When it comes to a producer’s share price, production efficiency and commodity price are the two most important drivers.
While a mining company has no control over metal prices, they can improve production efficiencies which will in turn lower production costs, increase their profit margins and ultimately boost the value of their stock.
Successfully implementing production efficiencies requires the expertise of a highly-skilled mine management team, one that recognizes the importance of a mine-to-mill approach to designing an effective mine plan. There are of course numerous factors involved, but the most critical concern of any profitable mine is controlling grade by minimizing ore dilution.
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Poor mining practices and the lack of a skilled mine management team can have a seriously detrimental impact on run-of-mine (ROM) grades, mine output and most importantly, mine revenues. An unprofitable mine quickly gets shuttered.
The road to getting a shuttered mine back on track starts with skilled mining engineers and metallurgists and includes implementing grade optimization at every step of the way: from cleaner mining practices and effective grade control at site to metallurgically-based controls for processing within the mill.
What is ore dilution?
Dilution refers to the barren rock (waste) that is mined along with the ore and is not separated prior to processing at the mill. Some dilution is inevitable and mine plans include a dilution factor in ore recovery calculations. Poor quality control results in an increase in dilution, which affects mill throughput, can impact recoveries, reduces profits and, in the case of gold mining, increases the key performance indicator – cost per ounce.
How much of the waste rock is mined along with the ore is dependent upon a variety of factors including “geology, shape of orebody, drilling and blasting techniques, scale of operation and equipment size,” explained Anoush Ebrahimi, Principal Mining Engineer at SRK Consulting, in his report, ‘The Importance of Dilution Factor for Open Pit Mining Projects’.
As an inevitable component, dilution is a reporting requirement in mineral reserves. Both the JORC and NI 43-101 require dilution factor to be included in the mining plan, representative of the mining style and method of excavation. The percentage of mine dilution for a given operation represents the amount of waste in the ROM that is introduced in the mining process. Too much dilution can shut down a mine. “In addition to its direct impact on short term income of a mine, dilution causes significant changes in other factors that on the long term reduce the overall value of the project,” said Ebrahimi. “Underestimating dilution may pose a significant risk to a project.” Even a ten percent error in copper grade may result in a 60 percent change in the net present value of a project, he added.
Case study: Laiva gold mine, Finland
The Laiva gold mine located in Finland, the Nordic world’s most prolific gold producing jurisdiction, offers a good example of a mining operation crippled and closed by poor mining practices resulting in massive dilution and subsequently significant decreases in grade.
Gold production first began at Laiva in late 2011 from two shallow open pits and a newly-constructed 6,000 tpd mill and leach processing plant. Before its closure in early 2014, Laiva had produced a total of 2,241 kilograms of gold from 2.8 million tons of ore, which equals an average head grade of 0.9 g/t gold with recoveries averaging 80 percent.
Laiva’s processing plant is equipped to process reserves mined from the adjacent pits. The autogenous grinding circuit is designed to reduce the consumption of grinding media and requires a stable blend of feed type and size for optimal performance. The low head grades and insufficient recoveries indicated above are directly tied to the previous operator’s inaccuracies in the resource modelling (which muddied the line between mineralized zones and barren zones) and the decision to mine the resource using large-scale, bulk methods. Added to this the quality control was under the management of a contract miner, paid on tonnes, which led to a highly variable dilution factor.
“Moving to a larger scale of operation means less selectivity, hence more dilution. This is true for all kind of deposits,” Ebrahimi said. “High level and uncontrolled dilution may ultimately defeat the purpose of increasing production rates.” In fact, production records show that a significant ramp-up in bulk mining production in late 2012 led to a nearly 50 percent drop in the ROM gold grade at Laiva. As there was no change in mineralization or geological conditions, this can be tied back to an increase in mine dilution.
In basic terms the cost of mining and milling remained the same but the value of each tonne of ore was less because of dilution. This resulted in average all-in sustaining costs averaging $1,760 per ounce gold. In 2013, the price for the yellow metal averaged $1,411 per ounce, making production at the mine far from economical. Mining operations at Laiva halted in late 2013, and the mill ceased processing ore in March 2014.
Addressing deposit and operational factors
Reducing dilution to effectively control mill feed grades and bring a mine operation into the range of profitable production involves a multi-prong strategy that considers deposit-related and operational-related factors. The best route to controlling dilution and maintaining mine grades is to take a holistic mine-to-mill approach, recognizing the importance of integrating detailed knowledge of the resource model, building that with appropriate block sizes to match mining plans, developing mining plans around the mineralization and structural geology and applying metallurgical science-based operational efficiencies at each sequential processing stage.
At the mine: Defining the resource model to control grade
It is critically important to address the dilution issue as part of the mining process. This starts with completing an accurate and detailed resource model. “Deposit related factors are inherent features of the resource and comprise …read more
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