Hall, B E, 2005. Ninth Underground Operators’ Conference, Perth WA 7-9 March.

A Quantitative Assessment of the Factors

Influencing the Shaft Versus Trucks
Decision
By B E Hall 1

Abstract
As near-surface underground mines progress deeper, the inevitable question is whether to convert
from truck haulage to shaft hoisting. The desire to defer capital expenditure frequently delays
investigation of the shaft option, or deferral of a decision to start shaft sinking, unless the shaft option
is clearly significantly better than trucking. By the time increasing depth makes trucking uneconomic,
there may then be insufficient resource remaining to justify a shaft, and the mine must close.
However, had the shaft been built earlier, its lower operating costs would have permitted the mine to
continue to greater depths.

This paper presents a methodology for investigating the shaft versus trucks decision. As well as the
typical analysis of which option is preferable at the time the analysis is conducted, the process
presented illustrates how the timing of the decision to sink a shaft is critical. The paper shows how to
identify the latest date at which the decision to sink a shaft can be made, after which time the shaft
option will not be economic. It also illustrates how to assess the resource that may be required to
justify the shaft. Considering this in conjunction with the latest decision date, implications for the
company’s exploration program are discussed.

Introduction
Near-surface underground mines, often as extensions of an
open pit, typically commence production with truck haulage for
ore handling. Even if the resource is known to be of sufficient
size and quality to support a shaft, the desire to defer capital
may often lead to trucking initially. As the mine progresses
deeper, the inevitable question is whether to convert from truck
haulage to shaft hoisting. The desire to defer capital
expenditure frequently delays investigation of the shaft option,
or deferral of a decision to start shaft sinking, unless the shaft
option is clearly significantly better than trucking. By the time
increasing depth makes trucking uneconomic, there is often
then insufficient resource remaining to justify a shaft, and the
mine must close. However, had the shaft been built earlier, its
lower operating costs would have permitted the mine to
continue to greater depths. Frequently, in order to minimise
exploration expenditure, the resource is insufficiently identified
at various stages of the mine’s life to allow rigorous evaluation
and justification of a shaft, but in retrospect, with improved
knowledge of the resource from ongoing exploration, it
becomes evident that a shaft could have been justified earlier,
had the knowledge been available earlier. The mine closes
earlier than it could have, returning less to its owners than it
could have done.
Simplistically, a shaft should not be sunk earlier than when
production is at the depth where truck haulage costs become
more expensive than shaft operating costs, and there must then
be sufficient reserves remaining for the lower operating costs to
pay for the shaft development. Clearly the longer a shaft is
1. Principal Mining Consultant, AMC Consultants Pty
12/179 North Quay, Brisbane QLD
E-mail: bhall@amcconsultants.com.au
deferred beyond this point, the smaller the resource available to
pay for it, and the lower the overall return of the mine. This
paper describes a methodology for identifying how product
prices may influence the economic limit of mining with and
without a shaft, and, whether a shaft is viable or not, how the
value of a shaft diminishes with deferral and when it becomes
uneconomic. It also indicates how the resource required to
justify a shaft ahead of the current mining front will vary, in
particular increasing rapidly as the date of the shaft installation
is deferred as long as possible.
The examples are in the context of underground metalliferous
mines, though similar situations no doubt exist in other sectors
of the industry. The challenge for mine technical and
managerial staff is to identify where these types of things are
happening in their operations, and to address the culture and
attitudes that allow them to continue to occur.
Hypothetical Case Study Operation
A hypothetical mining operation has been used to illustrate this
paper. The key underlying assumptions and input data are
described below. The data does not represent any one mine, but
is typical of a number of operations. Cost data in the tables are
generally typical of a number of operations of this type, though
some values have been set in order to demonstrate the
principles involved. The results described should therefore be
seen as indicative of the general nature of the results obtainable
by such studies, and should not be taken to represent real
economic rules of thumb for current mining operations.
Figure 1 shows a schematic cross-section of the hypothetical
resource and infrastructure development.
Ltd,
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision
The hypothetical resource
The resource modelled starts 250 m below surface, is steeply
dipping and is well known down to a depth of 700 m, 300 m
below the current production front at 400 m depth. This is the
Measured and Indicated Resource (and Proved and Probable
Reserve), and it consists of 25 000 tonnes per vertical metre
(‘t/vm’) at 3.5 g/t Au. An Inferred Resource exists down to 900
m, 500 m below the current production front, since widely
spaced drill holes have intersected similar mineralisation down
to that depth. This zone is also assumed to consist of 25 000
t/vm at 3.5 g/t Au. The resource is open at depth and
exploration potential extends below 900 m to an unknown
depth. This is also assumed to be 25 000 t/vm at 3.5 g/t Au. In a
real study, more detailed information for tonnage and grade for
smaller depth increments can of course be modelled.
Infrastructure and operating physical parameters
The orebody is assumed to be mined by a method that has a
single mining front advancing downwards (such as sublevel
caving or uphole retreat). The mill capacity, and hence the
production target, is 1.0 Mtpa, but a vertical advance rate of 50
vertical metres per year (‘vm/yr’) is not to be exceeded. With
the resource data specified above, mining will progress at 40
vm/yr.
The main access and trucking decline can advance at a
maximum rate of 150 m per month and has an effective overall
gradient of 1:8. The decline face is at 600 m. It is planned that
the decline should generally maintain a lead of 100 vertical
Figure 1 - Schematic cross-section of hypothetical operation.
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metres (‘vm’) ahead of the production front, but will finish 20
metres below the lowest production level for provision of a
sump. If a shaft is sunk, the decline is required to be at the level
of the shaft bottom 1.5 years before shaft commissioning.
Haulage out of the mine is either by ‘trucking only’, with all
rock hauled directly from where it is produced to surface, or by
‘trucking plus shaft hoisting’ (also referred to as ‘trucking plus
shaft’ or the ‘shaft option’). With trucking plus shaft hoisting,
rock is trucked to surface until the shaft is commissioned.
Thereafter, rock generated from the depth of the production
front down to the level of the truck tip is assumed to be tipped
into passes on the production level and gravitate via the passes
to the shaft skip-loading facilities with no trucking occurring,
while rock generated below the depth of the truck tip is trucked
up to that elevation.
The shaft loading station is to be 1000 m below surface: it is
assumed that by the time the shaft is sunk, additional reserves
will have been proved below the current limits of knowledge at
900 m depth. The truck tipping point is 50 m above the loading
station, and the shaft bottom 50 m below. The shaft
construction period is two years and the shaft starts hoisting
when the production front is at a depth of 650 m.
Metallurgical recovery for current operations is 95 per cent, and
this is assumed to continue for the life of the operation.
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision

