Articles tagged with: Mine Engineering

Meetups and Mining Millennials

mining millenials
Over the last year I have had many encounters with the Toronto tech start-up community.  I have noticed some similarities with the junior mining industry but some differences also.
The tech start-up model is similar to the junior mining business model as it relates to early stage funding followed by additional financing rounds.  One obvious difference is that mining mainly uses the public financing route (IPO’s) while the tech industry relies on private equity venture capital (VC’s).
There are also some less obvious differences.
Generally the tech industry is young, vibrant, technology-savvy, and applies the latest in social technology to collaborate.  The mining industry seems to be lagging behind on many of these aspects.
The following article will describe a few of my observations. As you read through this, ask yourself “Should the mining industry be doing these things?”

Tech Meetups and Networking

My first experience with the tech industry was associated with the many after-hours networking meetings called “meetups”.  They are held weeknights from 6 to 9 pm  and consist of guest speakers, expert panels, and for general networking purposes.   Often guest speakers will describe their learnings in starting new companies and failures they had along the way.
The meetups may also provide “how-to” advice for techniques like Google Analytics, Facebook advertising, Google Adwords, email marketing, etc.).
Attending these meetups is usually free.  They are typically held after hours at different tech company offices and they often provide free beer and pizza. One can see the entire industry working together for the betterment of the industry.

How to Organize Meetups

Scheduling of meetups is done via the online software platforms Meetup or eventbrite.  Both of  these work well for announcing the meeting notice and tracking signups and attendees.
By the way, meetups are not only tech-related; they are also held for interest groups for hiking, theatre, writing, yoga, business marketing, etc.  The platforms provide a good way to manage communities.  Unfortunately here in Toronto there are no geology or mining related meetups so the mining industry may be missing out on a good way to build a more collaborative community.
The mining industry does have some local meetings, as far as I know there are mainly three after-hour mining events.  The CIM has a monthly luncheon with a cost of $50-$65 (not exactly inclusive to everybody).   There is a Toronto Geological Discussion Group that holds monthly meetings and seems to be comprised of the older geologist demographic.  The third event is Mining 4 Beer, which a small group that meets intermittently at a local bar.  These few events limit the amount of buzz for those working in the mining industry.  There are a lot of mining companies here with a lot of mining people but not a lot of vibrancy.

Where to hold an event

Most of the tech meetups are held in local tech offices.  These offices are great. They have an open concept, pool tables, ping pong, video games, fully stocked kitchen. Who wouldn’t want to work there?
The last time I was in the offices of a large engineering firm I felt like a lab rat in a cubical maze.   I’m not saying engineering offices can switch to a tech office layout, but more enjoyment of the office environment might help draw more people to the mining industry.
Perhaps it’s easier to have a positive work attitude when money is being thrown at you (as is happening in the tech world) rather than having to scratch and claw for funds like mining must do right now.   However I suggest if one wants more smart young people to come into the industry then one needs to adapt.  This means more than just buying the latest 3D geological software.  It means creating an environment that people want to work in.
In the late 1990’s I was working in the Diavik  engineering office in Calgary.  They provided a unique office layout whereby everyone had an “office” but no front wall on the office so you couldn’t shut yourself in.  There were numerous map layout tables scattered throughout the office to purposely foster discussion among the team.
A similar type philosophy is used by Apple in their office layout design where even the kitchen placement has a purpose.  People should mingle and run into one another to promote conversation.  Discussion is good. Camping out in an office is not good.

Keep it short and to the point

Another thing I noticed with the tech industry is that when start-up tech companies are given an opportunity to tell their story, typically they only have 5 to 10 minutes to pitch.  No long winded thirty page PowerPoint presentation to explain what they are doing.
The tech industry is also big on the “elevator pitch”, a one minute verbal summary of what they are doing.  The tech people are taught to be concise.  If you can’t explain it in plain language in one minute then it’s too complicated.
For comparison, many mining investor presentations can be long, highly technical, and tailored to other technical people and not the average person.   One must ask who is the real target audience for those presentations?

