Mine project life cycle

Robin M Kear, Independent Mining Advisor

Abstract
Significant projects are often undertaken in the mining industry. These projects can extend mine life by several years and involve considerable resources. Such projects are normally developed through several stages from conception to implementation and each of these stages has a specific function with a particular environment thus requiring different management and technical skills. In order to correctly manage and staff a project during these stages and also to enable an orderly progression through the project it is helpful to recognise the requirements of these stages. This paper examines a mining project from the delineation of a resource to implementation and attempts to identify the individual stages, the broad concepts that define them and the management issues that need to be considered. The views are based on the authors experience on several mining projects. It is hoped that the paper may assist a reader in ascertaining their requirements when commencing or during a project execution.

1 INTRODUCTION Mining projects are normally highly expensive, have a long lead time and extend mine life for many years. The actual planning of a project can take considerable time and resources. Because of these factors it is important that a project moves through various distinct phases prior to construction. These phases should ensure that if the project is not viable, expenditure is curtailed as soon as possible or if viable, then the best possible return is obtained with the minimum risk. These project phases require different mind sets and consequently have different intellectual environments. This and the purpose of each phase are often misunderstood which can cause significant problems in bringing a project to a successful conclusion. For the purposes of this paper, a mining project covers the phases after the ore resource has been defined, either as an extension of an existing mine or as new ore body. This paper examines the phases through which a project moves and, should the mine prove viable, to the final construction and implementation. The paper is more a discussion of the various principles and concepts involved rather than a definitive study. 2 PROJECT CONCEPTION Most major mining projects will be one, or a combination of the following A new ore body has been discovered. An extension to an existing mine. An expansion of, or a change to, an existing mine. Within most mining groups the objective of a project is to increase the value of the company. In some situations other factors may enter the equation. It is therefore important to define what parameter or parameters the project must satisfy. Also the correct environment should be set up to ensure that project phases are correctly undertaken. 3 INTELLECTUAL ENVIRONMENT For the purposes of this paper, two environments will be considered. The first being strategic and the second tactical. The following broadly defines the differences between them.
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3.1 Strategic Environment This environment is required when the development of a strategy is required. The strategy is the broad plan required to achieve an objective. This requires "free" or lateral thinking and all possible scenarios, which could lead to the objective, need to be identified. Normally, for a mining project, the objective is to obtain the best economics from a particular resource. In summary "Define the Goal". 3.2 Tactical Environment In this environment the objective is to develop and implement the tactics required to achieve a strategic objective. In the mining sense this would be the procurement and utilisation of resources such as capital and labour to achieve the defined strategic plan. In summary "Achieve the Goal". The mining industry operates mainly in a tactical environment. A strategy is set and the organisation and management effort is concentrated on the best employment of the available resources to achieve the strategic objectives, such as production and construction targets. However, when a new project commences it is important for the strategy to be first determined and requires that the planning team shifts from the tactical to the strategic environment. This can present various problems especially as not all people are strategic thinkers, and even those who are will require some time to adjust to this environment. During the progress of a project the environment changes from strategic to tactical as shown in the following figure.

Figure 1 Environment over Time

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Strategic issues are most prominent at the start of a project falling off as criteria are defined. Tactical issues grow over time. Expenditure on a project normally follows the tactical curve, that is, increases over time. The following paragraphs broadly indicate the requirements of each phase and the transition between these environments. 4 PHASE 1 - CONCEPTUAL The purpose of the conceptual study is to determine if there is a potential project and if so justify the expenditure for a pre-feasibility study. A potential project would be one which meets the required selection criteria. Normally the selection is based on economics but could be on other parameters. This phase will indicate some of the major design criteria. Unfortunately, it is this conceptual phase that is often inadequately undertaken. With a rush for production, major criteria can be arbitrarily set to continue with present practice or something that has been observed on a visit to another property. Often a junior engineer is requested to do some basic calculations and if positive the study leaps into the detail. What is required is to stand back from the present situation and critically examine all facets of the situation. To do this adequately requires properly experienced engineers who have had the necessary exposure to the mining industry. Unfortunately engineers of this type are not too common and are often thought to be "too valuable" to "waste" on a study. However, this stage of the project starts to lay the foundations for subsequent work, has the most impact on the outcome and is therefore of the utmost importance. In order to successfully complete a conceptual study it should comprise of the following components. 4.1 Identification of Major Design Parameters All potential options must be looked at such as the mining method, production rates, major design boundaries and mine elevations. Where possible, constraints should be left out of the equation. This will enable the costs of these constraints to be evaluated when they are later applied. Assumptions should be positive and tests done to evaluate the effects of varying the parameters between the perceived confidence limits. These iterations should identify the major design criteria for the project. Various techniques are available to assist in these evaluations, one of which is the evaluation or economic surface analysis of the project. 4.2 Develop the Economics A cash flow model is required to assist in the evaluation of the various options. The model should be simple and easily understood. The purpose of the model is to allow for the ranking of alternatives rather than for absolute values. Checks should be made on the effect of different selection criteria to determine if these affect the choice of an option. If so then this should be discussed with the management to ensure that the correct selection criteria have been chosen. If the selection criteria are to be economic then it is normally best, at this stage, to use the Net Present Value (NPV) at the required hurdle rate rather than say the Internal Rate of Return (IRR). There are many views on this and the team must be sure that they are using the correct parameter for ranking of the alternatives. 4.3 List the Assumptions In order to complete this stage of the investigation various assumptions will be made. These will need to be confirmed during later phases and as such will be required to be included in the further schedule and budget.