Financial and economic parameters Are trucking only or trucking plus shaft hoisting down to the
bottom of the current Inferred Resource at 900 m depth. For
The financial and economic parameters used in the analysis are completeness, though it will almost certainly be uneconomic,
shown in Table 1. It can be seen that a number of these have trucking plus shaft hoisting down to the bottom of the current
been entered in such a way as to permit or facilitate flexing of Reserves at 700 m depth is also evaluated. Although the nature
the physical parameters. For example, varying the shaft depth of the mineralisation suggests that the Inferred Resource
will result in changes to both the capital and operating costs. continues at 25 000 t/vm, analyses will be done for both that
Also, the time specified for no capital spending at the end of the and a conservative estimate of 60 per cent of that value, being
mine’s life will take cognisance of the calculated life of the 15 000 t/vm.
mine and adjust sustaining capital expenditure accordingly.
Winder and headframe costs have, however, been entered as Table 2 shows the after tax NPV for the six cases evaluated. It
single values only. If it were desired to vary the production can be seen as expected that there is no value from sinking a
capacity of the shaft significantly, it would be necessary to have shaft to start when production is at 650 m depth if the reserve to
capex data that supported that level of analysis. be ultimately mined only continues to 700 m. Mining down to
900 m adds some $9 M of NPV with trucking only if the
Traditional Analyses of Alternatives resource continues at 25 000 t/vm, and a shaft adds a further $2
M of NPV. If the Inferred Resource only converts to Reserve at
Typically, analyses of truck versus shaft hoisting evaluate what the conservative rate of 60 per cent or 15 000 t/vm, continuing
is known at the time of the analysis. In the hypothetical case production below 700 m is not warranted, and the shaft option
developed, one option is clearly trucking only down to the has an NPV some $5 M less than that for trucking only.
bottom of the current Reserves at 700 m depth. The alternative Interpolating linearly between the values in the table indicates
strategies that the Inferred Resource needs to convert to Reserves of some
17 300 t/vm with trucking only, and 19 200 t/vm with the shaft
Table 1 - Financial and economic parameters. option, for mining below 700 m to be economic, while 22 200
t/vm is required for the shaft option to break even with trucking
Gold price $550 $A/oz only.
Gold price inflation rate 1.50% /year A typical analysis would also involve what is often referred to
Capital costs as a ‘sensitivity analysis’, whereby certain key data parameters
Decline development $3500 /metre are varied by certain percentages above and below their base
case values, and the results plotted. Figures 2 and 3 show
Shaft sink and equipment $25 000 /metre
typical sensitivity plots for the effect on after tax NPV of
Winder, headframe, etc $10.0 M changes in gold price and operating costs, for the trucking only
General sustaining capital $2.50 /tonne produced and trucking plus shaft options down to 900 m, for 25 000 and
Shaft sustaining capital $1.00 /tonne hoisted 15 000 t/vm, and in both cases compared with trucking only
down to 700 m.
No Capex in last three years
Capital cost inflation rate 2.50% /year (excluding decline
As expected, increasing gold price leads to increasing NPV,
development)
and increasing costs lead to reducing NPV. Unfavourable
Operating costs variations of the order of 15 -25 per cent for both price and cost
Mining fixed costs $10.0 M /year result in NPVs approaching zero. With trucking only,
Mining variable costs $10.00 /tonne produced continuing down to 900 m becomes better than stopping at 700
m as the gold price increases through 90 per cent of the base
$2.00 /tonne.km produced
case price with a 25 000 t/vm reserve, and at approximately 104
Shaft fixed costs $1.0 M /year per cent of base case with 15 000 t/vm. With a shaft, the
Shaft variable costs $1.00 /tonne hoisted corresponding prices are approximately 89 per cent and 113 per
$1.00 /tonne.km hoisted
cent of the base case. Similar analyses can be done for the
break-even points for changes in operating costs.
Mill fixed costs $4.0 M /year
Mill variable costs $3.00 /tonne milled
Administration fixed costs $5.0 M /year
Operating cost inflation rate 2.00% /year (also applied to decline
development)
Discount rate before tax 10.00% /year real
Discount rate after tax 8.00% /year real

