Consultants for Mining and Financial Solutions ISSUE NO.

94 — January 2009

An Integrated Procedural Approach to Underground Mine

C A L E N D A R
Planning that Increases Value
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Mineral Exploration Roundup 2009 Introduction business, the planning process must be repeatable
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January 26 – 29, 2009

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and scaleable to enable easy replication throughout

Westin Bayshore Resort & Marina
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The value that is derived by good mine planning is the different mines and projects within an
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Vancouver, B.C., Canada

often underestimated as many mines steer their organization.
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Email: shendry@amebc.ca
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attention and recognition to the more immediate

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Mining Indaba 2009 and more easily recognized successes made by the The diminishing numbers of highly experienced
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February 9 – 12, 2009 day to day operational “bush fire” fighting. Similar personnel within our industry, coupled with the
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to machine maintenance, the efforts made to growing pressure to clearly demonstrate that
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Cape Town International

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Convention Centre quickly rectify short term, breakdowns are well appropriate due diligence has been exercised,
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Cape Town, South Africa recognized, whereas the value derived from the means that well documented and monitored mine
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Email: mcady@iiconf.com planning processes using purposed built and

work in planning, and scheduling and undertaking
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preventative maintenance is not so obvious or innovative tools need to be developed to ensure

2009 SME Annual Meeting &
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readily quantified. Too often the focus of the optimum outcomes.

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Exhibit
business shifts to building and supporting an
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February 22 – 25, 2009

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Colorado Convention Center efficient operations team at the expense of The aim of this paper is to:
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Denver, Colorado developing a highly experienced team of mine

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Email: meetings@smenet.org planning practitioners that are well trained with 1. Discuss a systematic approach to establishing
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well designed mine planning processes which

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Visit PAH/Runge at Booths 523 & 525 procedures and purpose built tools to develop
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optimum mining strategies. incorporate purpose built tools;

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PDAC 2009 International Trade 2. Provide an overview of one of the main

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Show & Investor’s Exchange fundamental processes for incorporating an

A resource has an inherent value based on its
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March 1 – 4, 2009
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quality parameters, its physical constraints and its economic understanding of a resource early in
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Metro Toronto Convention Centre

likely mining conditions. How well that value can the mine design process, namely Margin
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Toronto, Ontario, Canada

be unlocked is governed to a large degree by the Ranking; and
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Email: info@pdac.ca
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Visit PAH/Runge at Booth 708 proficiency of the mine planning practitioners, as 3. present the summary results of a case study
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they essentially set the foundation of the mine which demonstrates the value gains which can
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be realized through the implementation of a

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Asia Mining Congress 2009 business and the path along which the mine will
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March 23 – 27, 2009 operate. (We are of course taking marketing and well integrated technical and business
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Raffles City Convention Centre commodity price for granted for the sake of this planning methodology.
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Singapore, Singapore
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discussion.)
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Email: winnie.koh@terrapinn.com Developing Effective Planning Processes

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The importance of having a well documented and and Tools

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AR Minera 2009
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procedural mine planning methodology which

April 28 – 30, 2009
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integrates both a thorough technical and economic As part of our international mine planning
Costa Salguero Center
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understanding of the resource cannot be over consulting work, Runge has observed the
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Buenos Aires, Argentina

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Email: info@viewpoint.com.ar emphasized. The aim of the mine planning process growing need and strong desire expressed by
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is to develop a robust mine design and production mining corporations for a well designed,
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2009 CIM Conference and capability which can best cater for future uncertainty systematic and procedural mine planning
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Exhibition whilst providing the best opportunity to maximize methodology which is consistent between the
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May 10 – 13, 2009 cash flow into the business. The planning process mines and projects within their portfolio. Their
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Metro Toronto Convention Centre desire is for a system which can provide for:
must be transparent and auditable, clearly
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Toronto, Ontario, Canada

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summarizing the process steps and assumptions

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Email: cmurphy@cim.org
made to arrive at a justifiable and defendable 1. Monitoring and control of the process;
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Visit PAH/Runge at Booth 1320

outcome. To provide maximum value to the 2. The development of common, purpose built
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Copyright 2009 by Pincock, Allen and Holt, a division of Runge Inc. All Rights Reserved.
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tools designed in a modular fashion to Ideally, mine planning should provide a An example of a top level business process

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facilitate the generation and risk weighted set of alternative outcomes flow chart for a typical mine planning process

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communication of mining strategies

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so as to provide the most robust strategy is shown in Figure 1 (page 4). The

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and resultant plans; which can quantify and cater for future documentation which should be attached to

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3. The movement of personnel whilst uncertainty. A well designed mine plan these charts should clearly state the purpose

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ensuring the capture and retention of

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should provide no “surprises” for of each individual process, the input data

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valuable intellectual property; and operations personnel so that they can do required plus the source of the input data, the

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4. Simplifying and accelerating the what they do best which is mine coal. outputs that are to be generated and the

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training process. So what are the essential components that recipient of these outputs as well as the

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make up a best practice mine planning storage of the outputs. Each process within

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To meet these needs and to ensure the system? Runge suggests the following: the flow chart is broken down into the sub

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successful design and implementation of process charts until the appropriate level of

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an efficient mine planning system, Runge ♦ An appropriately experienced mine detail in obtained.

