Chapter 4

Mine Planning I:
Fundamentals
116 Massmin 2004 Santiago Chile, 22-25 August 2004
Massmin 2004 117
1 INTRODUCTION
Mining projects are normally highly expensive, have a
long lead time and extend mine life for many years. The
actual planning of a project can take considerable time and
resources. Because of these factors it is important that a
project moves through various distinct phases prior to
construction. These phases should ensure that if the project
is not viable, expenditure is curtailed as soon as possible or
if viable, then the best possible return is obtained with the
minimum risk. These project phases require different mind
sets and consequently have different intellectual
environments. This and the purpose of each phase are often
misunderstood which can cause significant problems in
bringing a project to a successful conclusion.
For the purposes of this paper, a mining project covers the
phases after the ore resource has been defined, either as an
extension of an existing mine or as new ore body. This
paper examines the phases through which a project moves
and, should the mine prove viable, to the final construction
and implementation. The paper is more a discussion of the
various principles and concepts involved rather than a
definitive study.
2 PROJECT CONCEPTION
Most major mining projects will be one, or a combination
of 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 to
increase the value of the company. In some situations other
factors may enter the equation. It is therefore important to
define what parameter or parameters the project must
satisfy. Also the correct environment should be set up to
ensure that project phases are correctly undertaken.
3 INTELLECTUAL ENVIRONMENT
For the purposes of this paper, two environments will be
considered. The first being strategic and the second tactical.
The following broadly defines the differences between them.
3.1 Strategic Environment
This environment is required when the development of a
strategy is required. The strategy is the broad plan required
to achieve an objective. This requires "free" or lateral
thinking and all possible scenarios, which could lead to the
objective, need to be identified. Normally, for a mining
project, the objective is to obtain the best economics from a
particular resource. In summary "Define the Goal".
3.2 Tactical Environment
In this environment the objective is to develop and implement
the tactics required to achieve a strategic objective. In the
mining sense this would be the procurement and utilisation of
resources such as capital and labour to achieve the defined
strategic plan. In summary "Achieve the Goal".
The mining industry operates mainly in a tactical
environment. A strategy is set and the organisation and
management effort is concentrated on the best employment
of the available resources to achieve the strategic
objectives, such as production and construction targets.
However, when a new project commences it is important for
the strategy to be first determined and requires that the
planning team shifts from the tactical to the strategic
environment. This can present various problems especially
as not all people are strategic thinkers, and even those who
are will require some time to adjust to this environment.
During the progress of a project the environment changes
from strategic to tactical as shown in the following figure.
Figure 1 Environment over Time
Santiago Chile, 22-25 August 2004
Abstract
Significant projects are often undertaken in the mining industry. These projects can extend mine life by several years and
involve considerable resources. Such projects are normally developed through several stages from conception to
implementation and each of these stages has a specific function with a particular environment thus requiring different
management and technical skills. In order to correctly manage and staff a project during these stages and also to enable
an 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 the
individual stages, the broad concepts that define them and the management issues that need to be considered. The
views are based on the authors experience on several mining projects. It is hoped that the paper may assist a reader
in ascertaining their requirements when commencing or during a project execution.
Mine project life cycle
Robin M Kear, Independent Mining Advisor
118 Massmin 2004
Strategic issues are most prominent at the start of a
project falling off as criteria are defined. Tactical issues grow
over time. Expenditure on a project normally follows the
tactical curve, that is, increases over time.
The following paragraphs broadly indicate the
requirements of each phase and the transition between
these environments.
4 PHASE 1 - CONCEPTUAL
The purpose of the conceptual study is to determine if
there is a potential project and if so justify the expenditure
for a pre-feasibility study. A potential project would be one
which meets the required selection criteria. Normally the
selection is based on economics but could be on other
parameters. This phase will indicate some of the major
design criteria.
Unfortunately, it is this conceptual phase that is often
inadequately undertaken. With a rush for production, major
criteria can be arbitrarily set to continue with present
practice or something that has been observed on a visit to
another property. Often a junior engineer is requested to do
some basic calculations and if positive the study leaps into
the detail. What is required is to stand back from the present
situation and critically examine all facets of the situation. To
do this adequately requires properly experienced engineers
who have had the necessary exposure to the mining
industry. Unfortunately engineers of this type are not too
common and are often thought to be "too valuable" to
"waste" on a study. However, this stage of the project starts
to lay the foundations for subsequent work, has the most
impact on the outcome and is therefore of the utmost
importance.
In order to successfully complete a conceptual study it
should comprise of the following components.
4.1 Identification of Major Design Parameters
All potential options must be looked at such as the mining
method, production rates, major design boundaries and
mine elevations. Where possible, constraints should be left
out of the equation. This will enable the costs of these
constraints to be evaluated when they are later applied.
Assumptions should be positive and tests done to evaluate
the effects of varying the parameters between the perceived
confidence limits. These iterations should identify the major
design criteria for the project. Various techniques are
available to assist in these evaluations, one of which is the
evaluation or economic surface analysis of the project.