Table 2 - After tax NPVs of typical options evaluated.

Mining the Reserve only (down Mining the Reserve and Mining the Reserve and Resource at 15 000 t/vm (down
to 700 m) Resource at 25 000 t/vm (down to 900 m)
Trucking only $52.8 M $61.5 M $50.2 M
Shaft hoisting below 650 $35.3 M $63.4 M $45.2 M

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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision

Figure 2 - Sensitivity of after tax NPVs – trucks only. FIG 3 - Sensitivity of after tax NPVs – trucks plus shaft.

Figure 3 – Sensitivity of after tax NPVs – trucks plus shaft

This type of analysis provides some insights, but is often
simplistic and of limited value for strategic decision-making. In
some analyses, it is implicitly assumed that mining is economic
down to the known Base of the Resource, which may not be
true. In other cases, simple operating break-even depths for the
limits of trucking may be calculated for both trucking only and
trucking plus shaft. These calculations are typically done for the
base case data only, and the limits identified define the reserves
and resources used for further evaluations. They often do not
take account of other cash flow timing effects. The optimum
depth as defined by maximum NPV after tax will typically be
less than the operating cost break-even depth. The type of
sensitivity analysis shown above typically does not take any
account of changes in economic limits to depth with changes in
the parameters being varied.
In a case such as this, a typical decision would be that a shaft
cannot be justified with the present knowledge of the resource,
and trucking will continue. Exploration may or may not
continue, and another evaluation of the shaft alternative may