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suggests the following key “ingredients” planning team with a mix of technical,

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are required:
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operational and business analysis skills The completed workflow charts and

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♦ Recognition and understanding of the documentation can be well presented in a

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1. Recognition that change is required, different business planning horizons HTML text sensitive computer format

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plus a desire for improvement and a ♦
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A clear and well documented “mapping” similar to the familiar windows based help

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willingness to devote the resources and of the planning workflow and individual style format making navigation of the

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time to the process. processes and tasks. processes easy and the presentation of the

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♦
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2. A mine planning domain specialist who Purpose built tools designed to meet detailed information simply understood.

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can provide the guidance and expertise the workflow within each planning

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as well as provide customizable tools or horizon Once having designed a well thought through

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♦
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integrate existing tools to suit the The engagement of mine planning planning methodology it then becomes

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process. This specialist will facilitate specialists with the mine planning necessary to design the various tools need to

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the process and build the business flow

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domain expertise and IT skills. meet the requirements of the workflow
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charts and documentation in a usable process. Runge have developed a range of

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and easily understood format which the What becomes quite apparent when looking state-of-the-art technical and financial

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user can interact with via computer within most mining corporations is that there software tools to facilitate efficient mine
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software or web browser. is a wide and varied opinion of what mine planning. These software packages are
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planning is and what it can deliver. Often, widely recognized as industry standards in
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The key initial step in the process is to even on the one minesite, individual mining the Australian and South African coal industry
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engage in a strategic conversation. The engineers have a different opinion of what and are rapidly gaining recognition in other
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purpose of the strategic conversation is to the planning process is and the overall regions of the world.
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obtain “buy in” to the process and achieve a process of getting from the borehole data
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common understanding of the problem, the through to a complete cash flow valuation of Through the adoption of these tools within a
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desired goal and the roadmap of tasks the business in not consistent or well framework of well designed planning
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which need to be undertaken to move from

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understood. Rarely are the processes methodology, mine planners are able to gain
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the current situation to reach the goal. flowcharted and properly documented. a significantly better understanding of their
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To build a well designed and documented coal resources as well as the sensitivity of
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A well designed planning system requires

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business process map requires starting with their business to the inherent attributes of the
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the integration of technical and business a facilitated strategic conversation aimed at resource as well as influences external to the
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streams operating across a range of time identifying: business. With these increased insights,
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frames or planning horizons. These discrete plans can be developed or refined to

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planning horizons commence with the ♦ The current situations i.e., “Where are maximize the value of the business by
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strategic view and cycle through the Life of

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we now”? identifying the areas of the deposit with lower

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♦ What would be the preferred position

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Mine planning phase, Five Year and Annual risk, higher productivity, best coal qualities,
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Business Plans and ultimately down to the i.e., “Where do we want to be”? highest margins etc.
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operational Weekly and Daily planning ♦ Determine the roadmap of steps

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processes. In broad terms these various needed to get from the current position Runge has additionally developed a state
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planning time frames can be divided into to the preferred outcome. i.e., “How do of the art technology architecture which
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three discrete planning horizons being the we get there”? enables the monitoring, control and
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Strategic, Tactical and Short term visualization of the complete workflow

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operational horizons. Recognizing and These conversations should be undertaken process and manages the storage and flow
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understanding the purpose and output with an appropriate cross section of of data from all point solution packages.
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requirements as well as the input data and personnel within an organization to initially The system known as Mining Dynamics
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the detailed process steps within each develop a high level process workflow and enables the control and visualization of all
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planning horizon is essential to ensure then progress down to the detailed steps forms of 3D and 2D spatial data and
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maximum value is obtained. and tasks within individual processes. interfaces this data with reports and charts
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2
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from Enterprise Resource Planning (ERP) A planning methodology based on average variable components for each mining

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planning systems. This then provides a economics may well provide an overall process. As the distance from pit bottom

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economic mine plan which may in fact mine increases mining costs will increase, as

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clear, auditable and transparent decision

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making process and promotes good areas of uneconomic coal which are hidden will the overall system complexity with

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corporate governance. by the returns of other economic reserves. increasing length and number of

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conveyors. All else being equal, this will

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To demonstrate the value to be gained from The Process result in lower system availability and

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a well designed strategic planning potentially a lower overall mine output.

