Date: April 28, 2016Author: Ken Kuchling
Comments: 3 Replies
In many of the past mining studies that I have worked, stockpiling strategies were discussed and eventually implemented. Sometimes study team members were surprised at the size of the stockpiles that were generated by the production plan. It became apparent that not all members of the team were clear on the purpose of the stockpiling strategy or else they had preconceived ideas on the rationale. To them stockpiling may have seemed to be a good idea until they saw it in action.
In this blog I won’t go into all the costs and environmental issues associated with stockpile operation but will focus simply on the reasons for stockpiling and why stockpiles may get large or numerous .
In my experience there are four main reasons why stockpiling might be done at an operation. They are:
1. Campaigning: For metallurgical reasons, there may be certain ore type(s) that can cause process difficulties if mixed in with other ores. Therefore the problematic ore(s) might be stockpiled until sufficient inventory is built up until it makes sense to process that ore (i.e. campaign) through the mill. Such stockpiles will only grow as large as the operator allows them to, before processing the material and eliminating the stockpile. Be aware that if the mine operations are still delivering different ore types to the crusher area, then those ores may need to be stockpiled during the campaigning period. More different ore types may mean more stockpiles.
2. Grade Maximization: This stockpiling approach is used in situations where the mine delivers more ore than is required by the plant, thereby allowing the best material to be processed directly and the lower grade material to be stockpiled for a future date. Possibly one or more low grade stockpiles may be used, for example a low grade and a medium-low grade stockpile. Such stockpiles may not be processed for years, possibly remaining in place until the mine is depleted or until the mined head grades are lower than those in the stockpile. Such stockpiles can grow to enormous size if accumulated over many years.
3. Surge Control: stockpiling may be used in cases where the mine may have a fluctuating ore delivery rate and on some days excess ore is produced while other days there is underproduction. The stockpile is simply used to make up the difference and provide a steady primary crusher feed rate. These stockpiles are also available as short term emergency feed if for some reason the mine is shut down (e.g. extreme weather). In general such stockpiles may be relatively small in size since they are mainly used for operational surge control.
4. Blending: blending stockpiles may be used where a processing plant needs a certain quality of feed material with respect to head grade or contaminant ratios (silica, iron, etc.). Blending stockpiles enables the operator to ensure the plant feed quality to be consistent and uniform. Such stockpiles may not be large individually; however there could be several of them depending on the orebody character.
There may be other stockpiling strategies beyond the four listed above but those four capture the bulk of the situations.
Using today’s automated production scheduling software, one can test multiple stockpiling strategies by applying different cutoff grades or using multiple grade stockpiles. The scheduling software will have algorithms to determine whether one should be adding to the stockpile or drawing from it. It will track the grades in the stockpile and sometimes be able to model stockpile balances assuming reclaim by average grade, or first in-first out (FIFO), or last in-first out (LIFO).
Stockpiling in most cases will provide some potential benefits to an operation and the project economics. Even if metallurgical blending or campaigning is not required, one should always test the production schedule and project economics with a few grade stockpiling scenarios. Unfortunately these are not simple to undertake when using a manual scheduling approach and so are another reason to move towards automated scheduling software. Also make sure everyone on the team understands the rationale for the stockpiling strategy and what the stockpiles might ultimately look like. They might be surprised.
Date: February 23, 2016Author: Ken Kuchling
Comments: 7 Replies
When metals prices are high, we are generally taught that we should lower the cutoff grade. Our cutoff grade versus metal price spreadsheet tells us this is the correct thing do. Our grade-tonnage curve reaffirms this since we will now get more ounces of gold in the mineral reserve. But is lowering the cutoff grade really the right thing to do?
Books have been written on the subject of cutoff grades where readers can get all kinds of detailed logic and calculations using Greek symbols (F = δV* − dV*/dT). Here is one well known book by Ken Lane that sells for $998 on Amazon the last time I checked. You can also download a 38-page abridged sample of this book at THIS LINKand the full version is available for $150 at the COMET Strategy web site.
Recently we have seen higher production cash costs at operating mines when commodity prices are high. Why is this? It may be due to higher operating costs inputs caused by increasing labour rates or supplies costs. It also may be partly due to the lowering of cutoff grades, thereby lowering the milled head grade, which then requires more tonnes to be milled to produce the same quantity of metal.
