The Practical Aspects Of Mine Equipment Replacement Analysis ? Introduction

Determination of the best time to replace an aging unit of equipment is a recurring problem which is common to essentially all surface and underground mining operations. Virtually all mining equipment is subject to wear and the resulting deterioration that increases with equipment life. This mechanical deterioration results in lower availability and, thus, decreasing, production. Due to decreasing production and increasing repair costs, there is an optimum age at which the replacement of a given equipment unit with a new unit will result in the lowest cost per unit of production for the equipment operation in question (Figure 1). Determination of this optimum replacement age is further complicated by factors such as: possible overhaul alternatives, fleet replacement and expansion alternatives, remaining life of the mine, and technological improvements in the potential replacement or differences in the production capacities of these replacements. Determination of the optimum time to replace an equipment unit becomes more critical each successive year due to the rising capital costs of new equipment versus maintaining old equipment. An incorrect choice of the replacement age for an equipment unit can result in excessive costs to the mining operation. If a unit is replaced too early, the capital cost of the unit is not fully utilized; conversely, replacing a unit too late results in excessive maintenance costs and low production. The economic life of a piece of equipment is the equipment age that results in the lowest total discounted cost per unit of production for that piece of equipment, not considering the cost of future replacements. The economic life of a piece of equipment is usually shorter than the physical life, the maximum age at which a machine is capable of doing useful work. The optimum replacement age for a piece of mining equipment may vary from the economic life of that equipment due to the remaining life of the mine, fleet considerations, costs associated with potential replacement machines, and capital rationing constraints. For example, the equipment life of the current machine that may result in the lowest cost per unit of production might be 10 years; however, when the timing of the future replacement costs are entered into the calculation, a different life for the current machine might result in the lowest total cost per unit produced for the remaining life of the mine.