mine management

Profit

- Is an income less cost

Operational planning

- developing more detailed long-range plans for major functions and activities; determining what must be done, when and by whom to implement strategic decisions.

Four steps in conducting business assessment:

1. Assessment of the company's performance, strengths and limitations 2. Assessment of the external environment 3. assessment of the expectations of stakeholders 4. Summarizing the business position and prospects

Steps in Strategic Planning:

1. Developing the business mission 2. Determine the strategies

PLANNING IN THE MINING INDUSTRY

1. High risk in acquiring mineral ore supply 2. Capital intensive nature of mining 3. Little or no control over product price 4. The actual timing of development 5. Substantial government intervention and control

What causes change in management?

1. Increase in production 2. Emergence of new technology 3. Socioeconomic influences (Social/political and economic factors) 4. Legislations

HOW TO MAKE PLANNING PRODUCTIVE

1. Keep planning action oriented 2. Maintaining line responsibility 3. Keeping it simple 4. Emphasizing strategy 5. Keeping it top-down 6. Being realistic 7. Giving sufficient attention to the process

The relationship between cost and output is determined by:

1. Physical characteristics of the orebody; 2. Technical factors (e.g. the time required to mine in the most effective sequence); 3. Size of the facilities (e.g. the mill volume, size of shafts); 4. Size of the services and administrative staff.

10 Planning Principles

1. Strategic planning is the management of change 2. Strategic planning deals with effectiveness 3. Allocation of limited resources demands concentration 4. Planning means making decision 5. Decisions improve when there are alternatives to choose from 6. Good planning requires a top down approach with bottom up inputs. 7. Commitment requires participation 8. Commitment is more important than perfection 9. Good planning requires a system 10. Planning an integral part of managing

Principal Cost Factors

1. The physical characteristics of the ore deposit, the cost of getting at the ore, and the mining of waste. 2. Wage rates, cost of supplies and services. 3. Facilities available or required to achieve output, including the capacity of the plant and equipment, and the level of staff services. 4. Productivity; including output per man-hour, material consumption, and the use of facilities. 5. Royalties, taxes, and other public charges.

In brief, the planning process is directed to thinking through questions such as:

1. Where are we? 2. What is likely to happen to the environment? 3. Where do we want to go? 4. How will we get there? 5. What action is required now?

Covering costs:

1. debt-retirement charges, 2. equity holder's expectation, 3. retained earning funds for working capital

Operational planning provides an essential link between strategic and annual planning, and it usually covers these steps:

1. organization 2. formulate unit policies and objectives 3. develop and select unit actions 4. preparing an integrated action plan

A mining company should consider developing objectives and policies on the following topics:

1. profitability 2. financial resources 3. physical resources 4. market position 5. human resource development 6. public responsibility 7. productivity

Decision Making

: Selecting a course of action from a set of alternatives.

Financial Planning: The Sales Forecast

A forecast of a firm's unit and dollar sales for some future period, generally based on recent sales trends plus forecasts of the economic prospects for the nation, region, industry, etc.

Projected (Pro Forma) Financial Statements

A method of forecasting financial requirements based on forecasted financial statements

2. Tons of ore -(grades per ton, cost per ton)

Advantage: it includes already the costs Disadvantage: Sales value per ton fluctuates

1. Unit weight of contained metal (pounds, ounces).

Advantage: relates cost to the final product (Cost per ounce) Disadvantage: combines in one unit two unrelated factors which are metallic content of ore and the cost in mining, and metallic content rarely has any influence on the cost

Annual planning

Annual planning and action by managers assigned responsibility for specific activities.

Developing the Business Mission

Assessment of the core strength and weaknesses Identifying external vulnerabilities

Projected Financial Statements

Determine how much money the firm will need in a given period. Determine how much money the firm will generate internally during the same period. Subtract the funds generated internally from the funds required to determine the external financial requirements.

STRATEGIC PLANNING

Determine long-term direction Determine long-term commitment

determining the strategies

Examine the options or alternatives 1. Company's strengths 2. Opportunities 3. Threats 4. Resources available. Determining the strategies

STARTING THE PROCESS

Full support is required Involvement of the managers Appointing a planning coordinator Concentrating on crucial issues Understanding the principles Making a plan for planning

Organizing

Grouping activities and resources in a logical fashion.

Benefits of Management

Identify problems more quickly Decrease downtime of equipment or facility Improve safety Raise employee's morale Strengthen employee's pride in their work To develop control through visibility Establish convenient work practices Maintains and improve quality of product Promote stronger communication among staff

Importance of Forecasting and Control Functions

If projected operating results are not satisfactory, management can reformulate its plans. If funds required to meet sales forecast cannot be obtained, management can sale back projected levels of operations. If required funds can be raised, it is best to plan for their acquisition in advance. Any deviation from projections needs to be handled to improve future forecasts

Principal Income Factors

Income is dependent upon the following: 1. The volume of different grades or types of ore. 2. The physical characteristics of the ore deposits; the limits on output covered by the position of the ore which affects such matters as sequence of mining. 3. The price received for the contained metal. 4. The efficiency of the extraction process. 5. The efficiency of the processing process.

