Separata Cost Estimation Corregir

Part 1 - Introduction to Cost Estimating
Why Estimate Costs?

You will cover the following points in Part 1: Introduction to Cost Estimating.
reasons for the need to estimate mining costs:

exploration decision-making,
resource analysis and pit planning,
development decisions,
acquisition decisions, and
financing
organizations and agencies that provide standards
an overview of cost estimating methods and their application
methods to estimate ore and waste production rates
If you are an exploration geologist, a mining engineer, a metallurgist, a mine

accountant, or a practitioner of any of a number of other mining-related
specialties, at some time you will be asked to do a cost estimatewhether
you feel qualified to do so or not. Mining, after all, is an economic endeavor,
and, after safety, the cost of mining and its related processes is one of the
most important considerations in that endeavor. All of us involved in the
industry, whether it be in exploration, planning, production, legal, or
financing, need to have a handle on the cost of mining and its significance
to what we are trying to accomplish.
This course will introduce you to the methodologies of cost estimating, and
prepare you to complete a credible estimate whether or not you have any
cost estimating experience. It will draw on your education, experience and
background and show you how to apply that background to a cost estimate.
It will show you that you already know most of what you need to know to
complete an estimate. The course will simply help you focus your efforts in
the right direction.
We will talk about several methods for completing an estimate. Some of
these methods, although commonly used by inexperienced estimators, are
not recommended for use today. We will talk about why. The emphasis of
this course will be on itemized cost estimating, which takes some time and
effort to accomplish, but we will look at ways to minimize that effort if
desired, as well as ways to carry the method on to more detailed and
involved estimates if necessary. Anyone completing an estimate by one of
the shortcut methods should at least understand itemized cost estimating in
order to appreciate the reduced credibility of the shortcut methods.
Why Estimate Costs?
The need to estimate mining costs crops up during many phases of mine
exploration, development, operations, and related activities. Following are
some of the more common applications.
Exploration decision-making
Mining cost considerations play a minimal role in the early stages of grassroots exploration projects, where attention is focused on geologic
phenomena rather than economics. Assuming some

exploration success, a need eventually arises to
examine the potential economic benefits of further
exploration efforts. As the cost of the exploration
work increases, and when sufficient data is
accumulated to make reasonable speculations about
the potential size and grade of the target, most
companies will conduct prefeasibility-level estimates
of potential costs and revenues for mining the
deposit. The decision to expend further exploration dollars typically depends
on a reasonable expectation that an ore body exists that can be mined at
costs that are less than revenues.
The process of conducting these early estimates can be a very valuable
exercise. The process can be thought of as an exploration tool in itself in
that it forces the explorationist to begin thinking of his target as an actual
mass of rock that must be excavated and moved, rather than thinking of it
strictly in geologic terms. Questions that must be answered before the first
cost estimate and subsequent economic analyses can be completed will
help identify problem areas that should be addressed during, rather than
after, the exploration phase. These questions include: "what mining method
will be required?" and "what mine recovery and dilution factors should be
assigned?" These questions will lead to other questions such as: "do we
need more drilling to better define the ore/waste intersection?" "do we need
to construct detailed bench plans to address this issue?" and "is our vein too
narrow to mine without excessive dilution?"
Very early in the study we must assume an ore grade, a mine production
rate, and projected life. Once we have examined these issues in light of
projected costs, we will be able to judge whether we need to expand our
exploration program to increase reserves, or Efirst cost study will force us to
make some preliminary assumptions about the location of mill and waste
sites. These assumptions will give us an idea of how significant haulage
costs are to the project, and will help guide the environmental analysis and
permitting process.
Resource analysis and pit planning

Fundamental to all reserve/resource estimates is the concept of cut-off
grade. Whether the estimate is done using simple empirical methods or
advanced geostatistical methods, a determination must be made of what
grade of material to include in the estimate, and what to reject. Much has
been written about how to define and how to determine cut-off grade.
Methods may vary depending upon the data available, what the results will
be used for, and the estimators choice, but basically, cut-off grade is simply
the grade of material that results in a gross value for the material that is
equal to the cost of exploiting the material. Material with a grade that
produces a higher value is included in the estimate as ore. Material with a
grade that produces a lower value is rejected as waste. The two variables in
this relationship are grade and cost. Grade is determined by any of a
number of empirical or geostatistical methods. Cost

is determined by one of the methods described in
this course.
All pit planning techniques for determination of pit
limits and shapes, whether hand methods involving
construction of cross sections or block modeling
techniques such as floating cone or LerchsGrossman, require an initial economic evaluation of
volumes derived from cross sectional areas or
blocks. All of the techniques require the calculation of net value for volumes
of a slice or blocks. Hustralid and Kuchta (2006) note that four basic steps
are involved in determining pit limits using hand methods.
A slice is selected.
The contained value is compared with the costs.
If the net value is positive, the pit can be expanded. If negative,
the pit contracts.
The final pit position (pit limit) is where the net value of the slice is
zero.
Net value is the amount of money remaining after production costs are
deducted from revenues to be obtained from the block or slice.
Production costs for blocks will vary depending upon position in the pit,
especially depth, even without consideration of changes in stripping ratio.
As the pit deepens, the in-pit haul road lengthens, thereby increasing
haulage costs for each block of material moved. This cost variation should
be considered in the pit planning process. Commonly, once a basic
production cost is estimated, the increased cost due to depth is accounted
for simply by adding a percentage amount to the basic cost for each deeper
bench. This is a shortcut that could be improved upon, provided costs are
estimated using itemized techniques described in this course. Haulage costs
can be readily adjusted for increased haul distance once bench height and
in-pit haul road gradient are determined or assumed. The Sherpa Cost
Estimating Software for Surface Mines (see Software onCostMine.com)
handles this adjustment quite easily.
Development decisions
Cost and economic analyses are fundamental to the decision-making
process for broad issues such as whether or not to develop or expand a
mine, and to more specific issues such as what mining method to use or
whether to access by shaft or ramp. Hence, the cost estimate may be based
on exploration data and early assumptions or on well-verified operational
data.
Acquisition decisions
Knowledge of mining costs, and an expectation of profit, while not the only
considerations important to acquisition decision-making, are certainly
fundamental to the process. One common acquisition decision-making tool

relies on costs alone, especially for globally traded commodities such as
base metals. Estimated production costs for the property in question are
compared to production costs for other producers of the same commodity,
in a ranking of high to low costs, that demonstrates the amount of the
commodity that is produced worldwide at costs higher than, and lower than,
that expected for the property in question. A position towards the low cost
end of the ranking is desirable based on the theory that when commodity
prices turn down, the higher cost mines will shut down first, removing
commodity from the market and driving prices back up again, thereby
shielding the lower cost mines from price swings that might otherwise cause
them to shut down as well.
Financing
A cost estimate is required in virtually all cases before project financing can
be obtained, whether it be debt or equity financing obtained from bankers,
institutional investors, individual investors, stock funds, or internal corporate
funds. The cost estimate is an integral and important aspect of an economic
analysis prepared for the purpose of obtaining financing. Unfortunately, the
cost estimate sometimes receives inadequate attention during the process
of financial analysis. Indeed, many people operating in this arena,
particularly those outside the mining industry, are unfamiliar with the
nuances of cost estimating and fail to realize the impact that seemingly
insignificant details can have on the ultimate viability of their investment.
Hence, the analyses tend to focus on financial and risk aspects, while the
technical details and reliability of the cost estimate are paid only minor
attention. It is, of course, the responsibility of mining professionals to assure
that the reliability of the cost estimate is adequate for the purpose intended.
Others
Mandated technical reports
Canada, the U.S., Australia, Chile, Peru, South Africa and other countries
with significant equity markets for mining stocks are now requiring the
preparation and reporting of cost estimates in conjunction with technical
reports to be made available to potential investors. The best known of these
requirements is the Canadian National Instrument (NI) 43-101 report.
Legal
Cost estimates are commonly required for a variety of purposes where legal
issues are involved, such as appraisals, where the cost estimate may be
important in application of income or cost appraisal methods; mining claim
validity cases where rights are held on the basis of "discovery;" lawsuits
involving royalty or takings issues; taxation, whereby taxes may be levied
on property value determined by potential income analysis; and other
purposes.
Mineral leasing
Both lessor and lessee need reliable estimates of costs for effective
negotiations of lease terms.
Equipment selection
Life cycle costing is an estimating procedure specific to equipment
selection decision-making. The procedure utilizes many of the principles
described in this class.
Appraisals
A cost estimate is an important step in a mineral property appraisal using
the income method of the cost method of appraisal.
Contract negotiations
The contractor and contractee both need a good handle on estimated costs
for successful negotiations.
_____________________________________________________________________________
Estimating Costs for Mining Prefeasibility Studies
Standards and Terminology
Introduction
Before starting any cost estimating project, a decision must be made
regarding what method to use for the estimate. This decision involves three
major considerations, as follows.
How much background information is available regarding the

deposit and the proposed mining operation.
The purpose for which the estimate is intended.
The amount of time available for completion of the estimate.
These considerations are interrelated in that both the time devoted to the
estimate and the amount of background information available should be
adequate to fulfill the purpose for which the estimate is intended.
To help make this decision we may look to outside sources for guidance.
When we do so, we find that considerable efforts have and are being made
to achieve global consistency in setting standards for terminology and
studies concerning the amount of mineral resources and reserves available
in a deposit and the potential economic viability of exploitation thereof. Most
of these efforts are focused on studies done for the purpose of raising
money for exploration or development purposes through established stock
exchanges. The purpose of the efforts is to assure the quality and
consistency of information provided to potential investors. The primary
focus of these efforts at standardization is in the reporting of resource and
reserve amounts. An estimate of mining costs is a necessary corollary to
determination of reserve amounts, and as such is a necessary consideration

in any efforts at standardization.
One stumbling block we face in searching out standards, is what to call the
type of study we are embarking upon. While large companies no doubt have
names and standards for various levels of studies to be applied in-house,
globally there are no precise definitions for the various types of studies nor
agreement on the level of study to which the many names apply. Below is a
listing of terms commonly applied to types of mining feasibility studies and
related cost estimates.
scoping study
order of magnitude
screening
rule-of-Thumb
feasibility
prefeasibility
preliminary feasibility
final feasibility
bankable
top down
bottom up
concept study
budget
detailed
semi-detailed
factored
pre-study
conceptual
definitive
While general agreement exists for definitions of some of these terms,

others are dangerously vague. It would not be an unreasonable expectation
to find definitions prescribed in this course. You wont find them here,
however, because if I were to provide my own definitions, I would simply join
the chorus of individuals using these terms as his or her experience dictates,
which no doubt conflicts with the experiences of other members of the
chorus. I will instead defer to the on-going works of the organizations
described in the following paragraphs to establish universally accepted
standards and terminology.
Richard Bullock, Professor Emeritus, Missouri School of Mines, summed up
the situation most eloquently in his SME Jackling Lecture in 2011 and an
article in Mining Engineering, April 2011. Following are pertinent quotes
from that lecture and article.
We can call our feasibility studies just about anything we want and they will
mean whatever we want them to mean [...]
Thus, you can call your initial study conceptual, preliminary, scoping, order
of magnitude or a resource calculation and you can mean the same thing.
[...] you can call your second level study preliminary feasibility and no one
will know if you are talking about the first level study or the second level
study.
[...], your third level study may be called definitive, detailed, bankable,
feasibility or the final feasibility study and they are supposed to mean the
same thing.
The following organizations and government agencies are known to be
addressing this issue:
Commitee for Mineral Reserves International Reporting Standards

(CRIRSCO)
Association for the Advancement of Cost Engineering International
(AACEI)
Australasian Joint Ore Reserves Committee (JORC)
Canadian Securities Administrators (National Instrument 43-101)
Society for Mining, Metallurgy & Exploration (SME) and U.S.
Securities and Exchange Commission
Chile and Peru (JORC based codes; see CRIRSCO)
South Africa (SAMCODE)
Association for the Advancement of Cost Engineering International

The Association for the Advancement of Cost Engineering International
(AACEI) is the lead agency for establishing cost estimating standards,
methodologies, and terminology. Its focus is primarily on estimation of
capital costs rather than operating or life cycle cost estimates, and most of
its members come from the building, construction, chemical and process
industries. Few of its members have experience in the mining industry.
Hence, its published guidelines and standards generally dont address
mining directly. The concept of estimating costs on the basis of minimal
geologic data obtained from a few drill holes is quite foreign to the groups
approach to the establishment of recommended practices. However, the
guidelines established by AACEI are intended to be generic, and in general
provide a valid basis for guidelines applicable to the mining industry. In the
AACEIs own words, Each industry will have a typical set of deliverables
that are used to support the type of estimates used in that industry. For the
mining industry more so than any other industry, the word "typical" could
well be replaced by the word "unique."
AACEI provides guidelines for a cost estimate classification system in a
series of memos, Recommended Practice (RP) No. 17R-97, 18R-97, and 56R8. The RP closest to the needs of the mining industry is RP 56R-08, Cost
Estimate ClassificationAs Applied for the Building and General
Construction Industries. Table 1 from the RP shows the classification system
in matrix format. While the matrix does not address mine estimating
specifically, its parallels applied to mining can be readily envisioned.
The maturity level of project definition is the prime determinate of the

estimate class. Summary characteristics of the estimate classes are listed
below.
Class 5 estimate
based on very limited information

may be prepared within a very limited amount of time with little
effort expended, sometimes prepared in less than one hour
often, little more than proposed building type, location, and space
requirements known
End usage: strategic business planning purposes, market studies,

assessment of initial viability, evaluation of alternate schemes, project
screening, location studies, long range capital planning
Estimating methodology: generally stochastic methods such as area factors
and other parametric and modeling techniques
Alternate estimate names/terms: block schematic estimate, functional area
based estimate, scoping study estimate; concept design, ratio, rough order
of magnitude, idea study, concept screening estimate, prospect estimate,

rule-of-thumb
Class 4 estimate
based on limited information

typically used for project screening, determination of feasibility,
concept evaluation, and preliminary budget approval
engineering at minimum comprises preliminary room layouts and
site plan, functional space requirements fully identified
End usage: detailed strategic planning, business development, project

screening at more developed stages, alternative scheme analysis,
confirmation of economic or technical feasibility study, preliminary budget
approval or approval to proceed to next stage
Estimating methodology: stochastic estimating methods such as parametric
models, functional space unit price or model driven
Alternate estimate names/terms: schematic design estimate, prefeasibility
estimate, feasibility, screening, top-down, authorization, factored, pre-study,
concept study
Class 3 estimate
generally prepared to form the basis for budget authorization,

appropriation or funding
typically form the initial control estimate against which all actual
costs and resources will be monitored
based at minimum on completed design information for site plan,
site conditions, demolition, utility plan, electrical plan, room
layouts, mechanical plan, plumbing layout and one-line electrical
diagram
End usage: to support full project funding request, first of the project phase
control estimates, project budget, may be the last estimate required
Estimating methodology: more deterministic methods than stochastic
methods, involve high degree of unit cost line items, factoring and other
stochastic methods may be used for less significant areas
Alternate estimate names/terms: budget, scope, sanction, semi-detailed,
authorization, preliminary control, concept study, development, basic
engineering phase estimate, target estimate
Class 2 estimate
generally prepared to form a detailed contractor control baseline

against which all project work is monitored
used as bid estimate by contractor
all drawings, plan views, elevation and section drawings complete
End usage: detailed contractor or owner control baseline, monitored for

change management
Estimating methodology: high degree of deterministic methods, often tens
of thousands of unit cost line items, forced detail developed rather than
relying on factors for areas still undefined
Alternate estimate names/terms: design development estimate, detailed
estimate, control, forced detail, execution phase, master control,
engineering
Class 1 estimate
generally prepared for discrete parts of the total project rather

than for the entire project
typically used by subcontractors and owners for bid checks
becomes the new baseline
used to evaluate or dispute claims
End usage: support change management, support

negotiations, dispute resolution, support bidding
vendor/contractor
Estimating methodology: highest degree of deterministic methods, require

great amount of effort, prepared in great detail, usually performed on only
the most critical areas of a project, specific quotations, based on detailed
drawings and specifications
Alternate estimate names/terms: construction document estimate, pretender estimate, pre-construction estimate, project control estimate, full
detail estimate, bottoms-up, final, execution phase, master control, change
order estimate
Australasian Joint Ore Reserves Committee (JORC)

The JORC is actively developing standards for the definition and reporting of
resources and reserves to be applied to properties included as assets by all
companies seeking to sell stock on any Australian or New Zealand stock
exchange. Their first set of standards was published in 1989. These were
revised in 2004, and are now undergoing further revision. The standards
provide virtually no guidelines specific to cost estimating, but place
considerable emphasis on the professional judgment of a "competent
person." The following are a few telling quotes from the standards.
An Ore Reserve is the economically mineable part of a Measured and/or
Indicated Mineral Resource.
[...] there can be no fixed definition for the term economically mineable.'
It may not be necessary for these studies to be at the level of a final
feasibility study.
Canadian Securities Administration

The Canadian Securities Administration is engaged along with prominent
Canadian mining organizations in an on-going effort to develop standards
for reporting mining information. These standards as presently written are
stated in Canadian National Instrument (NI) 43-101. The standards apply to
all companies listed on any Canadian stock exchange. Because of the large
number of international mining and exploration companies listed on these
exchanges, the standards are rapidly becoming world standards. Like the
JORC standards, the NI 43- 101 standards rely on the judgment of a
"competent person." While considerable discussion is provided regarding
the amount, type and quality of work that should be done to provide the
basis for an economic analysis, guidelines specific to the cost estimating
process are surprisingly sparse. These guidelines are stated in Item 25 of NI
43-101, as follows.
Technical reports on development properties and production properties
must include [...] capital and operating cost estimates, with major
components being set out in tabular form. (item g)
and
Economic Analysisan economic analysis with cash flow forecasts on an
annual basis using proven mineral reserves and probable mineral reserves
only, and sensitivity analyses with variants in metal prices, grade, capital
and operating costs (item h)
and
Mine Lifea discussion of the expected mine life and exploration potential
(item j)
The complete text of NI 43-101 can be viewed at the homepage of the
Geoscientists Canada, formerly known as the Canadian Council of
Professional Geoscientists (CCPG).
Hence, we are left with few guidelines, and apparently considerable latitude
in the selection of the cost estimating method to apply, and the amount of
effort to invest in the estimating process. As we shall see, while several
shortcut methods exist, few are broadly applicable.

Summary of Cost Estimating Methods
Cost Estimating Methods
The focus of this course will be on cost estimation methods that are
commonly used for the purposes described in Part 1: Why Estimate Costs?,
especially those usually applied in conducting feasibility or pre-feasibility
studies on undeveloped properties. These methods listed in order from less
detailed to more detailed are as follows.
Figura 2
comparison to costs at other mines

comparison to established cost models (Figure 1)
parametric methods (Figure 2)
cost modeling software (Figure 3)
itemized methods (Table 1)
Figura 3
Figura 4
Method Application
The types of feasibility studies for which each of these methods is generally
appropriate can be depicted graphically as shown in Figure 4 (right).
Feasibility studies and their associated cost estimates are generally

considered to be accurate to within about plus or minus 50% at the
prefeasibility level, plus or minus 25% at the preliminary feasibility level,
plus or minus 15% at the feasibility level, and plus or minus 5% at the final
feasibility level. While this is a handy rule of thumb for discussion purposes,
it should never be considered to apply with any degree of specificity. While
the ranges are commonly quoted in the literature, as far as this author
knows, there are no known statistical studies to support them for the mining
industry. The expected accuracy of a cost estimate depends upon the
accuracy and amount of information available to support the estimate, the
method used to make the estimate, and the care and skill employed by the
estimator.
The difficulty of assigning accuracy levels to a cost estimate is well
illustrated by a series of news releases regarding the Galore Creek project in
northern British Columbia issued by joint venture partners, Teck-Cominco
and NovaGold.
In an October 25, 2006 news release, NovaGold reported the following:
Hatch Ltd., and independent engineering services company,[...], together
with a number of specialized consultants, has completed the final Feasibility
Study for NovaGolds Galore Creek project [...]. The study confirms the
economic viability of a conventional open-pit mining operation [...] . Total
capital cost was estimated to be US$ 1,805 million. The news release went
on to say The cost estimates of the study reflect a +15%/-10% feasibility
study level of engineering accuracy."
In a November 26, 2007 news release, NovaGold and Teck-Cominco

announced the suspension of construction activities at the Galore Creek
project. A recent review and completion of the first season of construction
indicate substantially higher capital costs. They also noted that AMEC
Americas Limited was retained to review the 2006 feasibility study.
In July 2011, NovaGold announced that AMEC had reviewed the 2006 study
and estimated the capital cost to be $5,155 million. AMECs estimate was
said to be within an accuracy range of +25%/-20%.
The 2006 study was completed by competent people using standard
methodologies appropriate for a final feasibility study and supposedly
accurate to within +15%/-10%, yet according to the AMEC study it was off
by 185%.
Each of the previousliy described methods will be discussed in detail in the
sections that follow, with considerably more emphasis placed on itemized
methods, the preferred methodology for all cases for which adequate time is
available to complete the estimate in the most useful and reliable manner.
Itemized methods draw on "first principles," such as material densities, swell
factors, haul distances and gradients, etc. Suggestions will be provided to
help make this methodology useful and efficient at varying levels of detail
and effort. Cost estimating for surface mines will be emphasized, but most
of the principles discussed apply to underground mining as well.