4.4 Identify Trade off Studies From the assumptions and other parts of the investigation various alternatives will be identified. These will require to be further investigated and incorporated into the on going schedule and budget. 4.5 Develop the Pre Feasibility Scope, Schedule and Budget If a potential project is identified then the conceptual study is required to justify the expenditure for the subsequent phase, normally a pre-feasibility study. A schedule and cost for this study must be produced for approval. The schedule should show the various trade off studies and data gathering exercises identified during the conceptual study. This conceptual phase should not be rushed and the design team should be small and comprise of senior staff. The staff should not have routine responsibilities as well as the project. Ideally the team should vary between the following numbers:Table 1 Phase One Manning Position Maximum Number 1 1 1 1 1 1 1 7 Minimum Number 0 1 0 0 0 0 0 1

Project Manager Mining Engineer Mech/Elect Engineer Metallurgy Geotech/Geology Accountant Secretary Total

Some of the disciplines may not be required to be full time but the team should have access to these skills for particular areas of the investigation. Routine responsibilities for the team should be as minimum as possible as these are normally tactical whereas the study is strategic. These modes require different mindsets and changing from one to the other is difficult. In the end neither is completed satisfactorily. A small team is required, as a conceptual study is extremely fluid with major changes occurring regularly. Each member must be aware of the latest status of these changes. After being involved in several projects the author has devised the following formula for strategic planning Kears Rule of Planning -- C proportional to n^2 Where n is the number of components and C is confusion. Although this may seem facetious there is some truth in an inverse relationship between numbers and the ability to be innovative, especially during conceptual planning. Obviously there should be some form of progress management during the study and the best would appear to be management by milestones. It is pointless to attempt to identify every task that must be undertaken, as the tasks in this stage will constantly be changing. To be continuously updating the schedule to reflect this will require enormous resources and probably all the teams time. Rather identify the broad areas that need to be accomplished and when they need to be completed. This keeps the schedule simple, preferably on one page or at most two. The individual(s) will

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then know at what point these sections must be completed and adjust the investigations accordingly. Once a conceptual study has been correctly undertaken it is often observed that the study has raised more questions than it has answered. In fact, this is as it should be as various assumptions must be tested and trade off studies will be required in the following stage. The conceptual stage is strategic in nature and as such requires lateral thinking. Very little is routine and many changes will take place during this stage. Should the conceptual phase indicate that there is a suitable prize, under various assumptions it should justify the following study phase. However, if the project does not appear positive even under optimistic assumptions the project should be stopped. In this case it is important to document the work completed and also the major drivers which could change the outcome. This will make it relatively easy to recommence should one of the drivers change, for example the mineral price. 5 PHASE 2 - PRE FEASIBILITY This phase of the project is to firm up and or confirm the issues identified in the conceptual phase and to justify the expenditure for the feasibility and detailed design stage of the project. The major design criteria should have been decided during the conceptual study. However, it is often the case that some parameters have not been settled due to lack of data, or further investigation is required. Therefore the pre feasibility study should be done in two stages. 5.1 Pre Feasibility Initial Stage This stage is required to obtain the required data and/or complete the investigations highlighted in the conceptual study. The assumptions made during the conceptual study should be tested and updated if required. There are often trade off studies to be completed and visits to other operations are useful at this point. A major problem, which may be experienced, is the lack of reliable non mining costs. It is sometimes supposed that a project is a mining project and therefore all the detail and planning is mining related. However, the design criteria can be hugely affected by the non mining costs and these need to be properly identified and quantified for the correct determination of the design criteria. This first stage remains strategic with a few tactical issues being required. 5.2 Pre Feasibility Second Stage Once the assumptions and trade off studies have been competed it is then required to commence detailing the design criteria, develop a schedule of resources and budget for the Feasibility stage. More detailed cash flow models are required and a detailed justification for the feasibility should be developed. Up to this point study expenditure and manpower requirements are normally not high. The exception would be data capture, for example a drilling program. Once the project moves into the following feasibility and detailed design phase considerable resources, both manpower and money, are required. For this reason a detailed and reasonable accurate justification is required prior to committing these resources. It is important that all major issues have been resolved at the completion of this phase. This second stage has a reduced strategic component and the tactical issues are beginning to become the predominant ones. At this point the team will possibly expand and typical numbers are shown in the following table Control of this phase can still be on milestones, but these will be more specific than in the previous phase. Basically this phase, collects data that is required, completes trade off studies, confirms that there is a viable project and if so details and justifies the next phase. Should
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the work completed during this phase show that the project does not meet the requirements it should be stopped with suitable documentation to revisit the study should any of the main drivers change over time. Table 2 Pre-FeasibilityManning Position Maximum Number 1 2 2 2 1 1 1 10 Minimum Number 0 1 1 1 0 0 0 3

