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Synopsis
This paper describes the integration of the mineral resource management philosophy within strategic long
term planning at Anglo Platinum Limited. Consideration is given to the philosophy, processes, techniques
and supporting systems.
1. INTRODUCTION
A key consideration for mineral resource companies is the need to optimise value from
a finite, non-renewable asset, whilst operating in a market environment characterised by
variable metal prices. Central to this is the effective selection and implementation of a
strategically aligned project portfolio that enables optimal resource exploitation whilst
operating within mandated strategic bounds and identified constraints.
Realisation of value for stakeholders thus requires the effective integration of a range of
competencies, financial resources and assets across the business value chain. This is the
core function of mineral resource management.
This paper describes the integration of mineral resource management principles within
strategic mine planning at Anglo Platinum Limited - the process and techniques that are
applied to value and select mining investment options, so as to realise stakeholder value,
within a defined strategic context.
The core of this thinking can largely be traced to seminal thinking by Lane (1988) who
in the development of cut-off grade theory provided a rigorous analytical process that
leads to a cut-off policy (a sequence of cut-off grades over the life of mine) which will
maximise net present value for a specified production rate and set of economic criteria.
Application of this logic within a mining business value chain construct has
progressively evolved into the mineral resource management philosophy.
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A perspective of this mineral resource management philosophy, ‘a way of doing things’,
is provided by Macfarlane (2006):
This perspective can be considered in terms of what should be achieved through the
effective application of a MRM philosophy viz,
Mining operations within the Group develop and articulate a mine extraction strategy,
from which a Mining Right Plan (“MRP”) is developed and the Long Term Plan
(“LTP”) extracted. Each step in the process is a path along a decision tree with choices
being identified, rationalised, motivated and implemented.
The relationship of these integrated planning elements within the overall strategic
planning process is represented in Figure 1.
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Optimal scale
Production mix - MR/UG2 BUDGET ALIGNED
LTP
Basic mining layouts
Constraints identified
STRATEGIC
DIRECTIVES
MINE
STRATEGY GROUP VALUE
OPTIMISATION
INTERIM LTP
MINING
RIGHT PRODUCTION PLAN RANK/
BUDGET
PLAN PRIORITISE/ EXCO BUDGET -1 -2-3 EXCO
CONC. PROCESS GUIDELINE
SCENARIOS
PLAN PLAN
(multiple
options) LTBP
LTP 2006 Production Profile - Tons Milled
Level 1, 2a, 2b, 2c, 3 TO
AA plc
100,000
BUDGET
AP All Group L3
90,000
TO
60,000
BOSCHFONTEIN NOT CURRENTLY
LEVEL1 VIABLEBELOWFAULT
50,000 AP All Group L2a
LEVEL 2
TOWNLANDS
LEVEL3 40,000
TOWNLANDS LEVEL
2 FRANK AP All Group L1
OPERATIONS
30,000
LEVEL LEVEL TURFFONTEIN
1 PAARDEKRAAL 3 LEVEL 3
20,000 RS WLTR L1
8
06
08
12
14
18
24
28
30
34
40
1
LEVEL2
0
0
20
20
20
20
20
20
20
20
20
20
2
POOL BL BRAKSPRUIT
WATERVAL SHARE
AND LEVEL 1 LEVEL1
LEVEL1
POOL AND
SHARE
• How the entire mineral resource associated with the Mining Right Area is to be
exploited;
• Over what time period, and;
• At what cost (capital and operating).
The Mine Extraction Strategy sets the context in which all other strategic planning is
done. Key issues that must be addressed are:
The Mine Extraction Strategy thus informs the nature of the Mining Right Plan
specifically; optimal scale, associated reef mix (where multiple economic horizons
occur in a Mining Right Area), basic infrastructure options and critical constraints.
It is important to note that the Mine Extraction Strategy is not “the plan” but a clear,
motivated statement of the basic rules that will guide development of the Mining Right
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Plan and the subsequent Long Term Plan upon which investment decisions will be
made.
It is not necessary that the MRP be economically viable across the full life span but
rather that the full extent of the mining right is planned out in a technically defensible
manner using appropriate capital and operating cost estimates, and the prevailing global
planning parameters. Several options (normally extraction sequencing) should be
developed in order to identify an optimised (maximise NPV) plan.
The planning horizon of the MRP must cover the entire Mining Right Area – viz it is
not time constrained but area constrained. The MRP is reviewed and updated annually
as part of the Long Term Planning process.
The LTP is a full economic plan indicating the optimised exploitation option selected
from the MRP. Support infrastructure and service requirement forecasts are based on
the production profile and project pipeline as defined in the Lo ng Term Plan.
The LTP is updated twice a year (interim and budget aligned final) for level 1 plans, and
quarterly for all projects in execution in level 1 and any unapproved projects at study
levels 2a, 2b, 2c and 3 categories (Andersen et al, 2005).
Level 1 model’s are effectively current operations and approved projects (in
implementation / execution phase) that have all the necessary capital expenditure
already approved and thus requires only the necessary Stay in Business capital
expenditure for the balance of its life.
Level 2 models are proposed capital investments or projects and are divided into 3 sub-
categories (a, b & c), which are related to the confidence stage that the respective
proposed capital investment or project has last been reviewed. These sub-categories are
governed by a stage-gate review and approval process and comprise of:
The LTP forms the basis of the Group production and cost (operating and capital)
forecasting and is used for capital prioritisation and value optimisation.
Concentrating, smelting, converting and refining projects are identified and motivated to
match forecasted production outputs and timescales. Individual Process Directorate
projects compete with each other on a trade-off study basis to ensure that the optimal
value solution is developed to meet anticipated production levels. Capital requirements
for these projects is defined and associated with specific forecast production levels,
timelines and scenarios.
In this approach competing investment options are logically grouped, like compared
with like, values assessed and ranked within an overall prioritisation framework which
is completely aligned with strategic imperatives.
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LONG TERM PLAN BUSINESS PLAN
Level 1 Level 1
Current operations Current operations
STRATEGIC FILTER
Projects in execution Projects in execution
Figure 2 Long term plan to business plan – categorisation and ranking (adapted
from Smith & Pearson-Taylor, 2006)
One of the outputs from the Business Plan is an EXCO approved ‘Target’ scenario
reflecting the ‘Base’ scenario and additional confidence and value ranked projects from
the ‘Immediate project portfolio’. This plan is effectively managed by the operations
within the Mining Technical Services environment where the complete scope of tools
and techniques for achieving the objectives of mineral resource management are
applied.
These tools and techniques have been extensively documented, see Smith et al 2006,
and are not expanded on in this paper.
6 CONCLUSION
Capital investment is the life blood of minerals companies. Owing to the depleting
nature of the mineral resource asset it is necessary to continuously re- invest to sustain
production, let alone expand. Within this context there are often many competing
investment “imperatives” that can divert funding from critical projects.
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Alignment of capital investment with strategic intent can be readily achieved through
structured planning processes based on optimisation (value maximisation) of underlying
exploitation units and subsequent structured competition for financial resources.
The integration of processes and the logic applied to strategic long term planning at
Anglo Platinum Limited is underpinned by the philosophy of mineral resource
management.
ACKNOWLEDGEMENTS
The authors acknowledge the permission of Anglo Platinum to publish this paper.
REFERENCES
LANE, K. F. The Economic Definition of Ore: Cut-off Grades in Theory and Practice,
Mining Journal Books Ltd, London, 1988.
MACFARLANE, A. S. Extract from MRM lecture notes – Graduate Diploma in
Engineering, University of Witwatersrand, 2006.
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