Communication methods

The tech industry relies a lot on remote workers.   They might be overseas or spread around Canada. For communication and collaboration, they use various online systems such as Slack, Google Hangout, Trello.  No more  long email threads with five people cc’d on each email.   Slack uses a chatting approach, similar to text messaging, which makes it easier to follow the conversation and share files.
Can the mining industry be taught to use something new like Slack?  I don’t see a problem with that as long as one honestly wants to learn it. It’s really not that complicated.
For interest, another blog provides some more discussion on online collaboration software “Online Collaboration and Management Tools“.

Conclusion

The bottom line is that I can see a great difference in the attitude and atmosphere in the tech industry compared to the mining industry.  The junior mining game was the precursor for the tech start-up industry but has not kept pace with evolving work techniques.
As senior personnel retire from mining, the loss of this mining experience will be felt.  However the new ideas that may follow could be a positive outcome.
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New Mining Software and 43-101 Legal Issues

43-101 issues
NI 43-101 puts a fair amount of legal liability on the Qualified Person preparing a resource or reserve estimate or sign off on an advanced study.  The QP is to be responsible for the accuracy of their work and take legal responsibility.
Every so often some new mining software comes along and I often wonder what are the risks in using it? Some examples of new mining software that I have heard about (but not personally used) nor have seen mentioned in any 43-101 studies are SimSched, the ThreeDify’s software packages, NPV One, and Bentley.

Is the software doing everything correctly?

Given that as a QP I am legally responsible for my work, I am  bit apprehensive about how I can be assured the new software will provide reliable and accurate results for which I accept legal liability.  The last thing I would want to do is issue a public technical report which is found to be in error due to a software bug.
Irrespective of 43-101, if you are working at a mining operation the last thing you want to do is present management with an incorrect reserve, pit design, or production plan.
If you are a consultant, how agreeable will your client be when you tell him that his study was done using a novel software package and not one of the industry standard packages, and there was an error in it?
I recall working with a major mining company and there was a reluctance to adopt any new software that was unproven and not an industry standard.  Money was not the issue; the company’s concern  was with the risk in using unproven software.

What if you have a limited budget?

How do you view new software if you have a limited budget?   The new software may be cheaper, may appear to be be great, and may be a technological improvement and all at a lower cost.  However the software risk still remains.  There is no guarantee that all software output is correct simply because it comes from a computer.
As a QP, I suggest the onus is on the software developers to demonstrate that they can produce reliable and comparable results under all conditions.  They need to be able to convince the future users that their software is accurate.
Perhaps over time the new software will gain wider adoption and be generally accepted.  We may see more 43-101 reports that use it and hence it will get more overall acceptance.
Another question when developing a market for new software is whether it is better to focus on more consultant adoption or more mining company adoption?
Will mining companies use the software if their consultants are using it, or will consultants use it if more companies adopt it?  It’s an interesting discussion that new software vendors must deal with in trying to grow their market share.

 

Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website. The entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.
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Independent Consultants Are Growing

I have read quite a few articles indicating that the mining industry is seeing a shortage of experienced people, on both the technical and management side of the business.  Apparently the baby boomer generation is now nearing their retirement or early-retirement stage and there is a gap in the number of experienced people following behind.
Many of these retirees enter the “independent consultant” stage of their careers.
I also hear from recruiters that there is a shortage of engineers willing to take remote or international assignments.  This is particularly difficult when a senior level candidate has a growing family.

Can the independent engineers help out?

In a previous article (14. Miners – Why Have Your Own Independent Consultant?) I discussed why mining companies (or even consulting firms) should make use of the independent engineers as advisers or Board members.
I understand from colleagues in the mining industry that many of the people nearing retirement are willing to take on consulting assignments or board or directors roles or other management roles.  They are often willing to work part time and independently.  Or they may work as “associates” with engineering firms.
So there likely is a significant network of experienced people out there.  It’s just a matter of being able to tap into that network when someone needs specific expertise.
So how can one do this?
LinkedIn currently seems to be the only global network for technical people.  It is a great way to connect with engineers and geologists industry wide.
LinkedIn members work everywhere, at mine operations, consulting firms, financial houses,  as independents, or even retired. Almost every technical person I know is registered on LinkedIn.
The question is how to find these people when you are looking for a specific independent expertise for a short term or over the longer term.