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methodology, this paper provides details of Similar to the cost ranking methodology This must also be considered in

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one of the fundamental processes which used in open cut coal operations, all estimating the overall unit mining cost per

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should be included with in the early stages variable operating costs and the factors block. If the seam entry can be located in

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of the resource analysis and mine design which affect their variability must firstly be a number of locations, the ranking

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phase. The process known as Margin determined. process should be repeated based on

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Ranking seeks to identify the key drivers of these alternative pit bottom locations to

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productivity, cost and revenue and ○ In an underground operation there are two determine which location provides the

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embodies these within a modelling basic groups of factors which have most economical entry point.

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framework to enable the calculation and impacts on productivity and operating 6. Sum the component mining and

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cost: factors which can vary depending on processing costs and downstream costs
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subsequent mapping of the relative

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variation in operating margins both laterally location within the deposit and those to derive the total incremental costs to

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and vertically across a coal deposit. which can also vary depending on produce the incremental saleable coal

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distance from pit bottom. and revenue.

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Underground Coal Margin Ranking 7. Present the incremental costs, revenue

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Typical factors which vary by location are and margin for each mining block in a

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To date, a systematic technique which can those related to geology such as roof and graphical format.

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provide an initial or ongoing assessment of floor conditions, gas emission, seam 8. Undertake sensitivity analysis by ranging

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thickness, yield and coal quality etc. the various input parameters in accordance

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the comparative marginal costs of mining
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an underground coal deposit has not been Typical factors which vary depending on with the level of uncertainty. This will assist

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developed as a standardized technique. distance from pit bottom include conveying to build up a picture of how variable the

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costs, ventilation costs, labor costs, inherent economics of the deposit are

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Techniques such as Cut Off Grade, used to
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assess economic limits on underground system availability etc. based on the future uncertainty.
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metal mines are not readily applicable to ○

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underground coal deposits. The basic steps involved in cost ranking Once completed the margin ranking output
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an underground deposit are outlined plots become another layer of information

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Traditional assessment of underground coal below: guiding the development of the future mine
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deposits has generally entailed formulating a layout. With this information now at hand,
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mine plan which seeks to maximize the total 1. As with open cut cost ranking, firstly mine planning engineers can now look to
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coal that can be removed within the physical divide the deposit into appropriately design the mine to ensure maximum
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sized mining blocks, commensurate extraction occurs in the high margins areas,
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and technical constraints of the deposit,

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paying limited cognisance to economics. with the level of geological knowledge. panels can be limited where margins fall
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Typically a block size between 50m to below acceptable thresholds and access to
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100m square is appropriate. highest margin areas occur sooner in the

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Once a mine design has been established,

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a production schedule is derived based on 2. Derive the in situ block data using a mine life. Not only does margin ranking
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various productivity assumptions. Average suitable geological model. assist to direct the mine design process it
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operating and capital costs are then applied 3. Select suitable mining systems and also highlights where data gaps exist and so
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to generate a future cash flow. The determine basic default mining equally assists to focus the requirements of
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economic viability of the deposit is finally parameters which suit the nature of the future exploration.
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judged on whether the projected future deposit. From these basic starting
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cash flow meets some predetermined parameters an average mining The results of the margin ranking process
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hurdle criteria. recovery and ratio of development to provide a clear auditable and transparent
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extraction can be estimated. basis on which mine planning decision can

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A fundamental problem with this 4. From the geological mining conditions, be easily communicated to senior
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methodology is that it is based on average determine the likely variation in management and ensures that appropriate
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costs. The method does not provide a productivity and then assign the mining due diligence has been undertaken to satisfy
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basis for determining incremental costs and costs, process costs, product yields corporate governance standards.
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revenues of mining one area of the deposit and revenues which vary in relation to
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the geological and quality parameters. This month’s article was provided by Mike
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compared to another, and so cannot easily

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highlight which areas of the deposit are 5. Determine the mining costs which vary Rowlands, Manager Underground Coal
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more economic than others, or which areas with increasing distance from the seam Consulting, Runge Limited
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may not be economic to mine. entry point and establish the fixed and mrowlands@runge.com.au
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33
Standardized Underground Mine Planning Process – Top Level Process Flow Chart
FIGURE 1

Pincock, Allen & Holt is a consulting and engineering firm serving the international mineral resource
industry. Your comments and suggestions are always welcome. Contact Pincock, Allen & Holt • 165 S.
Union Blvd., Suite 950, Lakewood, Colorado 80228 • TEL 303.986.6950 • FAX 303.987.8907 •
www.pincock.com. Pincock Perspectives is published as a free information service for friends and clients.

Consultants for Mining and Financial Solutions