The ratio of infrastructure costs vs. equipment costs has dramatically shifted in the last decade.
Transportation costs make up some of the biggest outlays for a mining company. Choosing the right options can therefore make a big impact on a mine's operation. According to Andrew Keith while the costs of transportation are already high they're set to grow worse in the future.
In a post conference workshop at the Indonesia Pit to Port Summit, Keith listed some key trends that looked set to hike future costs.
One was the rising distance mines were getting from the coast and from buyers. Others included more challenging terrain and difficult political and environmental conditions.
Keith said because of these trends infrastructure now needed as much consideration as geology, mine planning, and processing. He told Australian Mining, a Government study indicated back in 1998 that plant equipment and machinery made up some 60 per cent of a mine's development cost while infrastructure (such as transport, power, and water) made up around 40 per cent.
But by 2011 the figures have switched dramatically, with infrastructure now accounting for around 80 per cent of development costs and plant and machinery taking up around 20 per cent. In some parts of the world, such as the developing regions of Africa and Indonesia, Keith said those costs were likely to be higher.
"Trends in the mining industry mean that transportation infrastructure and operational costs are becoming increasingly vital to the viability of resource projects," he said. "This key area is one where efficiency developments and sustainable cost reduction could produce long lasting and significant improvements."
Keith told Australian Mining "incremental increases" in infrastructure technology were starting to address the issue. "Ten or fifteen years ago it would have been unthinkable to have a 20 km long overland conveyor running at greater than five metres a second," he said. "There are now a number of 20 km long overland conveyors and there is a 13 km one running at nearly 9 metres a second."
Technology leading the way
"Technology is pushing the boundaries of what was previously regarded as how things worked." Keith said historically companies hadn't focused on infrastructure but if they wanted to stay on top of costs they needed a greater awareness of the issue.
"With the changed balance of costs going towards these long supply lines, both in terms of the ore chain out and the supply line out, that previous approach ceases to be a reasonable way to asses mine development," he said. "Inevitably the project will have cost blow outs if infrastructure isn't taken more into account." And he said in some cases companies lacked the awareness.
"When you've been doing things one way for many decades then there's an inertia involved in adapting to changed circumstances," he stated.
As broad generalisations to cut infrastructure costs he offered two main tips, of which he said most miners were already aware. "Reduce your reliance on fuel oil, electrify what you can, and get stuff off the road."
With some big name developments in Queensland's Galilee Basin sorely lacking infrastructure networks the topic is likely to take an increasingly large take of the future mining news cycle. Bitter tonnage allocations fights at Port Hedland in Western Australia, as well as rail access negotiations in the Pilbara are already a sign of more to come.
The companies that start to take notice of infrastructure, and keep it at their planning forefront, are likely the ones who will succeed in the future.