Networking

Networking with people you already know is the most common approach.  However what if you need someone with particular knowledge?
LinkedIn is a great search mechanism for technical experts.  With a keyword search one can identify a lot of experts with very specific skill sets.  The problem is that many of the experts highlighted by the LinkedIn search may be fully employed at mining operations or with large consulting firms and may not be the person you are looking for.
To my knowledge, there is no searchable online registry solely intended for independent geologists and engineers.  It would be in the interests of the mining industry to have some type of easily searchable independent consultant directory to be able to tap into the expertise that is out there.  I understand that MineLife.org  is attempting to build such an online service but it still appears to be early in the development stage.
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Junior Mining – Are People Still Investing?

small mining companies
Update: This blog was originally written in June 2015, however many of the observations made then still hold in late 2018.
The general consensus over the last couple of years is that the junior mining sector is still in a state of flux.
I briefly touched on this in a previous article “12. Financings – It Helps to Have a Credible Path Forward”.
It is still difficult for junior miners to get funding and the stock prices of have been on a downward trend.   Some observers say this just a temporary phase and the stock prices will cycle, as they have in the past.   I’m not convinced that this will be the case, although I am hoping.

Metal prices may recover, but will stock prices?

I am reasonably confident that metal prices will improve over time, but I am not sure that alone will result in the junior mining sector invigorating.  I think there is a long term shift in how personal investments are being made and how the mining industry is being viewed.  The following blog has some personal opinions on the present and the future.
Mining companies are constantly in the media with stories of cost over-runs, mine shutdowns, fatalities, strikes & protests, and environmental incidents.
In addition, the junior mining sector has had a few notable scams that nobody ever forgets about.
In some instances management were over promoting sub-optimal projects simply for the purpose of raising the stock price and cashing out.  Not many companies fell into this category, but enough to create an unfavorable image of the industry.
I think it will take time to recover from the image being created by the events described above. Unfortunately new incidents only build on the perceived legacy.
The implementation of sustainable and green mining practices is an attempt to rehabilitate the image of mining, but is anyone out there listening?

Are investment practices changing?

Regarding today’s investment practices, I have three general observations:
  1. Yield Investors: When many of us baby boomers were younger with a steady job, we were willing to speculate on mining stocks hoping for the big payoff.  At the time there were some well publicized payoffs. Also there wasn’t much else to speculate on.
    Now those same baby boomers are moving into retirement and financial planners are push them into fixed income and dividend paying investments.  Be happy with a 2% to 5% yield.  The risk tolerance for many of these investors has shifted from speculation / growth to income / capital retention.
    I’m not sure how many of these people will ever re-enter the mining stock market.  The majority of miners don’t pay any significant yield.   Looking at the yield for Barrick (2%), Goldcorp (0.8%), and Yamana (0.85%), their yields are lower than those for the more conservative bank stocks (4%-6%).
  1. Where to speculate now?  Where might the 30 to 40 year old’s speculate today? Younger people today may still speculate with their free cash, but they are not hoping to be investors in the next Voisey’s Bay, Kidd Creek, or Hemlo.  They have never even heard of them.
    They are hoping to be investors in the next Apple, Google, or Facebook, or a cannabis company.  The dot.com bubble of 1999–2000 was a case of junior mining speculators jumping into technology and it was a bust.  However currently several of the new breed of dot.com companies that have IPO’d are getting huge share price increases.  Is it still a tech bubble? Not so much anymore.
    I don’t know whether the younger speculators will ever have interest in the mining sector since they never heard of it.  There is so much other investing activity happening out there.
  2. The perception of mining: The mining and energy news shown in the media is not helping the industry by focusing mainly on the negative aspects. The resource business appears to be somewhat analogous to the meat industry. Everyone likes their nicely packaged rows of chicken and beef at the grocery store but nobody wants to see how it actually gets to the store.  Everyone also loves their metallic gadgets and the energy used to power them, but please don’t show how it actually gets from mine to store shelf.  It can be quite upsetting.
  3. Complexity:  To invest in a mining stock or understand a mining IR presentation, one needs a basic understanding of mining and geology.   To understand a tech stock or bank stock, one does not need to be an expert in that industry. People will intuitively have a better comfort level with them.