Choosing a Proposed Production Rate
Choosing an Ore Production Rate
Both capital costs and operating costs are very
sensitive to the production rate selected for the
proposed mine. Higher production rates generally
result in lower operating costs accompanied by
higher capital costs, whereas lower production rates
generally result in higher operating costs and lower
capital costs.
The daily production rate is commonly used to
express the size of a mine, e.g. a 10,000 ton per
day mine or a 50,000 ton per day mine. Indeed, the
production rate immediately tells us something about the mine, e.g. the
relative size of the equipment fleet, the size of the required working area,
the size of the workforce, as well as the size of the mill, etc.
It follows that the selection of the daily production rate is an important
decision that must be made before we can even begin to estimate costs no
matter what method we choose to use for our estimate.
In some cases the size of the mine is dictated by the size of the market for a
given commodity. This is especially true for an industrial mineral serving a
local market. In such cases, the production rate is largely determined by
company requirements based on market objectives. In other cases, the
production rate may be determined by the amount of material needed to
feed an existing processing plant, such as limestone to feed a cement plant.
For metals and other commodities for which there is a large market that is
insensitive to the amount of production from the proposed mine, the
question becomes one of practicality and internal economic analysis. In the
absence of external constraints, the proposed production rate is commonly
an optimum rate based on maximization of an economic parameter such as
net present value or rate of return. Typically, the optimum rate may be
constrained by practical considerations such as working area availability and
the ability to advance a shaft and underground development at the desired
rate. Furthermore, to find the optimum rate requires the completion of
multiple economic analyses based on multiple cost estimates for a range of
possible production rates followed by economic (DCF) analyses for each.
Time constraints placed upon the evaluator, as well as the limited amount of
information available for early prefeasibility studies, usually preclude such
complete analyses, although with software packages like Sherpa and Apex
(see Software on CostMine.com), multiple analyses can be accomplished
very quickly and efficiently.
Hence, because of the lack of alternatives, the evaluator typically is left to
his own experiences and knowledge of existing mines to select a reasonable
production rate upon which to base the initial cost estimate. An oft-quoted
effort to address this problem was made by H.K. Taylor, then mine valuation
superintendent for Placer Development Limited (Taylor (1977) and Taylor
(1986)). Mr. Taylor examined a number of actual and planned projects for a
wide range of ore body shapes and sizes and noted an empirical relationship
between the expected ore tonnage and the life of the mine.
He coined the term Taylors Rule for this relationship, which stated
mathematically says:
Life in years = 0.20 (expected tonnes)0.25
Assuming 350 days as a working year, the rule says:
Tonnes per day = 0.014 (expected tonnes)0.75
Taylor considered the relationship valid for all types of operations, including
surface and underground mines, except for very deep, flat mines, where
outputs depend on the hoisting capacities of deep shafts and the achievable
rates of radial or lateral development. Nor did he consider it applicable to
steeply dipping tabular or massive deposits worked towards great depths,
nor to erratically mineralized but dense multi-vein systems whose working
lives depend upon exploration success as the mines age.
The relationship, while commonly used, has always carried the stigma of a
small sample population (presumably 30 mines) and the lack of
acknowledgement of exactly what types and sizes of mines were included in
the sampling. McSpadden and Schaap (1984), Lasserre (1985) and Long and
Singer (2001) tested the relationship with results similar to Taylors. These
later studies confirmed the relationships between expected tonnes and life
of operations, but offered slightly differing proportional elasticities. The later
studies have never become as widely known nor accepted as Taylors Rule in
its initial form.
A more recent study by a U.S. Geological Survey evaluator, Keith R. Long
(Long (2009)) appears to offer a more thorough analysis of the relationship.
Long examined data for 342 open pit mines and 197 underground mines,
many of which have undertaken at least one significant expansion in
capacity corresponding to an expansion of reserves. Individual data points
for the study were defined as a capacity and its corresponding reserve for a
newly opened mine or an expansion thereof, resulting in a total number of
data points exceeding 1200. Long found two separate population groups,
one including open pit and block cave mines together and one for
underground mines excluding block cave mines. Long confirmed a
relationship between mine capacity and reserves, but with differing
proportionality exponents. According to Longs study, the following
relationships hold.
For open pit and block cave mines:

For underground mines:
These formulae, which are not precise enough to worry about whether
tonnage is expressed in short or metric tons, generate the rounded-off
results listed in the following table.
These values provide a reasonable initial estimate of production rate,

sufficiently reliable for prefeasibility studies until a more appropriate
production rate is decided upon through further studies.
Choosing a Waste Production Rate

The assumed daily production rate for waste removal
is dependant upon the stripping ratio determined for
the deposit. Even the most preliminary of cost
estimates require an estimate of a stripping ratio,
whether or not the estimate can be made with
confidence, so before a cost estimate can be
accomplished, the stripping ratio should be determined with as much care
as time and available data allow. At a minimum, one or more cross-sections
or long-sections should be plotted showing the ore body and its relationship
to surface topography. Final pit boundaries should then be plotted on the
sections, assuming a reasonable pit slope, typically about 45. The volume
of waste material within the pit boundaries is then determined by graphical
or mathematical means and converted to tons using an assumed density
factor, which may differ from the density factor assumed for ore. The
resulting value divided by the total ore to be mined yields a gross
preliminary stripping ratio.
Typically, some of the waste material will be produced before ore production
begins, and the rest will be produced simultaneously with ore production.
Pre-production stripping costs are usually included with the capital cost
estimate, while production stripping costs are included in the operating cost
estimate. Hence, an estimate needs to made of the amount of preproduction stripping required. This can be done by plotting a starter pit on
the same cross-sections used for the stripping ratio estimate and calculating
its volume and tonnage. The starter pit should be large enough to expose an
area of ore sufficient to begin ore production.
The starter pit tonnage is then deducted from the total waste tonnage to
determine total waste to ore ratio, which dictates the amount of waste to be
removed each day of ore production.
Many variations of this procedure are possible depending primarily upon
geometric considerations. As time goes on, and subsequent studies are
completed, the stripping ratio will be refined until an estimate can be made
using all available data and more sophisticated techniques. Hustrulid and
Kuchta (2006) provide excellent explanations of pit design methods used for
this purpose, including preliminary hand calculations, block modeling, and
pit optimization techniques. The impact that pit haul road construction has
on pit wall shape and slope is typically ignored in early cost estimates, but
should be considered in more detailed estimates based on advanced pit
designs.
You have covered the following points in Part 1: Introduction to Cost
Estimating.
reasons for the need to estimate mining costs:

exploration decision-making,
resource analysis and pit planning,
development decisions,
acquisition decisions,
financing
organizations and agencies that provide standards
an overview of cost estimate methods and their application
methods to estimate ore and waste production rates

Part 2 - Itemized Cost Estimation: Planning
Introduction to Itemized Cost Estimating
________________________________________
You will cover the following points in Part 2: Itemized Cost Estimation:
Planning.
the advantages of the itemized cost estimate method

the twelve steps to an itemized cost estimate
how to develop a conceptual mine (step 1)
how to determine ore and waste production rates (step 2)
how to determine haul distances and routes (step 3)
Introduction
As practiced here, itemized cost estimating is an equipment-based
procedure, in that particular emphasis is placed on determining equipment
productivity and utilization from first principles. These determinations are
then extended to create listings of equipment, labor and supply
requirements. Current unit prices for supplies, wages and salaries,
equipment, and equipment operation cost per hour are then applied to the
lists to complete the estimate. Commonly, certain less significant costs,
such as administrative charges, are not determined in this manner, but

rather by some "rule-of-thumb" type of method.
Throughout any cost estimating exercise, the estimator needs to recognize
that his or her time is valuable and limited. Typically adequate time is not
available to devote maximum attention to every detail of an estimate.
Hence, time and effort should be focused on those aspects of an estimate
having the greatest impact on the outcome of the estimate. This means that
some items will receive what may seem to be inadequate attention to detail,
but regardless of the level of detail, the impact of the item on the final
outcome will be insignificant.
Advantages of the Method
Compared to other methods discussed here, the itemized method requires
more effort and skill; but it actually is surprisingly easy to apply, particularly
with the ready availability of published cost and technical information
needed. The method doesnt require any skills or knowledge that any mining
engineer or mine geologist does not have. The advantages of the method
are as follows.
It is highly credible if done well.

It provides results that, if properly presented, are clear and
understandable by others.
It is easily adapted to less detailed studies, as well as to more
detailed studies; in fact, the first cost estimate for a proposed
mine usually evolves into more detailed estimates as more
information becomes available, right on into the final feasibility
stage using essentially the same procedures as used in the first
estimate.
It provides a basis for understanding the economic implications of
changes to mine design and operational considerations. For
instance, it aids in the selection of a mill or dump site by
facilitating the calculation of haulage costs to various locations.
A completed estimate provides important information beyond that
needed for the feasibility study itself - information that is useful in
a variety of ways, especially during the permitting process. For
instance, determination of the size of the workforce will help
predict hiring requirements, and may help the local government
plan for infrastructure needs, housing, schooling, and
transportation. The expected size of the payroll is certainly an
interesting issue to most communities. The amount and value of
materials and supplies needed is useful information for potential
suppliers.
The itemized method is in fact the basis for virtually all the other methods
discussed in this course. So, even if you never plan to use this method, but
will use some of the other shortcut methods described in Part 7: Other Cost
Estimating Methods, you need to understand how this method works so you
are aware of the pitfalls of using a less-detailed shortcut method.
Estimating Costs for an Open Pit Mine
The itemized cost estimating method will be demonstrated by estimating

the operating and capital costs for an open pit mine. The equipment-based
nature of the method is illustrated by the following procedure chart (Figure
1).
Twelve steps to an itemized cost estimate

The procedure for estimating costs for an open pit mine can be boiled down
to twelve distinct steps. Each of these steps is described in the following
sections, along with an example of how the step is completed. The steps
and examples are described at a level of detail suitable for a preliminary
cost estimate. A brief discussion following each step explains how the step
might be completed for a less detailed estimate, as well as how it might be
completed for a more advanced, detailed estimate. The twelve steps are as
follows.
Step 1 - Develop a conceptual mine plan

Step 2 - Determine ore and waste production rates
Step 3 - Determine haul distances and routes
Step 4 - Select excavating and hauling equipment and determine

its productivity
Step 5 - Select auxiliary equipment and determine its utilization
Step 6 - Determine supply requirements
Step 7 - Determine personnel requirements
Step 8 - Determine preproduction stripping requirements
Step 9 - Determine building and structure requirements
Step 10 - Determine haul road construction requirements
Step 11 - Determine unit prices and costs
Step 12 - Prepare capital and operating cost summaries
Example
To illustrate concepts described in the text, an example estimate of costs for
a theoretical open pit mine will be completed step by step as each concept
is described. We begin with a brief description of the theoretical deposit to
be mined.
Project Description
A copper porphyry deposit has been partially drilled out and a preliminary
resource estimate has been completed. Location, geometry and resource
data have been provided to us in the form of plan maps and cross sections.
Resource and waste amounts for a pit with slopes of 45 degrees have been
estimated based on limited drilling and outcrop data. Ore grades are
variable and ore boundaries are irregular. A potential waste dump site and
mill site have been identified. Ore and waste material consist of granodiorite
. Estimated resource and waste amounts are:
100,000,000 tonnes Resource (ore)
230,000,000 tonnes Waste
Our Assignment:
Provide an estimate of mining costs (capital and operating) at an
appropriate level of detail to be utilized in an economic analysis (DCF) to
determine if the property shows potential profitability sufficient to warrant
further expenditure of moneys for additional drilling.

Step 1 - Develop a Conceptual Mine Plan
Develop a Conceptual Mine Plan
A conceptual mine plan must be developed to

provide the basic information listed below. The plan
can be prepared to any level of detail desired or
possible, but the cost estimate cannot proceed until
the following essential items have been determined
or at least assumed.
Basic geometry of ore deposit and waste material: the estimate

does not require a detailed pit plan, but a waste to ore ratio must
be determined or assumed, and an approximate center of mass for
ore and waste should be determined as starting points for material
haulage.
Mill or stockpile location: the mill or stockpile location is necessary
in order to identify the destination point for ore haulage.
Waste dump location: the waste dump location is necessary to
identify the destination point for waste haulage.
Haul route for ore: a proposed haul route to the mill or stockpile
site should be plotted on a topographic map.
Haul route for waste: a proposed haul route to the waste dump
should be plotted on a topographic map.
Some analysts balk at providing even this much detail, but a credible
estimate cannot be prepared, even at the most rudimentary level, without
first determining or assuming the above details. If you dont have at least a
rough idea of the location and geometry of your ore body, or where you are
going to dump your ore and waste, you probably arent ready to begin an
estimate of costs.
Example step 1:
A pit cross-section should be prepared based on whatever information is
available regarding the geometry of the ore body. This may only be based
on limited drilling or projection of outcrop information, or it may be based on
detailed mine planning including pit optimization analysis. For starters, a pit
wall slope of 45 may be assumed. The objective here is to gain an idea of
pit depth in order to determine pit haul road distance. It is assumed that an
actual resource estimate has been completed at an appropriate level of
detail prior to this point.
Figure 2: Preliminary sketch of pit cross section

Consideration should be given to preproduction stripping requirements as
well. As a minimum, a preproduction starter pit is required, the size of which
is dictated by the depth to the top of the ore body, and the size of the
working area required to begin ore production. The significance of the
starter pit to the evaluator is that it represents work that must be
accomplished and costs that must be incurred before production begins.
Hence, its cost must be covered by initial mine financing rather than
through operating revenue. The starter pit is sometimes ignored in
preliminary analyses, because from a total cost perspective, it makes little
difference whether the material is moved before the start of production or
during the mine operating phase. It is mainly through the financial analysis,
especially discounted cash flow analysis, that the timing of this waste
production becomes significant.
A generalized layout plan should be plotted on a topo map, showing the
location of the pit, the waste dump area, and the ore stockpile or mill
location (Figure 3, above left). The objective for making this plot for our
purposes is mainly to determine haulage distances and gradients.
More detailed analyses

As mine planning progresses, more and more details become available to
support the cost estimate. Slope stability studies may be completed to
better define the pit slope angle. Pit plans may be better defined using pit
optimization and planning procedures as outlined in Hustralid and Kuchta
(2006). Waste dump and mill site locations may be designated with greater
certainty through site characterization studies, and haul roads may be
designed to the extent of actual centerline surveys. An appropriately scaled
cost estimate utilizes all significant design details available at the time the
estimate is completed.
Less detailed analyses
A credible estimate cannot be prepared, even at the most rudimentary level,
without first determining or assuming the above details. If you dont have at
least a rough idea of the location and geometry of your ore body, or where
you are going to dump your ore and waste, you probably arent ready to
begin an estimate of costs. The credibility of the estimate is greatly
influenced by the level of effort put into determining these mining
parameters. When working at the most preliminary level, the significance of
the starter pit is minimized and can be ignored in some cases, provided its
volume is included in the overall operating stripping ratio, in which case its
cost is covered by the mine operating costs, rather than capital costs.

Step 2 - Determine Production Rates
Determine Ore and Waste Production Rates
For a discussion of how to determine appropriate production rates for ore
and waste, refer to Part 1: Production Rate.
Example step 2:
Taylors Rule and Taylors Rule revisited (see Part 1: Choosing a Proposed
Production Rate for more information) will be used to help us decide what
production rate to use for our proposed mine. Our example assumes that we
have determined that 30,000,000 tonnes of preproduction stripping will be
required before full production can begin, leaving us with the following
material amounts:
Expected Resources = 100,000,000 tonnes
Total Waste = 230,000,000 tonnes
Preproduction Stripping required = 30,000,000 tonnes
Waste to be removed after Preproduction Stripping = 200,000,000 tonnes
Stripping Ratio = 2 tonnes waste per tonne ore
Taylors Rule as originally stated suggests a production rate as follows:
Ore Tonnes per day = 0.014 (expected tonnes)0.75

Ore Tonnes per day = 0.014 (100,000,000)0.75
Ore Tonnes per day = 14,000
Taylors Rule revisited (Long (2009)) suggests a production rate as follows:
Ore Tonnes per day = 0.123 (expected tonnes)0.649
Ore Tonnes per day = 0.123 (100,000,000)0.649
Ore Tonnes per day = 19,138
Using the Taylors Rule revisited result as a guide, we will assume a daily ore
production rate of 20,000 tonnes. Given our stripping ratio of 2:1, we will
assume a daily waste production rate of 40,000 tonnes.
Referencing Church (1981) and the Cat Handbook (2002, p26-4), we will
assume our ore has the following characteristics:
Specific Gravity = 2.69
Swell = 40%
Tonnage Factor (in situ) = 2.69 tonnes/m3
Tonnage Factor (loose) = 1.92 tonnes/m3
and our waste has the following characteristics:
Specific Gravity = 2.69
Swell = 40%
Tonnage Factor (in situ) = 2.69 tonnes/m3
Tonnage Factor (loose) = 1.92 tonnes/m3
More detailed estimates
For more detailed estimates, the assumed production rate should be based
on multiple cost and economic analyses completed at a range of production
rates. The rate that yields the highest NPV should be selected, unless
extraneous factors take precedence. Sherpa and Apex software(InfoMine
website) provide very convenient and efficient mechanisms for completing
these multiple analyses. In the absence of such software, this can be a very
time-consuming task. One way to shortcut the task is to use scale factors
(see the discussion of scale factors in Part 6: Scaling Factorsfor more
information) to estimate costs for other operating rates after completion of
the base case. This will shortcut the workload, but will diminish the reliability
of the results as well. Cost models from Mining Cost Service (website) can
aid in this process as well.
If detailed pit planning work has been accomplished, this information should
be utilized.
Less detailed estimates

Taylor's rule can be applied to any project for which the total minable
resource is known, with moderately reliable results. Sometimes a judgment
call made by an experienced evaluator will yield a production rate that is as
good as any rate determined by more rigorous methods. One problem with
relying on a judgment call, however, is that it can be difficult to establish
credibility of the results in the minds of reviewers. Sometimes it is important
to show a mathematical basis for an estimate simply to establish the
credibility of the estimate.
Step 3 - Determine Haul Distances and Routes
Determine Haul Distances and Routes
After production rate, haul distance is the most
significant parameter to be determined. Haul
distances and road gradients will be used first to
determine haulage equipment requirements and
hours of operation, and then later to determine road
construction and maintenance requirements and
costs.
Begin by dividing the haul roads into segments with obvious grade
differences. Number the segments in sequence and determine the gradients
of each by determining the elevation gain or loss for each segment divided
by its length, expressed as a percentage. Commonly, a minimum of two
segments, and rarely more than six segments, are required to express
haulage gradients in sufficient detail for purposes of determining haulage
productivity and costs.
For an initial estimate, the approximate center of mass of the ore and waste
zones can be used as the starting point for haulage.
Example step 3:
The distances for each road segment are measured from the generalized
mine plan map shown in Example step 1. The gradient percentage is
determined by dividing the elevation change for a segment by the length of
the segment. The distances and gradients for each segment are listed
below. The in-pit haul road gradients are specified by design to be on
gradients of 10%.
More detailed estimates

More preliminary work would be done to define haul road distances and
gradients. This might include detailed pit planning and actual surveying of
the haul road routes, or it might simply include more detailed plotting on a
topographic map with more careful measurement of distances and elevation
changes.
Obviously, haul distances, and hence haulage costs, will vary from one part
of the pit to another, and from one bench to another. Typically, the gradient
for the pit haul road will be consistent from the top of the pit to the ultimate
bottom, but the total haul distance will increase from bench to bench as the
pit is deepened. The change in haul distance from one bench to another is
easily computed knowing the road gradient and the bench height, e.g. the
haul distance differential between two 20 meter benches, assuming a 10%
pit road gradient would be 200 meters. The haul distance differential is the
key parameter difference between the cost of mining one block of ore or
waste compared to another. This is a very useful tool for estimating bench
by bench costs for pit optimization procedures, or for life of mine cash flow
calculations.
Less detailed estimates

No attempt should be made to estimate mining costs without first making at
least a minimal effort to estimate haulage distances. A rudimentary
estimate can be completed without consideration of road gradients provided
haul distances are known. An average truck speed can be assumed for the
hauls, but where actual road gradients are variable, the estimate may be
severely in error.
You have covered the following points in Part 2: Itemized Cost Estimation:
Planning.
the advantages of the itemized cost estimate method

the twelve steps to an itemized cost estimate
how to develop a conceptual mine (step 1)

how to determine ore and waste production rates (step 2)
how to determine haul distances and routes (step 3)

Part 3 - Itemized Cost Estimating: Equipment
Step 4 - Equipment: Excavating / Loading
Equipment.
how to select equipment and determine its productivity (step 4):

excavating and loading equipment
hauling equipment
drilling equipment
Select Equipment and Determine its Productivity

Primary equipment comprises the excavator(s), hauler(s), and blasthole
drill(s). Productivity exercises will be completed for each of these items to
select the number and size of each type, and the number of hours per day
each must operate to achieve the desired daily mine production rate.
Considerable care should be taken to select these units properly because
they form the core of the operating fleet. Auxiliary equipment such as
dozers, road maintainers, water trucks, service vehicles, etc. can be
selected in subsequent steps with less care because their impacts on the
overall operation and its costs are less significant.
All of the major equipment manufactures publish equipment specification

information that can be used to estimate equipment productivity capabilities
under specific conditions. Manuals containing this information should be
part of every estimators library. One of the best known and useful of these
manuals is the Caterpillar Performance Handbook, popularly know as the
"Cat Handbook," which is published irregularly in updated editions. Much of
the information contained in the Cat Handbook is now available online from
the Caterpillar Company (website). For this exercise, data from the
Caterpillar Performance Handbook (PDF), edition 33, published in October
2002, will be utilized.
Excavating/Loading Equipment
Initially, a decision must be made regarding the type of equipment to use as
the primary excavator. This is a judgment call on the part of the evaluator,
and the selection for ore may be different from the selection for waste. The
usual choices are:
a power shovel:
cable
hydraulic backhoe
hydraulic front shovel

a wheel loader
a dragline
a bucketwheel excavator
Each of these types is best suited for a specific range of conditions as

follows.
Power shovels
Power shovels are best suited for larger operations, in hard rock conditions
where good breakout strength is required, and mobility is of lesser
significance. In recent years, the hydraulic shovel has supplanted the
traditional cable shovel in many applications, but where greater breakout
strength is required in large operations, the cable shovel proves superior in
many cases. Good underfoot conditions are required for shovel operations,
which dictate hard rock conditions. Power shovels are more capital intensive
than wheel loaders, so long depreciation periods are necessary, requiring an
appropriate mine life to make them economically viable.
Electric powered cable shovels are generally preferred over diesel-electric
powered cable shovels because they are more energy efficient and easier to
control and maintain, even though the trailing electric cable can be a
hindrance. Diesel-electric shovels are likely to be found in more remote
areas of a pit.
Wheel loaders
Wheel loaders are commonly employed where mobility and versatility are
important. They are an excellent tool for excavating irregular or spotty ore
zones where the machine must make frequent moves within the pit or pits,
and care must be taken to avoid mixing ore and waste material. They can be
used as a primary hauler for distances up to about 200 meters.
Draglines
Draglines, either walking or crawler-mounted, provide a very cost-effective

means of excavating and moving large volumes of material where
conditions of pit design can take advantage of the reach, dumping radius
and digging depth of the dragline. They can handle both in situ and shot
rock, but fragmentation of the material must be appropriate for the bucket
used, otherwise the bucket loading factor will suffer. They are especially
well-suited for coal strip-mine overburden removal.
Bucketwheel excavators
Bucketwheel excavators were originally developed for relatively easy
digging materials such as overburden removal in the lignite brown coalfields
of Germany and in gravel, sand, loam and clays. Newer generations have
improved capabilities for more difficult digging materials, such as shales,
black coal, limestone, and tar sands. They are continuous excavators most
commonly used in conjunction with conveyor transport systems.
Bucketwheel excavatorshave not been well accepted by North American
mines.
Defining Ore and Waste Characteristics