Income/Financial Planning and Control

It is the detailed study of the available ore and analyses of various profit possibilities and their effects on future income. This includes annual plan and actual financial plan to the long-term plan

Tool to assess and improve performances

Management by objectives Performance appraisal system Education, training and development Management information system Mine productivity Underground incentive bonus system Maintenance management Industrial relation and corporate social responsibilities Introduction to quantitative management techniques

Controlling

Monitoring organizational progress toward goal attainment and taking corrective action when needed.

How should a business policy crafted?

Must be expressed in quantitative terms Ex. To increase return on assets from 4% in 1978 to 11% by 1984 To reduce employee turnover from 23% in 1978 to 15% in 1983 To achieve savings of at least $200,000 per year from cost reduction projects.

Benefits and Limitations of Planning

Planning enables a more effective management team to be developed through: 1. Fostering unity of purpose and increased commitment to common goals. 2. Permitting greater delegation of decision-making without loss of control. 3. Improving managers' understanding of the total picture. 4. Improving concentration of effort and so reducing wheel spinning at lower levels of management.

VALUE LESS COST IS PROFIT PER TON

Profit per ton = value per ton less cost per ton A rise or fall in costs requires the selection of higher or lower values per ton to maintain the profit per ton. The mix of different ore grades and different ore costs determines the annual profits.

Management

Requires a set of activities (including planning and decision making,directed at an organization's resources (human, financial, physical, and information), with the aim of achieving organizational goals in an effective and efficient manner

Objectives should be SMART

S - Simple M - Measurable A - Attainable R - Realistic T - Time bounded

Planning

Setting goals and deciding how best to achieve them.

ANNUAL PLANNING AND ACTION

Specify the results to be achieved and actions to be taken within the next fiscal year and should identify the contribution that each unit and manager is committed to achieve.

Financial Control

The phase in which financial plans are implemented, control deals with the feedback and adjustment process required to ensure adherence to plans and modification of plans because of unforeseen changes.

INTER-RELATIONSHIP OF LONG- AND SHORT-RANGE PLANS

The planning process is continuous. The strategic and operational plans are updated annually, modified where required to meet new circumstances, and a new year added.

Financial Planning

The projection of sales, income, and assets based on alternative production and marketing strategies, as well as the determination of the resources needed to achieve these projections

The relationship of ore value, production level and profit

This can be used to show the contribution of different grades to the result.

Preparing an integrated action plan

This is facilitated by converting plans into quantitative and monetary terms. And to ensure the following; plans are in balance, desired results are obtainable, and financial resources adequate.

AFN

additional funds needed to support the level of forecasted operations

break-even cut-off grade

assumes that the block does not have to be mined and classifies the material as ore or waste to mine or ignore respectively.

Internal cut-off grade

assumes that the block in question must be mined and determines whether it should be sent to the mill.

Annual planning

company budget, should be based: performance standards, material usage, inventory turnover and expected output. Each unit of the organization should be responsive.

Full-cost tons

covers all cost

Develop and select unit actions

critical timing decisions are made that will affect resource development and exploitation schedules impacting on the ultimate profitability of the mining operations.

Organization

define each unit's mission, the scope of its activities and constraints, and critical relationships with other units.

In operational planning

detailed planning is needed to decide what must be done, by whom, and when to implement the chosen strategy and move the company from its

Strategic planning

determining the 'grand design' of the enterprise and the allocation of resources to opportunities.

Formulate unit policies and objectives

each unit must consider the implications for its operations and how to apply it. This leads to the formulation of more detailed policies and objectives for each unit.

Business assessment

gathering facts and forecasts in order to assess the company's current position, prospects, opportunities and threats. The purpose of this phase is to reach conclusions on the company's position and prospects which are essential prerequisites to making sound planning decisions.

PIMER DIAGRAM

implementation ➡️ monitoring ⬇️ ⬆️planning⬅️review⬅️evaluation

RELATIONSHIP OF INCOME TO CONTAINED METAL OR TO ORE TON

income usually expressed as value per ton. ie. price per ton

Absorption costing

is a cost allocation procedure to allocate all costs to each and every unit produced with the understanding that a ton containing insufficient metal value to cover all costs should not be mined.

profit-volume (PV) chart

is a graphic that shows the earnings (or losses) of a company in relation to its volume of sales. Companies can use profit-volume (PV) charts to establish sales goals, analyze whether new products are likely to be profitable, or estimate breakeven points.

organization

is a group of people working together in a structured and coordinated fashion to achieve a set of goals.

Cut-off grade

is the minimum grade required in order for a mineral or metal to be economically mined (or processed). Material found to be above this grade is considered to be ore, while material below this grade is considered to be waste. Grams/ton $/ton %

Maximum profits

maximum profits are indicated by the point on the P/V curve which is the greatest vertical distance from the fixed cost line. Fixed-cost-plus-profit curve crosses the P/V curve, where budgeted profits start to decrease

Leading

processes to get members of the organization to work together to further the interests of the organization.

Marginal cost

the cost added by producing one additional unit of a product

No profits

the point where the fixed-cost curve crosses the P/V curve shows the total ore and grades whose average value will pay all costs but no profit.

cost

usually computed at cost per volume (weight) ie. cost per ton