Can mining companies provide more yield?

An interesting group of companies are the mid tier producers that have operating mines and generate profits, but do not pay a dividend.  I will be curious to see how these companies shares will perform since they don’t satisfy the yield investor nor may they satisfy the pure speculator looking for order of magnitude capital gains.
The larger mining companies will always have their investors like pension funds and mutual funds, however the junior miners may be a different story.
Possibly private equity and equity-based crowdfunding will be one of the long term solutions.
I have heard of one geological consulting firm that was trying to foster a plan to help crowdfunders with their 43-101 report even though they don’t yet have the money to pay for the report.
I also understand that Canada now has a few private equity stock exchanges that allow PE to change hands, which may facilitate more private equity involvement.

Conclusion

The bottom line is the mining industry needs to have a self-examination with respect to what the future holds.  There is talk that mining needs to change its business model, but very little suggestion regarding what changes to make.
The growing population changing demographics, competition for equity funding, and society’s urbanization may result in fundamental, and permanent, changes to how the financial side of the junior mining industry can function.  Just my opinion.
Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  Otherwise I post notices on LinkedIn, so follow me at: https://www.linkedin.com/in/kenkuchling/.
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Open Pit Optimization – How I View It

Mining feasibility study
One of the first steps in an open pit design is the pit optimization analysis.  Pit optimization is used to define the most profitable pit shell for a given set of economic parameters.  The economic parameters include the metal prices, processing recoveries, and site operating costs. Normally when optimization is done, a range of metal prices or Revenue Factors (“RF”) is used to develop a series of nested shells to understand how the pit will expand or contract with increasing or decreasing metal prices.
Once the optimization step is complete, mining engineers will then design the pit inside that shell, introducing benches and ramps.  The pit design should mimic the selected optimized shell as closely as possible.
The pit design may (or may not) closely replicate the optimization shell depending on the slope angles used in the optimization and where the haul ramps are located in the design.
Hence the actual ore and waste tonnages mined may be different that the tonnages defined by the optimizer.
Various experts in pit optimization will use approaches of differing complexity.  Some may apply variable mining costs with pit depth; apply variable process recoveries linked to head grade; apply variable pit slopes by sector or depth, apply dilution and ore losses; etc.   One can make the pit optimization step as simple or detailed as one wants it.
The question is whether detailed pit optimization is warranted.  My view is that overly detailed pit optimization is  not required, other than if one wants to test parameter sensitivity on the resulting pit size and shape.  There are just too many uncertainties in the parameters being used in optimization.

Open Pit Optimization Uncertainties

Some of the uncertainties involved in the optimization approach are listed below:
  • Pit optimization can generate large pits that would have a long mine life.  However one doesn’t really know the metal prices far into the future.   So will that final pit ever get mined, or might it even be larger than shown.
  • Pit optimization is typically done at the start of a study, so one doesn’t have the detailed operating costs yet. The size of the project may be unknown and one has to use rough estimates for future costs and possibly even assume preliminary process recoveries.
  • Operating costs will also change in the future, and the optimization step is just a snapshot using current information.
  • Sometimes the optimization includes the use of Inferred resources, which are uncertainty.   Sometimes optimization is done only using Measured and Indicated resource, yet there may be areas if Inferred resource that ultimately convert to M &I and these will have been ignored.  So, either way you do it, you are not sure what ore the pit can captured and will  to shape the pit.
  • The smaller pits, if developed, would consist of smaller operations and may have different operating costs than assumed in the optimization.   Similarly larger pits may have different throughput rates and  operating costs than assumed in the optimization.
  • The ore and waste split reported within the pit will be based on a specific life-of-mine cutoff grade.  This is based on the fixed metal price and operating cost assumptions applied.
  • Overall pit wall slopes may differ for shallow pits versus deep pits.  Slopes may vary above the groundwater table and below it.  In many instances during pit optimization the wall angles are maintained at the same angle irrespective of the pit depths.   Sometimes geotechnical programs have not yet been completed, so optimization slope angles are simply educated guesses.
  • Dilution may be applied globally during pit optimization (unless one is working with a diluted block model).  In reality, dilution may differ in different parts of the ore body, and that may not be considered in the optimization stage. For more discussion on dilution in general, read the blog “Ore Dilution Prediction – Its Always an Issue“.