Once the type of excavator is decided upon, a productivity exercise must be
completed to determine the number and size of units required to achieve
the desired daily production rate. The following characteristics of the ore
and waste must be known or assumed.
In situ rock (bank) density
Ideally, in situ rock density will be known from previous test work. If not, a
value must be assumed. Tables of typical densities for various types of ores
and rocks are available in published manuals (see Caterpillar Performance
Handbooks (undated), Church (1981), Hustrulid and Kuchta (2006)). Usually,
a resource estimate will have been completed before the cost estimate is
started. The density factor determined for the resource estimate can be
applied to the equipment productivity analyses. For these analyses, the
density should be expressed in units of cubic meters per tonne. The term
"tonnage factor" is commonly applied when density is expressed in this way.
Swell
Swell is a metric that describes the fact that a volume of rock expands when
it is blasted or excavated. It is commonly expressed in one of three ways, as
follows.
Typical swell factors can be found in published manuals (see Caterpillar

Performance Handbooks, Church (1981) and Hustrulid and Kuchta (2006)).
Bucket fill factor

The bucket fill factor is the percentage of the excavator bucket capacity that
is actually utilized each time the bucket digs and lifts its load. Bucket fill
factors typically run 80% to 95%, with blasted rock at the lower end of the
range and fine aggregates and soils at the higher end. While a high bucket
fill factor may appear to maximize excavator productivity and efficiency, in
fact, digging time and energy consumption also increase when a high
bucket fill factor is targeted. Hence, the optimum bucket fill factor may be
something less than 100%. Mines commonly target a bucket fill factor less
than 100% based on on-site excavator tests. Bucket fill factors for various
types of materials are listed in Caterpillar Performance Handbooks (undated)
and Church (1981).
Determine the Size and Number of Excavators
With the above rock characteristics known or assumed, the required daily
mine output, decided, and the type of excavator determined based on the
criteria previously described, the next step is to determine the size and
number of excavators needed. This is accomplished in the following steps.
Select an excavator as a starting point for the productivity analysis
If this machine turns out to be an inappropriate selection, the process must
be repeated using other machine sizes until a satisfactory size is found; but
keep in mind, your objective as an estimator is to produce a preliminary
estimate of costs, and not necessarily to design an optimized equipment
fleet. Usually, your initial guess at appropriate equipment sizing will be
adequate for a preliminary estimate of costs.
Determine the excavator cycle time and number of cycles per hour
The cycle time for a wheel loader consists of the total time required to:
load the bucket;

maneuver;
travel full;
dump the bucket; and
travel empty.
The cycle time for hydraulic front shovels, backhoes and cable shovels
comprises the total time required to:
load the bucket;

swing loaded;
dump the bucket; and
swing empty.
Equipment manufacturer handbooks provide excellent guidance

estimating cycle times. See the example below for sample calculations.
in
Determine the estimated productivity per hour for one excavator

The amount of material a loader/excavator can be expected to load in one
hour equals the bucket capacity adjusted for material density, swell factor,
and bucket fill factor, times the number of cycles the excavator can be
expected to complete in one hour. One hour of clock time, however, is not
the same as one hour of productive machine time. For estimating purposes,
the 60 minute hour is usually reduced by a factor to account for operator
efficiency and another factor to account for machine availability.
Operator efficiency and machine availability are discussed
paragraphs. Sample calculations are shown in the example below.
in
later
Determine the number of excavators required to meet the daily

mine production requirement
The daily productivity for one equipment unit equals the hourly productivity
times the number of operating hours available per day, e.g. 8 hours per day
for a one 8-hr shift operation, 16 hours per day for a mine operating two 8
hour shifts per day, etc. For the initial estimate of the number of loaders
required, additional loaders must be added if one loader is unable to
complete the required daily production within the operating hours available
per day.
Re-examine the excavator selection after completion of the hauler
selection
Re-examine the excavator selection after completion of the hauler selection
to assure the excavators and haulers are appropriately matched. Check
manufacturer literature to assure that the excavator dump height at least
matches the hauler loading height. It may not change the cost estimate
much if you have selected a loader that cannot reach the truck bed for
dumping, but it will certainly damage the credibility of your estimate. Also,
the number of buckets required to load the truck should be between three
and five.
Repeat the excavator productivity analysis and selection process as
necessary
Repeat the excavator productivity analysis and selection process if the

excavators and haulers are not appropriately matched or if the number and
size of the excavators is inappropriate for the required daily production.
Examples of Excavator Selection and Productivity

We can assume, by the size of this operation, that more than one excavating
machine will be required, and possibly two different types of machines, one
type for ore and one for waste. We know that the ore zone contains variable
grades and irregular boundaries, so close attention must be paid to grade
control. The versatility and mobility of an articulated wheel-loader lends
itself well to keeping ore-grade material separate from non-ore material, so
we will consider an articulated wheel-loader for excavating and loading ore.
Grade control is not a consideration when mining the overburden waste
material, so a higher productivity front shovel may be more appropriate for
waste excavation.
Example of wheel-loader selection and productivity for ore excavation

We will begin by looking at a very large loader for ore excavation, one with a
bucket capacity of about 15-16 yd3. This is simply a judgment call, with no
mathematical basis at this time. We look through equipment manufacturer
literature to find an actual loader model close to this capacity, and we find
that the Caterpillar 992G meets our criteria. We search company literature
for actual equipment models for two reasons: we want to make sure we are
not specifying a non-existent equipment size, and we need the productivity
information for our machine that is provided in the equipment
manufacturer's literature. Productivity information for the 992G is shown in
Chapter 12 of the Caterpillar Performance Handbooks (undated).
Loader specifications:
Rated bucket capacity = 15 yd3 (11.475 m3)
Flywheel power = 800 hp
Dump height clearance = 14 ft 11 in. (4557 mm)
Please note: formula results may differ slightly from the stated values
because of spreadsheet rounding!
Determine number of loader cycles per hour
Caterpillar states that a typical loading cycle time for the 992G is about 0.53
minutes. Hence, the unadjusted number of cycles in a 60 minute hour would
be:
Unadjusted cycles per hour = 60 minutes / 0.53 minutes = 113.21
Determine the unadjusted hourly production capability

Caterpillar states that a typical loading cycle time for the 992G is about 0.53
minutes. Hence, the unadjusted hourly production capability would be:
Rated bucket capacity (volume) = 15 yd3 (11.475 m3)
Rated bucket capacity (weight) = bucket capacity loose material
density
Rated bucket capacity (weight) = 11.475 m3 1.92 tonnes per m3 =
22.05 tonnes per load (unadjusted for fill factor)
Bucket fill factor = 0.90 (Caterpillar Handbook pg 12-79)
Actual bucket capacity = 19.84 tonnes (adjusted for fill factor)
Unadjusted productivity per hour = 113.21 cycles per hour 19.84
tonnes per cycle = 2,246 tonnes per hour
Determine the adjusted hourly production capability

Efficiency factor = 0.83 (50 minute hour)
Availability factor = 0.90
Adjusted productivity per hour = unadjusted productivity efficiency
factor availability factor
Adjusted productivity per hour = 2,246 tonnes per hour 0.83 0.9 =
1,678 tonnes per hour
Determine hours per day loader must operate
Operating hours per day = daily production requirements / adjusted

productivity per hour
Operating hours per day = 20,000 tonnes per day / 1,678 tonnes/hr =
11.92 hours per day
Since our production schedule calls for two-10 hour shifts per day, we see
that the 992G loader is capable of meeting the mine's production
requirements with 8 hours to spare. However, we are going to adjust these
hours to 19.5 hours per day (see Part 4: Step 4 - Equipment: Hauling)
Information carried forward in our cost estimate
Loader size required = 800 hp with 15 yd3 (11.475 m3) bucket
Number of loaders required = 1
Hours loader must operate = 19.5 hrs per day
Example of front shovel selection and productivity for waste excavation

With no grade control issues to worry about, high and efficient productivity,
rather than mobility and selectivity, is of primary importance in selecting an
excavator for mining the overburden waste. Front shovels are commonly
used for this purpose. The procedure for estimating productivity of a front
shovel is much the same as the procedure described above for the wheel
loader. The Caterpillar front shovel model 5230B appears suitable for our
purpose, so we will base our initial analysis on its characteristics.
Front shovel specifications:

Rated bucket capacity = 22.2 yd3 (17.0 m3)
Flywheel power = 1,550 hp (1156 kw)
Determine the unadjusted hourly production capability
Loading cycle time (Cat Handbook) = 0.49 min
Unadjusted cycles per hour = 60 minutes / 0.49 minutes = 122.45
Rated bucket capacity (volume) = 22.2 yd3 (17.0 m3)
Rated bucket capacity (weight) = bucket capacity loose material
density
Rated bucket capacity (weight) = 17.0 m3 1.92 tonnes per m3 = 32.66
tonnes per load
Bucket fill factor = 0.95 (Caterpillar Handbook pg 12-79)
Actual bucket capacity = 31.03 tonnes (adjusted for fill factor)
Unadjusted productivity per hour = 122.45 cycles per hour 31.03
tonnes per cycle
Unadjusted productivity per hour = 3,799.72 tonnes per hour
Determine the adjusted hourly production capability

Efficiency factor = 0.83 (50 minute hour)
Availability factor = 0.90
Adjusted front shovel productivity = unadjusted productivity efficiency
factor availability factor
Adjusted productivity per hour = 3,799.72 tonnes per hour 0.83 0.9
Adjusted productivity per hour = 2,838.39 tonnes per hour
Determine hours per day shovel must operate

Operating hours per day = daily production requirements / adjusted
productivity per hour
Operating hours per day = 40,000 tonnes per day / 2,838.39 tonnes/hr
Operating hours per day = 14.09 hours per day
Since our production schedule calls for two 10-hour shifts per day, we see
that the 5230B front shovel is capable of meeting the mines production
requirements with 6.0 hours to spare. This is an acceptable operating
schedule, so we will base our cost estimate on a front shovel with size,
power, and production capabilities similar to the Caterpillar 5230 B.
However, we are going to adjust these hours to 18.0 hours per day (see
explanation in Part 4: Step 4 - Equipment: Hauling).
Information carried forward in our cost estimate
Front shovel size required = 800 hp with 22.2 yd3 (17.0 m3) bucket
Number of front shovels required = 1
Hours front shovel must operate = 18.0 hrs per day
More and Less Detailed Analyses

For large projects, a great deal of effort typically goes into the excavator
selection process and productivity analysis, including rock characterization
studies that might entail exploration by drilling, test excavating, or seismic
work. Based on the results of this work and discussions with equipment
manufacturers, an appropriate excavator is selected along with specific
considerations for bucket, boom, horsepower, etc. Much of this is beyond
the realm of the cost estimator, but if the project is at this advanced stage
and the information is available, it must be used in the estimate. For the
estimator, the procedure is much the same as described here, however,
even with this level of detail.

Equipment manufacturer product literature, e.g. the Cat Handbook,
sometimes provides shortcut productivity tables for quick estimates of
excavator productivity that provide data that is quite adequate for early
feasibility studies.

Step 4 - Equipment: Hauling
Hauling Equipment
The most common choices for hauling equipment include:
conveyors;
rigid frame rear dump trucks;
scrapers;
bottom dump trucks; and
articulated rear-dump trucks.
Conveyors can be cost effective for long-term, high volume haulage where
limited flexibility is acceptable. They are capital intensive, but have
comparatively low operating costs. Usually crushing is required before
material can be conveyed (Figure 1, below).
Rigid frame rear dump trucks are the workhorse of mine haulage. These are
the most commonly used haulage machines at mines today (Figure 2,
below).
Scrapers combine the excavating function with the hauling function. They
are more commonly used for construction earth moving rather than mining
(Figure 3, below).
Bottom dump trucks, sometimes referred to as belly dumps, require a
comparatively low capital investment and can be effective where long hauls
are involved. Highway-legal models are the machine of choice if the haulage
includes a public road segment (Figure 4, below).
Articulated rear-dump trucks are smaller than rigid frame, but they are more
maneuverable and generally favored for hauling under adverse conditions
such as uneven ground or tight curves (Figure 5, below).
Determine the Size and Number of Trucks

Once the type of hauler is decided upon, the number and size of hauler units
must be determined. For truck haulers, this is accomplished through a
productivity analysis similar to that done for the excavator. Material
characteristics important to this analysis are:
in-situ rock density,

swell factor,
truck fill factor, and
haul road profile.
In-situ rock density, swell factor, and haul road profile were discussed in the
previous section.
Truck fill factor

Truck fill factor is the percentage of the trucks design capacity that is
actually utilized in an average haul. Truck capacities are usually specified as
either "struck" or "heaped." The struck capacity is the volume of material
contained within the bed of the truck and its sidewalls, without exceeding
the height of the sidewalls. Heaped capacity assumes that material is piled
higher than the sidewalls with 2:1, 3:1, or 4:1 slopes, but usually at a slope
angle of 2:1 (SAE). The designation SAE indicates the slope angle is
defined by the standards established by the Society of Automotive
Engineers to define capacities of excavating and hauling equipment. The
SAE definition of slope angle differs from the definition usually used by civil
and mining engineers. An SAE slope angle is defined as rise over run,
whereas a civil engineering definition of slope angle is usually run over rise.
Productivity analysis for truck haulers
1. Select a reasonably sized truck as a starting point for the analysis.
If this size turns out to be an inappropriate selection, the process must be
repeated using other truck sizes until a satisfactory size is found. Again,
keep in mind that your objective is to develop a preliminary estimate of
costs, not to design an optimized equipment fleet.
2. Determine the hauler cycle time. The time
required for a truck to complete one cycle consists of
the time required to:
maneuver the truck into position for

loading;
load the truck;
travel from the loading point to the dumping point;
turn and dump the load; and
travel from the dumping point to the loading point.
Caterpillar (Caterpillar Handbook (undated), chapter 9) lists typical truck

maneuvering times in the loading area of 0.6 to 0.8 minutes. This assumes
that adequate space is available for unrestricted maneuvering, and the
truck does not have to be backed into position a significant distance, such
as down an initial drop cut ramp. Assumptions are similar for maneuvering
at the dump point. Caterpillar (Caterpillar Handbook (undated) pg 9-9) lists
1.0 to 1.2 minutes for typical time to maneuver and dump.
Loading time depends on the excavator, and is determined by the excavator

cycle time calculation.
Truck travel time is determined by estimating the time it will take the truck
to travel through each of the road gradient segments. The times for each
segment are accumulated to determine the total time, first for the loaded
truck traveling from the loading point to the dump point, and then again for
the empty truck traveling in the return direction.
Segment by segment travel times are estimated using speed and retarder
curves supplied by the manufacturer of the selected truck. These ponderous
looking charts depict the design speed of the vehicle when traveling against
the total of the gradient resistance plus or minus the rolling resistance.
Speed curves are used for uphill travel. Retarder curves are used for
downhill travel.
Rolling resistance is a measure of the force that must be overcome to roll a
wheel over the ground. It is usually expressed as a percent gradient, in
recognition of the fact that certain road and tire conditions impact speed in
the same way that an uphill road gradient does. Hence, it is added to the
road gradient when estimating uphill travel speed, and it is subtracted from
the road gradient when estimating downhill travel speed. Caterpillar
(Caterpillar Handbook (undated) pg 26-1) provides a table of typical rolling
resistance factors for a variety of operating conditions. Rolling resistances of
1% to 5% are typical for most mining situations, although resistances as
high as 20% are listed for very soft, muddy road conditions. For preliminary
estimating purposes, a rolling resistance of about 3% can be used, assuming
the roadway will be fairly well maintained.
Speed curve
Using a speed curve (Figure 7 (right)) to determine the speed at which a
hauler will travel on an uphill road segment, read down from the gross
vehicle weight (either empty or full as appropriate) to the appropriate line
for total effective resistance (grade plus rolling). From this point read
horizontally, either right or left to the curve with the highest obtainable
speed. The number on this line represents the gear in which the truck will be
working. From this point, read down to the estimated speed.
Figure 7: Speed curve (adapted from Caterpillar Company for a Caterpillar
777F truck)to determine gradeability performance: read from gross weight
down to the percent of total resistance. Total resistance equals actual
percent grade plus 1% for each 10kg/t (20lb/ton) of rolling resistance. From
this weight-resistance point, read horizontally to the curve with the highest
obtainable gear, then down to maximum speed. Usable rimpull will depend
upon traction available and weight on drive wheels.
For high altitude situations, the estimated speed should be adjusted by an

altitude deration factor suggested by the truck manufacturer. Caterpillar
Company (website) lists deration factors for its equipment on its website.
Retarder curve
To determine the speed at which a hauler will travel downhill, the vehicle
retarder curve should be used. On the retarder curve, read down from the
gross vehicle weight to the appropriate line for total effective grade. For
downhill travel, the rolling resistance should be subtracted from the grade
assistance factor to determine total effective grade. From this point read
horizontally, either right or left to the curve with the highest obtainable
speed, then down to read the estimated speed on the bottom scale.
Downhill speeds should not be adjusted for altitude deration.
An adjustment factor can also be applied to account for a reduction of speed

because of deceleration and acceleration at the start and end of road
segments.
The speed for each segment should be converted to travel time by the
following formula.
T = 60 D/S
where:
T = travel time in minutes

D = distance in feet or meters
S = speed in feet or meters per hour
Figure 8: Retarding performance (adapted from Caterpillar Company for a

Caterpillar 777F truck)to determine retarding performance: add lengths of
all downhill segments and, using this total, refer to proper retarding chart.
Read from gross weight down to the percent effective grade. Effective grade
equals actual % grade minus 1% for each 10kg/t (20 lb/ton) of rolling
resistance. Form this weight-effective grade point, read horizontally to the
curve with the highest obtainable gear, then down to maximum descent
speed brakes can properly handle without exceeding cooling capacity. The
following charts are based on these conditions: 32 C (90 F) ambient
temperature, at sea level, with 27.00 R49 tires.
Note: select the proper gear to maintain engine rpm at the highest possible
level, without overspeeding the engine. If cooling oil overheats, reduce
ground speed to allow transmission to shift to the next lower speed range.
When the travel times for all the road segments have been determined,
they should be added together to determine the total travel time loaded,
and the total return travel time empty.
So now we have the total cycle time required for a truck to position itself to
load, travel to the dump point, dump, return, and position itself for loading
again. Four questions remain to be answered to complete the truck analysis.
How much material can one truck haul in each cycle?

How much material can one truck haul in one hour?
How many trucks are required to achieve the desired amount of
production per shift?
How many hours must the haul trucks operate each shift to
achieve the desired level of production?
3. Determine how much material one truck can haul in each cycle.
To determine how much material one truck can haul in each cycle, we
reference manufacturers' literature to determine the target payload in tons
for which the truck is designed. We then determine the loose density of the
material to be hauled by multiplying its bank density by the expected swell
factor. The volume of the target payload is then calculated to assure that it
does not exceed the volume of the truck bed. If it does, the payload per haul
is limited by the volume of material the truck can hold. If not, the design
payload for the truck is usually used as its capacity for purposes of
preliminary analysis. Manufacturers commonly list a struck capacity and a
heaped capacity for their trucks. The struck capacity adjusted by a fill factor
is commonly used for preliminary estimates. Application of a fill factor
provides a means for the estimator to account for the fact that the
excavator does not provide a perfectly full load with each cycle.
4. Determine the amount of material one truck can haul in one hour.
The amount of material one truck can haul in one hour is the number of
cycles that can be completed in one hour, multiplied by the anticipated
amount per load, adjusted by an "efficiency factor." The efficiency factor is
applied in recognition of the fact that the truck is not always operated with
100% efficiency, i.e. the driver may stop occasionally for a restroom break, a
conversation with his supervisor, a traffic delay, etc. Commonly an 83%
efficiency factor is applied for preliminary estimates of routine production
work. This is sometimes called the "50 minute hour."
An "availability" factor should also be applied, on the assumption that each
truck may be out of service from time to time for mechanical reasons.
5. Determine the number of trucks required and the number of hours the
trucks will operate.
Once the adjusted hourly production per truck is determined, the number of
trucks required to achieve the desired production level per shift is
determined, and the total number of hours the trucks will operate per shift.
The numbers should be reviewed to assure that the planned fleet is
practical, manageable, and appropriate for the situation. To be avoided is a
very large number of small trucks or a very small number of large trucks.
Whether or not to include spare trucks in the equipment fleet is a judgment
call based on a number of factors, such as the need to assure uninterrupted
haulage, the breakdown history of the fleet, capital availability, etc. Adding
spares to the fleet will of course add to capital costs, but it has no effect on
estimated operating costs because the estimate assumes that no operating
costs are involved when a truck is idle.
Three critical pieces of information are carried forward from this haulage
analysis:
the size of the trucks required;

the number of trucks required; and
the hours per shift these trucks will operate.
These three items are the basis for determining the capital cost for haulage
equipment, the number of hauler operators required, and the cost per day
for haulage equipment operation, as well as such seemingly extraneous
factors as the width of the haul road, the size of the mechanical shop, the
number of mechanics required, and even the number of supervisory
personnel required.
Excavator/Hauler Cycle Time Test

After the number of required units and the cycle times for the excavators
and the haulers have been determined, a comparison should be made to
assure that the cycle times are compatible, so that a truck arrives at the
excavator as close as possible to the moment when the excavator has
completed loading the previous truck, and is prepared to load the next. This
is done by comparing the time it takes for the entire truck fleet to cycle to
the time it takes the excavator to load one cycle of the complete fleet. If the
time required for the truck fleet to complete a cycle is greater than the time
required for the excavator to load one cycle of the fleet, the excavator must
wait for the arrival of trucks, in effect adding to its cycle time. To alleviate
this, additional units should be added to the truck fleet. If, on the contrary,
the truck fleet cycle time is shorter than the time required for the excavator
to load the fleet, then the excavator(s) should be increased in size or
number.
Example of Haul Truck Selection and Productivity (Ore Haulage)