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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision
not be undertaken until another exploration drilling program
has been conducted, at which stage the production front will
have moved down. Exploration is often extended merely to
maintain a minimum tonnage of reserves and resources ahead
of production, and the depth of the limits of knowledge of the
resource beyond the current mining front are therefore typically
no greater than when the previous shaft evaluation was done.
The results of future shaft versus trucks studies will therefore
frequently be the same as before. This cycle will repeat, and a
shaft will never be able to be justified, until the economic limits
of truck haulage are reached and the mine must close.
An Alternative Evaluation Methodology
Construction of the evaluation model
A simple hypothetical model has been constructed in Microsoft
ExcelTM to evaluate a range of options. It allows substantially
more information to be provided for strategic decision-making
than a traditional analysis. All the numerical values in the data
described for the hypothetical operation can be altered and the
model will automatically take account of the changes in the
physical schedule generated.
A key variable in the logic of the model is the changing depth
of the production front, which as noted above, is currently at
400 m. By considering the reserves, production rate and vertical
advance rate, this can easily be converted to a time-scale for the
various physical activities. The ultimate depth of the mine also
affects the model calculations. If specified as a depth less than
the base of the Reserve (700 m) or Inferred Resource (900 m),
the material to be mined will be truncated at that specified
ultimate depth, overriding the specified boundaries of these
regions. If set deeper than the base of the Inferred Resource,
mining is assumed to continue down to the specified depth
using the tonnage and grade specified for Exploration Potential
in the input data.
The model has been constructed so that changes in any of the
data entry items will be correctly reflected in the physical
schedules, including in particular such key cost drivers as
production tonnes and grades, decline development, truck and
shaft tonne.kilometres and the timing of shaft construction. The
input parameters for the size and final depth of the resource and
reserve mined, and the mining rate targets and constraints, are
used to generate a production schedule that complies with all
these requirements. Requirements for decline development
relative to both the production front and shaft development
determine the development schedule. Cash flows are then
calculated from the appropriate physical cost drivers and the
fixed and variable unit costs and prices in the data. Mining,
milling and administration operating costs, both fixed and
variable, and capital costs for shaft development and
construction, decline development and sustaining capital, are
generated at the correct times from the physical schedule, and
tax calculations are performed. For simplicity in this
hypothetical example, depreciation for tax calculations is
assumed to be on a tonnage depletion basis for the mining
reserve and life of the mine as calculated by the model for the
scenario specified by the current input data set. Net cash flows
and NPVs, before and after tax, are calculated.
The only financial parameters that have not been taken into
account fully in the demonstration model are the effects of
production target changes on the capital cost of the shaft winder
and headframe, though as noted above, this requires only the
inclusion of a suitable data table.
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The model has been constructed in such as way as to enable the
flexing of any number of data input variables in any desired
combinations and to report the resulting values of any number
of output variables (up to limits imposed by the maximum
number of rows and columns allowable in a worksheet in
Microsoft ExcelTM). For example, in the model as used for this
study, results were extracted for net undiscounted cash flow
(‘NCF’) and net present value (‘NPV’), both before and after
tax, for scenarios with trucking only, or trucking plus shaft
optioning. As the main purpose of this paper is to discuss the
results obtained, detailed modelling techniques are not
discussed further.
All results discussed are for after tax NPV, unless otherwise
noted.
Use of the model
For the results reported in this paper, the main parameter varied
in the analyses is the ultimate depth of the mine, in order to
identify the optimum depth both with and without a shaft, and
to assess the impact on changes in other parameters on those
and other relationships. Other parameters varied are:
• gold price;
• the tonnes per vertical metre in the Inferred Resource
and Exploration Potential regions below 700 m and
900 m depth respectively;
• the depth of the production front when shaft hoisting
starts; and
• the duration of any break in production between
trucking only and shaft hoisting if the Economic
Depth of trucking only is exceeded.
