Successful mining executives know how to set up a good planning process and they know what benefits this will bring. Most operational problems can be foreseen and avoided with good planning.
It is easy to see the costs of the technical team in the cost reports, but we mine to make money, not to save costs. The major benefits of a good planning team, and of good plans, are orders of magnitude greater than their costs—particularly from the mistakes that weren’t made and the problems that were foreseen and avoided. A good plan is like good health: you don’t notice it till you don’t have it. “Prevention is better than cure” is a truism that is just as relevant to the health of our mining operations as to the health of our bodies.
An integrated planning process, working in a hierarchy from long term to short term, is essential. Longer-term plans set the overall strategic direction. Progressively shorter-term plans provide more detail and accuracy at the front end of the longer-term plans. Approvals processes should also work from longer term to shorter term. Longer-term plans must be focussed on delivering the corporate goal in the long run. Shorter-term plans must then detail how operations in the near future will contribute to the achievement of the longer-term plans.
The Strategic Options Analysis (SOA) evaluates, at a high level, the impacts on value of all the various strategic decisions that the company can make, both separately and together. A full SOA is not normally done on an annual basis but should be reviewed annually as part of the planning cycle to ensure that the approved life-of-mine plan continues to be the best long-term plan. Major updates and reworking of the SOA should occur every three to five years.
The Life of Mine Plan (LOMP) is the formally approved long-term plan for the mine. It is selected after conducting an SOA, and is the plan identified as best delivering the corporate goal. It establishes the framework within which all other shorter-term plans are developed. The LOMP is reviewed and updated annually as part of the planning cycle, taking account of constraints identified in shorter-term plans or resulting from actual events, and changes identified in the SOA.
The Five-Year Plan (5YP) forms a critical medium-term link between the high-level strategies in the LOMP and the detailed shorter-term implementation plans. The 5YP is generated annually, with quarterly time periods modelled. Its timeframe is selected to provide sufficient “look-ahead” time for long-lead activities to be identified and adequately planned for, once they appear at the end of each new 5YP. Formal approval of the 5YP is part of the annual planning cycle. Failing to look far enough ahead is a common cause of operational problems in a mine.
The Two-Year Rolling Plan (2YP) provides a higher level of detail, supported by more-detailed engineering work, at the front end of the 5YP. It is updated quarterly with activities reported against it on a monthly basis. It is a regular ongoing part of the short-term planning process and, importantly, is not just done once a year as part of the annual budgeting cycle. The 2YP update cycle requires operators and planners to regularly look at the effects of current operating and planning issues up to two years ahead, avoiding actions that may be expedient in the short term but that create problems in the longer term. The appearance of an activity at the end of the 2YP is the flag for detailed design work to begin, with the aim of having all activities occurring in the first 12 – 18 months of each 2YP planned in detail and solutions found for any problems that have been identified. A good 2YP ensures that the mine operations will have as few unpleasant surprises as possible.
The Annual Budget (Budget) plan is simply the plan for the budget year in the version of the 2YP created three to six months before its start. Its preparation does not require any special attention or additional work, since the rolling process of plan and schedule generation and associated approvals ensures that the plan is realistic and achievable and is aligned with the corporate goal. Physical quantities in the Budget plan drive the Budget costs via appropriate cost models, which evolve in detail and accuracy in the same way as the physical plans and schedules. There are of course some formal processes that are specific to the budget, but if an integrated LOMP / 5YP / 2YP / Budget process is in place, the additional work required at budget time can be significantly less than is common at many mines.
Key performance indicators (KPIs) cascade down through the organizational structure to ensure the ultimate delivery of the LOMP. KPIs for more-senior operating managers (and market analysts?) focus not on short-term production measures but rather on measures related to the LOMP. Focussing on short-term plans and one-year budget KPIs is almost guaranteed to result in outcomes that are at variance with the optimal LOMP and activities that are suboptimal and value-destroying, not value-adding.
Our knowledge of rock conditions and ore grades will never be as complete as we might like these to be, so we will always have to respond to unexpected situations in the short term. To use a first aid analogy, we must attend first to breathing and bleeding to maintain life, and can worry about fixing up broken bones later. There may therefore be times when we are focussed solely on the short-term survival of our operation. But this should be the exception, not the rule, and having survived the emergency, our day-to-day actions should deliberately contribute to the long-term good health and well-being of the operation. To extend the safety analogy, continual accidents trigger a review of operating practices and changes are made to prevent reoccurrence. In the same way, continual short-term operational problems cause us to ask what is wrong with our planning systems if we are always operating in crisis mode. The best-planned mine will have a problem from time to time, but it does not continually lurch from crisis to crisis.
So to summarize, what is long-term planning, how does it differ from short-term planning, and what are its benefits? In one sense, if we only look at the processes involved in developing plans—gathering geological and geotechnical information, generating mine designs, scheduling mining and treatment operations, and forecasting cash flows, etc.—the main differences between short and long-term planning are the timeframe and the level of detail and accuracy. The more important difference is the underlying motivation and ethos of the planning process; whether the focus is on long-term value generation or short-term achievement of a set of annual targets.
Long-term planning clearly puts the focus on identifying the plan that delivers the corporate goals in the long term, with all shorter-term plans focussed on achieving the long-term plan. In the absence of a proper long-term planning process, short-term thinking leads to sterilization of Mineral Resources, lower production rates, and less efficient and profitable operations.
Where does your planning process fit?
Principal Mining Engineer