Conclusion

The bottom line is that pit optimization should be viewed as a guide to the pit design, but not as a highly precise calculation.  There are too many uncertainties in the parameters used.
There is always opportunity for future miner operators to examine pushback to grow the pit larger than initially envisioned.  Having said all that, one should still understand how future changes in metal prices can impact on the pit size, and then assess whether practical pushbacks are possible.   Thin sliver pushbacks are operationally difficult so this should be understood at the start.
While open pit optimization is not a precise science, there is still merit in examining how the pit size and shape reacts to changes in different parameters.  There are many ways to examine this and help select which shell should be advanced into the design stage. It can be more than just looking at the NPV versus Revenue Factor chart.   You can read this post at this link “Pit Optimization – More Than Just a “NPV vs RF” .
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Mining Project Economics – Simple 1D Model

mining desktop study
In a previous article I outlined my thoughts on the usefulness of early stage financial modelling (“Early Stage “What-if” Mine Economic Analysis – Its Valuable”).     My observation was that it is useful to take a few days to build a simple cashflow model to help your team better understand your project.

By “simple” I mean really simple.

This blog describes one of the techniques that I use to take a super-quick look at any project; whether it is for a client wishing to understand his project at a high level; or whether it is a project that I have read about.  There isn’t any actual study or production schedule available yet.  Maybe there is only a mineral resource estimate available.
It takes about 10 minutes to plug the numbers into my template to get fast results.  The image below is an example of the simple model that I use, but anyone can build one for themselves.

Screenshot of Simple Economic Model

I use the term one dimensional (“1D”) model since it doesn’t use the typical X-Y matrix with years across the top and production data down the page.
The 1D model simply relies simple on life of mine (“LOM”) totals to estimate the total revenue, total operating cost, and total profit.  This determines how much capital expenditure the project can tolerate.
The only caveat is that you need to have some sense for operating and capital costs for similar projects. This analysis can be on both a pre-tax and simple after-tax basis.
Using estimated metal prices and recoveries, the first step is to calculate the incremental revenue generated by each tonne of ore (see a previous article “Ore Value Calculator – What’s My Ore Worth?”).
Next that revenue per tonne is multiplied by the total ore tonnage to arrive at the total revenue over the life of mine.
The second step is to determine the life of mine operating cost, and again this simple calculation is based on estimated unit operating costs multiplied by the total tonnages being handled.
The third step is to calculate the life of mine profit based on total revenue minus total operating cost.
The potential net cashflow would be calculated by deducting an assumed capital cost from the life-of-mine profit.  The average annual cashflow is estimated based on the net cashflow divided by the mine life.  An approximate NPV can be calculated by determining the Present Value of a series of annual payments at a certain discount rate.
The reasonableness of the 1D model will be examined via benchmarking and this will be summarized once completed.  I will include a link to that future blog here.

You need to understand your project

One can easily evaluate the potential impact of changing metal prices, changing recoveries, ore tonnages, operating costs, etc. to see what the economic or operational drivers are for this project.  This can help you understand what you might need in order to make the project viable.

Conclusion

The bottom line is that a 1D economic calculation is very simplistic but still provides a vision for the project.  The next step in the economic modelling process would be a 2D model based on an annual production schedule.  The 1D approach is just a quick first step in looking at the potential.  You can do it even when you only know the head grades and some generalized orebody information.
The two ways you can apply the simple 1-D model are:
  1. evaluate the potential of early stage projects using cost inputs from other studies,
  2. examine a project’s sensitives (units costs, recoveries, prices) by calibrating your simple model to the published study (i.e. use the same parameters and make changes as needed.
The entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.

 

Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  
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Oil Sands vs Tar Sands – Something I’ve Been Wondering About

tar sand mining
Watching the television news in Canada these days, one sees the environmental opponents of the oil sands parading around with signs that say “Stop the Tar Sands”.  One way to distinguish whether someone is for or against the oil sands is to see what terminology they use.  Do they call them “oil sands” (i.e. pro groups) or “tar sands” (i.e.anti groups)?   Personally raw bitumen seems more tar-like than oil-like so the enviro’s seem to have it right.