At this point we have very little information upon which to base the selection
of truck size for our initial productivity analysis. We will start by looking at a
100 ton rigid frame hauler, comparable to the popular Caterpillar Model
777D, because the Cat Handbook lists this truck as a reasonable match for
the 992G. (Caterpillar Handbook (undated) Ch. 22) Caterpillar lists the
following characteristics for the 777D.
Caterpillar 777D Rigid Frame Hauler
gross machine weight = 163,293 kg (360,000 lb)
target payload = 90,536 kg (199,597 lb.)
capacity struck = 42.05 m3 (55 yd3)
capacity heaped = 60.57 m3 (79.2 yd3)
flywheel power = 699 kW (938 hp)
loading height = 4.48 m (14 ft 7 in)
Determine truck cycle time (ore haulage)
To start we need to estimate the truck cycle time. One complete cycle for
the truck consists of the following actions:
maneuver at the loading site;

load;
travel loaded to the ore storage pile;
maneuver and dump; and
travel empty to the ore excavator.
To determine the travel times, we need first to determine the speed at which
the truck will travel over each of the haul road segments listed in Step 3
above, once fully loaded from the loading point to the dumping point, and
once empty in the opposite direction. For this information we refer to the
speed and retarder curves for the 777D hauler in the Caterpillar
Performance Handbook (undated) (Chapter 9). See above explanation of
how to read the curves. The three factors needed to determine speed from
the curves are machine weight loaded, machine weight empty and total
resistance. The formula for calculating travel time from speed is:
60 D /S = T
where:
D = distance
S = speed
T = time
For this example, speeds were capped off at 50km/h for safety reasons.
We now know the truck travel time for the haul. Remaining to be determined
are the maneuver times at the stockpile and at the excavator, and the
loading time.
Typical maneuver times in the load area are 0.6-0.8 minutes. Typical
maneuver and dump times at the dump point are 1.0-1.2 minutes.
Loading time is determined by the excavator productivity as calculated
above. We have estimated actual bucket capacity for the 992G excavator to
be 19.83 tonnes. With a 90 tonne target payload for our truck, this means
that the loader must make 4.54 passes to fill the truck (90 tonnes / 19.83
tonnes). A well known rule of thumb says that for a good excavator to truck
match, the number of passes should be 3 to 5. As noted above, the typical
loading cycle time for the 992G is about 0.53 minutes. Therefore, the
loading time for one truck is 2.4 minutes.
Truck cycle time (ore haul)
We now have all the data we need to add up our full truck cycle time, as
follows.
maneuver at the loading site: 0.7 minutes
load: 2.4 minutes
travel loaded to the ore storage pile: 17.35 minutes
maneuver and dump: 1.1 minutes
travel empty to the ore excavator: 8.38 minutes
total truck cycle time: 29.93 minutes
Number of trucks needed for ore haul
Our target daily ore production is 20,000 tonnes. Each truck carries 90
tonnes and takes 29.9 minutes to complete one haul cycle, but we still need
to account for a 90% availability factor and an 83% efficiency factor. Hence,
the amount of ore each truck can haul in two 10-hr shifts is:
90 tonnes 1200 minutes 0.9 0.83 / 29.93 minutes
truck productivity per truck per day = 2,695.5 tonnes
number of trucks needed for ore haul = 20,000 tonnes / 2,695.5 tonnes =
7.4 trucks (round to 8 trucks)
Amount of time the trucks must operate in one day for ore haulage
This information will be used in our estimate of operating costs, which will
be on a per hour basis. Well ignore the efficiency factor in this calculation,
on the assumption that at least the engine will be idling or some maneuver
is taking place during the down time. Well include the availability factor,
however, on the assumption that the truck is not operating when it is not
available. The total operating hours for the truck haul will be
7.4 trucks 20 hrs per day 0.9 availability factor = 133.2 hours
(Notice that we used our original number of trucks (7.4) rather than 8 to
estimate operating hours properly)
Examination of the Waiting Time the Trucks Impose on the Ore Excavator
This calculation accounts for the fact that the excavator loads a round of
trucks faster than the time it takes for the round of trucks to complete a full
cycle, requiring the excavator to sit at idle for an amount of time, waiting for
trucks. This increases the required daily operating time for the excavator.
Number of trucks hauling ore = 8

Excavator cycle time = 0.53 min
Excavator cycles per truck = 4.54
Total loading time per truck (0.53 4.54) = 2.41 min/truck
Total cycle time per truck = 29.93 min/truck
Time between loadings for one truck (T1) = (29.93 2.41) = 27.52 min
Number of trucks excavator must load during T1 = (8-1) = 7
Time excavator spends actually loading during T1 = (7 2.41) = 16.87 min
Time excavator spends idle between successive loadings of any specific
truck = (27.52 16.87) = 10.65 min
Time excavator spends idle for each truck = (10.65/7) = 1.52 min
Excavator time needed per truck including idle time 2.41 + 1.52 = 3.93 min
Total time loader must be available per day (unadj) ((20,000/90) 3.93)/60
= 14.56 hr
Total time loader must be available per day adjusted for availability and
efficiency = 14.56/(0.83 0.90) = 19.49 hr = 19.5 hours
Example of Haul Truck Selection and Productivity (Waste Haulage)
We have determined what size of truck to use for ore haulage, the number
of trucks needed and the number of hours per day total that the trucks must
operate. Now we will do the same for waste haulage. The procedure will be
identical except the haul profile is different, resulting in a change in travel
times, and the waste haul trucks are being loaded by a front shovel rather
than a wheel loader, so the loading time might be different as well. We will
begin by testing the Cat 777D model, as with the ore haul analysis, because
a matched ore and waste haul fleet is a desirable operating advantage.
Number of shovel passes per truck load

90 tonnes per truck / 31 tonnes per shovel bucket = 2.9 passes
Loading time per truck
2.9 passes per truck 0.49 minutes shovel cycle time = 1.42 minutes
Truck cycle time waste haul
maneuver at the loading site: 0.7 minutes
load: 1.42 minutes
travel loaded to the ore storage pile: 7.65 minutes
maneuver and dump: 1.1 minutes

travel empty to the ore excavator: 3.23
total truck cycle time: 14.1 minutes
Number of waste haul trucks needed
90 tonnes 1200 minutes 0.9 0.83 / 14.1 minutes
truck productivity per truck per day = 5,722 tonnes
number of trucks needed for waste haul = 40,000 tonnes / 5,722 tonnes =
6.99 trucks (round to 8 trucks)
Total hours per day the waste haul trucks will operate
7 trucks 20 hrs per day 0.9 availability factor = 126 hours
(Notice that we used our original number of trucks (7) rather than 8 to
estimate operating hours properly)
Haul truck fleet
We see from the above calculations that we will need 8 ninety tonne trucks
(similar to Cat 777D) for ore haul operating a total of 133.2 hours per day,
and 8 ninety tonne trucks for waste haul operating a total of 126 hours per
day.
Examination of the Waiting Time the Trucks Impose on the Waste Excavator
This calculation accounts for the fact that the excavator loads a round of
trucks faster than the time it takes for the round of trucks to complete a full
cycle, requiring the excavator to sit at idle for an amount of time, waiting for
trucks. This increases the required daily operating time for the excavator.
Number of trucks hauling ore = 8

Excavator cycle time = 0.49 min
Excavator cycles per truck = 2.9
Total loading time per truck (0.49 2.9) = 1.42 min/truck
Total cycle time per truck = 14.1 min/truck
Time between loadings for one truck (T1) = (14.1 1.42) = 12.68 min
Number of trucks excavator must load during T1 = (8-1) = 7
Time excavator spends actually loading during T1 = (7 1.42) = 9.94 min
Time excavator spends idle between successive loadings of any specific

truck = (12.68 9.94) = 2.74 min
Time excavator spends idle for each truck = (2.74/7) = 0.39 min
Excavator time needed per truck including idle time 1.42 + 0.39 = 1.81 min
Total time loader must be available per day (unadj) ((40,000/90) 1.81)/60
= 13.41 hr
Total time loader must be available per day adjusted for availability and
efficiency = 13.41/(0.83 0.90) = 17.95 hr = 18 hr

For more detailed analyses, factors should be applied for altitude deration, if
elevation exceedes 3000 m, and for acceleration and deceleration at the
start and end of road segments and on curves. Haul road segments and
gradients can be determined in greater detail. Multiple haul routes can be
tested. Multiple estimates can be prepared to test multiple truck and
excavator sizes. When testing multiple truck and excavator sizes, some form
of DCF type of study should be completed to test the trade-offs between
capital and operating costs with differing equipment sizes. Queuing theory
and life cycle costing analyses may be applied.

For less detailed analyses, a simple estimate of average haul speed can be
applied, ignoring the haul road profile. Some of the equipment
manufacturer's literature provides quick reference charts for estimating
haulage productivity. As a minimum, a reasonable haul distance should be
assumed.
Change Level
Step 4 - Equipment: Drilling

Drilling Equipment
Production blastholes for mining or quarrying typically are drilled using
crawler mounted percussion drills (Figure 1, below left) or rotary drills
(Figure 2, below right).
The use of percussion drills is generally confined to smaller operations with

production rates less than a few thousand tonnes per day. Rotary drills are
used for production drilling at most larger scale operations where blasting is
required. For purposes of our cost estimate, drilling for production of ore and
waste should each be considered separately because rock conditions and
production requirements for one may differ considerably from those of the
other. Upon completion of the separate analyses, a judgment call should be
made to decide if the same equipment can be used to drill both ore and
waste, keeping in mind that the distance between the two operations in an
operating pit may be so great that utilization of the same equipment units
for each may be impractical.
The objectives for our analysis and selection of drilling equipment for cost
estimating purposes are as follows.
1. Select the appropriate type and size of drill(s) required based on the
information we have available about the rock characteristics and the
proposed operation.
2. Determine the number of hours our drill(s) must operate per day to
meet production requirements.
3. Determine the number of drills required to fulfill the daily
requirements.
4. In conjunction with the drill selection procedure, determine the daily
requirements for drill bits, drill steel, primers, caps, and explosives.
By the time our mine goes into production, considerable test and design
work will have been completed to determine ore and waste drilling and
blasting characteristics, powder requirements, and preliminary bench height
and blasthole drill patterns. At the time of our preliminary cost estimate,
however, we may have little or no information available other than rock
types and our predetermined production rates for ore and waste. A credible
cost estimate can be derived from this minimal information, as follows.
If our daily production rate is 5,000 tonnes or less, assume percussion; if it is
10,000 tonnes or more, assume rotary; if it is between 5,000 and 10,000,
either may be appropriate.
Blasthole requirements based on hole spacing
For large scale operations, in the absence of more definitive specifications,
begin by assuming blasthole diameters of 6 cm for very small operations up
to 38 cm for very large operations.Church (1981) suggests appropriate hole

spacing for various rock types and face heights (Table 1, right).
Table 1: Material type and distance between blastholes (ft.)
Height of
face
Granite, Gneiss
Quartzite
Limestone (medium-thickly
stratified)
Shale (medium-hard
to soft)
25
10 12
12 14
15 18
35
12 14
14 16
16 18
45
13 15
14 19
18 22
55
14 16
15 21
19 24
80
16 20
16 25
20 28
100
16 22
20 28
20 30
120
16 25
20 29
20 32
Table 1: Material type and distance between blastholes (ft.) - adapted and
abbreviated from Church 1981 p. 11-47
Once an appropriate drill pattern has been selected, the footage of drilling
required per day can be determined from Table 2 (left), which outlines the
volume of rock blasted per foot of blasthole.
Table 2: Volume of rock per lineal foot of blasthole (cubic yards)
Spacing
Burden
10
12
14
16
18
20
25
30
40
10
3.70
4.44
5.19
5.93
6.67
7.41
9.26
11.11
14.81
12
4.44
5.33
6.22
7.11
8.00
8.89
11.11
13.33
17.78
14
5.19
6.22
7.26
8.30
9.33
10.37
12.96
15.56
20.74
16
5.93
7.11
8.30
9.48
10.67
11.85
14.81
17.78
23.70
18
6.67
8.00
9.33
10.67
12.00
13.33
16.67
20.00
26.67
20
7.41
8.89
10.37
11.85
13.33
14.81
18.52
22.22
29.63
25
9.26
11.11
12.96
14.81
16.67
18.52
23.15
27.78
37.04
30
11.11
13.33
15.56
17.78
20.00
22.22
27.78
33.33
44.44
40
14.81
17.78
20.74
23.70
26.67
29.63
37.04
44.44
59.26
Spacing is distance in feet between blastholes parallel to face.

Burden is distance in feet between blastholes at right angles to face.
For total cubic yards of rock per blasthole, multiply by height of face in feet.
Table 2: Volume of rock per lineal foot of blasthole (cubic yards) - adapted
and abbreviated from Church (1981) p. 11-44
Volume of rock can be converted to weight by multiplying by an appropriate

density factor. Rock density can vary considerably depending upon rock type
and condition. A table of typical densities from the Caterpillar Performance
Handbook is shown in Figure 3 (right).
Step 4 - Equipment: Drilling - Figure 3
Figure 3: Typical densitiesadapted from Caterpillar (2002) p. 26-4
The daily drilling requirements should be increased by about 15% to 20% to

account for stemming and sub-grade drilling requirements. Blastholes are
usually drilled to a depth below the desired finished grade to prevent the
extension of conical peaks of rock above the desired grade between
blastholes. Subgrade drilling is usually carried to a depth of about the
distance between drill holes.
Average drill penetration rates

In order to select an appropriate size and number of blasthole drills, first an
average drill penetration rate must be assumed. Example rates can be
found in equipment product literature and in a number of publications.
Following are some typical rates from Church (1981).
average hourly drilling rates for down-the-hole air hammers of

track drills or combination percussive and rotary drills working at
250 psi air pressure and 67% drilling efficiency:
average hourly drilling rates for rotary drills using tricone bits
based on 67% drilling efficiency:
average hourly drilling rates for rotary drills using drag bits of
fishtail or finger type based on 67% drilling efficiency:
The above tables are adapted from Church (1981).

Daily drill productivity
Based on the preceding information, a specific model of drill should be
assumed for the remainder of the estimate. Drills are commonly specified by
horsepower, hole size capability, depth capability, and pulldown rating.
Manufacturer product literature can be used to select an appropriate model
from this information. It is very useful to select a specific model at this
stage, because this provides a means of determining the capital cost for the
drill, which can be the actual price for the drill as provided by the
manufacturer. The horsepower of the drill is a key piece of information that
we will use later to estimate drill operating costs.
A rotary drill is typically specified by its:
hole diameter capability;

maximum hole depth capability, either single pass or multiple
passes;
maximum pulldown pressure; and
power.
A drill should be selected with the capability of drilling a blasthole of the

diameter and depth capable of containing the required amount of
explosives, compatible with planned bench heights.
Pulldown pressure is provided by the weight of the drill itself, although not
all the weight can be assigned to pulldown. Drill designers work to place as
much of the drills weight as possible at the drill end so as to contribute to
pulldown without lifting the drill off its jacks and thereby disrupting its
balance. Typically, about 50 to 60 percent of a drills weight can be assigned
to pulldown.
Rotary drills are generally electric or diesel-hydraulic. Electric drills are
cheaper to own, operate, and maintain than diesel-hydraulic, but must be
tethered to a power cable. Diesel-hydraulic machines can be propelled to
any area of the pit unencumbered by the requirement to connect to power.
Bit rotation and air compression consume most of the power used by the
machine.
Once a drill model and its operating characteristics are assumed, we can
estimate the daily productivity for the drill by the following relationship:
(drill penetration rate per hour) (hours per shift) (efficiency factor)
Here again, an efficiency factor of 83% is appropriate for a preliminary
estimate.
Once the adjusted daily production per drill is determined, the number of
drills required to achieve the desired production level per shift is
determined, as well as the total number of hours the drills will operate per
shift. The numbers should be reviewed to assure that the planned drill fleet
is practical, manageable, and appropriate for the situation, especially
considering the need to have one or more drills operating in waste, and one
or more operating in ore, which may have different drilling characteristics
and may be some distance apart.
Three critical pieces of information are carried forward from this drilling
analysis:
1. the size of the drills required;
2. the number of drills required; and
3. the hours per shift these drills will operate.
These three items are the basis for determining the capital cost for drilling
equipment, the number of drill operators and helpers required, and the cost
per day for drill operation, as well as contributing to such seemingly
extraneous factors as the size of the mechanical shop, the number of
mechanics required, and even the number of supervisory personnel

required.
Example of Drilling Productivity and Equipment Selection: Ore

We begin our assessment assuming one or more 6 inch rotary drills are a
reasonable choice for drilling blastholes in the ore and in the waste.
Drill productivityore
Church (1981) suggests a drill hole spacing of 16 ft. 22 ft. (4.87m
6.70m) for our granodiorite ore mined on 100 ft. (30.5m) benches. Church
(1981)tells us that with this pattern, 13.04 yd3 (9.97 m3) of rock will be
blasted per lineal foot of blasthole. The density of our ore is 2.69 tonnes/m3.
Hence, 26.82 tonnes of rock will be blasted for each lineal foot of hole
drilled. Therefore, 746 ft. (227 meters), of blasthole, plus sub-drilling and
stemming requirements, must be drilled each day to meet our daily
production target of 20,000 tonnes per day. We will increase this total by
15% to account for sub-drilling and stemming requirements, resulting in a
total of 858 ft. (262 m) drilling required per day.
9.97 m3 2.69 tonnes/m3 = 26.82 tonnes blasted per lineal foot of
blasthole
20,000 tonnes per day / 26.82 tonnes blasted per foot = 746 ft (227 m) of
drilling
227 meters of drilling 1.15 = 262 meters of drilling required per day
including stemming and sub-drilling requirements
Church (1981) suggests that our machine can drill 4070 ft. per hour in
medium hard rock using tricone bits based on 67% drilling efficiency. At 50
ft. per hour it would require 17.2 hours of drilling to meet the daily drill
requirements for ore.
Drill Selection
With the aquisition of Terex and Bucyrus by Caterpillar, Cat now makes
several drills suitable for this project. Our job at this stage is not to do a
comparative study of multiple drills, but rather to select a drill whose capital
and operating costs can be expected to be representative of those for one
or more drill models that might ultimately be selected. Review of Caterpillar
product literature available on their website suggests that a machine
comparable to model MD 6290 (previously Terex Reedrill SKF) would be
appropriate. Pertinent specifications for that model are as follows.
Cat MD 6290
hole diameter: 152-270 mm
maximum hole depthmultiple passes: 52.7 m
maximum pulldown: 27,216 kg

power: 475540 hp
We will not assume that the Cat MD 6290 will be used for our project, but at
this stage we will assume that a machine with similar characteristics will be
used.
Example of Drilling Productivity and Equipment Selection: Waste

If we assume drilling requirements for waste are similar to those for ore,
except doubling of the daily production amount, then we can assume that
two drills similar to the one selected for ore drilling must operate 17.2 hours
per day each to meet daily production requirements.
40,000 tonnes per day / 26.82 tonnes blasted per foot = 1491 ft (455 m) of
drilling
455 meters of drilling 1.15 = 524 meters of drilling required per day
including stemming and sub-drilling requirements (+ 15%)
The total daily drilling requirement for ore and waste is 262 m + 524 m =
786 m with a total of 3 drills.
The procedure for estimating blasthole drilling requirements and costs for
more detailed analyses is much the same as described here, except that it
would be based on more complete knowledge and analyses of material
blasting characteristics and blast pattern design. This knowledge is gained
through rock mechanics studies and further testing as a project progresses.
The initial drilling productivity and cost estimate can be adjusted for these
new parameters when they become available.
A quick and simple procedure for estimating drill requirements is outlined in
the operating manual for the Sherpa Cost Estimating System for Surface
Mines by Aventurine Engineering (see "Software" on CostMine.com). This
procedure begins with an estimate of the powder factor (pounds of
explosive required per ton of material blasted) along with the density of the
explosive. From these two data items, the volume of blast holes required to
contain the necessary explosives for, say, one day's production can be
calculated. Assuming six inch blastholes, the total length of holes required
per day can then be determined. The drill pattern does not need to be
known for this technique, nor is it necessary to know the number or depth of
holes required; however, some additional drilling should be provided to
allow for stemming of the holes. Once the amount of drilling is known, the
size, number and hours of operation for the drills can be determined as
above.
You have covered the following points in Part 3: Itemized Cost Estimation:
Equipment.
how to select equipment and determine its productivity (step 4)

hauling equipment
drilling equipment

Part 4 - Itemized Cost Estimating: Auxiliary Equipment and Supply
Change Level
Step 5 - Auxiliary Equipment
Auxiliary Equipment and Supply.
how to select auxiliary equipment and determine its utilization

(step 5)
how to determine supply requirements (step 6)
Select Auxiliary Equipment and Determine its Utilization

Auxiliary equipment at a large surface mine may include:
road maintainers;
bulk powder trucks;
dozers;
service trucks;
pumps;
water tank trucks;
lighting; and
pickup trucks.
Productivity analysis and equipment selection typically are conducted with

considerably less detail for accessory equipment than for production
equipment. Individually, each accessory unit has only minimal impact on
overall costs, and it can be hard to estimate the amount of work to be
accomplished by each. Personal judgment, comparison to known equipment
fleets, and rules of thumb are all used to decide what equipment is required
and how many hours per day each will operate. The Mining Cost Service
(website) Cost Models Section and the Equipment Cost Calculator(website)
provide some guidance in selection of the number and sizes of auxiliary
equipment units
Road maintainer
A good rule of thumb for selection of a road maintainer is to assume the
maintainer must grade the haul road once per day. The haul road length is
known from the mine plan. The road width is determined by the width of the
haul trucks. In the U.S., MSHA guidelines recommend a road width sufficient
to provide clearance of the vehicle width on each

side of the vehicle. i.e. for two-way traffic, the road
width should be 3 times the vehicle width (two
truck widths for the traffic lanes plus truck width
twice for outside clearance, and truck width for
center clearance between trucks). Ditch and berm widths can be included in
the clearance zone. Manufacturer literature should be examined to find a
maintainer with suitable blade width and operating speed to accomplish this
task efficiently.
Dozers
Dozers are needed to assist the excavators,
construct and maintain haul roads, waste dump
maintenance, and a range of other activities. It is
difficult at the feasibility stage to estimate the
amount of work to be done by dozers, so we resort to
rules of thumb and personal judgment. A good place
to start is to assume at least one dozer per excavator, with additional dozers
added for other purposes. Since no productivity calculations will be made, it
is not necessary to select an actual manufacturer's model. Rather, pick a
reasonable size for which cost information is available.
Bulk powder truck

