Superficial Mine Analysis

In our daily life we know we should not make superficial judgements of people, "not to judge a book by its cover", so it should be no surprise that the same applies to the mining industry, specifically to strategic mine analysis.

What might superficial analysis look like? Let me provide some observations:

  • Analysis of JUST THE CURRENT YEAR or a few years to make decisions. If we were to just look at the cash flow this year we might see how expensive stripping waste is, there is often no revenue from this activity and may not have an impact on the project until several years down the track when we are no longer able to utilise our full processing capability.
  • Finding A PLAN THAT MAKES MONEY, perhaps the same or better than last year, perhaps slightly higher metal than previously. While this may be good, there may be a better plan that is not even looked for. Nobody sees this lost value but it does not mean that it isn't there. We only get one chance to mine a resource, we are in a privileged position if we are doing the strategic mine plan since this impacts many people.
  • DOING ONLY WHAT YOU ARE TOLD! Yes, we do what our management and peers request of us, but this is not necessarily enough. We can also give them what is best, not just what they ask for. Just because they ask for a certain plan often does not stop us from finding a better solution. Although we may be asked to reduce the costs of the mine, we should also advise if the downstream reduction in revenue is greater than the costs we save. Management may not be fully aware of the implications of instructions to the project unless we tell them, this can take courage.

Superficial analysis has impacted mining strategic planning as it has many aspects of our life. The shareholders would want us to find the best value for the project, not just a profitable project. This takes deeper analysis, time and energy. Optimisation using the full Net Present Value (NPV) is normally more difficult to undertake but yields significantly better results. The reward of such strategic analysis is often several percentage points higher project value, which should find its way to the shareholders. The shareholders ultimately pay our salaries, we want to treat them how we would like to be treated if it were our mine.