There are opposing views on whether someone should have a back-up or contingency plan. Some interpret it as accepting some level of failure. I view it as insurance that addresses the things that are outside of your control. It is a lesson learnt from Murphy’s Law: Anything that can go wrong will go wrong. De-risking plans and designs is critical for success however you choose to define success. Risk assessments, whether formal or informal, are a crucial step in the mine planning process. They help to develop the contingency plans. This article is about the importance of Plan B.
The narrative this week is about mine planning and what to consider and why. The question of “what I would do” during COVID-19 shut-downs is ensuring there are options available should Plan A get disrupted. Right now, Plan A for many organizations is no longer valid. The resilience of these companies and operations is getting tested. Mines and mining companies that had a Plan B will be better placed than those still in a reactive mode.
The groundwork for what a mine plan is and who develops it is outlined. It is then all about keeping to a plan and ensuring there are alternatives available when things change. This is what I would do.
Mine Planning and the mining engineer: Not mutually exclusive
Mine planning is widely used as an adjective to describe activities that outline a list of tasks to achieve an objective. There are mining practitioners, mostly degreed mining engineers, that lead and undertake mine planning. Mine planning requires skills and knowledge to complete a mine plan. Planning cannot be completed in isolation. Mine planning is a team sport. A fully developed mine plan requires input from several specialists including geotechnical, maintenance, processing, and geology. The mine planner collects that information and uses it as inputs to the mine plan. I do despair when I see or hear of mining schedules produced by an engineer versus a planning team. It is a multi-disciplinary effort.
Is a mining engineer necessarily the mine planner? They are but one crucial player in a larger team. The deliverable at the end of mine planning is a schedule. The mining engineer is the keeper of that schedule and, hopefully, the cost and cashflow models that justify the plan. The more specialist sources of information driving the plan, the more likely it is to achieve the objectives. This is part of the de-risking process of a plan.
What is a mine plan?
How long is a piece of string? There are opinions as varied as the practitioners. My definition of a mine plan is:
A schedule that integrates a layout or design with the resources required to complete the design. The design will be the result of inputs from geological, geotechnical, and other disciplines. The schedule of activities and production outputs form the basis of a business plan that accounts for all costs and revenues to achieve the end design.
A mine, and any element of it, is a construction project. The end point is not simply an excavation, but (hopefully) a profitable enterprise that justifies the on-going excavation that is the mine. What is key to the definition is that it is scalable. As a philosophy, it can apply to a stope and a life-of-mine plan. Infrastructure including sumps, workshops, or refuge chambers are a part of the plan and ultimately support delivering the business plan. The infrastructure is as important as the supporting resources and reserves to achieving the cashflow targets for the mine.
Mine plans come in many shapes and sizes. I refer to four classes of mine plan:
The four plan classes are listed in order of decreasing time scale. A strategic plan is a life-of-mine plan that establishes the mining methods, designs production rates and scale of the operation. The strategic plan will define what the mine will look like. It will have costs and revenues included in it. A strategic plan may be part of a feasibility study or developed by an operations team. The long-term plan is similar in scope and scale to the strategic plan, however many of the decisions that drive the design will have been made as part of strategic planning. It may be of a fixed time period (five years for example) or be a life-of-mine plan. The long-term plan will be focused on designs, production schedules, and have an indicative cashflow model attached to it. These plans are too forward looking to justify budget-detailed cost estimates. We cannot forecast commodity prices much further than a few weeks or months in advance. Why would we go to great lengths to estimate capital costs 15 years from the time of the study when the commodity prices will have gone through two or more cycles? Some may disagree but the mining industry puts too much energy into life-of-mine cashflow models and not near enough into start-up scheduling and cost estimating. For whatever reason, we give 20 weeks into a project similar emphasis as 20 years out.
Strategic and long-range plans should include complete cashflows and consider alternatives. In study terms they are prefeasibility level of accuracy.
The medium-range mine plan will be an operating plan (I like to call this a business plan) for the mine. It will be based on the long-range plan with detailed engineering and design and will have an activity-based schedule as an output. Infrastructure, capital allocations, equipment, personnel, and other resource requirements will be defined with confidence. The business plan will be heavily reliant on input from many disciplines and specialists. This plan is updated at regular intervals such as quarterly.
The short-range plan will be extracted from the medium-range plan. Costs and other value inputs will be updated to be as current as practical. The designs will be finalized for issue to crews and the plan will have specific crews and equipment assigned to each task. This is the plan that will be executed with the objective of achieving the production and revenue targets.
The types of plans can be as varied as anything else you can imagine. The common characteristics to the plans are:
- Design of sufficient detail to extract a bill of quantities to support a cost estimate.
- Current operating and capital costs and commodity prices.
- A schedule of activities.
- A cost model that accounts for productivities and the current costs.
- A cashflow model that demonstrates the economic viability of the schedule.
- Some level of risk assessment of the plan. Mitigations need to be defined.
- Alternatives and options.
All scales of mine plans should include cost estimates and commercial analysis to justify the plan. Stopes and bench blasts need to undergo repeated assessments to determine the ultimate excavation limits that will produce a profit. There are exceptions of course.
You now have a plan and it makes cash – so now what? Anyone that has worked at an operation of any description knows that situations can change very, very quickly. I am sure many of us have delivered mine plans to crews that were obsolete before they got to cage. It happens. Equipment failures, absenteeism, falls of ground can all upset the best of plans. The business plan must be achieved so an alternative must be in place to keep to that plan. That tonne of ore not delivered cannot have its commodity sold. It drives up the unit costs across the mine and may impact resource (such as equipment) utilization. The fixed costs per unit produced then increase as well.
Without an alternative in hand the plan will not be achieved. Time is not on the planning team’s side. A means to recover production needs to be in hand. This is why the medium and short-range plans need to inform one another. It is also why the risk assessment is crucial. It is only as good as the knowledge available at the time it is completed but it will identify known challenges to achieving the plan. It is the best you can do with the information you have.
This is why Plan B, the contingency plan, needs to be developed in parallel to the base plan. The commercial risks must be mitigated just as the technical risks need to be. The mine planning team needs to be armed with the price and cost information to quickly appraise alternatives when things do change.
So, which two aspects would occupy my mind during the quiet time of the COVID-19 pandemic? Risk assessments and alternative analysis of the mine plans.
Bryan Pullman P.Eng. (AB)
General Manager, Maidenhead