Scielo RSS <![CDATA[Journal of the Southern African Institute of Mining and Metallurgy]]> vol. 109 num. 3 lang. pt <![CDATA[SciELO Logo]]> <![CDATA[<b>'Short-term gain for long-term pain' - how focusing on tactical issues can destroy long-term value</b>]]> Maximizing shareholder value has become a common aim for mining companies. This paper discusses the results of a number of studies developing strategic mine plans, covering a wide range of commodities, styles of mineralization, mining methods, and processing facilities, for single and multiple deposits. It has become evident that traditional methods and conventional wisdom often do not in fact achieve these goals. Operating policies at many mines ensure that shareholder value is not maximized. Changing the overall strategy can provide significant value gains. Typically, the new optimal plan involves a significant increase in the cutoff grade, at least in the earlier years. An increase in the underground development rate or open cut stripping rate is often associated with this, at least in the short term, to establish the new strategy. Cost minimization is found to be counter-productive. Counter-intuitive plans are often found to be optimal. For example, optimal cutoffs for different parts of an underground mine may be significantly different, even if mineralisation and cost structures are similar. Sub-optimal strategies are also frequently found to have a significantly greater financial risk than optimal lans, which have been found in many cases to be relatively insensitive to changes in major value drivers, such as metal prices. This paper shows how identifying and then operating within the framework of an optimal strategic plan can have substantial benefits over being continually driven by short-term tactical issues. <![CDATA[<b>Design - a strategic issue</b>]]> A set of six design principles for rock engineering was developed by Bieniawski: design objectives; minimum uncertainty; simplicity of design components; state-of-the-art practice; optimization; and constructability. These principles translate into a ten-step design process. Although this methodology was developed for rock engineering, it is applicable to any design process, feasibility study, etc. Diligent use of such a process will ensure that a defensible design or evaluation has been carried out. Recently a 'strategic conversation' process has been identified by Ilbury and Sunter that includes the following ten steps: scope; players; rules of the ame; key uncertainties; scenarios; SWOT analysis; options; decisions; measurable outcomes; and meaning of winning. A comparison of these steps with those of the design process shows a remarkable correlation. This is perhaps not surprising since engineering design is a strategic up-front issue, and front end loading in a project is critical to achieve the expected project performance. Based on the close correlation between the strategic conversation and engineering design processes, a circular design process, rather than a linear process, is proposed. The 'circle of design' better reflects the importance of review and monitoring in the two hases of successful design and implementation-defining the design, and executing the design. <![CDATA[<b>The challenge of building local capacity to support the development of a sustainable mining industry in emerging mining nations</b>]]> Mining companies are increasingly looking to the developing world for the next generation of mining projects, often in countries that have little or no previous history of large-scale mining. One of the major challenges for such projects is hiring-and retaining-personnel that have technical skills and experience in iningrelated disciplines. Staffing a mine with an expatriate workforce is neither costeffective nor sustainable, and many countries now insist that mining companies 'transform' the profile of their workforce to more closely mirror the demographic profile of the host population. The need to nurture mining-related skills in emerging mining nations is not solely limited to the workforce: there are also pressing economic and sustainability imperatives to develop capacity within local service providers such as consultants and contractors, as well as to facilitate informed engagement between mining companies, government and civil society. However, few educational institutions in emerging mining nations currently have the ability to offer practical training in mining-related disciplines. Local employees who are sponsored by companies to develop their skills through international study may be impeded by language and cultural barriers, and may also be taught using course content that is of limited relevance to the specific challenges of their future working environment. This paper addresses the challenge of skills development and retention in emerging mining nations and uses examples from sub-Saharan Africa and the Asia Pacific region to explore practical means of developing capacity in mining-related disciplines. It examines the need for companies to implement strategies to develop local technical capacity in countries where they envisage a longterm operational future and also highlights the need to foster partnerships between academia, developmental institutions, mining companies, governments and civil society to establish the critical mass of mining-related skills required to nurture the development of a sustainable mining industry. <![CDATA[<b>Modelling financial risk in open pit mine projects: Implications for strategic decision-making</b>]]> Strategic decisions in the mining industry are made under multiple technical and market uncertainties. Therefore, to reach the best possible decision, based on information available, it is necessary to integrate uncertainty about the input variables and model financial risk of the project's merit measures. However, this rovides few useful insights to decision-makers unless accompanied by modeling management responses to uncertainty resolutions. It is widely acknowledged that conventional decision-support methods based on static, no-change, discounted cash flow (DCF) techniques such as net present value (NPV) and internal rate of return (IRR) tend to provide inaccurate value estimates. This could mislead the strategic decision-making process and result in significant value losses. This paper aims to model financial risk related to uncertainty about market variables such as metal prices and foreign exchange rates. Other sources of risk that are related, for example, to geology and production costs are not considered in this work. The article outlines a flexible financial model that integrates uncertainty about market variables and management flexibility to react to uncertainty resolutions into mine project valuation using a real-options valuation technique based on Monte Carlo simulation. Significance of information generated from this simulation-based flexible valuation model to the strategic decision-making process is tested using an illustrative case study of a Canadian mining project. The project is a typical multi-metal, open pit mine that produces copper and gold. In this case, there are three uncertain market variables, which are: copper and gold prices and US$/CAN$ exchange rate. Financial valuations are carried out using both the conventional static DCF method and a flexible real-options model. In the flexible model, management flexibility to decide whether to go ahead with the next expansion or terminate production operations is integrated. Results show how the flexible financial model can enhance the decision-making process. <![CDATA[<b>Strategies and tactics to control seismic risks in mines</b>]]> The risk associated with mining induced seismicity is one of the major threats to the safety and sustainability of deep underground mines. This paper describes techniques that allow site practitioners to efficiently control such risks in mines. The proposed approaches rely on ground support to strategically control seismic risk nd reentry time to tactically control this risk. The strategic approach is based on the detailed understanding of past seismicity to ascertain the seismic hazard of individual sources throughout the mine. This approach also relies on assessing the potential damage that these sources can induce on nearby excavations using the xcavation vulnerability potential (EVP) and rockburst damage potential (RDP) concepts proposed by Heal et al. (2006). It is then possible to investigate how to reduce the risk of experiencing damaging seismicity in mine drives by locally enhancing the ground support system. The tactical approach relies on a proposed ethodology to estimate reliable re-entry times or exclusion periods based on the seismic decay following blasting. Some examples of how these techniques have been applied in Australian mines are given. <![CDATA[<b>Consolidation, fragmentation and the structure of the mining industry</b>]]> This paper discusses reasons for mining company mergers that have become the fashion, the role of the 'Juniors' and asks what the motives might really be. It examines changes in company concentration over the last 20 years in key mineral segments. Data at different stages of a project are examined to attempt to lucidate the role of the 'Juniors'. Areas for further research are suggested. <![CDATA[<b>Strategic long-term planning at Anglo Platinum</b>]]> This paper consolidates the key elements of seven contributions, on strategic long-term planning, to two of the three international conferences on Strategic versus Tactical approaches in Mining held over the period 2005-2008. The holistic concept of strategic long-term planning as developed and implemented at Anglo Platinum is described. Consideration is given to the planning cycle, principles supporting the construction of the long-term plan, and aspects of unique best practice as developed in Anglo Platinum. Further description of Anglo Platinum's approach to corporate governance, including the processes, methodology, systems, unique tools and techniques that are applied to value and select capital investment options is also given.