Several trends are taking place in the mining business. Mining companies are investing in operations, but they have to justify those investments with a healthy rate of return. Cost overruns have simply become unacceptable. They are also looking for ways to improve profit margins by reducing costs at profitable operations and idling those that are either less profitable or losing money. In many cases, they are looking to mechanization, automation and information technology to assist in that endeavor. The major mining companies are also selling or spinning off noncore mining operations to generate cash or get them off their books. A noncore asset could be a mine that produces an outlying metal or mineral with which they no longer have an interest; it could be located in a region they no longer find trustworthy; or both.

The News this month opens with a discussion of Barrick Gold’s future growth plans in Nevada. Recently, Barrick said its five cornerstone mines in the Americas are expected to account for 60% of its gold production in 2015. Approximately 85% of its 2015 exploration budget is allocated to the Americas and about half of the budget will be directed to Nevada. In contrast, the company idled the Lumwana copper mine in Zambia last year and posted an after-tax impairment charge of $930 million. Zambia passed legislation that raised the royalty rate on the country’s open-pit mining operations from 6% to 20%.

Much of this boiled to the surface at the recent Mining Indaba, which was held during February in Cape Town. In his report from the event (See Mining Indaba, p. 56), Gavin du Venage noted the conference highlights, the atmosphere and the bizarre behavior of African leaders. The article closes with some harsh remarks from Mark Bristow, CEO, Randgold Resources. He said the African mining industry has no one to blame, but itself. Bristow said an irresponsible short-term approach has inflicted damage and African governments are putting the squeeze on mining companies that are basically insolvent. Bristow can make these statement because Randgold is one of the few companies that recently raised its dividend and is carrying no debt.

Whether it involves debt or not, a number of factors have to be considered before miners make that huge long-term investment decision to build a mine or expand on an existing operation. As Simon Walker points out this month (See The EPCM Perspective, p. 32), the terms “on time” and “under budget” are a rarity in the mining business. In his report, some of the leading firms offering engineering, procurement, construction and management (EPCM) services for mining projects address this issue. Some of their explanations are as complex as the projects they manage, yet some of their solutions are simple; if the budget was bigger or the timeline was more reasonable, the project would have been under budget and on time.

In both of those reports and two others (Energy Efficiency, p. 38, and Condition Monitoring, p. 50), the authors showcase various ways mining companies can hold down costs. Deep mines in Africa are adopting more mechanized mining methods. Engineers are using experience and advanced systems to make complex calculations on the front-end of the project. Mining companies are relying more on automated systems to monitor and control processes such as ventilation and conveyors systems. They are also looking for more efficient ways to generate and consume power. All of this is an effort to make ends meet. Enjoy this edition of E&MJ.

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Steve Fiscor, E&MJ Editor-in-Chief