The following sections describe these evaluations and how they
may be used for improved strategic decision-making.
Definitions
In the discussions below, several terms are used with specific
meanings, as follows.
Base of the Resource
The depth of the bottom of the mineralisation. Unless the
context otherwise implies, it refers to the as yet unknown true
bottom of the mineralisation, which will eventually be
discovered by ongoing exploration. Until it is actually known, it
is a hypothetical depth to facilitate evaluation of what might be
the case if the resource were in fact to extend to that depth.
Base of Mining
The depth of the lowest level from which production will occur.
It obviously cannot be deeper than the Base of the Resource: it
can be shallower.
Economic Depth
The Base of Mining that delivers the maximum value of the
parameter for which it is derived. For example, the Economic
Depth for after tax NPV will be the depth which, if set as the
Base of Mining, maximises the NPV of the operation. If the
value parameter is specified as the more usual ‘cash break-
even’, it is the depth at which the revenues generated from the
ore mined equal the cash costs of mining them. Since costs will
typically increase with depth, this definition is satisfactory if
the grade is constant or has a consistent trend with depth. If,
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision
however, the grade is variable, it may be necessary to define the
cash break-even Economic Depth as the Base of Mining that
delivers the maximum cumulative net operating cash flow.
Evaluation of Options and Scenarios
The effect of the ultimate depth of the mine
The Base of Mining can be varied in the model from the current
mining front to any desired depth. For the cases reported, this is
from 400 m to 2000 m depth. The Base of the Resource is at or
below the Base of Mining. Figure 3 shows after tax NPVs for
trucking only and trucking plus shaft as functions of the Base of
Mining. The resource and exploration potential are assumed to
continue down-dip at 25 000 t/vm and 3.5 g/t Au as for the
Reserve above 700 m depth. Other parameters in the initial
analysis are as shown in the description of the model.
Figure 4 - After tax NPVs as functions of ultimate depth.
It should be noted that the Economic Depth may be different
for different economic goals. Table 3 shows the Economic
Depths (to the nearest 50 m) for NPV and NCF, before and
after tax, and with and without a shaft. It can be seen that the
after tax Economic Depths are shallower than those before tax,
and NPV-based Economic Depths are shallower than those
using NCF. The explanation of these differences is beyond the
scope of this paper. The before tax NCF Economic Depth
represents the depth where a simple cash break-even occurs and
would typically be the Economic Depth specified by traditional
analyses. Table 3 illustrates that this may not deliver the
company’s overall strategic goals.
Table 3 - Economic Depths for various parameters.
Trucks only Trucks and shaft
NCF before tax 1150 m 1850 m
NCF after tax 1150 m 1800 m
NPV before tax 1100 m 1750 m
NPV after tax 1050 m 1550 m
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Figure 4 shows a number of features that may be of benefit for
decision-making. The Economic Depths of the mine with
trucking only and trucking plus shaft are 1050 m and 1550 m
respectively. The reduced truck haulage distances and operating
costs with a shaft installed allow production to continue to a
greater depth than with trucking only. Though hoisting starts
when production is at 650 m, the mine needs to extend to at
least 900 m for the upfront capital costs of the shaft to be paid
for by the cumulative discounted operating cost savings. If the
resource is known with confidence down to 900 m or below,
the shaft can be safely sunk with the knowledge that any
increase in resource will only add further value. Also, there is
no point in exploring below 1550 m depth, unless further
exploration results in higher ore grades at depth, or costs are
reduced, in which case further analyses could be conducted
with new data values.
The effect of product price
Figure 5 shows similar curves to those in Figure 4, but at three
different gold prices – $A510, $A480 and $A450 per ounce. As
expected, the Economic Depths decrease as the gold price
reduces.
Other information can be derived from these curves. It can be
seen that at $510 the shaft curve passes through the trucking
only curve at the Economic Depth of 850 -900 m and continues
rising to its own Economic Depth of 1350 -1400 m. Whatever
the depth of the Base of the Resource – down to the Economic
Depth of 1400 m – a viable mine plan exists with the Base of
Mining at the Base of the Resource, and increasing depth
delivers increasing value (so long as the shaft is operating as
planned when production is at 650 m and the resource
continues below 900 m).
At $480, however, there is a range of uneconomic values for
the Base of Mining. Although the shaft option becomes better
than trucking only with the Base of Mining at 850 - 900 m, as
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision

