1Metallurgy 2 1Geotech/Geology 1 0Accountant 1 0Secretary 1 0Total 10 3

Table 3 Feasibility Manning

Position Maximum MinimumNumber Number

Project Manager 1 0Mining Engineer 3 1Mech/Elect Engineer 4 2Metallurgy 3 1Geotech/Geology 2 1Accountant 1 0Secretary 1 0Technicians 300 100

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7 APPROVAL

Whilst each phase of the project requires approval, themove from the feasibility and detailed design to theconstruction phase is a major event in the projectdevelopment. Considerable sums of money are involved,not to mention that the mines’ future for many years isprobably decided at this point. The time required to obtainapproval should be included in the schedule as it can takeseveral months to obtain this approval.

8 PHASE 4 - CONSTRUCTION

The construction phase should have a dedicatedmanagement team which should be different from thedesign team. This phase is definitely tactical and requiresgood control and discipline. It is essential that both scheduleand cost tracking systems are in place before commencingconstruction. These systems should be able to show theoriginal schedule, possibly a revised schedule and theactual to date with variances highlighted. These systemsshould be installed and demonstrated before any activitiesor expenditure take place.

The design team is still required to continue with details.When approval has been granted it is normal that only 30%-40% of the detailed design has been completed. Thereforean excess of 60% of the design still has to be completed.This should not be left to the construction team to manageand hence the design team will still function well into theconstruction phase.

Control of this phase is important firstly to ensure thatwhat has been designed is constructed and secondly thequality of work must not be an impediment to the futureproduction. The Steering Committee becomes much moreof a control issue and should have members from both thedesign team and the future production team. The committeeshould not be under the control of the Project Manager.

9 SUB PROJECTS

Often, several possible improvements to the approveddesign have been identified but rely on new technology orsystems still under development. Whilst the approveddesign should be based on practical and achievablesystems there is often a window of time available to proveup these newer systems and include them in the project.The cut off times for proving these systems should bedetermined and separate project teams be convened toundertake this work with their own schedules and budgets.The management of these teams should not fall under the

construction team as they will be focussed on theconstruction. Rather it is suggested that either these fallunder the design team or preferably under their ownmanagement structure.

10 IMPLEMENTATION - COMMISSIONING

Major projects most often do not just switch on. Systemsrequire time to bed down, people require time to learn newtechniques and, especially with mining methods, time isrequired to build up production. If sufficient time is notallowed for these activities the pressures on the team willoften dictate the use of "short-cuts". These "short-cuts" canbe extremely detrimental to the long term viability of themine and should be avoided. The best avoidance strategy isto allow a realistic time for these activities and ramp-up.

11 SUMMARY

This paper has emphasised the conceptual phase of aproject. This is because the concepts set the foundation forall further work. Properly done the other phases flow fromthis stage and the team will be confident that the correctcriteria have been set. In practice and for various reasons itis often the pre feasibility or feasibility study that is used asthe start point with the major criteria being arbitrarily set, thisdoes not often lead to the best utilisation of the resource. Amine has only one resource and can mine this resourceonce. There is only one method that will produce the besteconomics for this resource, others may be economic but oflesser value. In view of the magnitude of the capital normallyrequired for a mining project and the usual life of a projectof many years the effort in determining the best project iswell justified.

ACKNOWLEDGEMENTS

There are doubtless many papers and textbooks whichcover the management of a mining project. The authorreadily admits that these will probably give the reader muchgreater insight into the issues involved however they tend todeal with the management of a project whereas this paperhas attempted to highlight the issues to be managed.

This paper has been the result of the observations madeon many mines and the author would like to thank his manyclients for the ideas and discussions over the years. Theauthor stresses that this paper is based on his observationsand conclusions but hopes that these will form a basis fordiscussion and may assist in the formulation of a suitablestrategy for a mining project.

Santiago Chile, 22-25 August 2004