Bulk powder trucks are used for loading bulk
explosives such as ANFO into blastholes. The number
and size of trucks needed depend upon the amount
of explosives and number of holes loaded per day. Manufacturer literature
can be researched and productivity studies can be completed to find the
appropriate size and number of vehicles for our mine. Usually only one or
two trucks are required for fairly large operations.
Lighting plants
Lighting plants are needed only if the mine is
scheduled to operate at night. These are usually
diesel generator driven portable light towers
stationed at strategic locations, around the mine,
especially at the excavation sites, and the ore
stockpile and waste dump sites.
Service trucks
One or more fuel and lube trucks are needed to
service the mobile equipment fleet, typically once
per shift. The truck(s) are equipped with a fuel tank
and fuel delivery system, multiple lube tanks with a
compressor and lube delivery system, and a lube
salvage system. One or more mechanic's field service trucks, with welding
equipment and a hydraulic crane, are needed to facilitate maintenance and
field repair of the mobile fleet. The number of service trucks needed
depends upon the number of mobile equipment units in use.
Pumps
Reliable
pumping
requirements
are
typically
unavailable at the time of prefeasibility analysis.
Rainfall accumulation can be determined from
climate data and pit area, but groundwater
accumulation may not be available. Some pumping
should be assumed in all cases. Centrifugal pumps
are typically used for open pit mine applications. One
or more pumps capable of pumping an estimated amount of water against a
head at least as high as the pit depth in the first several years of operation,
plus the friction head, should be selected.
Water trucks
One or more water tank trucks are needed for dust

control on haul roads and in the excavation and
dumping areas. The size required and the amount of
usage depends to a great extent on climatic
conditions (wet or dry), and the dust-making
characteristics of the road surface material and excavated ore and waste.
The amount of watering required may actually be specified by mine permit
regulations. In general, the truck or trucks should at least be capable of
watering the entire haul road lengths once per shift, for all or part of the
year. A typical water tanker will travel 5-10 mph (8-16 km/h) when watering,
and 20-35 mph (32-56 km/h) when returning empty to be refilled, and will
spray 400 or more gallons per minute (1500 l/min). A detailed analysis
would include all travel time as well as loading time. An additional difficulty
in estimating hours of usage is determining how far the truck will have to
travel to its water source. This distance will vary depending on the trucks
location when it runs out of water and on the location of the water source,
which may not be known.
Pickup Trucks
Pickup trucks are ubiquitous at mining operations.
Typically they are full size, to ton, 4-wheel-drive
vehicles. Their number and hours of usage can vary
considerably from mine to mine.
Other Auxiliary Equipment

The list of possible auxiliary equipment can go on and on, to include such
vehicles as flatbed trucks, an ambulance, fire truck, mobile rock breaker,
etc., etc., but these are items that have minimal impact on overall costs. It
is not worth the time at the prefeasibility level to include them in detail.
Their cost should be covered by a miscellaneous fund in the capital cost
estimate.
Example of Selection of Auxiliary Equipment
Road maintainer
The road maintainer (grader) will be required to maintain the haul roads
once per day.
Ample time is available to grade the haul roads in one shift with time to
spare for other tasks such as grading around the plant area, road
construction, ditch and berm maintenance, etc. We will assume the grader
will work one full shift (10 hours) per day.
Dozers
Well assume we need one dozer per excavator (2) plus two additional for
other work. Two will operate ten 50 minute hours each per shift, and two will
operate six 50 minute hours each per shift. Consulting the Cost
Calculator(website) we find that we have cost data available for a 350 hp
dozer with a 14.8 ft. (4.5 m) blade. This is a reasonable size and type for our
project. Hence, our estimate will include the following:
Four 350 hp dozers operating a total of 64 hours per day (32 hours per shift)
Bulk Trucks
Consulting the Cost Model Section of Mining Cost Service(website) we find a
model designed around a production level of 20,000 tonnes ore per day with
a 2:1 stripping ratio. We note that this model includes one bulk truck
capable of loading 450 kg of explosives per minute. We will do the same for
our project.
Lighting Plants
We see by the 20,000 tonne per day Cost Model in Mining Cost Service that
four 16 kW plants should be adequate for our project.
Service Trucks
The Cost Model in Mining Cost Service lists 5 service trucks needed for a
mine the size of ours. Well assume 2 fuel/lube trucks, 2 mechanics field
trucks, and 1 tire service truck. The Cost Calculator lists such units having
82 hp service system power and 33,000 lb (14,969 kg) gvw.
Pumps
Since we are given no information about the amount water inflow that will
require pumping for this mine, we are left to making a reasonable pump
selection based on our own judgment. The Cost Calculator contains cost
data for a number of pump sizes and a variety of heads vs. volume. A
reasonable choice is the 65 hp diesel centrifugal pump capable of pumping
800 gpm against a 150 ft. head.
Water Truck
Task: Road Dust Control
Pickup Trucks
The Cost Model Section of Mining Cost Service suggests that a mine the size
of ours would utilize 14 ton, 4 wheel drive pickup trucks.
Example of Equipment Summary
The table below summarizes our mobile equipment needs based on the
above analyses.
Table 3: Equipment summary
Units
Required
1
Equipment
Wheel Loader
Specifications
800 hp, 15 yd3 (11.5 m3) bucket
Front Shovel
1550 hp, 22.2 yd 3 (17 m3) bucket
18
Haul Trucks
983 hp, 90 tonne (82 tonne), rigid frame (incl. 2 spares)
Rotary Blasthole
Drill
6 in. (15.2 cm) hole diameter, 52.7 m hole depth, approx 27,000
kg pulldown
Road Maintainer
14.7 ft. blade, 270hp
Dozers
350 hp
Bulk Explosives
Truck
450 kg/min loading capacity
Lighting Plants
16 kw
Fuel/Lube Truck
Mechanic's Truck
Tire Service Truck
Centrifugal Pump
65 hp, 800 gpm, 150 ft. head
Water Truck
26,498 liter tanker
14
Pickup Trucks
ton, 4 wheel drive
More or Less Detailed Analyses

Detailed productivity studies can be completed for each of these equipment
types as done for the excavator/hauler fleet.

An equipment list can be drawn from a reliable source such as the Cost
Models in Mining Cost Service for a model, or an actual mine with similar
size and characteristics.
Part 4 - Itemized Cost Estimating: Auxiliary Equipment and Supply
Change Level
Step 6 - Supply Requirements
Determine Supply Requirements
Supplies are the commodities that are consumed daily in the operation of
the mine. At the prefeasibility level, the daily needs and cost of the following
commodities and miscellaneous items should be included in the estimate.
TheMining Cost Service (website) Cost Models Section and theEquipment
Cost Calculator (website) provide good guidance regarding the required

amounts and costs of supply items.
fuel;
lubricants;
electricity;
drill bits;
drill steel;
explosives;
primers;
detonation cord;
repair parts;
tires; and
assays.
Fuel
Fuel requirements for individual units are based on the units power rating
and its power factor, which is the average percentage of full power at which
the unit operates throughout its operating hours. Typically, diesel engines
will consume about 0.020.04 gal (0.070.15 liters) of fuel per hp utilized. If
the Equipment Cost Calculator (website) is referenced, the actual fuel
consumption need not be calculated because the Calculator provides the
fuel cost per hour for each vehicle. Power, power factor, and the fuel price
have all been considered.
Lubricants
Crankcase oil needs are roughly proportional to the size of the engine.
Additional lubricants are needed for other mechanical parts. The amount
varies with the equipment size, complexity and amount of usage. Lubricant
consumption can be difficult to predict, but the Equipment Cost Calculator
provides hourly lubricant costs for all the equipment units in its database, so
there is no need to estimate actual consumption. If a consumption figure is
desired, it can be back calculated from the Cost Calculator lubricant cost,
knowing the price of the lubricants used by the calculator.
Electricity
Mining companies pay a monthly power bill primarily consisting of:
a fixed customer charge;
a demand charge based on the maximum power draw over a brief

period, usually about 15 minutes; and
an energy charge calculated from the total kwh consumed in the

billing period.
For the estimator, the customer charge is usually small enough to ignore,
but can be included if known. The demand is estimated by summing the
connected power in kw or hp of all the electric-power-consuming equipment

in the project. Appropriate load factors may be applied to each unit or to the
total, if it is known that the total power of all units will never be required
simultaneously. The energy consumed is estimated in a similar manner on
an individual unit basis, multiplied by the hours of operation.
A typical rate schedule might consist of:
customer charge$250 per month;
demand charge$3.50 per kW demand; and
energy charge$0.04 per kWh used.
The monthly power bill for a crushing operation consisting of a jaw crusher,
a cone crusher, and a vibrating grizzly operating 200 hours per month would
be estimated as shown in Tables 1 and 2.
Table 1: A crushing operation
Stage
HP
KW
Power Factor
Actual Power Draw (kw)
Jaw crusher
125
168
0.8
134
Cone crusher
400
536
0.8
429
Vibrating grizzly
40
54
0.8
43
Total
565
758
606
One horsepower is approximately equivalent to .746 kilowatts.
Table 2: A crushing operation, continued
Charge/Consumption
Calculation
Customer charge
Demand charge
Amount
$250
$3.50 606 kW =
$2,121
Energy consumed
200 hr 606 kW =
121,200 kWh
Energy charge
$ 0.04 121,200 =
$4,848
Total monthly bill
$7,219
A percentage is commonly added to this total to account for the cost of

building HVAC and lighting.
For estimating purposes, this amount is commonly converted to a simple
rate per kwh (including customer, demand and energy charges combined)
by dividing the total monthly bill by the kwh consumed.
$7,219 / 121,200 kWh = $0.059/kWh
This allows the evaluator to manipulate the charge in a variety of ways, such
as to distribute it among each of several power consuming units. It makes it
easier to make minor changes to the estimated electric power usage
without going through the complete rate schedule calculation with each
change. The rate is reasonably accurate as long as the demand total is fairly
close to that used in the monthly bill calculation.
Blasthole drill bits

The number of drill bits consumed per day is
estimated by dividing the daily drilling requirements
in feet or meters by the estimated life of each bit in
feet or meters. The trick is to know what the
anticipated bit life will be under the conditions at the
project in question. On-site data may be available for
late stage feasibility studies, but usually not for prefeasibility studies. In
such cases, published data must be relied upon.
A recent study by Montana Tech (website) in cooperation with several large
mining companies (Forecasting Drill Bit Consumption in Surface Drill and
Blast Operations, Johnathan Hoover) attempted to provide a mechanism for
prediction of drill bit consumption rates useful for evaluation of new
properties. The study identified 51 factors that impact drill bit wear rates,
including various rock properties, tool characteristics, tool maintenance, and
operator experience. Three separate equations were developed based on
regression analysis of empirical survey data, one each for rotary drill bits,
hammer and rotary drill bits, and hammer drill bits, wherein the number of
bits consumed was stated as a function of depth drilled, pull-down force,
unconfined compressive strength of the rock, rock quality designation, and
air supply pressure. While the detail required to utilize the equations is
probably beyond the scope of most prefeasibility studies, the article
provides a good basis for understanding the issue. Hopefully the authors will
carry the analysis further to provide a simple mechanism for predicting bit
wear rates within the accuracy required for a prefeasibility study. In the
meantime, Church (1981)provides the following convenient but
oversimplified guidance for estimating bit life:
Blasthole drill steel

Drill steel also wears out in the drilling process. In the absence of on-site
data, one should assume that a drill rod will need replacing every 50,000 to
70,000 ft. of drilling.
Explosives
A broad range of explosive types is available for production blasting. The
choice depends on rock characteristics, water conditions, loading
preference, etc. Descriptions of the various types can be found in Church
(1981) and other references. The explosive of choice for most large scale
mining operations is an ammonium nitrate, fuel oil mix (ANFO), which is
desirable because of its relatively low cost, ease of loading, and safety.
The volume of ANFO required per day can be
estimated from the volume of drill holes required per
day. ANFO is sold on a weight basis, so the volume
must be converted to weight by multiplying the
volume by the density of ANFO. Typically, blastholes are not loaded
completely to the collar, leaving room for stemming. The amount of hole left
for stemming is usually about equal to the amount of subdrilling included.
ANFO density varies from about 0.8 (50 lb/ft3 = 801 kg/m3) to 0.9 (60 lb/ft3
= 961 kg/m3). The lower density results when the material is poured into
the hole, the higher density when it is air injected.
A simpler method for determining daily explosive consumption is to utilize
the powder factor if one is known. The powder factor is the pounds or
kilograms of explosive required per ton or tonne of rock blasted. The powder
factor will probably be known for an existing operation, but in the absence
of on-site data, you will need to assume a factor based on judgment or
experience. Powder factors for surface mines typically range from 0.25 to
0.5 kg per metric ton (0.5 to 1.0 lb per short ton) and usually higher for
underground mines.
Primers
At least one primer or booster is required per blasthole. If you know the
number of blastholes required per day, this is a simple calculation. The
number may have been determined previously in a mine plan, blast
analysis, or drilling analysis. If not, then a number should be assumed based
on rough estimating.
Detonation cord
Detonation cord (e.g. Primacord) is commonly used to initiate the blast.
Typically, detonation cord is inserted the length of each drill hole and it also
forms a circuit tying the holes together. If a blasthole pattern has been
designed, the amount of detonation cord required can be determined from
that. In the absence of such detail, a reasonable estimation can be made by
equating the length of detonation cord required per day to the total length
of blasthole drilling required per day, plus a factor for connectors between
holes.
Repair parts
The cost of repair parts per hour or day of operation can be a difficult value
to estimate with confidence. After all, if you anticipate having to repair
something you institute a maintenance program to prevent having to do so.
Hence, the amount and cost of repair parts depends on the diligence of the
maintenance program and other factors such as the working conditions, the
operators care, and the complexity of the equipment.
Tires
Tire life depends heavily on the diligence of the tire maintenance program,
the attention paid to haul road grooming, and working conditions.
The tire life estimates in Table 3 (below) are suggested by TEREX
Corporation.
Table 3: Tire life
Tire life (estimated hours)
Job Conditions
Favourable
Average
Unfavourable
Wheel Tractors
4,000 hr.
3,000 hr.
2,500 hr.
Graders
4,500 hr.
2,250 hr.
1,000 hr.
Wheel Loaders
4,000 hr.
3,250 hr.
1,750 hr.
Rear Dump Haulers
4,000 hr.
3,250 hr.
2,250 hr.
Bottom Dump Haulers
8,000 hr.
5,000 hr.
3,500 hr.
Adapted from Mining Cost Service (www.costmine.com) courtesy of TEREX Corporation.
Table 3: Tire life
Assays
Assays of course are not really supply items, but they are a daily cost of
mine operation so should be considered in the estimate. Typically, one
sample will be assayed from the cuttings for some or all of the blastholes, as
well as from face samples taken for a variety of reasons. A good preliminary
estimate of daily assay requirements is to assume one assay per blasthole

drilled each day, plus an additional number for miscellaneous purposes.
Miscellaneous consumable items

Many other items are consumed by a mining operation beyond those
described above. Taken individually, these individual items are not
significant enough to the cost estimate to be worth analyzing. In aggregate,
however, they represent an amount that should not be ignored. To account
for this, the total supply cost should be increased by a percentage factor to
cover miscellaneous items not included in the individual supply analyses.
Example of Determining Requirements for Supplies
Fuel
We will be referencing the Equipment Cost Calculator fuel cost per hour for
each unit of equipment, so we do not need to estimate the total fuel usage.
If we need to know the total fuel usage, we can back calculate the amount
by dividing the Cost Calculator cost/hr by the fuel price.
Lubricants
We will be referencing the Cost Calculator lubricant cost per hour for each
unit of equipment, so we do not need to estimate the total lubricant usage.
If we need to know the total lubricant usage, we can back calculate the
amount by dividing the Cost Calculator cost/hr by the lubricant price.
Electric power
All of our equipment is diesel powered or uses diesel generated power, so
our project wont be subject to significant charges for electricity. We will
include a small allowance to cover the cost of electricity used for HVAC and
lighting in buildings.
Drill bits
Drill steel
Explosives
Primers
Detonation cord
Length of detonation cord required per day = length of blasthole drilling per
day + 20% for circuit = 786 m 1.20 = 943 m
Repair parts
The cost of repair parts per hour of operation will be determined by
referencing the Equipment Cost Calculator when we accumulate the
equipment operating costs.
Tires
The cost of tires per hour of operation will be determined by referencing the
Cost Calculator when we accumulate the equipment operating costs.
Assays
Number of assays required per day = number of blastholes drilled per day +
an allowance for other purposes = 26 + 5 = 31 assays per day.
Part 5 - Itemized Cost Estimating: Requirements and Costs
Step 7 - Personnel Requirements

Requirements and Costs.
how to determine personnel requirements (step 7)
how to determine preproduction stripping costs (step 8)
how to determine requirements for buildings and structures (step 9)
how to determine haul road construction requirements (step 10)
how to determine unit prices and costs (step 11):
capital and operating unit costs
supply items
wages, salaries, benefits
buildings and structures
haul road construction
an overview of benefits, especially in Canada and the U.S.
how to prepare capital and operating cost summaries (step 12)
an overview of additional capital items:
working capital
contingency
salvage
sustaining capital
first fill
how to prepare a cost summary for the life of the mine
Determine Personnel Requirements

Careful determination of personnel needs and costs is a very important
exercise, typically accounting for as much as 50% of total mine operating
costs. Usually the estimate is limited to on-site personnel only, leaving home
office staff expenses for another analysis. The job titles that should be
considered for a fully staffed, large open pit mine

include:
hourly personnel:
equipment operators,
blasters,
mechanics, and
laborers & maintenance;
salaried personnel:
manager,
superintendent,
foreman,
engineer,
geologist,
supervisor,
technician, and
accountant;
clerks;
human resources personnel; and
secretaries.
Begin the process by assigning an operator for each piece of equipment

specified in the equipment analysis for the operating hours specified,
keeping in mind that miners work full shifts even though some of the
equipment does not. Place yourself in the position of mine manager for a
moment and think about how you can utilize your operators most effectively.
For instance, a dozer operator may have time to operate the road
maintainer or the water truck in addition to his dozer responsibilities. At the
end of the day, personnel may not be distributed as you suggest, but keep
in mind you are not trying to run this mine; you are only trying to come up
with a reasonable estimate of the cost of running the mine.
Once the equipment operators have been assigned, other hourly and
salaried personnel should be assigned based on knowledge of personnel
utilization at known similar mining operations. Mining Cost Service (website)
and its related labor reports are excellent references for finding out the
numbers and types of personnel employed at other mines, as well as
compensation amounts to apply to each position.
Example of Determining Personnel Needs

The equipment for which operators are needed is listed in Table 1 (below
left). The hourly personnel required to operate this equipment for 2-10 hr
shifts per day are presented in Table 2 (below right). Operators are assumed
to work full 10 hr shifts, even though some of the equipment units do not.
Table 1: The equipment for which operators are needed
Equipment
Number
Hours of operation each unit per day
Wheel loader
19.5
Front shovel
18.0
Ore Haul Trucks
16.7
Waste Haul Trucks
15.8
Blasthole Drills
17.2
Dozers
20.0
Dozers
12.0
Road Maintainer
10.0
Water Truck
10.0
Table 1: The equipment for which operators are needed

Table 2: Hourly personnel required
Role
Number of hourly personnel
Wheel loader operator
Front shovel operator
Haul truck drivers
32
Drillers
Dozer operators
8 (with time available for other work)
Road maintainer operator
2 (with time available for other work)
Water truck driver
Table 2: Hourly personnel required
Other hourly personnel

Table 3: Other hourly personnel
Role
Hours
Mechanics
NA (Mechanic's wages will be included in equipment

operating cost as provided by the Equipment Cost
Calculator.)
Blasters
Laborers/Maintenance/Helper
s
46
Total Hourly Personnel
103
Table 3: Other hourly personnel
Salaried personnel
The number and classification of salaried personnel are listed in Table 4

(below).
Table 4: Number and classification of salaried personnel
Role
Number of salaried personnel
Manager
0.5
Superintendent
Foreman
Chief Engineer
Engineer
Chief Geologist
Geologist
Shift Supervisor
Technician
Accountant
Clerk
HR Personnel Manager
HR Personnel Staff
Security/Safety Manager
Security/Safety Staff
Total Salaried Personnel
34.5
Table 4: Number and classification of salaried personnel
Part 5 - Itemized Cost Estimating: Requirements and Costs

Level
Change
Step 8: Determine Preproduction Stripping Requirements

Preproduction stripping can be a very significant capital cost item. The
capital cost estimate should include preproduction removal of enough waste
material to provide sufficient ore exposure and space, e.g. pit bottom, to
allow production equipment to operate at the mines rated production. This
may be based on a detailed pit plan or on a rudimentary sketch of pit
outlines. The cost of preproduction stripping may be estimated in
considerable detail if necessary, based on rate of production, haul distance,
equipment utilized, etc.; but a simpler method commonly used at the
prefeasibility level is to assume the cost per tonne of mining preproduction
waste material is equal to the operating cost per tonne of material produced
by the operating mine.
Example of preproduction stripping

Preproduction stripping required as calculated from pit cross-section (here
only assumed, see Part 2: Step 2 - Determine Production Rates) =
30,000,000 tonnes
The cost of this stripping per tonne will be assumed to be the same as the
cost per tonne of material mined by the fully operating mine.

As the pit planning process progresses, preproduction stripping
requirements will be defined in more detail. This new information should be
used in the cost estimate.