4.2 Develop the Economics
A cash flow model is required to assist in the evaluation of
the various options. The model should be simple and easily
understood. The purpose of the model is to allow for the
ranking of alternatives rather than for absolute values.
Checks should be made on the effect of different selection
criteria to determine if these affect the choice of an option. If
so then this should be discussed with the management to
ensure that the correct selection criteria have been chosen.
If the selection criteria are to be economic then it is normally
best, at this stage, to use the Net Present Value (NPV) at
the required hurdle rate rather than say the Internal Rate of
Return (IRR). There are many views on this and the team
must be sure that they are using the correct parameter for
ranking of the alternatives.
4.3 List the Assumptions
In order to complete this stage of the investigation various
assumptions will be made. These will need to be confirmed
during later phases and as such will be required to be
included in the further schedule and budget.
4.4 Identify Trade off Studies
From the assumptions and other parts of the investigation
various alternatives will be identified. These will require to
be further investigated and incorporated into the on going
schedule and budget.
4.5 Develop the Pre Feasibility Scope, Schedule and
Budget
If a potential project is identified then the conceptual study
is required to justify the expenditure for the subsequent
phase, normally a pre-feasibility study. A schedule and cost
for this study must be produced for approval. The schedule
should show the various trade off studies and data gathering
exercises identified during the conceptual study.
This conceptual phase should not be rushed and the
design team should be small and comprise of senior staff.
The staff should not have routine responsibilities as well as
the project. Ideally the team should vary between the
following numbers:-
Some of the disciplines may not be required to be full time
but the team should have access to these skills for particular
areas of the investigation.
Routine responsibilities for the team should be as
minimum as possible as these are normally tactical whereas
the study is strategic. These modes require different
mindsets and changing from one to the other is difficult. In
the end neither is completed satisfactorily. A small team is
required, as a conceptual study is extremely fluid with major
changes occurring regularly. Each member must be aware
of the latest status of these changes. After being involved in
several projects the author has devised the following
formula 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 in
an inverse relationship between numbers and the ability to
be innovative, especially during conceptual planning.
Obviously there should be some form of progress
management during the study and the best would appear to
be management by milestones. It is pointless to attempt to
identify every task that must be undertaken, as the tasks in
this stage will constantly be changing. To be continuously
updating the schedule to reflect this will require enormous
resources and probably all the teams time. Rather identify
the broad areas that need to be accomplished and when
they 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 Minimum
Number 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
Massmin 2004 119
then know at what point these sections must be completed
and adjust the investigations accordingly.
Once a conceptual study has been correctly undertaken it
is often observed that the study has raised more questions
than it has answered. In fact, this is as it should be as
various assumptions must be tested and trade off studies
will be required in the following stage.
The conceptual stage is strategic in nature and as such
requires lateral thinking. Very little is routine and many
changes will take place during this stage.
Should the conceptual phase indicate that there is a
suitable prize, under various assumptions it should justify
the following study phase. However, if the project does not
appear positive even under optimistic assumptions the
project should be stopped. In this case it is important to
document the work completed and also the major drivers
which could change the outcome. This will make it relatively
easy to recommence should one of the drivers change, for
example the mineral price.
5 PHASE 2 - PRE FEASIBILITY
This phase of the project is to firm up and or confirm the
issues identified in the conceptual phase and to justify the
expenditure for the feasibility and detailed design stage of
the project. The major design criteria should have been
decided during the conceptual study. However, it is often the
case that some parameters have not been settled due to
lack of data, or further investigation is required. Therefore
the pre feasibility study should be done in two stages.
5.1 Pre Feasibility Initial Stage
This stage is required to obtain the required data and/or
complete the investigations highlighted in the conceptual
study. The assumptions made during the conceptual study
should be tested and updated if required. There are often
trade off studies to be completed and visits to other
operations are useful at this point.
A major problem, which may be experienced, is the lack
of reliable non mining costs. It is sometimes supposed that
a project is a mining project and therefore all the detail and
planning is mining related. However, the design criteria can
be hugely affected by the non mining costs and these need
to be properly identified and quantified for the correct
determination of the design criteria. This first stage remains
strategic with a few tactical issues being required.
5.2 Pre Feasibility Second Stage
Once the assumptions and trade off studies have been
competed it is then required to commence detailing the design
criteria, develop a schedule of resources and budget for the
Feasibility stage. More detailed cash flow models are required
and a detailed justification for the feasibility should be
developed. Up to this point study expenditure and manpower
requirements are normally not high. The exception would be
data capture, for example a drilling program. Once the project
moves into the following feasibility and detailed design phase
considerable resources, both manpower and money, are
required. For this reason a detailed and reasonable accurate
justification is required prior to committing these resources. It is
important that all major issues have been resolved at the
completion of this phase. This second stage has a reduced
strategic component and the tactical issues are beginning to
become the predominant ones.
At this point the team will possibly expand and typical
numbers are shown in the following table
Control of this phase can still be on milestones, but these
will 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 viable
project and if so details and justifies the next phase. Should
the work completed during this phase show that the project
does not meet the requirements it should be stopped with
suitable documentation to revisit the study should any of the
main drivers change over time.