A mining construction manager once said to me that he never understood us mining guys who lower the cutoff grade when gold prices increase. His rationale was that, since the plant throughput rate is fixed, when gold prices are high you suddenly decide to lower the head grade and produce fewer ounces of gold and at a higher cash cost. His point was that we should be doing the opposite; when prices are high you should produce more ounces of gold, not fewer. In essence, in times when supply is low (or demand is high) may not be the right time to further cut back on supply by lowering head grades.
Now this is the point where the grade-tonnage curve comes into play. Certainly one can lower the cutoff grade, lower the head grade and produce fewer ounces now with the upside being extending the mine life. By doing this a company is able to report more ounces in their mineral reserve and the overall snapshot of the company looks better if it is being valued on reserve ounces.
The problem with this is that there is no assurance that metal prices will remain where they are or that the new lower cutoff grade will remain where it is. If the metal prices dip back down next year, the cutoff grade will be increased and the mineral reserve is back to where it was. All that was really done was accept a year of lower metal production for no real benefit. Such a trade-off essentially contrasts a short term vision (i.e. annual production) against a long term vision (i.e. mineral reserves).
My bottom line is that there is no simple answer on what to do with the cutoff grades, hence the need to write books about it. Different companies have different corporate objectives and each mining project will be unique with regards to the impacts of cutoff grade adjustments on their orebody. I would like to caution that one should be careful when taking your cutoff grade spreadsheet, plugging in new metal prices, and then running off to the mine operations department with the result. You need to fully understand the long term and short term impacts of that decision.
Date: February 2, 2016Author: Ken Kuchling
Comments: 2 Replies
Question: how important is the integrity of a tailings dam to the successful operation of a mine? Very important; so much so that in some jurisdictions regulators may soon be stipulating that mining companies must have third party independent review boards or third party audits done on their tailings dams. The feeling is that although a team of capable engineers may be doing the dam design, there is still a need for some outside oversight to get another perspective. Differences in interpretation, experience, and errors of omission are always a possibility regardless of who does the work. Hence a second set of eyes can be beneficial.
Next question is how important is the integrity of the resource and reserve estimate to the successful operation of a mine? Very important; the mine life, project economics, and shareholder value all depend on it. So why aren’t a second set of eyes or third party resource audits commonly done?
In the years prior to 43-101, junior mining companies could produce their own resource estimates and disclose the results. With the advent of NI 43-101, a second set of eyes was introduced whereby an independent QP could review the company’s internal resource estimate and/or prepare their own estimate and ultimately take legal responsible for the estimate.
Nowadays most small companies do not produce their own in-house resource estimates and the task is generally awarded directly to an independent QP. Maybe companies don’t prepare their own in-house resource estimates due to the specialization needed in modelling and geostatistics, and the knowledge needed to use today’s block modeling software. Maybe they feel doing their own internal resource estimate is a waste of time since an independent QP will be preparing an estimate for them anyway.
Given that, in many cases the project resource estimate is prepared solely by the QP or a team of QP’s. In many cases this resource gets published without any other oversight, in other words without a second set of eyes taking a look at it. The assumption is that QP doing the work is a qualified expert, their judgement is without question, and their work is error free.
As we have seen recently, some resources estimates have been mishandled and disciplinary actions have been taken against some QP’s. I guess one can conclude that maybe not all QP’s are perfect. Just because someone meets the requirements to be a Competent Person or a Qualified Person does not automatically mean that they are competent or qualified. Geological modeling is not an exact science and will be partly based on the person’s experience and what they have seen in the past.
My question is whether it wouldn’t be good practice for companies to have a second set of eyes take a look at their maiden resource estimates produced by independent QP’s? For example, where I have been involved in mining mergers or takeovers, often one side will tend to rebuild the resource model using their own team. They don’t put 100% confidence in the original resource model handed over to them. “Just give me the database” they ask.
One downside to a third party review is the additional cost. Another downside is that when one consultant reviews another consultant’s work there is a tendency to list numerous concerns that are not really that material, which then can muddle the conclusion of the review. On the other hand, a third party review may identify serious interpretation or judgement issues that could be fatal if they impact on the viability of the resource.
If tailings dams are so important to require a second set of eyes, why not the resource estimate that is the foundation of the project?