with the higher price, the break-even point is at an NPV less
than that at the Economic Depth for trucking only, which is at
700 m with this gold price. The shaft curve only rises above the
maximum value of trucking at a Base of Mining of 900 - 950 m
depth. Therefore, if the Base of the Resource is between 700
and 950 m, a shaft will not add value, and the mine should
truck down to a Base of Mining of 700 m and then close.
However, if the resource continues below 950 m, mining may
continue down to the Base of the Resource or the Economic
Depth with a shaft of 1250 - 1300 m, whichever is shallower.
With the lower gold price of $450, the shaft curve, though
again higher than the trucking only curve below 900 m, never
rises above the maximum value of the trucking only curve, and
the mine will close after trucking down to the Economic Depth
at this gold price of 600 m, regardless of how deep the resource
extends.
Figure 5 - After tax NPVs versus ultimate depth and gold price.
This form of analysis indicates how the gold price not only has
an influence on the Economic Depth, but also can generate a
range of depths for the Base of Mining, between the Economic
Depths with and without a shaft, that will reduce project’s
value. This results in a step change in the Economic Depth as
the Base of the Resource gets deeper.
The effect of the resource tonnage
From the discussion of the ‘traditional’ analysis above, it is
evident that the size of the resource and exploration potential
can have a bearing on the mine’s strategy. Figure 6 shows after
tax NPVs for trucking only as functions of Base of Mining and
the tonnes per vertical metre below 700 m depth. Figure 7
shows these for both trucking only and the shaft option.