Project Manager Mining Engineer Mech/Elect Engineer Metallurgy Geotech/Geology Accountant Secretary Total

6 PHASE 3 - FEASIBILITY AND DETAILED DESIGN The purpose of this phase is to provide an estimate of the required accuracy to justify the major capital required for construction and implementation. Provided that the previous phases have been satisfactorily completed, the project at this stage should have a comprehensive design criteria document. All major decisions should have been made. Decisions, which are required in this phase of the project, should relate to the specific system under design with no or almost no impact on other systems. This phase will require considerable manpower, either in the team or contractors. If major changes are made during this stage there is a very real danger that team members will be working with obsolete design criteria with the possibility of serious flaws in the design and the associated money and timing consequences. If the previous phases have been properly completed then this stage is largely tactical. The design criteria having been set now need to be incorporated into the design. Major decisions should not be made during this stage but rather the effort should be directed at producing the required detail to give an estimate of the desired accuracy. This stage is largely tactical, with the management concentrating on using the available resources to produce a design to the specifications of the required accuracy. Continuity between this and the previous phase is required and a properly convened steering committee is one technique to ensure continuity by the inclusion of the conceptual and prefeasibility team members. The high costs of this phase are mainly due to the number of persons required with typical numbers being shown below

Table 3 Feasibility Manning Position Maximum Number 1 3 4 3 2 1 1 300 Minimum Number 0 1 2 1 1 0 0 100

Project Manager Mining Engineer Mech/Elect Engineer Metallurgy Geotech/Geology Accountant Secretary Technicians

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7 APPROVAL Whilst each phase of the project requires approval, the move from the feasibility and detailed design to the construction phase is a major event in the project development. Considerable sums of money are involved, not to mention that the mines future for many years is probably decided at this point. The time required to obtain approval should be included in the schedule as it can take several months to obtain this approval. 8 PHASE 4 - CONSTRUCTION The construction phase should have a dedicated management team which should be different from the design team. This phase is definitely tactical and requires good control and discipline. It is essential that both schedule and cost tracking systems are in place before commencing construction. These systems should be able to show the original schedule, possibly a revised schedule and the actual to date with variances highlighted. These systems should be installed and demonstrated before any activities or expenditure take place. The design team is still required to continue with details. When approval has been granted it is normal that only 30%40% of the detailed design has been completed. Therefore an excess of 60% of the design still has to be completed. This should not be left to the construction team to manage and hence the design team will still function well into the construction phase. Control of this phase is important firstly to ensure that what has been designed is constructed and secondly the quality of work must not be an impediment to the future production. The Steering Committee becomes much more of a control issue and should have members from both the design team and the future production team. The committee should not be under the control of the Project Manager. 9 SUB PROJECTS Often, several possible improvements to the approved design have been identified but rely on new technology or systems still under development. Whilst the approved design should be based on practical and achievable systems there is often a window of time available to prove up these newer systems and include them in the project. The cut off times for proving these systems should be determined and separate project teams be convened to undertake this work with their own schedules and budgets. The management of these teams should not fall under the

construction team as they will be focussed on the construction. Rather it is suggested that either these fall under the design team or preferably under their own management structure. 10 IMPLEMENTATION - COMMISSIONING Major projects most often do not just switch on. Systems require time to bed down, people require time to learn new techniques and, especially with mining methods, time is required to build up production. If sufficient time is not allowed for these activities the pressures on the team will often dictate the use of "short-cuts". These "short-cuts" can be extremely detrimental to the long term viability of the mine and should be avoided. The best avoidance strategy is to allow a realistic time for these activities and ramp-up. 11 SUMMARY This paper has emphasised the conceptual phase of a project. This is because the concepts set the foundation for all further work. Properly done the other phases flow from this stage and the team will be confident that the correct criteria have been set. In practice and for various reasons it is often the pre feasibility or feasibility study that is used as the start point with the major criteria being arbitrarily set, this does not often lead to the best utilisation of the resource. A mine has only one resource and can mine this resource once. There is only one method that will produce the best economics for this resource, others may be economic but of lesser value. In view of the magnitude of the capital normally required for a mining project and the usual life of a project of many years the effort in determining the best project is well justified. ACKNOWLEDGEMENTS There are doubtless many papers and textbooks which cover the management of a mining project. The author readily admits that these will probably give the reader much greater insight into the issues involved however they tend to deal with the management of a project whereas this paper has attempted to highlight the issues to be managed. This paper has been the result of the observations made on many mines and the author would like to thank his many clients for the ideas and discussions over the years. The author stresses that this paper is based on his observations and conclusions but hopes that these will form a basis for discussion and may assist in the formulation of a suitable strategy for a mining project.

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