6 PHASE 3 - FEASIBILITY AND DETAILED DESIGN
The purpose of this phase is to provide an estimate of the
required accuracy to justify the major capital required for
construction and implementation. Provided that the previous
phases have been satisfactorily completed, the project at
this stage should have a comprehensive design criteria
document. 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 or
almost no impact on other systems.
This phase will require considerable manpower, either in
the team or contractors. If major changes are made during
this stage there is a very real danger that team members will
be working with obsolete design criteria with the possibility
of serious flaws in the design and the associated money and
timing consequences.
If the previous phases have been properly completed then
this stage is largely tactical. The design criteria having been
set now need to be incorporated into the design. Major
decisions should not be made during this stage but rather
the effort should be directed at producing the required detail
to give an estimate of the desired accuracy. This stage is
largely tactical, with the management concentrating on
using the available resources to produce a design to the
specifications of the required accuracy. Continuity between
this and the previous phase is required and a properly
convened steering committee is one technique to ensure
continuity by the inclusion of the conceptual and pre-
feasibility team members.
The high costs of this phase are mainly due to the number of
persons required with typical numbers being shown below
Santiago Chile, 22-25 August 2004
Table 2 Pre-FeasibilityManning
Position Maximum Minimum
Number Number
Project Manager 1 0
Mining Engineer 2 1
Mech/Elect Engineer 2 1
Metallurgy 2 1
Geotech/Geology 1 0
Accountant 1 0
Secretary 1 0
Total 10 3
Table 3 Feasibility Manning
Position Maximum Minimum
Number Number
Project Manager 1 0
Mining Engineer 3 1
Mech/Elect Engineer 4 2
Metallurgy 3 1
Geotech/Geology 2 1
Accountant 1 0
Secretary 1 0
Technicians 300 100
120 Massmin 2004
7 APPROVAL
Whilst each phase of the project requires approval, the
move from the feasibility and detailed design to the
construction phase is a major event in the project
development. Considerable sums of money are involved,
not to mention that the mines future for many years is
probably decided at this point. The time required to obtain
approval should be included in the schedule as it can take
several months to obtain this approval.
8 PHASE 4 - CONSTRUCTION
The construction phase should have a dedicated
management team which should be different from the
design team. This phase is definitely tactical and requires
good control and discipline. It is essential that both schedule
and cost tracking systems are in place before commencing
construction. These systems should be able to show the
original schedule, possibly a revised schedule and the
actual to date with variances highlighted. These systems
should be installed and demonstrated before any activities
or 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. Therefore
an excess of 60% of the design still has to be completed.
This should not be left to the construction team to manage
and hence the design team will still function well into the
construction phase.
Control of this phase is important firstly to ensure that
what has been designed is constructed and secondly the
quality of work must not be an impediment to the future
production. The Steering Committee becomes much more
of a control issue and should have members from both the
design team and the future production team. The committee
should not be under the control of the Project Manager.
9 SUB PROJECTS
Often, several possible improvements to the approved
design have been identified but rely on new technology or
systems still under development. Whilst the approved
design should be based on practical and achievable
systems there is often a window of time available to prove
up these newer systems and include them in the project.
The cut off times for proving these systems should be
determined and separate project teams be convened to
undertake 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 the
construction. Rather it is suggested that either these fall
under the design team or preferably under their own
management structure.
10 IMPLEMENTATION - COMMISSIONING
Major projects most often do not just switch on. Systems
require time to bed down, people require time to learn new
techniques and, especially with mining methods, time is
required to build up production. If sufficient time is not
allowed for these activities the pressures on the team will
often dictate the use of "short-cuts". These "short-cuts" can
be extremely detrimental to the long term viability of the
mine and should be avoided. The best avoidance strategy is
to allow a realistic time for these activities and ramp-up.
11 SUMMARY
This paper has emphasised the conceptual phase of a
project. This is because the concepts set the foundation for
all further work. Properly done the other phases flow from
this stage and the team will be confident that the correct
criteria have been set. In practice and for various reasons it
is often the pre feasibility or feasibility study that is used as
the start point with the major criteria being arbitrarily set, this
does not often lead to the best utilisation of the resource. A
mine has only one resource and can mine this resource
once. There is only one method that will produce the best
economics for this resource, others may be economic but of
lesser value. In view of the magnitude of the capital normally
required for a mining project and the usual life of a project
of many years the effort in determining the best project is
well justified.
ACKNOWLEDGEMENTS
There are doubtless many papers and textbooks which
cover the management of a mining project. The author
readily admits that these will probably give the reader much
greater insight into the issues involved however they tend to
deal with the management of a project whereas this paper
has attempted to highlight the issues to be managed.
This paper has been the result of the observations made
on many mines and the author would like to thank his many
clients for the ideas and discussions over the years. The
author stresses that this paper is based on his observations
and conclusions but hopes that these will form a basis for
discussion and may assist in the formulation of a suitable
strategy for a mining project.
Santiago Chile, 22-25 August 2004