While it is not recommended to do so, sometimes preproduction stripping
requirements are ignored in very early cost estimates, provided all waste
removal requirements are accounted for by the operating stripping ratio. In
such a case, the stripping costs are included in operating costs rather than
capital costs. This should result in the same total life of mine cost as would
be estimated if preproduction stripping were considered, but the timing of
the cost would be spread over the life of the mine rather than during the
preproduction period.
Step 9: Determine Requirements for Buildings and Structures
The construction cost for a variety of buildings and structures should be

included in the capital cost estimate. Buildings typically found at open pit
operations include:
office;
dry (change room);
mechanical shop;
warehouse;
explosives storage facilities; and
fuel storage and dispensing facility.
Detailed cost estimating techniques for building construction are a subject

for another course; however, reliable square foot estimators costs are
available in a variety of published databases, e.g. R.S. Means Building
Construction Cost Data(website) and Mining Cost Service (website). Before
they can be used, however, building sizes must be assumed.
For the office facilities, a good rule of thumb is approximately 100 sq. ft. per
salaried employee.
For the dry, a factor of about 100 sq ft per hourly employee should be
assumed, with consideration given to fact that, at a multishift mine, all
employees will never be using the dry at the same time.
The size of the shop depends on the size of the equipment to be serviced
and the number of units to be serviced at one time. Assume a certain
percentage (e.g. 50 %) of the haul truck fleet may need to be in the shop at
one time. Determine the floor area each would occupy from company
literature. Haul truck sizes range from about 27 ft 17 ft (8.3 m 5.0 m) to
about 40 ft 25 ft (12.2 m 7.7 m). Multiply the truck size times the
estimated number of vehicles to be in the shop at once, and then double
that figure for an estimate of the total shop size. Equipment other than haul
trucks would be serviced in this facility also.
For the warehouse, the Mining Cost Service models recommend floor areas
of 149 m2 for the smallest of the mines to 12,485 m2 for the largest.
Intermediate models list appropriate warehouse sizes for a broad variety of
mine sizes.
Explosive storage facility

MSHA approved (or equivalent in other countries) explosive storage facilities
should be included to provide storage for about one weeks consumption of
ANFO.
Fuel storage and dispensing facility
The cost of a fuel storage facility capable of storing sufficient fuel for 10 to
30 days of mine operation should be included in the estimate. The amount
of storage capacity needed can be estimated by summing the total amount
of fuel required by each unit of equipment for 10 to 30 days of operation.
Equipment manufacturers generally provide fuel consumption data for their
equipment. The Caterpillar Performance Handbook(website) provides low,
medium and high consumption rates for most of their equipment. Table 1
(right) shows the range of medium level rates for the smallest to the largest
of their models.
Table 1: Fuel consumption
Fuel Consumed per Hour
Equipment
Liter
U.S. Gallon
Dozers
11-113
3-30
Motor Graders
13-60
3.5-16
Excavators
5-204
1.5-54
Front Shovels
71-204
19-54
Haul Trucks
30.3-228
8-60.5
Articulated Trucks
15-32.5
4-8.5
Wheel Loaders
4-144
1-38
Table 1: Fuel consumption
Example of determining buildings and structures needs

Office building
Floor area = 100 ft2 35 employees = 3,500 ft2(325 m2)
Dry (change room)
Floor area = 100 ft2 103 employees 0.6 = 6,180 ft2 (574 m2)
Mechanical shop
Warehouse
The Mining Cost Service Cost Model recommends a warehouse size of 905
m2 for a mine of this size.
Explosive storage facility
Mining Cost Service recommends an explosive storage facility of 130 m2 for
a mine of this size.
Fuel storage and dispensing facility
Provide fuel storage for 10 to 30 days of consumption.
The largest double wall steel fuel tank listed in Mining Cost Service is a
15,000 gallon tank. We will assume three of these are needed. MCS also
provides the capital cost for a 50 gpm (189 lpm) fuel pump. We will assume
this is adequate for our project. An allowance will be added in the cost
summary for installation and for dike construction.

Ultimately, buildings will be designed in detail. When this is accomplished,
costs can be estimated from design take-off information. Until such designs
are completed, attempts to estimate construction material and labor
requirements will most probably result in erroneous results.

Published cost models provide summaries of building requirements and
costs for a variety of mine sizes.
Step 10: Determine Haul Road Construction Requirements

Considerable attention is paid to the design,
construction and maintenance of haul roads at most
large mining operations, because of the abusive,
heavy traffic to which they are subjected, and because
a poorly constructed or maintained road can have
considerable negative impact on productivity and on
equipment and tire wear. In the US, MSHA guidelines recommend a road
width sufficient to provide clearance of the vehicle width on each side of
the vehicle. i.e. for two-way traffic, the road width should be 3 times the
vehicle width (two truck widths for the traffic lanes plus truck width twice
for outside clearance, and truck width for center clearance between
trucks). Ditch and berm widths can be included in the clearance zone. Berms
are required wherever a dropoff exists of such grade and depth to cause a
vehicle to overturn.
Haul road construction may involve any or all of the following tasks:
surveying;
clearing and grubbing;
drilling and blasting;
cutting and filling;
grading of subgrade;
compaction;
placement of surfacing material (usually crushed rock);
construction of ditches;
construction of bridges or drainiage crossings;
grading of running surface;
placement of berm material; and
watering for dust control and to aid compaction.
Costs per kilometer for all these tasks can be estimated using equipmentbased productivity techniques similar to those described in previous lessons;
but usually this approach is far too time consuming for most feasibility
studies, particularly at the prefeasibility level. A more common approach is
to utilize reliable pre-calculated costs per meter or kilometer of road from
published references.
Example of determining haul road construction requirements

Length of haul roads to be constructed:
Width of haul road to be constructed:

With a detailed road design in hand, any or all of the above listed tasks can
be estimated in detail if desired. This can be a time-consuming task
generally not undertaken in early cost estimates.
The Cost Models in Mining Cost Service (website) contain summary road
construction costs that can be applied to other estimates.
Step 11: Determine Unit Prices and Costs

In the preceding lessons we discussed methods for determining the amounts
of materials, number of personnel, equipment requirements and daily hours
of usage, and certain development needs. Once these items have been
estimated, it is time to apply unit pricing to each item in order to calculate
total cost. The mathematics of all this is very simple, basically involving little
more than multiplying the daily usage of an item by the unit price for the
item, and accumulating the results on a spreadsheet. The difficult part is
obtaining reliable unit prices and costs to use for the estimate. Possible
sources for unit costs are many and varied, some reliable, some not so
reliable. Information available through InfoMines CostMine division
(website) is particularly useful for this purpose. Listed below are available
sources for unit cost information.
Equipment capital and operating unit costs
Mine & Mill Equipment Cost Guidepublished by InfoMine,

hardcopy
Mining Cost Servicepublished by InfoMine, hardcopy
Equipment Cost Calculatoronline at CostMine.com
manufacturers/distributors
company catalogues
Unit costs for supply items
Mining Cost Service

manufacturers/distributors
power company rate schedules
Wages, salaries and benefits for employees
Mining Cost Service

InfoMine wage and salary reportsonline at CostMine.com
local surveys available from government agencies
Buildings and structures
Mining Cost Service

Cost Models section
development series articles
Building Construction Cost DataR.S. Means
Haul road construction
Mining Cost Service

Cost Models section
Benefits
Benefits as defined here refers to the moneys and amenities that a mine
provides its employees in addition to base wages and salaries. From the
perspective of cost to the mine, they are commonly referred to as burden."
Benefits can be broadly divided into two categories: mandated and
voluntary. Mandated benefits are those the mine is required by law to
provide. Voluntary benefits are those the mine pays voluntarily in addition to
the mandated benefits. Below are listings of mandated benefits for US
mines and Canadian mines respectively, along with approximate amounts.
Mandated benefits in other countries are many and varied.
Mandatory Employment Taxes and BenefitsUS Mines (from Mining Cost
Service)
Federal Withholding Tax:
Withholding (income) taxes are deducted from the employees wages and
paid to the federal government by the employer. They are fully paid by the
employee, so need not be considered in cost estimating.
Federal Unemployment Tax:
Provides funding for federal support of state unemployment programs. For

2012, the tax rate is 6.0% up to a maximum wage of $7,000 per year.
Credits for state unemployment taxes paid reduce this to an effective rate of
0.6% up to the maximum wage of $7,000.
Social Security Tax:
For 2012, employees and employers each pay 6.2% of wages up to a

maximum wage of $110,100. Provides funding for retirement, disability and
other benefits for workers.
Medicare Tax:
Employers and employees each pay 1.45% of total wages. Provides funding
for medical benefits for retirees.
State Unemployment Insurance Tax:
Provides funding for payment of benefits to unemployed workers. Rates vary

by state. Typical rates for mining are 2.5% to 3.0% on wage bases of about
$9,000 to $30,000. Fully paid by employer.
Workers Compensation Insurance:
Provides state funding for payment of medical and other expenses for
workers injured on the job. Rates vary by state, by industry, and by industry
depending on the claim record for that industry. Underground coal mining
carries the highest rates within the mining industry, ranging from about $20
per $100 of payroll to as high as $80 per $100 payroll. Surface non-coal
mines carry the lowest rates within the mining industry, typically less than
$10 per $100 of payroll.
Mandatory Employment Taxes and BenefitsCanadian Mines (from Mining
Cost Service)
Federal Withholding Tax:
Withholding (income) taxes are deducted from the employees wages and
paid to the federal government by the employer. They are fully paid by the
employee, so need not be considered in cost estimating.
Employment Insurance:
Provides funding for unemployment programs in Canada. Premiums are

collected from employers and employees. The employers rate for 2012 is
2.58% on maximum earnings of $45,900 per year. The rate is slightly lower
in Quebec.
Worker Compensation Insurance:
Provides funding to pay medical and other expenses for employees injured
on the job. Rates vary by industry and province, typically between $1.70 per
$100 payroll to $8.00 per $100 payroll on maximum assessable earnings
ranging from $49,000 to $104,000 per year for 2012.
Pension Plans:
Employer and employee each pay about 5% of earnings to a maximum of

$50,100 per year for 2012.
Health and Medical Insurance:
Rates vary considerably from province to province, typically between 2%

and 4% of payroll.
Voluntary benefits commonly include vacation and sick leave of various
lengths and holidays. Some mines provide housing, tool, clothing and
transportation allowances, scholarships, bonuses and a variety of creative
incentives.
Most prefeasibility estimators ignore the details of the mandated and
voluntary benefits likely to be offered, and simply attach a percentage
addition to base wages and salaries to cover the estimated cost of the
benefits. Mining Cost Service reported the following average total cost of
benefits as a percentage of wages paid in 2011:
US Metal and Industrial Mineral Mines: 44%
U.S. Coal Mines: 37%
Canadian Mines: 34%
Bonus Plans: According to surveys conducted by Mining Cost Service, 80%
or more of mines in US and Canada pay pay their employees bonuses in
addition to base wages. Bonus plans sometimes are based on production
efficiency, development advance, cost savings, safety record, contract rates,
drill footage, commodity production above a calculated breakeven, profit,
attendance, and commodity price. Bonus payments can approach 100% of
base wages for some workers. Most are less. An allowance somewhere
between 5% and 20% of wages should be added to account for the cost of a
bonus plan.
Example of Determining Unit Prices and Costs

Now that we have determined the daily requirements for equipment,
supplies, and personnel, as well as development needs, the next step is to
assign reliable unit costs or prices to each.
Equipment capital and operating costs

All of the unit capital and operating cost data for our equipment fleet can be
found in the Equipment Cost Calculator (website). The results of our search
of the Cost Calculator are shown in the two tables below, which were
generated by the Calculator. Table 1 (below left) lists the capital costs for
our equipment fleet; Table 2 (below right) lists the hourly operating costs.
For this example, well use unadjusted values provided by the Calculator. If
so desired, the Calculator allows for adjustments according to varying prices
for fuel, lube, mechanics wages, etc.
Unit prices for supply tems
Supply item
Amount
Unit price
Blasthole drill bits
6 in. tungsten carbide
$2,692 ea
Blasthole drill rods
6 in. 10 ft.
$630 ea
ANFO
$48 / 100 lb
Primers
1 lb
$4.56 ea
Detonation cord
50 grain
$225 / 1,000 ft
Assays/sample prep
2-3 elements per sample
$25 ea
Fuel/lube/tires
Unit costs available from Mining Cost Service, but we will use the
hourly costs provided by the Equipment Cost Calculator
Source: Mining Cost Service (2010)
Table 3: Unit prices for supply items
Personnel wages and salaries
Hourly personnel
Hourly Wage ($)
Wheel loader operator
23.14
Front shovel operator
23.14
Haul truck drivers
22.00
Drillers
23.05
Dozer operators
23.14
Road maintainer operator
23.14
Water truck driver
23.14
Mechanics
Blasters
23.14
Labourers/maintenance/helpers
18.68
Mining Cost Service, U.S. or western U.S. averages, 2010
Salaried personnel
Yearly Salary ($)
Manager
$143,000
Superintendent
119,000
Foreman
87,900
Chief engineer
105,100
Engineer
70,400
Chief geologist
92,600
Geologist
67,600
Shift supervisor
63,000
Technician
50,100
Accountant
74,600
Clerk
41,400
HR personnel manager
101,000
HR personnel
48,000
Security/safety coordinator
84,000
Security/safety staff
50,000
* (Mechanics' wages will be included in equipment operating cost as provided by the Equipment Cost
Calculator.)
Adapted from U.S. Metal and Industrial Mineral Mine Salaries, Wages and Benefits, 2010 Survey Results) (U.S. average for surface
mines) (www.CostMine.com)
Table 4: Personnel wages and salaries
Preproduction stripping
The preproduction stripping cost per tonne will be assumed to be the same
as the operating cost per tonne of material mined estimated for the mining
operation (determined to be $2.50/tonne).
Haul road construction cost

For purposes of this class and in keeping with the needs of a pre-feasibility
study, a detailed haul road design and cost estimate will not be completed.
Instead, we will apply a unit cost of $1,000/meter, a reasonable estimate
roughly derived from cost models in Mining Cost Service.
Building and structures costs

Our reference for square meter (square foot) construction costs will be the
Development Series article "The Cost of Constructing Mine Buildings"
(Stebbins (undated)). Costs from this article must be updated, as the article
is now quite old. The unit construction costs are as follows.
Construction costs for the explosive storage facility and fuel

storage/dispensing facility are from file data, as follows.
Step 12: Prepare Capital and Operating Cost Summaries

The final step in the cost estimating procedure is to complete the simple
math equations to convert the numbers of units and the prices per unit to
costs per day (or month or year) and cost per tonne. This is best done on a
spreadsheet that allows you to complete the mathematics efficiently and to
summarize the costs in a concise manner. One spreadsheet should be
created for capital costs, and one for operating costs. The spreadsheets
should be as simple, straightforward and clear as possible. Dont develop
lengthy formulae that combine several mathematical calculations into one.
Instead, step by step results should be shown. This helps you to avoid errors
due to hidden complexities; it allows you and your reviewers to identify

errors more readily; and, perhaps most importantly, it provides clarity and
eliminates mysteries that might otherwise be confusing for your readers.
Example of a cost summary
Unit prices are applied to the various items in the operating cost summary
and the capital cost summary spreadsheets below.
Table 1: Mine operating cost summary
Table 1: Mine operating cost summary

Table 8: Capital cost summary
Mine operating cost summary
Example mine
20,000 tonne per day ore
40,000 tonne per day waste
Date of costs: September 2011
Equipment purchase
Item
Specifications
Units
required
Units
Cost/unit
($)
Extended
cost ($)
Wheel loader
800 hp,
15yd3 bucket
ea
1,752,000
1,752,000
Front shovel
1550 hp,
22.2yd3bucket
ea
4,516,000
4,516,000
Haul trucks
938 hp
(9699kw), 90
ton, rigid frame
18
ea
1,002,000
18,036,000
Rotary blast hole

drills
6 in hole diam,
52.7 m hole
depth, approx
27,000 kg
pulldown, 500
hp
ea
777,350
2,332,050
Road maintainer
14.7 ft blade,
270 hp
ea
453,000
453,000
Dozers
14.8 ft (4.5 m)
blade, 350 hp
ea
836,100
3,344,400
Bulk explosives
truck
459 kg/min
ea
82,600
82,600
Lighting plants
16 kw
ea
22,045
88,180
Fuel/lube truck
ea
80,750
161,500
Mechanic's truck
ea
67,750
135,500
Tire service truck
ea
159,500
159,500
Centrifugal pump
65 hp, 800 gpm,

150 ft. head
ea
26,350
26,350
Water truck
26,498 liter
ea
630,000
630,000
Pickup trucks
3/4 ton, 4 wheel

drive
14
ea
26,000
364,000
Total equipment
capital cost
Capital
cost ($)
32,081,080
Prepduction development costs

Development
Units
required
Units
Cost/unit
($)
Extended
cost ($)
Preproduction
stripping
30,000,000
tonne
2.50
75,000,000
Road construction
7,983
meters
1,000
7,983,000
Total
preproduction
development costs
Capital
cost ($)
82,983,000
Buildings and structures

Building/structure
Units
required
Units
Cost/unit
($)
Extended
cost ($)
Office building
325
m2
1,175
381,875
Dry
574
m2
1,469
843,206
Mechanical shop
1,010
m2
842
850,420
Warehouse
905
m2
440
398,200
Explosive storage
facility
130
m2
800
104,000
Fuel
storage/dispensing
facility
110,000
110,000
Capital
cost ($)
Total buildings
and structures
2,687,701
Subtotal
117,751,781
Engineering, procurement & construction management (10%)
11,775,178
Other Capital Costs

Cost
Extended
cost ($)
End of project
reclamation
5,000,000
Sustaining capital
15,000,000
Working capital
Total other capital
costs
60
days
150,000
9,000,000
29,000,000
Subtotal
158,526,959
Contingency (10%)
15,852,696
Total capital costs
174,379,655
Table 8: Capital cost summary
Additional Capital Items

You will notice that the above capital cost summary contains a few items
that we have not yet discussed: working capital, contingency, salvage, and
sustaining capital. These important concepts are discussed below, along
with another commonly seen capital cost item, first fill."
Working capital
Working capital is an important accounting metric that measures a
companys ability to meet its short term liabilities. It is defined as follows:
working capital = short term assets short term liabilities
Financial managers monitor working capital closely to assure that a
company is always in a position to meet its short term liabilities, most
notably, near term payroll and accounts receivable. At the time of startup
for a mine, we begin incurring short term liabilities immediately, but as far
as the mines accounts are concerned, it has no short term assets with
which to meet short term liabilities unless provision is made in our capital
funding to assure a positive working capital metric. In our engineering
economic analysis we make this provision by adding an appropriate amount
of money to our capital requirements. Typically this amount is determined
by estimating the amount of operating expenses that will be incurred before
adequate revenue becomes available from the sale of our product to cover
the full operating expenses.
As you can see, at mine startup assurance of a positive working capital
metric is not just good financial management, it is a necessity. Workers must
be paid and supplies must be purchased for a period of time before our first
product is produced and sent to market. If adequate working capital is not
available, the wait for that first check from the smelter will be a stressful
wait indeed. Hence, we try to estimate the amount of time it will take from
startup to receipt of that first check, commonly 60 to 120 days is used for
the estimate, and then multiply that number of days times our previously
estimated operating expenses per day to determine the amount of working
capital to include.
This begs the question then, what happens to this fund through the life of
the mine? Theoretically, in simplistic terms, at the end of the mines life
operating expenses will cease before revenue stops coming in from the sale
of our last days products. In other words, working capital is recovered at the
end of the mines life. Hence, in our life of mine cash flow summary, we list
working capital as a capital liability at the beginning of the life, and a capital
asset at the end. Its net effect on our economic analysis is to add to the
initial amount of money that must be financed from some source, possibly
incurring some interest expense thereby, and also to reduce the NPV of our
project because of the time value of the money involved.
Initial working capital requirements are commonly underestimated. Consider
the learning curve involved in ramping the mine up to full production, the
difficulties that might arise in moving our first shipment through rail or port
terminals, the unexpected transportation delays that might occur because
of weather conditions or border crossings, and finally the technical and
business complications that might show up when working the first shipment
of our ore through a new smelter, while in the meantime, the mines
employees and suppliers all expect to be paid on time.
Contingency
Contingency is a capital cost item defined by the Association for the
Advancement of Cost Engineering (AACE) as
[...] an amount added to an estimate to allow for items, conditions, or
events for which the state, occurrence, or effect is uncertain and that
experience shows will likely result, in aggregate, in additional costs
Referred to here are happenings such as unexpected increases in unit prices
for needed materials, inclement weather conditions that add to costs,
increased drilling and blasting costs because rock hardness exceeds
expectations, water inflow exceeding expectations thereby increasing
pumping costs, and a myriad of other potential unforeseen circumstances.
The contingency amounts may be based on sophisticated risk studies such
as Monte Carlo analysis, or simply on personal judgment. The amount may
be added as a single capital cost item, usually a percentage of total capital
costs, or as individual amounts attached to various cost centers. By applying
individual amounts to various cost centers, the contingency percentages
can vary as appropriate for the individual cost items, and the percentages
can be reduced or eliminated as the project progresses and more
information becomes available, or the involved activity is completed
For purposes of engineering economic analysis, the contingency amount is
assumed to be spent whether or not it is actually needed. It is not recovered
at the end of the mine life in the way that working capital is recovered.
Contingency amounts should be stated clearly and openly for all to see.
Others may have their own opinions of what the contingency percentages
should be, and if they are not aware that an amount has been included
somewhere in in the cost estimate, they may attempt to add their own idea
of an amount after the fact, thereby doubling up on an existing amount.
Contingency percentages of 5% to 20% are typical. Estimators tend to feel
safer by erring on the high side when estimating contingencies rather than
the low side. This is easy to understand, but care should be taken to avoid
overestimating a contingency, because the amounts involved can become
very large very quickly, and can easily destroy the economics of a
potentially viable project.
Salvage
We can assume that on the last day of the last year in the life of a mine, a
fully functional equipment fleet will be at work. The day after that last day,
the fleet will no longer be needed, yet it certainly has some value that
should be accounted for. While the condition and value of the equipment are
difficult to predict from the vantage point of a prefeasibility study, a rough
value can be guessed by taking a percentage of the purchase price of the
fleet that we have determined for the initial capital investment. Typically, a
bottom line percentage of at least 15% is assumed for the salvage value of
the mobile equipment fleet at the end of the mine life. This value would be
entered as a revenue item in the year after mine closure. The value can be
refined by estimating the resale value of the equipment based on its
expected life compared to its hours of use during mining. Other equipment,
especially processing equipment, may retain salvage or resale value as well.
Sustaining capital
Sustaining capital, sometimes called recurring capital," refers to capital
infusions during the life of a mine for items that have a beneficial life
greater than one year, and are beyond the amount estimated for routine
operating costs. The most obvious sustaining capital item is the cost of
replacing worn out equipment. Other items might include adding a lift to a
tailings dam, extension of a haul road to reach distant ores, stripping of
overburden for a pit push back, and addition of equipment for operational
changes such as added haul trucks for a longer haul. Reclamation work
completed during the life of the mine may fall into this category as well.
Sustaining capital cost amounts are inserted into the life of mine cost table
in the appropriate years. They are sometimes reported as a total amount in
a capital cost summary without regard to the year of the event, but any
reviewer of such a cost summary should be aware that an item reported as
sustaining capital or recurring capital is not an upfront cost. He or she
should be looking for a life of mine cost table to see when the monies will be
needed.
First fill
The concept of first fill is closely related to that of working capital." First
fill refers to the cost of stocking the warehouse with spare parts, rock bolts,
timber sets, electrical wiring, piping, drill bits and steel; the cost of the initial
filling of the fuel storage tanks; the cost of an initial supply of explosives,
etc. For processing, the first fill might comprise the cost of an initial supply
of reagents, grinding mill balls and liners. It is generally not considered an
effective use an estimators time to itemize all these materials for a
prefeasibility study. Instead, short cut methods are used to come up with a
total first fill cost amount, such as multiplying the estimated daily operating
cost amount for materials and supplies by an appropriate number of days.
Care should be taken to avoid double accounting of first fill costs and
working capital cost, because in part, they may be considered to cover the
same items. First fill costs are treated as an up front capital cost item to be
recovered at the end of the project life in much the same way working
capital is treated.
Summary
This completes our discussion of itemized cost estimating and our example
estimate. We have gone to considerable detail in some areas, while we have
seriously shortcutted some others. All in all, we have come up with a
reasonable estimate for use in a prefeasibility or preliminary study. Keep in
mind, all we have estimated is the actual mining costs. Following are a
number of additional cost items that may have to be considered if we were
to carry this estimate on to a complete feasibility study.
exploration costs: very project specifica subject for another class

