Practical tools for integrated planning
Integrating landform engineering and closure cost calculations into your tactical mine planning delivers a more complete, overall view of the value of a project. It also allows operations to proactively manage both the financial and regulatory risk of a mine.
Although we’ve described a typical open cut coal mine, the suggested approach and tools are applicable across all mines with a surface disturbance footprint.
Regulatory requirements. License to operate. Liability. Profit. If these four factors become unbalanced, it can ultimately destroy the value of a project.
Many mines progress without an integrated plan and many decisions are made without a final landform design, rehabilitation scheduling and closure costing. A number of issues arise from this approach:
- Throughout a mine’s life, the proportional cost of rehabilitation increases.
- Actual costs and liabilities can be far greater than those that were estimated using simplistic calculations normally used for financial assurance or internal liability provisions:
- When final engineered costs are calculated, a ‘valuation shock’ can result.
- Opportunities to reduce cost or improve outcomes are lost.
- Without an accurate view of liabilities, boards and executives are ‘flying blind’ with regard to asset valuations.
- Decision makers are unaware of the true cost of some short and long-term decisions.
- Ballooning disturbance liabilities become an issue for governments, as operators go bankrupt and the cost of fixing disturbance reverts to the state.
Our solution to these issues is integrated mine planning: integrating production scheduling, landform engineering, water planning, rehabilitation scheduling and closure cost calculations into both short and long-term decision making. We are incrementally building the tools and methods required to integrate these aspects into the core of mine planning.
Connecting and improving the tools used for this sort of planning has made it realistic for planners to complete this work as a part of their ‘business as usual’. This enhances the knowledge of overall value for operations, executives and board decision makers.
It has not been from a lack of effort that these issues existed. It is simply that the work required has always exceeded the time available to do it. As teams are empowered with improved tools, they’re highly motivated to improve what’s gone before because these tools make what was a daunting task, easy.
The details – What does successful integrated planning look like?
In an open cut coal mine, it means the final landform has been designed and construction of that landform is referenced as a goal for all short and long-term decisions. The rule of thumb is that building the final landform shape is 50-80% of the overall cost of mine closure. Therefore, any decisions that step outside of the engineered landform have potential to be cost multipliers.
Likewise, having visibility of the overall goal allows constructive assessment of options. That means operators can seize tactical opportunities to improve cost positions. Our experience shows that meaningful improvements evolve over at least four strips of mining, so short term decisions must also have a longer-term view to ensure value is created, not destroyed.
Breaking it down
An integrated planning process may have these steps:
- Determine in situ quantities
- Run a cash margin rank or pit optimization
- Reserve and schedule
- Truck dump balance and landform schedule
- Landform planning and surface water review, including infrastructure costs
- Identify any closure cost minimization opportunities
- Revise schedule and/or dump
- Landform planning and schedule
- Complete the progressive and closure rehabilitation schedule, calculate overall costs
- Return to margin rank/pit optimization, and refine the ‘decision to mine’ in light of ‘all in’ costs
- Repeat as required for all scenarios considered
Each production scenario is examined in this way – ensuring that all trade-offs are well understood. In turn, that means that the increased knowledge and visibility of cost drivers always underpins any decisions made. So while the short-term decision makers are able to understand the strategy required to maximize value, the long-term decision makers always know the current and future value of the asset.
Things to consider
There are key considerations for miners seeking the benefits of integrated planning. We have seen companies locked into (regulatory) conditions that are costly and may not deliver the best result. It is critical to develop a level of trust with regulators. This enables best-value scenarios to be put forward and agreed upon, knowing that the company will do what they said they will do.
By definition, integrated planning requires the destruction of planning and decision-making silos. If decision-making structures and practises are not updated to reflect new planning capabilities, then the plans will stay as just that –plans, while the business continues to behave as it has always done.
Current state – typical planning process, valuation decision not fully informed
An integrated planning system (with no silos), requires transition to collaborative modelling. Instead of each silo working in a linear fashion with little interaction, we transition to a system that has expert inputs from Mine Planning, Water, Closure and other experts by using a single integrated model, run by a suitably skilled technician, or team.
Future state – integrated planning delivers better valuation decisions
A progressive future
To implement integrated planning, true change management is required to inform and educate all stakeholders as each incremental improvement is implemented.
Frequently this requirement is not understood, resulting in increased effort and cost of change, but failing to move forward and realise the potential benefits. Incremental improvements in technology are enablers, but success will only come from focusing on the people involved.
For more information on how to move towards integrated planning and the tools and techniques available, contact your local Deswik office.