Impact Of Metal Prices On Operating Philosophy

INTRODUCTION Mining companies are In the business of making an acceptable profit on their Investments, It became obvious in the recent recession that economic profitability/viability depends on being the lowest cost producer In order to compete on a global basis. The burden of achieving this objective falls on the mineral manager. He must strive to produce a salable product in an environmentally acceptable process while continuously Improving the profit margln.(1,2) Metal prices fluctuate on a regular basis. They directly Impact revenue and hence operating philosophy. The mineral engineer needs to develop an optimum operating strategy to meet his overall objectives, One would expect that, In the modem era of complex computer models, it would be easy to develop an economic model to maximize profits and/or cash flow. Discussions with mill managers Indicate that one mine/corporation's optimum operating strategy is not necessarily optimum for another. This paper approaches the problems from basics "Economics 101" and Illustrates the complexity of developing a universal model which can be applicable to all mines. Case examples are used to illustrate the need for better communication to avoid the basic economic fallacy “that optimization of segments leads to optimization of the whole system.” TECHNICAL MODELS Technical models are a prerequisite to the development of economic models because they provide the necessary Input data to these models, The flow of material from a mine through the sale of the finished product is shown In Figure 1. The ore Is mined and milled, and the concentrate can be stored for sale or smelted and refined In-house or at a toll facility. The finished product(s) are held In Inventory until sold either through existing contracts or in the spot market. [ ] Fairly reliable technical models have been developed for mining, milling and smelter operations. Mine plans are developed to provide a good Indication of the relationship between production and cut-off grade. It is easier to change surface mine plans than plans for underground mines. However, there are limits to maximum production that can be achieved with existing equipment. It Is possible that mine benches may not be developed to handle additional equipment, even If It was purchased to enhance production. More often than not, the cut-off grade Is lowered to Increase throughput goals.