permitting and environmental analysis costs: also very project
specificheavily dependent on politics of the situation; the
experience of others can be helpful
access roads, powerlines, pipelines and railroads to the mine site:
call the local utility or railroad for advice
milling costs: see discussion elsewhere in this course
home office overhead: usually applied as a percentage of
operating costs; the amount is sometimes dictated by company
policy
taxes: see the "Taxes" section of Mining Cost Service (website);
usually incorporated during the economic analysis
insurance: commonly included as a percentage of capital costs
depreciation: derived from the capital cost estimate; usually not
included if capital costs are carried intact into an economic
analysis
townsite or camp construction and operation: subject for another
class
off-site transportation: see the "Transportation" section of Mining
Cost Service; usually estimated on a cost per ton-mile basis
incentive bonus premiums for workers: see various wage, salary,
and benefit reports by InfoMine USA, Inc. (CostMine); this is
difficult to estimate with any specificity, but should be added as a
percentage of base wages, because payment of bonus premiums

is the norm for most new mines
sales expenses: usually a home office overhead item
smelting and refining costs: see the Smelting section of Mining
Cost Service
interest expenses: a finance consideration usually covered in the
economic analysis
reclamation: calculated in much the same way as mining costs are
calculated, once reclamation requirements are known; typically
the cost of earth moving is a major item; Sherpa Cost Estimating
System for Reclamation Bonds (see Software on CostMine website)
can be a big help here
You have covered the following points in Part 5: Itemized Cost
Estimation: Requirements and Costs.
how to determine personnel requirements (step 7)
how to determine preproduction stripping costs (step 8)
how to determine requirements for buildings and structures (step
9)
how to determine haul road construction requirements (step 10)
how to determine unit prices and costs (step 11):
capital and operating unit costs
supply items
wages, salaries, benefits
buildings and structures
haul road construction
an overview of benefits, especially in Canada and the US
how to prepare capital and operating cost summaries (step 12)
an overview of additional capital items:
working capital
contingency
salvage
sustaining capital
first fill
how to prepare a cost summary for the life of the mine
Part 6 - Useful Techniques
Cost Indexes ... | Scaling Factors ... | Price Data and Sensitivity ... |
Cost Indexes
You will cover the following points in Part 6: Useful Techniques.
the application of cost indexes

the application of scaling factors
how to obtain equipment and supply price data
how to prepare a sensivity analysis
Cost Indexes
Cost indexes are dimensionless numbers used to track the pace of inflation
or deflation in the cost of certain items or groups of items. They are
commonly expressed as a number representing the cost of an item in a
particular year relative to the cost of the item in a base year, which is
usually represented by an index of 100. In other words if the cost index for
an item in a particular year is 160, the cost of the item in that year is 60%
greater than the cost of the item in the base year.
Because the indexes for all the years for a certain item are all expressed
relative to the same base year, they can also be expressed in ratios of the
indexes for any one year to that of any other year. This relationship allows
us to adjust outdated cost information to the present, or to any other time
for which an index is known.
Example:
If a haul truck cost $1,700,000 in 2006, what would be its estimated cost in
2011?
Sept 2011 = 2006 cost (Sept 2011 cost index) / (2006 cost index)
From the Mining Cost Service Cost Index section, the appropriate cost
indexes for machinery and equipment are:
2006 cost index = 175.4
Sept 2011 cost index = 199.8
therefore:
Sept 2011 cost = $1,700,000 (199.8 / 175.4)
Sept 2011 cost = $1,700,000 1.14
Sept 2011 cost = $1,938,000
Adjusting for inflation by the use of cost indexes is a common practice in
estimating costs at the pre-feasibility level. If the cost for a particular item is
well documented from a year or two ago, it is usually safe to adjust that cost
to the present using cost indexes. The practice is less safe at more
advanced feasibility levels, where greater accuracy is required.
There are times when the raw data for a cost estimate is gathered over a
lengthy time period of perhaps several months. These individual cost items
should be adjusted to a common timeframe and expressed as the cost for
the items, all in the same specific month, representing the date of analysis.
Cost indexes are used for:
updating outdated cost information to the present;

adjusting current or historical cost data to a past date; and
tracking the effects of inflation.
The length of time for which it is safe to adjust cost data using cost indexes
is a matter of personal judgment or company policy because in time,
technological, design or market changes creep in to render the index
relationships invalid for some items and for some purposes. When the U.S.
Bureau of Mines first developed the predecessor to its Cost Estimating

System, which was designed to systematically evaluate the nations supply
of mineral resources, the Bureau maintained a hard and fast rule that in
general, costs should not be updated more than five years using cost
indexes. This rule held until the System and its database of unit costs
became six years old. At that time the Bureau decided it was impractical to
re-survey all of the raw data in the system, so cost indexes were used to
update the six-year old data. At the time of this writing, the System is over
15 years old, and some of the data is as much as 20 years old, and some
users continue to rely on cost indexes to update the seriously outdated base
data. This is a highly questionable practice.
Useful cost indexes for a variety of items important in mine cost estimating
can be found in Mining Cost Service (website).
InfoMine also maintains a series of composite indexes, the MCS Indexes,
which track changes in overall costs for mine and mill development and
operation in Canada and the U.S. The following indexes are available free of
charge at CostMine.com.
MCS Capital Cost Index for Surface MinesCanada
MCS Operating Cost Index for Surface MinesCanada
MCS Capital Cost Index for Underground MinesCanada
MCS Operating Cost Index for Underground MinesCanada
MCS Capital Cost Index for MillsCanada
MCS Operating Cost Index for MillsCanada
MCS Capital Cost Index for Surface MinesUS

MCS Operating Cost Index for Surface MinesUS
MCS Capital Cost Index for Underground MinesUS
MCS Operating Cost Index for Underground MinesUS
MCS Capital Cost Index for MillsUS
MCS Operating Cost Index for MillsUS
Cost Indexes are country-specific. Indexes appropriate for the country in
which the project is found should be located before using this method for
updating costs.
Scaling Factors
Scaling factors aid in estimating capital costs for an item, a processing
facility, or a mine based on the known or estimated cost for a similar item,
processing facility, or mine of a different size, usually in terms of production
capacity. The factors allow us to go beyond the over-simplified assumption
that if plant A has twice the production capacity of plant B, it should cost
twice as much to construct. The concept of economy of scale tells us that
while plant A should cost more to construct than plant B, its cost should be
something less than twice the cost of plant B. In other words, the scaling
factors define the economy of scale. The relationship is usually expressed as
follows.
where:
CA = capital cost of plant A
TA = daily production capacity of plant A
CB = capital cost of plant B
TB = daily production capacity of plant B
x = scale factor
In the absence of reliable statistical data, the scale factor (x) is usually
assumed to be 0.6. This has become such a well-accepted factor in the
mining industry that the above relationship has become known as "the six
tenths rule," a rather presumptuous title for a concept that hasn't had an
empirical test, in the published literature at least, for decades. Published
literature for the chemical, manufacturing, and construction industries
contains empirically derived values for x that differ from 0.6 for specific
types of facilities. Not so for the mining industry. The industry is badly in
need of research to refine the "six tenths rule."
The relationship for scaling operating costs is even more tenuous than for
capital costs, and is rarely used. The equation for operating costs is usually
expressed as:
where:
DA = operating cost per day for mill A
TA = daily capacity of mill A
DB = operating cost per day for mill B
TB = daily capacity of mill B
x = scale factor
A scale factor of approximately 0.9 is commonly used for operating costs,

with little statistical justification.
Note that the equation does not calculate operating cost per tonne directly,
but rather cost per day. The operating cost per tonne must be calculated
from this.
Price Data and Sensitivity
Session Headings:
Obtaining Equipment and Supply Price Data

Once all the requirements for equipment, personnel, and supplies have been
determined, the task of obtaining appropriate unit price data must be
accomplished before a cost estimate can be completed. This can be a
daunting task. It may be difficult to find a source of the data, and it may be
difficult to pry the data loose from the source. Commonly, equipment
manufacturers and suppliers are reluctant to provide pricing information for
fear of losing a competitive edge. With the advent of the CostMine products
(website), Mining Cost Service, Mine and Mill Equipment Cost Guide,
Equipment Cost Calculator, Sherpa software, and CostMines annual wage
and salary reports, the task is now much easier; but for those without
access to these products, the difficult task of directly contacting
manufacturers and suppliers remains. Several rounds of acquisitions by
equipment manufacturers in recent years have aided the estimator in one
sense, but have also added a potential hindrance. On the one hand, the
estimator looking for equipment pricing information has fewer contacts that
must be made. On the other hand, if a supplier refuses to cooperate when
you ask for help, you may run out of options rather quickly.
Table 1: Mining equipment manufacturers (from Coal Age, October 2011)
Equipment
Manufacturers
Dozers and Graders
Cat, Komatsu
Wheel Loaders
Cat, JoyGlobal
Surface Mining Trucks
Cat, Komatsu, Hitachi, Liebherr
Hydraulic Shovels
Cat, Komatsu, Hitachi, Liebherr
Highwall Miners
Cat
Surface Drills
Cat, JoyGlobal, Sandvik, Atlas Copco, Reichdrill
Cable Shovels
Cat, JoyGlobal
Draglines
Cat, JoyGlobal
Surface and Underground Belt Systems
Cat, JoyGlobal, Sandvik
Longwall Roof Supports
Cat, JoyGlobal, ZMJ, SANYHE
Shearers
Cat, JoyGlobal
Underground Drills
Cat, Sandvik, Atlas Copco, Fletcher, Cubex
Underground Trucks and Loaders
Cat, Sandvik, Atlas Copco
Continuous Miners
Cat, JoyGlobal, Sandvik, SANYHE
Underground Diesel Transport
Cat, JoyGlobal, Sandvik, Atlas Copco, SNYHE
Roof Bolting
Cat, JoyGlobal, Sandvik, Atlas Copco, Fletcher
Table 1: Mining equipment manufacturers (from Coal Age, October 2011)

As one begins looking for equipment price information, you soon realize that
many of the old familiar equipment names have faded away, and while the
equipment may still be available, it is now under the wing and name of a
larger company. A good example of this is the purchase of Unit Rig by Terex,
which was subsequently acquired by Bucyrus, which was recently acquired
by Cat. This makes your Cat contact a mighty important player in your
estimating project. Table 1 (right) lists the manufacturers to contact for price
information for various types of surface and underground mining equipment.
When approaching representatives of these companies, the following
protocols should be followed to improve your chances of obtaining the
information needed.
First and foremost, respect the fact that your contact has limited time
to spend on your request. Your contact will probably be a sales
representative who is under considerable pressure to make sales for the
company and would much rather be spending his or her time on an
imminently potential sales opportunity.
Educate yourself as much as possible about the items for which you
are seeking information. All the companies have websites that provide
details of their products, as well as contact information. Your contact will be
much more amenable towards cooperation if you present yourself as well
informed.
Limit your initial request to as few items as possible. Once a contact

has been made, it may be possible to squeeze in another request or two
later.
If your project may actually present a future sales opportunity for your
contact, play this up big time. Point out that by modeling your proposed
project around your contacts equipment, you are setting the stage for later
more detailed planning and possible purchases. Be careful about overstating
this case, however. To be avoided is encouraging so much enthusiasm that
your contact flies to meet you thinking a sale may be imminent.
Sensitivity Analysis
Some form of sensitivity analysis will provide a means of assessing the

impact of variations in economic or operational parameters on the economic
viability of a mining project. Parameters to be tested are those for which
some level of uncertainty may exist due to the inability to predict future
developments, such as commodity prices; difficulties in measuring specific
input parameters, such as ore grade; or concern regarding the estimation of
total capital or operating costs. When costs are estimated using itemized
methods as described in this class, the opportunity exists to test the
economic impacts of specific operational or project design parameters, such
as variations in the projected powder factor, labor wages or benefits, truck
fill factor, stripping ratio, etc.
The basic procedure to follow for preparing a sensitivity analysis is as
follows.
1. Determine which parameters to test.
2. Determine the base case value for each parameter.
3. Estimate the upper and lower limits of probable values for each of the
parameters.
4. Convert the upper and lower limits and a sampling of intermediate values
to percentages of the base case values for each parameter.
5. Calculate the net present value, internal rate of return, or other economic
metric for each of the values tested. A spreadsheet or a software package
such as Apex should be used for this process.
6. Display the results in a tabular or graphic format.
A clear and understandable display of results is critical, because the purpose
for performing a sensitivity analysis is to alert readers to the significance of
changes in data items. A simple graphical format commonly used for this
purpose is the spider plot. Figures 1 and 2 (below) show tabulated results of
sensitivity analyses for milling costs and development costs vs sum of cash
flows, present value, payback period, and internal rate of return derived
from an analysis of a fictitious project using Apex software (see
CostMine.com). Figure 3 (below right) shows the some of the same data in
graphical format using a spider plot. Notice that the slope angle of the
milling cost data line is much steeper than that for the development cost
data line. This makes it immediately clear that the NPV for the project is
much more sensitive to changes in milling costs than it is to changes in
development costs.
Figure 1: Tabulated results of a sensitivity analysis testing the sensitivity of

sum of cash flows, present value, payback period, and internal ROR to
changes in estimated milling costs (from Apex Software for Economic
Analysis, www.CostMine.com)
Figure 1: Tabulated results of a sensitivity analysis testing the sensitivity

of sum of cash flows, present value, payback period, and internal ROR to
changes in estimated milling costs (from Apex Software for Economic
Figure 2: Tabulated results of a sensitivity analysis testing the sensitivity of
sum of cash flows, present value, payback period, and internal ROR to
changes in estimated development costs (from Apex Software for Economic
Figure 2: Tabulated results of a sensitivity analysis testing the sensitivity

of sum of cash flows, present value, payback period, and internal ROR to
changes in estimated development costs (from Apex Software for Economic
Figure 3: Sensitivity plot depicting the impact of changes in estimated
milling costs and development costs on NPV. Notice the difference in slope
angles of the data lines.
Figure 3: Sensitivity plot depicting the impact of changes in estimated

milling costs and development costs on NPV. Notice the difference in slope
angles of the data lines.
Information Check List

Now that we are familiar with the process of
estimating mining costs, we have a good feel for the
amount and types of information needed about a
proposed project before we can complete an
estimate. The checklist in Figure 4 will help guide the
collection of this information. This is a generalized
list applicable to estimating mining costs only. It of
course must be modified to fit individual situations, and it does not
represent all the information needed for a complete property evaluation,
such as geologic information needed to estimate resources, permitting
information, environmental baseline information, and financial, royalty and
tax information.
You have covered the following points in Part 6: Useful Techniques.
the application of cost indexes

the application of scaling factors
how to obtain equipment and supply price data
how to prepare a sensivity analysis
Parametric Cost Estimating Systems

You will cover the following points in Part 7: Other Cost Estimating Systems.
an overview of parametric cost estimating systems:

T. Alan OHaras quick guides to the evaluation of orebodies
the Mular system
the U.S. Bureau of Mines CES (cost estimating system)
the disadvantages of actual costs from similar mines for cost
estimations
the application of cost models for cost estimations
the application of the cost estimating software "Sherpa"
an overview of cost estimates for underground mines
an overview of cost estimates for processing plants
Introduction
The search for a quick and easy method for estimating mining costs seems
to be an eternal quest among evaluators. Several methods have been
proposed over the years, all with distinct problems and pitfalls, and some
advantages for some users. The approach in developing these systems has
generally been to utilize an itemized method to create a basis for the
system, and then provide an interface that the user can use to access and
adapt the system for a specific project, without actually going through the
exercise of completing an itemized estimate. This sounds ideal, but as we
shall see, these methods are no substitute for completing a properly done
itemized estimate. With the exception of the software methods described in
Part 7: Cost Estimating Software, none of these methods are suitable for
anything but in-house studies at the very earliest stages of examining the
economics of a potential project. They are not suitable for 43-101 or JORC
studies, and generally should not be used for much beyond intra-office
discussions. The following methods will be described in the sections that
follow.
parametric methods:
T. Alan OHaras Quick Guides to the Evaluation of Orebodies
A.L. Mulars system
US Bureau of Mines CES system
borrowing cost information from similar mines
applying cost data from theoretical cost models
cost estimating software (e.g. Sherpa Systems)
Parametric Cost Estimating Systems

(See Summary for main points)
Parametric cost estimating systems are a broad grouping of systems that
relate thecost of a unit or a process to some parameter of the unit or
process. For instance, the cost of a haul truck related to its capacity, or the
cost of sinking a shaft related to the cross-sectional area of the shaft. The
relationship may be expressed in a graph or in a formula such as:
C = f(P)
where:
C is the cost of the unit, item, or process; and
P is some parameter of the unit, item, or process, e.g. size, weight,
production capacity, face area, etc.
In general, the systems are simply methods of summarizing, relating, and
presenting the data from a database of cost information. They can be
misleading in that, by graphing only two or three data points, they can give
the impression that a continuum of sizes or types of units or processes exist.
For instance, a graph of haul truck horsepower versus truck prices suggests
that trucks of any horsepower within the range can be obtained. Such an
assumption can lead to erroneous cost estimates. In this authors opinion,
the graph or formula, when applied to unit pricing such as for equipment
prices, creates a barrier between the user and the base data. If prices for
several sizes of trucks are known, the appropriate prices should be
referenced directly by the estimator, rather than calculating them from a
formula or reading them from a graph created from the prices.
In order for a parametric system to be useful, three conditions must be met:
1. the database behind the system must be extensive and thoroughly and
carefully prepared;
2. the database and parametric relationships must be prepared by persons
with expertise and experience in cost estimating and in the operational
subject matter; and
3. the system must be maintained over the years by people with
appropriate expertise to keep the system current relative to changing
technology and economics.
Parametric systems are used extensively in the chemical, manufacturing,
and construction industries, where considerable data is available and a
sizable market exists to warrant the development and maintenance of the
system. To bring home the relative significance of market sizes, consider the
number of new houses one sees being constructed compared to the number
of new mines being built, and consider the relative amount of statistics
available from this work to develop such a system, and the number of
people involved in building, appraising and financing all that construction
who are willing to pay for the system once developed. Limited systems
developed for the mining industry have met the first two of the above
criteria, but not the third. To this authors knowledge, no comprehensive
parametric systems are presently being maintained and updated for the
mining industry in North America. I will summarize briefly the following three
systems that have achieved prominence in the industry in recent decades,
but which have all become dated because of lack of current support.
A.L. Mulars Mining and Mineral Processing Equipment Costs and

Preliminary Capital Cost Estimations
the CES System of the US Bureau of Mines

T. Alan OHaras Quick Guides to the Evaluation of Orebodies were
developed in the 1970s when Mr. OHara was Manager, Development Group
for Hudson Bay Mining and Smelting Co. and Anglo American Corporation of
Canada. The Guides were initially developed for in-house use by the
companies, but were made available in abbreviated format in a 1980 article
in the CIM Bulletin (OHara (1980)) and in a subsequent article published by
the Northwest Mining Association (OHara (1981)). OHaras original work
was updated and considerably expanded upon ten years later in a chapter in
the second edition of the SME Mining Engineering Handbook (OHara and
Suboleski (1992)). Anyone wishing to use any aspect of the system should
avail themselves of the 1992 article. The system as ultimately presented in
1992 consists of two distinct types of graphable mathematical relationships.
The first type relates the required amounts or sizes of certain key elements
utilized by a mine to some technical parameter of a mine, such as the
number of personnel required related to the production rate of a mine. The
second type relates the cost of a particular cost center to some technical
aspect of the mine, such as the capital cost of a maintenance shop related
to the mines production rate. We will discuss both these types of formulae,
but as we shall see, the first type has continued usability, while the formulae
of the second type are now obsolete and should not be relied upon.
While this author cannot vouch for the reliability of any of OHara and
Suboleskis 1992 formulae, some that do not involve costs are of interest.
For example, the following is a graphical depiction of a series of formulae
relating the total mine crew to the mine production rate for various stoping
methods (after OHara and Suboleski (1992)).
Figure 1: Underground mine crew for various stoping methods and ore
widths
widths
Following are a number of other example relationships selected from the

1992 article and presented in mathematical format.
1) the number of mill personnel (Nml) required to operate a mill treating T
tons of high-grade underground base metal ore daily by differential flotation:
Nml = 0.57 T0.6

2) the number of administrative and technical personnel Natrequired for a
mining and milling plant as a percentage of the total required for mining
(Nop), milling (Nml), and services (Nsv) for open pit mines and mills:
Nat = 11 % of (Nop + Nml + Nsv)

3) power consumed per day for underground mines hoisting ore (T tons per
day) to a surface concentrator:
kWh/day = 1800 T0.57