Figure 6 - After tax NPV versus ultimate depth and size of resource – trucks only.

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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision
Figure 7 - After tax NPV versus ultimate depth and size of resource – trucks only and trucks plus shaft.
Both figures show that the effect of the size of the resource is
and the Base of the Resource is below 850 m to 900 m.
relatively small for sizes above 20 000 t/vm, which is the size
At 15 000 t/vm, the shaft option is better than trucking only if
that permits the allowable vertical advance rate to deliver the
the resource extends beyond 1000 m depth, but in this case the
1.0 Mtpa production target. Once the possible production rate
maximum value of the operation with a shaft, at the Economic
falls below that, due to the 50 vm/yr limit, the value of material
Depth of 1250 m, is less than the value of trucking only with a
below 700 m rapidly reduces and becomes uneconomic. It can
Base of Mining at 700 m. Lower resource tonnages exacerbate
also be seen in Figure 7 that the shaft option is better than this
situation. The analysis provides a clear indication of the size
trucking only, so long as the resource is greater than 20 000
t/vm and depth of the resource required to justify a shaft.
The effects of shaft starting date
Qualitatively, it can generally be stated that shaft hoisting could
commence economically as soon as the production front
progresses below the depth where the truck haulage costs
become greater than hoisting costs. The sooner the shaft
becomes operational, the more tonnage can be handled at its
lower haulage costs, and the greater the benefit from the shaft.
Delaying the shaft reduces the tonnage handled at lower
haulage costs, and if delayed too long, there may be insufficient
savings to pay for the shaft and it will no longer be justifiable.
Figure 8 shows after tax NPV versus the Base of Mining for
trucking only and for shafts commissioned at various times, as
specified by the depth of the production front when shaft
hoisting starts. Broken and dotted lines show the maximum
value obtainable with trucking only, and a $5 M margin above
that.
It can be seen that, as expected, as the start of shaft hoisting is
delayed, the break-even Base of Mining increases, and the
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value of the shaft option reduces, eventually falling below the
maximum value obtainable with trucking only. The difference
in value between different shaft starting times is the same for
all depths of the Base of Mining, representing the extra cost
incurred by continuing to truck for a given period when cheaper
shaft hoisting could be used, less the difference in discounted
costs of the shaft due to its deferral. (While it has not been used
in this study, this calculation logic could be used to identify the
optimum timing of the shaft development and construction.)
For this case study it is specified that the shaft option should
have an NPV at least $5 M greater than trucking only, to reduce
the financial risk and deliver a positive NPV for the
development project. If the shaft is commissioned when the
production front is at 800 m, then it is only necessary for the
resource to extend to 1000 m for the shaft to be viable, and
additional depth of resource adds significant value. If the shaft
is delayed until production is at 1000 m, then the resource must
extend to 1350 m for the shaft to be viable, and there is little
extra value obtainable down to the Economic Depth of 1550 m.
It can be seen that the shaft must be commissioned when the
production front is no deeper than about 1030 m. In this case
the resource must extend to the Economic Depth of 1550 m for
the desired $5 M margin from the shaft to be obtained. If the
shaft commissioning is delayed further, until the production
front is at 1130 m or below, the shaft option can no longer add
any value, regardless of the depth of the Base of the Resource.
As with the effects of gold price, delaying the shaft generates a
range of depths for the Base of Mining between the Economic
Depths with and without a shaft that will reduce value, resulting
in a step change in the Economic Depth as the Base of the
Resource gets deeper. Figure 9 shows the Economic Depth,
with or without a shaft (whichever is more valuable), as the
depth of the Base of the Resource increases, depending on
when the shaft is commissioned.
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision
It can be seen that, with trucking only, as the depth of the Base
of the Resource increases, it is also the Economic Depth, down
to the Economic Depth of 1050 m. Beyond this depth,
increasing trucking costs reduce value. If a shaft is
commissioned when production is at 800 m or 900 m, the
whole resource is economic, with the Base of Mining at the
Base of the Resource, down to the Economic Depth of 1550 m.
With the shaft commissioning delayed until production is at
1000 m or 1100 m, there are ranges of depths of the Base of the
Resource where the Economic Depth is that for trucking, at
1050 m, until the increasing depth of the Base of the Resource
is sufficient to justify the shaft. From those points on, the
resource is again economic for bases of mining coincident with
the Base of the Resource, down to the Economic Depth of 1550
m. If the shaft is commissioned when production is at 1200 m,
there is insufficient resource down to the Economic Depth to
justify the shaft, and the Economic Depth of the mine remains
at the trucking only Economic Depth of 1050 m regardless of
the depth of the Base of the Resource below that.
The effects of breaks in production
The Economic Depth for trucking only is 1050 m, as shown in
Figure 8. The discussion of the effects of shaft timing above
includes cases with shaft hoisting starting when production is at
lower depths than this. This implies that uneconomic
production by truck haulage to surface is continuing while the
shaft is being constructed. This may be a valid strategy, for
example, to modelling of this mothballing. A data entry item
allows retain a trained workforce on site so that the mining
operation specification of the time with no production as a
percentage of can continue smoothly through the transition
from trucking only the shaft development and construction
time, which is two years to trucking and shaft hoisting.
Figure 8 - After tax NPVs versus ultimate depth and timing of start of shaft hoisting. FIG 9 - Effect of timing of start of
shaft hoisting on Economic Depth of mining.
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However, it clearly has a cost. in the data used. This percentage
can be greater than 100 per cent. An alternative strategy could
be to mothball the mine once The administration fixed cost is
assumed to continue through the production reaches the
trucking only Economic Depth until shaft break in production
to represent mothballing and care and hoisting commences,
after which production can resume and maintenance costs.
Figure 10 shows the effect on value of the continue to deeper
levels. The model logic also permits the duration of the break in
production.
Figure 10 is similar to Figure 8, and similar inferences can be
drawn. Increasing the duration of the break in production
results in the $5 M desired margin for the shaft being eroded to
virtually nothing, if the Base of the Resource and Base of
Mining continue to the Economic Depth with a shaft of 1550 m.
If the resource does not extend this deep, the shaft cannot be
justified and the mine should close permanently when
production with trucking only reaches 1050 m, rather than be
mothballed and a shaft constructed.
The impact on exploration strategy
A number of comments in the preceding discussion have shown
how the size of the Inferred Resource and Exploration Potential
(in tonnes per vertical metre) that is required to justify
production below the Base of the Reserve or the construction of
a shaft can be identified by this form of analysis. The depth to
which the resource needs to be identified to justify a shaft can
also be determined, together with the impact of that on the
exploration strategy. Figure 11 shows the Base of the Resource
and exploration lead required to justify a shaft.
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision

Figure 9 – Effect of timing of start of shaft hoisting on Economic Depth of mining

Figure 10 – After tax NPVs versus ultimate depth and duration of break in production before shaft hoisting

For example, as described above for Figure 8, if the shaft is
commissioned when the production front is at 800 m, it is
necessary for the Base of Mining to be at approximately 1000
m – more accurately 1025 m – for the shaft option to deliver $5
M more after tax NPV than trucking only. From the input data
it takes two years to develop and construct the shaft. If a six-
month investigation and decision-making process is assumed,
the data for the evaluation must be available 2.5 years before
the shaft commences operation. At a production rate of 1.0
Mtpa and with a Reserve of 25 000 t/vm, this time represents
100 vm of production. The resource must therefore be
sufficiently accurately defined at least 325 m ahead of the
production front at the time the evaluation commences.
This process is used to derive all the points on the curves in
Figure 11. The curves indicate that the minimum depth of the
Base of Mining, and therefore of the Base of the Resource,
increases gradually as the production depth increases towards
the Economic Depth for trucking only, but the exploration lead
reduces. However, as the production front approaches the

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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision
Figure 11 – Base of Resource and exploration lead required to justify a shaft
Economic Depth for trucking only, both the minimum depth of
the Base of Mining and the exploration lead increase rapidly.
The curves terminate at the Economic Depth for trucking plus
shaft.
The information derived from this type of analysis can
therefore give a clear quantitative indication of the minimum
exploration program required to provide information to justify a
shaft. Clearly a typical exploration program that seeks only to
prove up a couple of years’ Reserves – equivalent in this case to
80 vm, or at most 100 vm at the maximum vertical advance rate
– will never, in this hypothetical example, be able to generate
the Reserves needed to justify a shaft. Given the current level of
knowledge of the resource, the advance rates of both the
production front and the depth of the resource required to
justify a shaft, and the drilling rates available for various
numbers and types of drills, an exploration program can be
designed to ensure that resource information is available at the
right time and to at least the required depth to support a
definitive shaft versus trucks evaluation.
Conclusion
The timing of the decision to sink a shaft can have a dramatic
impact on the value that can be extracted from a resource. If
delayed too long, for example to defer capital expenditure, or
because the resource is not well enough defined to support the
decision, the extra value delivered by a shaft may fall to the
point where the shaft can never be justified.
A traditional evaluation of trucking versus shaft hoisting will
often evaluate only the known resources, and may also for
conservatism reduce the size and/or grade of any Inferred
Resource used in the analysis. Unless the shaft is clearly
justified with sufficient certainty to support a decision to install
it, the conclusion will often be that it cannot be justified with
the present information and should be re-evaluated later, rather
than that it can never be justified and should never be re-
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evaluated. Although the evaluation may then be repeated at
various times, limited exploration in advance of the mining
front on an ongoing basis may mean that there is never
sufficient information to justify the shaft at any point in time,
even though the resources eventually proved up could have
easily justified the shaft had they been known earlier.
The alternative methodology illustrated in this paper involves
the construction of a model that is able to handle correctly a
wide range of data inputs for resources and reserves in
particular, and also produce realistic physical schedules and
resulting cash flows for a range of decisions that could be
made, including such things as production rate targets and
constraints, and the timing of the transition from trucking only
to shaft hoisting. By evaluating the effects of variations in a
number of factors, both external, such as product price, and
internal, such as the lowest level of production and the timing
of introducing a shaft, various pieces of information to assist in
strategic decision-making can be produced. While such
‘number crunching’ cannot in itself justify a shaft any more
than a traditional analysis if the real information is not
available, it can clearly demonstrate what information must be
gathered in order to do so. The information generated can
include:
• The depth of the lowest production level to maximise
the value of the operation, with and without a shaft,
for any specified value measure. The Economic
Depth for after tax NPV can be significantly
shallower than that for the more typically used cash
break-even. There may be little point in exploring
below the Economic Depth with a shaft, unless there
is some reason to believe that the tenor of the
resource may increase in that region.
• The loss generated by deferring the shaft by various
periods. This loss depends on the period of deferral,
and is not influenced by the ultimate depth of the
Base of the Resource.
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A Quantitative Assessment of the Factors Influencing the Shaft Versus Trucks Decision

• The latest starting time of shaft hoisting for the

maximum value generated with a shaft to be greater
than the maximum
• value generated with trucking only. If a shaft cannot
be commissioned by that time, there may be little
point in exploring below the Economic Depth with
trucking only, unless there is some reason to believe
that the tenor of the resource may increase in that
region.
• The minimum depth of the Base of the Resource that
is required to justify a shaft, hence the amount of
exploration required ahead of the producing areas,
and how these may vary over the life of the operation.
The shaft-justifying exploration lead may be
significantly greater than what may be done to
maintain a reserve equivalent to some specified
number of years of production. If the exploration
program is based on maintaining a reserve, the
analysis may show that it may never be possible to
justify a shaft, even if it would have been justifiable if
the resource information had been available earlier.
• The impact of financial parameters such as product
price and costs on the above.

The methodology illustrated is a relatively simple extension of

methodologies already used. It requires a little more data
preparation and somewhat more complex modelling to ensure
that the ranges of alternatives compared are evaluated at a level
of accuracy that supports the conclusions drawn, but can
provide significantly more useful information for decision-
makers than has been provided by more traditional analyses.

Acknowledgements
The author wishes to thank the management of AMC
Consultants Pty Ltd for permission to prepare and present this
paper, and various members of the staff for their comments and
contributions.

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