Economics – Cost Records of Open Pit Mining

A detailed breakdown of mining costs, available to management on monthly and year-to-date bases, is mandatory for a controlled and efficient mining operation. A simple lump sum reporting of costs may indicate a profit or loss differential, but it does not allow an effective search for areas of possible cost reduction. Moreover, functional reporting is necessary on a timely basis so as to note trends of increasing costs In specific areas, which in turn allow possible preventive action by management. Definitive cost information helps to eliminate the tendency to overlook areas where cost Improvements can be made. A good cost control system points out salient operational weaknesses by: ( 1 ) allowing comparison of functional costs with similar costs of other mines and (2) pinpointing sudden increases over unit empirical costs within the organization. In general, the cost accounting structure is relatively uniform within large open pit mines, but surprisingly some systems will overlook the need for detailed breakout in comparatively high cost areas. In some other systems, unrelated costs will be lumped together, preventing careful analysis of cost accrual.