Total Drilling Cost

AC BHMT's Value Proposition

Prepared for:
Indiana Society of Mining and Reclamation
19th Annual Technolocy Transfer Seminar
Dec. 5th & 6th, 2005
What is "value"?

The AC BHMT "value proposition" is based on

drill productivity, not "bit life".
Drill productivity costs a mining company
much more than "bit life".

Let's take a few minutes to talk about and

understand what YOUR value proposition is
based on.
Then we will explain ours.
Total Drilling Cost

Total Drilling Cost is a value concept that places

its' emphasis on the cost of drill productivity.

Progressive customers understand and adopt the

philosophy that the cost of productivity drives the
economics of a mine.

Total Drilling Cost captures and shows the cost of

drill productivity.
The Total Cost of Drilling

TDC includes everything it takes to

run a drill:
Labor
Power: fuel or electricity
Drilling tools and supplies
$
Maintenance labor & parts
$ $ Supervision, administration
Cost of equipment ownership (lease,
$ purchase, or rental payments)
With all things considered, drill
operating costs can exceed US$300
per operating hour.
Total Drilling Cost

Method 1

TDC =

(Bit Price / Meters Drilled)

+
(Drill Operating Cost per Hour / ROP)
Total Drilling Cost

Example #1:
Bit cost = US$5,000
Bit life, meters = 6,500
Penetration Rate = 52 meters/hour
Rig Cost = US$200 per hour
Total Drilling Cost

Example #1:
TDC =
Bit Life + Productivity

($5,000 / 6,500m) + ($200 / 52 m/hr)

=
$0.77 / meter + $3.84 / meter

= $4.61/meter
Total Drilling Cost

Example #2:
Bit cost = US$5,000
Bit life, meters = 8,000
Penetration Rate = 40 meters/hour
Rig Cost = US$200 per hour

TDC = (Bit Cost / Bit Life) + (Rig Cost / Pen Rate)

Total Drilling Cost

Example #2:
TDC =
($5,000 / 8,000 m.) + ($200 / 40 m/hr)
=
$.625 + $5.00 =

$5.63 / meter
Total Drilling Cost

Example #2
TDC =
($0.63 / m.) + ($5.00 / m.) =
$5.63 / meter
$1.02 MORE!

for a bit that is less productive but has longer

life?!
(52 vs. 40 m/hr., 8,000 vs. 6,500 m)

Where is the advantage really found?

Total Drilling Cost

TDC Method 2

TDC =
(Bit Price / Meters Drilled) +
Fixed Cost +
(Variable Cost / Rate of Penetration)

Where:
Fixed Cost = Annual Overhead Cost / Annual Meter Budget
Variable Cost = Labor + Fuel + Supervision + Repair Parts +
Repair Maintenance + Repair Labor
TDC Method 2

Fixed Cost Calculation:

For example: $1.50/meter fixed cost

$1.50 / meter = $900,000 overhead cost for drill fleet /

600,000 annual budget meters
Ownership cost of the drill fleet (lease, rent, purchase
payments)
Drill Maintence budget for fleet (PM parts, fluids,
normal wear parts, etc.)
Budgeted drilled meters.
TDC Method 2

Example A:
Bit cost = US$5,000
Bit life, meters = 6,500
Penetration Rate = 52 meters/hour
Fixed Cost = $1.50 / meter
Variable Cost = $95 / hour

TDC = ($5,000 / 6500) + $1.50 + ($95 / 52)

TDC = $.77 + $1.50 + $1.83 = $4.10
TDC Method 2

Example B:
Bit cost = US$5,000
Bit life, meters = 8,000
Penetration Rate = 40 meters/hour
Fixed Cost = $1.50 / meter
Variable Cost = $95 / hour
TDC = ($5,000 / 8000) + $1.50 + ($95 / 40)
TDC = $.63 + $1.50 + $2.38 = $4.51

$.41 / meter MORE for every meter drilled!

($246,000 per year based on 600,000 m drilled/yr)
Production Cost Only

What is the cost of producing a single blasthole?

Cost = Drill Cost per Hour x Time spent drilling, hrs
$$ = $150 per hour x 30 minutes
$$ = 150 x .5
$$ = $75 per hole drilled
$$ = $150 per hour x 20 minutes
$$ = $150 x .33
$$ = $50 per hole drilled

Productivity costs less!

Total Drilling Cost

With Total Drilling Cost calculated by any method,

the productivity (ROP) and drill cost are the
drivers of the calculation.
Bit Price per Meter is a small part of theTDC.
Ex. 1, bit price/m, $.77 is 17% of $4.61/m.
Ex. 2, bit price/m, $.63 is 11% of $5.63/m.
Ex. A, bit price/m = 19%, FC + VC = 81%
Ex B, bit price/m = 14%, FC + VC = 86%
Total Drilling Cost

% of TDC Cost Breakdown

100%

75% 45%
53%
% Cost

83% 89%
50%
37%
33%
25%

17% 11% 19% 14%

0%
Ex. 1 Ex. 2 Ex. A Ex. B
Bit Cost/M Fixed Cost Variable Cost
Total Drilling Cost

The cost of productivity is the largest part of TDC

Spend less time drilling each hole.
Choose faster drilling bits.
Run bits to give high Penetration Rate and reasonable bit
life.
This will keep the TDC low.
Results
Western USA Copper Mining Company
Total Drill Cost (TDC)
2.40

2.00

1.60
US Dollars

BHMT
1.20

Manuf #2

0.80
Manuf #3

0.40

0
01/01/2002 1/01/2003 01/01/2004 01/01/2005
thru thru thru thru
12/31/2002 12/31/2003 12/31/2004 12/31/2005
11/15/2005
Results

Western USA Copper Mining Cost Savings:

2003 vs. 2002: $ -84,735 $1.89/ft
2004 vs. 2003: $ 837,561 $1.65/ft
2005 vs. 2004: $ 228,637 $1.58/ft
Total savings year on year: $981,463
If no change in TDC:
Would have spent: $22,921,117 (at $1.86/ft, 2002)
Actually spent: $21,254,869
Saved: $ 1,666,248
Results
Canadian Coal Miner
Total Drill Cost (TDC)
10.00

8.00
US Dollars

6.00 BHMT

4.00

2.00

0
01/01/2002 01/01/2003 01/01/2004 01/01/2005
thru thru thru thru
12/31/2002 12/31/2003 12/31/2004 12/31/2005

11/15/2005
Results

Canadian Coal Miner Operating Cost Savings:

2003 vs. 2002: $1,235,237 $7.58/m
2004 vs. 2003: $ 520,781 $6.30/m
2005 vs. 2004: $ 120,268 $5.85/m
Total savings year on year: $1,876,286
If no change in TDC:
Would have spent: $13,888,389 (at $9.91/meter, 2002)
Actually spent: $10,101,431
Saved: $ 3,786,958
Thank You!

Questions??