Dec '12/Jan '13


Addition by subtraction

By Herb Mathisen

Four wind turbines at the Diavik mine in the Northwest Territories went into operation in September to reduce the mine’s reliance on diesel | Courtesy of Diavik

Reducing operating costs and careful spending are the orders of the day, as the mining industry braces for a rocky year. Whether for added protection from volatile commodity markets or just smart business, many miners are looking inwards and tightening their belts. Barrick Gold initiated a company-wide portfolio review and is committed to reducing costs, which includes the potential sale of its share of African Barrick Gold to China Gold. And Teck Resources announced in October that it would not only defer more than $1.5 billion in capital spending but also attempt to reduce annual operating costs by $200 million.

Also in the fall, Vale CFO Luciano Siani said the Brazilian giant would reassess its “low value adding” operations and could halt or divest of mines not making money. “This is a different approach as, in the past, we privileged volumes over value; we didn’t do this sort of detailed analysis to try to understand what specific assets are contributing value for shareholders,” he said during an investors’ conference call. “But now we are committed to not operate those assets which are not value adding.”

Attacking costs from all angles

“We’ve gone through a period of some pretty high commodity prices that have probably allowed companies to slip by a little too easily at times, and we know this can’t last,” says Otto Schumacher, a mine cost consultant for 30 years and a director with InfoMine USA.

No magic formula exists to break down operation costs, as expenses vary for each individual mine. But generally one third to one half of costs are wrapped up in personnel, Schumacher says. And while human resources often account for the largest portion of a mine’s expenses, that is a tough place to reduce costs, since workforces have become leaner in the last 10 to 15 years. Moreover, a smart employee retention strategy is critical for reducing recruitment and initial training expenses once economic conditions are more favourable. Schumacher said equipment operation costs, including fuel, maintenance and supply parts for equipment, account for the next largest portion of expenses – around 25 per cent, plus the cost of operators. Schumacher argues that smart maintenance spending and deployment of personnel are critical to increased productivity.

More and more, companies are examining this area, aiming to decrease equipment downtime and make operations run smoother. The Copper Mountain Mining Corporation took a maintenance-centred approach at its British Columbia mine that went into operation last year. Jim O’Rourke, the company’s CEO, explained that the operation diverted money it used to spend on haul truck tires toward road maintenance, which has in turn led to a reduction in tire costs.

To reduce its energy bill, which O’Rourke put at $2 million per month, the company partnered with BC Hydro and its Power Smart program. A full-time electrical engineer now works on-site, seeking out plant and process inefficiencies. O’Rourke says the mine will soon implement modifications to its ball mill to reduce energy consumption.

This has been an ongoing focus for Taseko Mines Ltd. at its Gibraltar copper-molybdenum mine – first opened in 1971 and acquired by the company in 1999 – in south-central B.C.

“Energy efficiency in the 1970s was not a major design consideration,” says Rob Rotzinger, Taseko’s general manager of projects. As part of an upgrading process, the company replaced its conventional tumbling ball mill in 2009 with a stirred Metso Vertimill, which has reduced energy consumption by roughly four million kilowatt hours per year, decreasing the grinding circuit’s energy requirements by 35 per cent.

Taseko also receives funding from BC Hydro to employ an on-site energy manager who reviews plants and processes to find efficiencies.

Quebec, Ontario, Manitoba and other provincial utilities offer similar energy conservation partnerships for mines connected to their grids.

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