Modern Mining September 2020

Advantages Petter-Bowyer says a key benefit of contract mining is the reduction of the mine’s exposure to capital. “Instead, the contractor takes the risk on capital. Contractors also have a different focus to miners in that the latter will be focused mostly on ore grades and extraction rates, in pursuit of the maximum grade at the highest volume their plant can handle – and at the optimal extraction rate.” The contactor’s focus, by contrast, is on mov- ing the largest volume at the lowest cost per tonne, thereby driving productivity on the mining side. Herne says “going the contract miner route” potentially holds a number of advantages: “Contract mining companies offer economies of scale and scope through access to capital equipment and human resources.” He says services such as these can result in opti- mised mining, plant and equipment utilisation rates, as well as in the “associated labour productivity”. “The model reduces the owner’s capital expo- sure, which enables the junior miner to better utilise limited access to cash and capital during the ini- tial development of the mine. The contract mining model also removes many of the operational risks such as low productivity, workforce availability and performance.” He says contractors can provide a degree of flexi- bility to mining companies, as contracting companies can, to an extent, adapt with ease to market cycles. “Should demand increase, the contractor can add manpower and equipment resources quickly, as production requirements rise. In times of slowdown, it may be possible for the contracting company to move resources to other projects, thereby reducing the risk of retrenchments or equipment holding costs for extended periods of time.” Service providers: what to look for Herne says mines should be on the lookout for a good safety and operational execution track record

when reviewing the competency of contract mining service providers. “Other important factors are in-house expertise and capabilities; flexibility; current order book and commitments; financial stability; ability to access capital and degree of reliance on subcontractors to execute the full mining service package.” Petter-Bowyer agrees in terms of track record, which he regards as the most important aspect a mine should look for in mining contractors. “The length of time they’ve been around might not seem relevant, looking at the age-old companies that have failed recently, but senior management’s experience is a good indication of their track record. “I would also look for a good blend of experience alongside younger, up-and-coming movers and shakers in a contractor firm, who can create momen- tum into the future.” He further points to the quality of contract miners’ equipment, as well as to their ability to raise capital. “Without regular injections of new capital, the contractor’s fleet will age beyond cost-effective use and become inefficient,” he says. “Inspect their workshops, as this will indicate their approach to maintenance.” A good safety record, too, is paramount, and safe behaviour also shows a disciplined approach to production. “Check the contractor’s lost-time injury (LTI) rate when assessing their safety record,” says Petter-Bowyer. Decision influencers Concor Opencast Mining’s Herne says aspects that should influence the decision to employ a contract mining company include the size and duration of the project, the complexity of the mining operation and the availability of the necessary in-house expertise and equipment to start up and execute the project successfully.

SPH Kundalila has a solid track record in contract mining in South Africa.

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