Is it Oil Sands or Tar Sands

Going back many decades the oil sands were originally called the tar sands.  I’m not sure when the terminology shifted, but in the mid-1960’s the first large scale mining operation was called Great Canadian Oil Sands (GCOS).  I’m not sure why the terminology shift from tar to oil, but maybe it was related to the fact that “tar” was considered something of low perceived value while “oil” was considered something of high economic value.
Jed Clampett and familyLook at what oil did for the economic situation of Jed Clampett on the Beverly Hillbillies.  How about the show “Dallas”? There was also a lot of money and scotch drinking.
Back then we all wanted to discover an oil well in our backyard so perhaps the term “oil” implied some level of elegance and prosperity.
These days when one sees the term “oil” in the news, it tends to be associated with negatives.  We see oil references to rail explosions, pipeline ruptures, tanker spills, job layoffs, fracing, carbon emissions, Middle East wars, and protests.
These days I don’t know if there is any intangible benefit in using the term “oil” to describe your product anymore.  Maybe there is actually some intrinsic harm in doing so.
Tar sand bitumenTar (or bitumen) on the other hand, is a molasses-like substance generally viewed by the public as a material used to repair our streets and patch our roofs. A tar spill is not going to flow anywhere; it will barely flow out of the tank it is held in.  What is there not to like about tar?
So next time there is a protest with signs being held up to “Stop the Tar Sands”, the oil companies should shrug their shoulders, jump on the band wagon, and say “Yeah, tar, that’s us. So what are you worried about?”.
They should try to commandeer the word “tar” back from the protest groups since there really is nothing wrong with tar.  There seems to be a lot wrong with oil.

 

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3D Printing – A Simple Idea

3D models
We hear more and more about 3D printing and what it is able to do. 3D printers have come down in price and can be bought for under $500.   Here is an example of using a 3D printer from a recent project that I consulted on.
The open pit was going to be located in hilly terrain, and issues related to haul road access, waste dump sites, and leach pad location were all important.   The client used a 3D printer to create a small desktop model of the terrain, which was given to each of the consulting firms.
The photo below shows the scale of the model.
3D printed topographyMembers of the engineering team were each given their own 3D model to take back to their offices.  Putting one of these on your desk helps with familiarity of the overall site and allows you to better understand the siting and drainage issues.
Topographic maps may give data on actual elevations and distances, but even a small 3D model gives you a feel for the site.    The model shown above was for undisturbed topography but one could easily print off a similar model once the final pit and dump design is done.
With the current three-dimensional printing capabilities, creating simple 3D topographic models for the engineering team is feasible and I recommend doing so.
At the same time provide the Owner’s team with their own models, helping them understand the site issues that must be dealt with.
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Work Breakdown Structures – Don’t Forget About The WBS

mining project WBS
Normally at the start of a mining study, the team members receive a matrix of responsibilities.  This table shows which people (or groups) are responsible for different aspects of the study, i.e. who is responsible for geology, for mine design, for process design, infrastructure, etc.  This is great tool and a necessity in making sure that everyone knows what they are supposed to do.
Next we generate a project schedule based on some work plan.  In realty this isn’t the correct sequence.

Sometimes the WBS is forgotten

What often gets forgotten in early stage studies is providing the team members a Work Breakdown Structure (“WBS”).   I consider the WBS an equally important component as the responsibility matrix and both should always be provided.
The WBS is a hierarchical breakdown of the project into phases, deliverables, and work packages usually associated with cost estimation. It is a tree based structure, developed by starting with the final objective and then dividing that into manageable components based on size, duration, and responsibility.  Typically this is done for the capital cost estimate, breaking it down into individual cost areas and cost components.  A WBS can also be used for the operating cost estimate.
request for propoalsThe WBS can provide the following information to the team:
  • It assigns the costing responsibility to specific people or group so each know what must be delivered.
  • It provides a consistent format for developing and reporting the capital costs (and operating costs).
  • It helps ensure that no cost components get omitted and no costs get double counted.
  • It provides the cashflow modeler with a clean format to import the capital cost into the cashflow model.
  • The WBS should be developed before the project schedule, not after it.

