FINANCE FORUM •
It goes on to say that global demand shocks account for 50 % of the variance of global commodity price growth , while global supply shocks account for 20 %.
In the past few years , the boom in commodity prices meant that mining organisations benefited . But as these recent market movements demonstrate , there is a very real danger in allowing our profits to be determined by a cycle which is just that – cyclical .
There is not a thing that we , as an industry , can do about the price of gold , or platinum , or iron ore – or anything else . So where do we need to focus to keep our bottom line looking healthy ?
At OIM Consulting , we specialise in building supervisor capability within the mining sector and focus on helping mines control their cost curve . There ’ s an example that forms part of one of our modules , which goes something like this :
“ There are two mines that are largely the same . Same depth , mining the same reef , with the same labour force . Because these mines are the same , it will cost the same to take out 1 ton of rock ( i . e ., the same amount of labour , machinery cost etc .) The only difference is the grade or grams of gold per ton . Mine A mine yields 40g of gold per ton of rock , while Mine B yields 2g of gold .
“ Thus , Mine A must extract 25 tonnes of rock to yield 1kg of gold , while Mine B must extract 500 tonnes to produce the same amount . Therefore , it stands to reason that Mine A ’ s total production cost will be much lower to produce the same amount of gold .’’
The point of this story is to illustrate that we cannot control the amount of gold ( or any other commodity ) we yield per ton we extract , which will affect our costs and thus profitability . So , we need to keep our eyes fixed firmly on what makes up our cost per ton , as this is something that is within our grasp . And this is where your people can make or break your bottom line .
What typically costs mines ? While there ’ s always some variance between mines , these would typically be salaries and wages , leave / absenteeism , machinery and tools / equipment , injury and first aid supply costs , as well as theft and accidents .
This is where the mining supervisor plays a critical role . Through coaching them on how to plan properly and execute competently , we can have more effective blasts , for example . We can promote a more efficient system . We can ensure our machines are wellmaintained and working at optimal capacity . We can create contingency plans for absenteeism . It ’ s not necessarily about increasing yield : while the amount of tonnes we extract might be fixed , we can ensure that those tonnes are as profitable as possible by focusing on reducing our cost per ton .
Mines also deteriorate after a few years , which means that we need to be even more effective in our operations . This is where it becomes critical to keep our costs at the same level , not allowing wastage to happen . We need to look at where we spend time , making sure that it centres on activities that extract the most value .
By focusing on your people , you will safeguard and future proof your bottom line when the commodity cycle , again , spins around . •
Global demand shocks account for 50 % of the variance of global commodity price growth , while global supply shocks account for 20 %.
Image by pressfoto | on Freepik www . africanmining . co . za African Mining Publication African Mining African Mining • July 2023 • 37