4) quantity of ventilation air required (Q) in cfm for underground uranium
mines:
Q = 1900 T0.8
5) capacity of a compressed air plant (C) in cfm for large underground mines
using large blastholes in wide stopes with diesel-powered mechanized
equipment for loading:
C = 130 T0.5
Many more formulae of this type are presented in the 1992 article, along
with background explanations.
Numerous formulae of the second type relating costs to some technical
parameter of the operation are included in the article as well. For example,
following is a graphical depiction of the cost of preparing stopes as a
function of daily mine production for a variety of stoping methods (from
OHara and Suboleski (1992)).
widths
Figure 2: Cost preparing stopes for mining 125 days of ore
Figure 2: Cost preparing stopes for mining 125 days of ore
Other graphs in the system include:
total capital cost of underground mine/mill projects vs. daily

production
total capital cost of surface mine/mill projects vs. daily production
cost of site preparations vs. daily production
cost of pre-production stripping vs. daily production
cost of shovels vs. daily production
cost of hoists and headframes vs. daily production
To the best of this authors knowledge, the system has languished since
publication of the 1992 article. Occasional use is made of the system by
applying cost indexes, but the time is long past when an indexed cost from
that era can be considered reliable. The following statement from the article
fixes the age of the cost data:
"The cost formulas for mining projects described in this segment are based
on actual costs of mine projects completed since 1980, which have been
escalated by statistical indices to the equivalent costs for the third quarter
of 1988."
Hence, the cost data behind these curves is now 25 or more years old. While
the system was easy to use, it had a sound basis, it was comprehensive,
and it was easily computerized, the cost data is now obsolete and the
system is not being supported at this time. Consequently, its use is not
recommended.
Mular system
This system, developed by A. L. Mular, Professor of Mineral Process
Engineering, University of British Columbia, was originally published in 1982
in a CIM handbook titled Mining and Mineral Processing Equipment Costs
and Preliminary Capital Cost Estimations (Mular (1982)). Sixteen years later,
Richard Poulin, Associate Professor, Department of Mining and Metallurgy,
Universite Laval, teamed up with Dr. Mular to update and expand the
system with the support of a number of professional organization and
corporate sponsors. This later work was published in 1998 as CIM Special
Volume 47, CAPCOSTS, A Handbook for Estimating Mining and Mineral
Processing Equipment Costs and Capital Expenditures and Aiding Mineral
Project Evaluations. This volume is a monumental effort to bring together a
large amount of costing methodology and data under one cover. In addition
to the Mular System described here, the handbook includes explanations
and rules of thumb for several shortcut procedures for cost and economic
analysis. The volume should be on the shelf of anyone involved in
evaluating and estimating costs for mining or milling projects.
The actual Mular System confines itself to providing capital cost data,
mainly for processing equipment, but also for mining equipment. The capital
cost data is presented in the form of graphs, tables, and equations of the
following form:
Cost = A(X)b
where:
X is a suitable parameter such as motor horsepower, and A and b are
statistically derived constants.
Below is an example graph and equation from the system depicting the
capital cost of a rotary disk filter as a function of disk area (Figure 3, below
left). The capital cost of a front end loader as a function of its flywheel
horsepower is depicted in the graph and equation in Figure 4 (below right).
Figure 3: Capital cost of a rotary disk filter as a function of disk area (Mular
system)
Figure 3: Capital cost of a rotary disk filter as a function of disk area

(Mular system)
Figure 4: Capital cost of a front end loader as a function of its flywheel

horsepower (Mular system)
Figure 4: Capital cost of a front end loader as a function of its flywheel

horsepower (Mular system)
Similar graphs and equations are provided for the following.
drilling equipment
haulage equipment
ventilation and cooling equipment
power generation stations
crushers and pulverizers
grinding mills
classifiers and screens
ore storage equipment
conveyors
feeders
motors
heating units
blowers
pumps
dust collection equipment
gravity/centrifugal separators
flotation cells
electrostatic separators
magnetic separators
continuous centrifuges
dryers
filters
thickeners
mixers/blenders
pelletizers
tanks
electrowinning cells
The cost data in the system was collected over a period of years prior to
1998 and updated to a common base using inflation factors. Hence, the
data is 15 or more years old, and, so far as this author knows, has not been
maintained or updated in that time period. Fifteen years is beyond the age
that cost data can be reliably updated using indexes. Therefore, the cost
data in the system should only be referenced as a last resort.
US Bureau of Mines Cost Estimating System (CES)

The US Bureau of Mines CES (Cost Estimating System) was based on a
system developed in the 1970s to provide a systematic means for the
Bureau to estimate costs for a large number of developed and undeveloped
mineral properties to be entered into the Bureaus Mineral Availability
System. It was published as an open file report in the late 1970s, and again
in revised format as IC 9142 and IC 9143 in 1987. The equations from IC
9142 and 9143 were put on Lotus spreadsheets and published as an Open
File Report in 1988. The system was maintained into the early 1990s, but
with the demise of the Bureau of Mines in 1996, it has languished. The most
recent descriptions of the system appear in two articles by an ex-Bureau of
Mines engineer, Thomas Camm (Camm (1991) and Camm (1994)).
The system drew on the engineering work of a large number of Bureau
employees, with unit costs provided under contract by Western Mine
Engineering, Inc., predecessor of InfoMine USA, Inc.
CES consisted of a large number of statistically derived equations to
determine capital and operating costs for specific unit processes. The
equations were based on individual cost estimates for a variety of
capacities. Regression analyses was then applied to the individual costs at
the various capacities or size ranges, producing the resulting cost equations,
which in most cases took the logarithmic form y = a(X)b.
Table 1 (below left) is a screen from the 1988 spreadsheets. One for
estimating the operating cost for cut and fill stoping, and one for capital
costs for cut and fill stope preparation. Notice that for the operating cost
estimate, costs are determined for labor operating costs, supplies operating
costs, and equipment operating costs; and for the capital cost estimate,
costs are determined for the cost of labor, supplies, and the capital cost of
the equipment. A method is provided to adjust the costs for stope width.
Itemized proportions are provided for each of the costs to allow for
application of appropriate inflation indexes if necessary. Similar screens
were provided for an impressive array of cost items covering surface mining,
underground mining, and mineral processing. A complete index for the
system is shown in Table 2 (below right).
The system was very comprehensive, and maintained with considerable

competence by specialists in a variety of fields. It required considerable care
and skill at cost estimating to use it properly, however, and was subject to
misuse by many who did not have the expertise to understand its full
ramifications, and how it could provide misleading results. It was difficult to
verify, and hence difficult to defend if challenged. Like the OHara and Mular
systems, CES is now seriously out of date and is not being supported. Its use
is not recommended, although it is still referenced occasionally, usually not
by mining engineers, but more commonly by economists and financial
analysts.
Part 7 - Other Cost Estimating Methods
Change Level
Actual Costs and Cost Models for Similar Mines

"Actual" Costs
Sometimes actual costs from a mine similar to the one under
consideration may be available to the estimator. It is tempting to give these
actual costs a high level of credibility, when in fact they can be the most
misleading of all cost sources. Operating and capital costs for existing mines
often can be found in publications, annual reports, or by word of mouth from
the mine operators themselves. These sound like highly credible sources,
and in fact they may befor the mine from which they are drawn. But that
mine and your proposed mine are two different entities, and their costs may
not be at all similar, even though the two operations might appear to be
much the same. Seemingly minor differences in stripping ratios, production
rates, or haul distances can have profound effects on costs for surface
mines, as can differences in vein width, rock characteristics, or water
production for underground mines. Even a difference in such an obscure
requirement as the amount of cement that must be added to cemented
sand fill can change the cost picture dramatically for a cut and fill mine,
especially with cement selling for in excess of $100/tonne as it has in recent
years.
The biggest problem in using actual costs from another mine, and the
main reason this author persists in putting the word actual in quotes, is
that unless you have full access to that mines accounts, which you never
do, you really dont know what is included in the costs and what is not,
because there is no industry standard for reporting these costs. For
instance, do cash costs include amortization of pre-stripping expenses,
royalties, state and local taxes, exploration, research and development, or
the cost of pilot projects? What costs are reported at the corporate level as
opposed to the project level? Also, accountants have a different way of
tracking costs than engineering estimators. This author has seen countless
instances where estimators from large companies, with decades of cost
experience from their own operating mines in their records, will turn to
outside sources such as InfoMine for cost data rather than to their own
operating records, because their own company records are not in a format
that lends itself to estimating costs for new projects.
Cost Models
(See Summary for main points)
For the reasons listed above and other reasons, a well-prepared published
cost model, such as those published in Mining Cost Service (website) can be
more reliable and useful to the estimator than actual costs from another
mine. Here, the costs are generated using itemized estimating techniques
with the operating parameters clearly laid out in a manner useful to the
estimator. Lists are provided to show what is included in the model, and just
as important, what is not included. Each model includes a listing of:
equipment requirements;
personnel requirements;
daily requirements for consumable items such as fuel;
unit costs for wages, salaries, and supplies;
operating parameters such as haul distances and production rates;
and
summaries of Capital and Operating Costs.
Surface mine models are provided with production rates ranging from 250
tonnes per day to 80,000 tonnes per day, with stripping ratios of 1:1, 2:1,
4:1, and 8:1 for each production rate. If you are lucky, your selected
production rate and stripping ratio may match one of the models exactly. If
not, some interpolation may be in order. Underground mine models range
from a production rate of 200 tonnes per day to 45,000 tonnes per day, and
include cut and fill, shrinkage, end slice, vertical crater retreat, sublevel
longhole, room and pillar, sublevel caving and block caving.
Summary results for one of the Mining Cost Service surface mine models are
shown in Figures 1 and 2 (below).
Cost Estimating Software

To the best of this authors knowledge there is only one software series that
carries the user completely through the cost estimating process for mining,
i.e. the Sherpa series developed by Aventurine Cost Engineering, Inc. and
distributed by InfoMine (CostMine.com).
Beginning with basic first principles information about deposit geology,
geometry, and rock characteristics or more detailed information if available,
Sherpa completes the engineering calculations necessary to produce an
estimate of capital costs and operating costs for a mining project. The
software uses itemized estimating techniques similar to those described in
Part 2 of this class, where possible, and abbreviated techniques where
necessary. The series consists of a package for surface mining, one for
underground mining, one for placer mining, and one for reclamation. By way
of disclosure, this author holds a royalty interest in some of the software.
Having studied this course so far, you will immediately recognize the
significance of the Sherpa input items.
The minimal information that must be entered before Sherpa can produce
an estimate is:
total minable resource;

ore production per day;
waste production per day;
haulage distanceore;
haulage distancewaste; and
preproduction stripping requirements.
With the minimum items entered, Sherpa will assume reasonable values for
all remaining items to produce a quick first pass look at costs. To produce a
more definitive estimate, however, the items listed below can be entered
and controlled by the user if desired. Sherpa will assume reasonable default
values for all items not entered by the user.
Sherpa will automatically determine number, size and type requirements for
equipment based on the listed input items (see below) using standard
techniques of productivity analysis. The user can change these numbers and
types if desired.
Sherpa determines the capital and operating requirements listed below

using standard productivity analysis. All can be changed and controlled by
the user if desired.
The following reports can be generated by Sherpa.
Costs in dollars per tonne or ton ore, dollars per day, and dollars per
year for all supply items, all hourly personnel, all salaried personnel, and for
equipment operation.
Capital costs for equipment, development and preproduction

stripping.
Project cost summary.
A typical Sherpa data entry screen is shown in Figure 1 (left) and a typical
results screen is shown in Figure 2 (right). Sherpa for Underground Mines
and Sherpa for Reclamation Bonds are similar to Sherpa for Surface Mines
but of course with parameters appropriate for the operations under
consideration.
A software system such as Sherpa provides the means to complete an

estimate using standard itemized methods in a very efficient manner.
Because of the speed at which estimates are completed, the effects of
changes in operating parameters, such as production rates, haul distances,
and stripping ratios can be tested without triggering the onerous task of
reproducing each estimate by hand or spreadsheet. InfoMine offers a free
trial period for the Sherpa packages. Contact InfoMine Inc. (CostMine.com)
for details.
Estimating Costs for Underground Mines and Processing Plants
Overview: Estimating Costs for Underground Mines

For much of this class we have focused on surface
mining, but most of the principles described for surface
mining apply to underground mining as well. Completion
of an itemized cost estimate for underground mining
requires attention to a greater variety of details than an estimate for surface
mining does, some of which require engineering design considerations.
Excellent resources are available to aid the underground cost estimator in
this effort. For technical background refer to SME (2001), SME (2011), AIMM
(1993). InfoMine USAs (CostMine) publications, Mining Cost Service, Mine
and Mill Equipment Cost Guide, the wage and salary surveys, and the online
Equipment Cost Calculator, all cover underground mining as well as surface
mining. Aventurine Engineerings Sherpa Cost Estimating Software for
Underground Mining performs most of the engineering calculations involved,
and walks you through the estimating process very effectively. Cost models
in CostMines Mining Cost Service provide a quick alternative to detailed
studies for preliminary estimates, and they provide a good check list for
more detailed studies.
The steps required to complete an itemized cost estimate for underground

mining can appear quite daunting. Hence, use of a good software package
such as Sherpa Cost Estimating Software for Underground Mining is strongly
advised for prefeasibility level studies. The steps followed by Sherpa are the
same as those that should be followed by an estimator completing a manual
estimate.
These steps, calculations, and items to determine or assume are outlined
below.
determine the amount of mineable resource

decide on a daily production rate and operating schedule
haulage:
ore and waste to surface
initial haulage to transfer points (method: conveyor, diesel rail,
trolley rail, battery rail, hoist, scoop tram, truck)
cycle times
daily amounts
hours per day
stoping:
method: cut and fill, shrinkage, vertical crater retreat, sublevel
caving, room and pillar, etc.
how is ore collected and hauled in stopes: scoop tram, front end
loader, overshot loader, slusher
machine size
distance and gradient
cycle times/Hours per day
specify proposed stope dimensions
specify deposit geometry
shape: vein, bedded, massive, etc.
dip, length, width, height
distance to surface, vertical or horizontal
This information is critical for determining the amount of development that

is required before production can begin, and how much is required during
production in order to maintain the desired production rate.
specify or assume rock characteristics for footwall, hanging wall

and ore
density, swell
rock quality designation (degree of jointing)
compressive strength
nature of ore contact
This information will help determine the nature and amount of ground
support required, drilling and blasting, excavating and hauling requirements
and productivity for stoping and for development work.
Based on information provided in in the preceding steps, if you are using
Sherpa, the software will proceed to make all further assumptions and
calculations to complete the estimate if desired.
specify proposed stope dimensions

development openings
adits, inclines, declines, drifts and crosscuts
miscellaneous openings: hoist rooms, pump rooms, backfill remix

stations, safety chambers, repair shops
location: in footwall, hangingwall, ore
face width and height
length
gradients
ground support required: Rock bolts, timber, lagging, shotcrete,
concrete, steel liner plate
length required before production can begin
daily advance required to maintain production (the required daily
advance depends upon the stope dimensions specified above)
development muck haulage
mucking machine types and sizes
muck hauling machines and sizes
muck hauling distances and gradients
construction: equipment, pipe, electrical, support materials,
ventilation, etc.
drawpoints
location: in footwall, hangingwall, or ore
area, number per stope, length
access raises, ventilation raises and ore passes
bored or drill and blast
area
lining/support type
number of compartments
in footwall, hangingwall, or ore
length prior to production
daily advance required during production
raise borers (diameter, raise length, bore hole and reamer
penetration rate)
prices
pipes/electrical/construction materials
supply items
wages and salaries
drilling and blasting requirements
for stopes, drifts, raises
type of drills: stopers, jacklegs, drill jumbos, DTH hammers,
longhole
bit diameters
type of explosives loader: Anfo, manual
anfo truck placement rate
drilling rates
powder factors
cycle times/hours per day
daily requirements
mucking requirements
machine types: slushers, overshot, scoop tram, front end loader
machine capacity
bucket fill factor
time to fill
haul distances
crushers
type
machine and product sizes
bond Work Index of rock

machine power and capacity
daily production/hrs per day
conveyors (length, gradient, width, speed)
shafts: Hoists
distance, speed, cycle time
skip capacity
drum and rope diameter
power
accessory equipment
roof bolters/Scalers
scissors lift truck (height)
service vehicles (hp/kw)
shotcreters (placement rate)
backfill mixers/pipes
volume per day
stope prep time
slurry density
cement content of fill
fill density
flow rate
static head
number of backfill pumps and mixers (hp/kw/daily use)
pipe lengths (shafts/adits/crosscuts/raises)
ventilation
vent fans (hp/kw, number, efficiency)
intake and exhaust friction factors, face areas, perimeters, lengths,
velocity, friction head, velocity head (shafts/adits/vent raises)
air volume required per worker and piece of diesel equipment
(safety factor)
fresh and drainage water
flow rate, head, pumps
hp/kw/daily use
pipe sizes (shafts/adits/drifts, etc.)
compressed air: pipe sizes and prices
rock support installation for various types of openings
rockbolts per day
timber per day
shotcrete per day
personnel requirements
hourly
salaried
surface buildings: sizes/types
Now, having read through this list of details that should be covered in a wellprepared cost estimate for an underground mine, you can understand why I
recommend turning to a software package like Sherpa for Underground
Mines to handle much of the detail work for you. Another way to reduce the
amount of effort expended on detail is to turn to the cost models found in
Mining Cost Service (website), here you will find models for complete mines,
as well as for specific aspects of mining, such as driving drifts, raises,
inclines and declines, and sinking shafts.
Overview: Estimating Costs for Processing Plants

A complete estimate of costs for a mining process commonly requires the
inclusion of the costs for an on-site processing plant or mill of some sort.
This is a subject for another class, but here again, most of the principles
discussed for estimating mining costs apply to the processing plant as well,
but with a twist of its own. The first and most important step in this process
is the design of a flowsheet for the plant, with type, sizes, and horsepower
of equipment specified. A material balance should be created to aid in
equipment sizing as part of this process, simplified or complex, as the
situation calls for. For instance, a concentrate filter should not be large
enough to filter the entire plant feed, but only the concentrate. A simple
material balance will specify this throughput amount. It will also indicate the
amount of tailings to be handled and stored, as well as the amount of
concentrates to be shipped and sold or smelted. The advice of a metallurgist
is highly desirable at this stage. If the flowsheet is not correct, the cost
estimate will have little or no credibility.
Personnel requirements are not as equipment-specific as they are for mining
operations. Typically one operator may be responsible for a large number of
equipment units. Model or actual operations should be referenced in
determining personnel needs. Electric power needs are determined from
connected horsepower of the many units of power driven equipment.
Reagent requirements are best specified by a metallurgist. Grinding media
consumption rates can be estimated by reference to historical data for
similar ores. Mining Cost Service (website) provides a listing of these.
Once equipment prices have been determined from manufacturers or from
one of CostMines publications, the cost of installation, piping, wiring,
instrumentation, the mill building, engineering and construction
management costs, etc., are typically added as a percentage of the base
equipment costs until further design detail is available. Cost models in
Mining Cost Service provide some guidance for these amounts. Unit costs
for equipment operation, personnel, electric power, and operating supply
needs are readily found in CostMines publications. Cost Models in
CostMines Mining Cost Service provide a quick alternative to detailed
studies for preliminary estimates and they provide a good check list for
more detailed studies.
Table 1: Estimating capital costs for a processing plant
Step
Measure
Step
1
Prepare flowsheet (seek advice of a metallurgist)
Step
2
Prepare material balance in sufficient detail to estimate amount of material passing through each
piece of major equipment (seek advice of a metallurgist)
Step
3
Compute comminution power requirements using Bond Work Index (seek advice of a metallurgist)
Step
4
Select equipment types and sizes, including electric motors and pumps (seek advice of a
metallurgist)
Step
5
Estimate the capital costs for individual equipment items (CostMine's Equipment Cost Calculator
is a good reference for this step)
Step
6
Apply cost factors to estimate the cost of installation, instrumentation, buildings, etc. (see Mular)
Step
7
Sum costs to determine total capital costs (Don't forget to include a "first fill" amount for reagents,
grinding media, etc.)
Useful references are AME's Cost Estimation Handbook, 1993 and CostMine's Mining Cost Service and
Equipment Cost Calculator
Table 1: Estimating capital costs for a processing plant

Table 2: Estimating operating costs for a processing plant
Step
Measure
Step
1
Determine equipment operating costs utilizing equipment list from capital cost estimate (good
reference: CostMine's Equipment Cost Calculator)
Step
2
Determine electric power requirements (Sum up motor kw requirements throughout plant. Utilize
Bond Work Index calculation results for comminution.)
Step
3
Determine requirements for reagents, grinding media, fuel, and other materials and supplies.
Step
4
Determine personnel requirements (Ref: Mining Cost Service - Cost Models)
Step
5
Apply unit prices (Ref: Mining Cost Service)
Step
6
Calculate total operating costs (include overhead, miscellaneous items, etc)
Table 2: Estimating operating costs for a processing plant

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Part 1 - Introduction to Cost Estimating

Why Estimate Costs?

reasons for the need to estimate mining costs:

If you are an exploration geologist, a mining engineer, a metallurgist, a mine

phenomena rather than economics. Assuming some

Resource analysis and pit planning

number of empirical or geostatistical methods. Cost

fundamental to the process. One common acquisition decision-making tool

How much background information is available regarding the

determination of reserve amounts, and as such is a necessary consideration

While general agreement exists for definitions of some of these terms,

Commitee for Mineral Reserves International Reporting Standards

Association for the Advancement of Cost Engineering International

The maturity level of project definition is the prime determinate of the

based on very limited information

End usage: strategic business planning purposes, market studies,

of magnitude, idea study, concept screening estimate, prospect estimate,

based on limited information

End usage: detailed strategic planning, business development, project

generally prepared to form the basis for budget authorization,

generally prepared to form a detailed contractor control baseline

End usage: detailed contractor or owner control baseline, monitored for

generally prepared for discrete parts of the total project rather

End usage: support change management, support

Estimating methodology: highest degree of deterministic methods, require

Australasian Joint Ore Reserves Committee (JORC)

Canadian Securities Administration

Estimating Costs for Mining Prefeasibility Studies

comparison to costs at other mines

Feasibility studies and their associated cost estimates are generally

In a November 26, 2007 news release, NovaGold and Teck-Cominco

Estimating Costs for Mining Prefeasibility Studies

For open pit and block cave mines:

These values provide a reasonable initial estimate of production rate,

Choosing a Waste Production Rate

reasons for the need to estimate mining costs:

Estimating Costs for Mining Prefeasibility Studies

the advantages of the itemized cost estimate method

such as administrative charges, are not determined in this manner, but

It is highly credible if done well.

The itemized cost estimating method will be demonstrated by estimating

Twelve steps to an itemized cost estimate

Step 1 - Develop a conceptual mine plan

Step 4 - Select excavating and hauling equipment and determine

Estimating Costs for Mining Prefeasibility Studies

A conceptual mine plan must be developed to

Basic geometry of ore deposit and waste material: the estimate

Figure 2: Preliminary sketch of pit cross section

More detailed analyses

Estimating Costs for Mining Prefeasibility Studies

Taylors Rule as originally stated suggests a production rate as follows:

Ore Tonnes per day = 0.014 (expected tonnes)0.75

Less detailed estimates

More detailed estimates

Less detailed estimates

the advantages of the itemized cost estimate method

how to develop a conceptual mine (step 1)

Estimating Costs for Mining Prefeasibility Studies

how to select equipment and determine its productivity (step 4):

Select Equipment and Determine its Productivity

All of the major equipment manufactures publish equipment specification

hydraulic front shovel

Each of these types is best suited for a specific range of conditions as

Draglines, either walking or crawler-mounted, provide a very cost-effective