Any study will benefit from a WBS

Typically a WBS is developed for pre-feasibility and feasibility mining studies but is often ignored at the PEA stage.  Some feel it is too detailed for that level of study.  I don’t feel this is the case.
The WBS is a communication tool to confirm responsibilities.  Thus even a simplified WBS is still useful at the PEA stage.
I have seen some instances where a WBS has been created but does not get wide distribution to the entire team.  The WBS should be provided to everyone and ideally a team session be held to walk through the WBS structure.
The idea is not make everyone a costing expert, but rather to ensure all understand how the project cost estimate will be structured.

Conclusion

The bottom line is that regardless of the level of study, a WBS should always be created.
Some will say the WBS is not required for early stage studies but I have found benefits in having one, at least for the capital cost estimate.   Obviously the level of detail in the WBS should be appropriate to the level of the study.
Once the WBS is in place, then go ahead and build your project schedule.
A competent Study Manager can easily create an initial WBS, thereby mitigating some headaches when the final study is being assembled.   You may even want a basis WBs at the proposal stage.
By the way, before awarding a study to anyone, try to have a prepared Request for Proposal beforehand.   I have written about the benefit of this document in a blog post titled “Request For Proposal (“RFP”) – Always Prepare One
My entire blog post library can be found at this LINK with topics ranging from geotechnical, financial modelling, and junior mining investing.

 

Note: If you would like to get notified when new blogs are posted, then sign up on the KJK mailing list on the website.  
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Potash Ore Grades – Check the Units

KCl vs K2O
Having worked with the potash industry for many years, I have reviewed numerous geological reports for projects in Canada, Asia, Russia, and Africa.  One of the curious things that I have seen is the reporting of resource  grades in two different units; either as potassium oxide (K2O) or potassium chloride (KCl).

Is it K2O or KCl ?

Standard practice in the Saskatchewan industry is reporting ore grades using K2O units, with typical head grades in the range of 25% K2O.  Many of the international projects, but not all, have decided to use the KCl units. Therefore when comparing potash resource grades between deposits, one must be vigilant for the units used since there is a significant difference.
The conversion from K2O to KCl is based on the formula K2O = 0.6317 x KCl.   So a grade of 25% K20 is equal to 25/0.6317 = 39.6% KCl.  The KCl grade value is significantly higher.  The unit issue is relevant with low grade deposits, were an actual grade of 15% K2O may be reported as 23.7% KCl.  One might see the ore grade in KCl and assume it is comparable to Saskatchewan potash grades, when in reality they are quite different.

Concentration Ratio is the Key

When looking at different potash projects, particularly those involving underground mining, a key economic factor is the concentration ratio.  This ratio represents the tonnes of potash ore needed to produce a tonne of final saleable product.
Typically the final potash product has a grade of 60% K2O.  Therefore a potash ore with a grade of 25% K2O would have a concentration ratio of about 2.4:1 (60%/25%).  This means that 2.4 tonnes of potash must be processed to produce 1 tonne of product (ignoring the process recovery factor).   For a lower grade ore with a head grade of say 15% K2O, the concentration ratio is 4:1 (60%/15%).

potash mining

This gives a rough sense for the comparable operation size required to meet the same final product production levels.  This also gives a indication for the relative amounts of salt tailings requiring disposal.  Low grade ore can generate significant quantities of tailings, the disposal of which is becoming a larger permitting issue.
In the past gold grades have been reported as “oz/ton” or currently as “g/t”, but most geological reports today are consistent with “g/t”.  Sometimes US based gold projects may use “oz/ton” however the magnitude in reported grades are fairly obvious between grams and ounces.  That isn’t the case with potash grades.
The bottom line is that potash is one commodity that will use different units when reporting ore grades.  Investors and reviewers must be aware of which units are being used.
If you are into potash mining, I have written a couple of blog posts about my brief, but interesting, time working at a potash mine in Saskatchewan.   This was early in my career and I had roles that included mine engineer, chief mine engineer and production foreman.  Each of these roles gave me a different perspective about a mining operation. In this two part blog, I share some stories relating to the uniqueness of potash mining.   If interested, here is the link “Stories from 3000 Feet Down – Part 1“.

 

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