To manage the risks associated with the delivery of major projects, mining companies are looking for the assistance of mining consultants to take the necessary steps towards the successful development of mine projects.
Professional advice and help with technical and financial project management,
financing and detailed engineering can be a valuable source of expertise and make the difference between long-term success and failure of a mine project.
Planning and management of mid-size and large-scale mining projects requires not only time and monetary resources, but also state-of-the-art technology and human assets with the necessary knowledge and know-how to successfully develop mine projects from exploration and feasibility through to design, international bid management, contract negotiation, construction and operational mine management.
Project Management, initially developed by the construction industry, has been taken by many industries including the mining industry. It focuses on results and the project processes which facilitates these results. Mining requires considerable initial expenditure before the mining venture delivers revenue, and during this period there is both interest being paid on the investment, as well as zero return.
Therefore there is significant benefit in earlier completion of the development process in order to gain revenue as soon as possible.
The model begins with exhaustive planning before work commences on site- and is a relatively cheap and high value adding activity. This is followed by monitoring and control during the costly implementation phase.
Project management can reduce the period between commencement of major expenditure and revenue collection, significantly improving project returns. The importance of up-front planning, rather than planning as the project progresses, is driven by the extremely low cost planning in this early phase of the project, as a percentage of the whole-of- life cost, and the large cost incurred to correct any wrong decisions made.
Planning costs are likely to be no more than 5to 8 percent of the capital costs and only 1to 2 percent of the whole-of-life costs. Correcting errors late in the life of the project can cost up to a million times the initial cost of correcting these ‘errors’ during the planning phase.
The potential reduction of construction time, justifies significant planning resources being spent during the relatively cheap planning period before major work occurs on site. Significant expenditure is justified by gaining the revenues much sooner due to the reduction in construction time of the more thoroughly planned activities.
A number of projects in South Africa and the world over have failed due to various reasons, including the development of the project proceeding parallel, and decisions to proceed being taken without critical environmental aspects being considered. Securing the market for the mineral before the project is approved and having the final environmental impact statement approved before the social environment is assessed, and it normally causes tension between the local community and the mining house.
The first stage of a mine development project can be particularly crucial and professional consultants have the means available to conduct scoping studies, which determine if there is sufficient opportunity to justify the investment required for further studies.
In a second step, pre-feasibility studies have to be carried out to select the preferred operating options, and at the end definite and bankable feasibility studies are used to refine the optimal operating scenario. Only after the completion of those steps projects can go ahead with the design and construction, followed by the implementation and operation of the programme.
Project phases are mainly completed sequentially but can overlap in some project situations. A project phase entails a collection of logically related project activities, usually culminating in the completion of a major deliverable (PMI 2004).
Developing a mine through a project management phase-gate process leads to a successful execution of the project. Phase-gate process stipulates – what must be satisfied before the project proceeds- providing greater certainty of project success.
At each gate, questions should be asked? What is the status compared to the plan; who are the stakeholders; and what are the objectives/ scope, technical considerations, cost/value/risk, quality, schedule, and resource requirement?
Mining Phase-gate process
The effective use of phase-gates in mining has always occurred well-run mining projects, even if the process has not been called a phase-gate approach. Decisions to kill a potential development have been made for such as the ore body not being as good as initially thought, and changed business conditions meaning the hurdle rate of return has not been reached due to reduced demand or increased interest charges.
Mining phase-gates process provides discipline in the development decision-making process, quality of execution, risk understanding and management, decision making based on facts, structure for ideas generation, scope for end user involvement in the earlier process phases and transparency for users.