Metals & Mining

Measuring labor
productivity in the
gold mining industry
By Adam Webb | 31 March 2017

Labor productivity in the mining industry is often expressed as tonnes of ore mined per man
hour and, as a consequence, open pit mines are often described as being more productive
than underground mines. However, looking at productivity in terms of revenue generated
per man hour accounts for both primary grade and valuable byproduct metals in the ore
and shows a different regional picture compared to that suggested by the more simplistic
measure of ore mined per man hour. This metric shows that underground mining is more
competitive in terms of labor productivity when compared with open pit mining than is
sometimes suggested by the more conventional metric of ore mined per man hour.
For this study, S&P Global Market Intelligence looked at 137 primary gold open pit and
underground mines across 30 countries in 2016. Figure 1 shows the average ore mined per
man hour for all 30 countries. Employees in the United States are apparently the most
productive, while in some more developed nations, such as New Zealand and Chile, the
workforce seems surprisingly unproductive. Generally, it is expected that employees in
more developed countries are more productive, as they require higher wage rates,
compared with less developed countries, where wage rates are lower. Looking at these
figures on a country level does not take into account the distribution of open pit and
underground mining, and this leads to some skewed results.

Figure 1 and 2
Figure 2 shows the same data but further split into open pit and underground mining
operations. This would appear to support the idea that employees at open pit mines are
able to be more productive than their counterparts at underground operations, due to the
large equipment and bulk-mining techniques that can be utilized at open pit operations.
However, a further problem is that looking at labor productivity based solely on ore mined
tonnage does not account for the value of metal that can be liberated from these mined
ores.

Underground mining exploits higher-grade ores in lower volumes, whereas open pit mining
exploits lower-grade ores at higher volumes. Figure 3 shows the weighted-average head
grade of gold in grams per tonne (g/t) for underground and open pit mines in each country
covered in this study. Average underground grades in the United States, Russia and
Argentina are particularly noteworthy in their superiority when compared with open pit gold
mines, although the same trend can be seen to a lesser extent across most of the
population.

In addition to the amount of gold that can be liberated from the ore mined, there are often
valuable byproduct metals present, such as silver or copper. The measure of tonnes of ore
mined per man hour also ignores the value of these secondary metals. To adjust for both
gold and byproduct metal content, we looked at productivity in terms of the gross revenue
generated in U.S. dollars per man hour for each mine. This represents the value generated
per man hour at each property, allowing for fairer comparison across regions and between
open pit and underground mining.

Figure 3

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By this measure, the underground gold mines we looked at in the United States, Peru and
Russia are more productive on average than the open pit gold mines operated in the same
countries. Employees at underground gold mines in New Zealand are more productive in
terms of gross revenue generation than those in open pit gold operations in most of the
covered countries, which contradicts what is suggested by the ore mined per man hour
values for New Zealand in figures 1 & 2. This difference is further demonstrated when
comparing figures 1 & 4. Figure 1 shows that for total average labor productivity, in terms of
ore mined per man hour, New Zealand is ranked 23rd out of 30, whereas figure 5 shows
that for total average labor productivity, in terms of gross revenue per man hour, New
Zealand is ranked 4th out of 30.

At the other end of the spectrum, figure 5 shows that South African employees at
underground gold mining operations are the least productive of the covered countries when
using the gross revenue per man hour metric. This is a result of the deep, narrow orebodies
that are exploited for gold in South Africa, which cannot easily be mechanized and
therefore rely on labor-intensive mining methods. This is further reflected in figure 4, with
average gross revenue generated per man hour by South African employees in both
underground and open pit primary gold operations lower than all other covered countries.

Figure 4 and 5
Comparing the position of countries in figures 1 and 4 shows that looking at mining
employee productivity using different metrics can lead to vastly different conclusions being
derived from the same data set. Using the conventional measure of ore mined per man
hour is useful when comparing mines that use similar mining methods at similar grades, but
its use is limited when comparing labor productivity across different mining methods and
deposit types. The measure of gross revenue per man hour allows for better comparisons
across mines that utilize different mining techniques exploiting ores with differing metal
contents, as it also accounts for the value of liberated metal.

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