Operating Costs – Are we in the dark?

CIM Montreal 2015
Leon Binedell (PwC)
For capital projects, there has been much dialogue regarding a need for better project execution and practices to deliver on-time and on budget. However there has been little discussion on operating costs.
For operating mines, it’s been another dismal year for commodities prices - economic challenges, the strengthening US economy and an imbalance of supply and demand have had a devastating impact leaving many miners squeezed by margins and with a cautious outlook for the future.

The mantra of ‘production at any cost’ has changed and miners are forced to have discipline on managing costs to preserve cash and boost investor confidence. But managing costs is a challenging proposition across the mining lifecycle – are we managing costs in the dark?

· What decisions are made early in the lifecycle (e.g. during the study stage to achieve bankable projects economics or during the build to address capital overruns) which constrain costs during operation?

· What are the challenges within the annual budgeting and planning cycle which ultimately set the targets for operating costs?

· Are miners proactively managing performance of the operations across the enterprise (corporate, mine, functional)?

· How are operating costs influenced by market expectations to bolster investor confidence?

· Is unit cost purely the aftermath of all other decisions/objectives being pursued?
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