Mine Planning is not Business Planning – a CFO’s view

Every CFO knows that the ability to rapidly generate and select the optimal technical mine plan is extremely valuable. They will also tell you that the job is not done until each operating plan is financially validated and tested! Mine planning is not business planning, and unfortunately the technical and financial business domains are divided by everything from egos to algorithms – not to mention the lack of standards and the deficiency of trust between the financial and technical domains in the mining industry.

MineRP 4.0’s “Rock as Stock” and “Lead Time Buster” features create business value by enabling or improving strategic and business planning, inventory / procurement, logistics management as well as operational and budgetary control.

In my first discussion, I decided to elaborate on the value offered by these features:

Amalgamated Spatial Data Base. - MineRP consolidates all the available geological and mining technical data into one powerful spatial database, a process we refer to as AMALGAMATION. The centralized spatial database (MineRP SpatialDB) is continuously updated as live data from various ongoing activities such as exploration and sampling modify the state and status of the ore body. On this basis MineRP maintains a real-time, auditable resource and reserve position, ensuring that any mine plan update and all statutory reporting is based on the latest, interpreted and approved geological data. The geological asset is now properly accounted for and earned the term “Rock is Stock”.
Mine Planning and Scheduling - MineRP has, at its core, a proven and tested ability to masterfully develop and update Mine Plans and Schedules. The specific feature that I’ll concentrate on in this document is the speed at which mine planning and scheduling can be done.By re-engineering the planning tools to develop planning alternatives though a parametric design interface instead of traditional CAD drawings, MineRP Planner has revolutionized the process and speed of mine planning. It is also the reason I decided to label it the “Lead Time Buster."

With MineRP 4.0, the lead time for developing a Life of Mine Plan and Schedule has been reduced from months to days/hours.

Figure 1 Parametric Technical and Financial planning with MineRP 4.0

With the mine planning and scheduling time constraint removed it is now possible, amongst other, to:

Rapidly deliver multiple, long term mining alternatives or scenarios for evaluation and comparison as necessitated by events in the market place, geological realities or in support of updated business plans.
Deliver a full array of operational options and scenario in support of an annual budget.
Deliver a fully-fledged revised mining plan and schedule for the rest of the year with almost no delay after the output from the last shift of the month is recorded.
Deliver fully updated Life of Mine plans for quarterly reporting to management and the Board of Directors.
Use the approved Life of Mine plan to derive all the information required for all planning horizons - down to the schedule for the next shift.

As already mentioned, CFOs understand the value of rapid access to alternative and eventually optimal technical mine plans. They also know that leaving the financial testing and validation of those plans as an afterthought exposes the whole process to failure.

With lead times for budget preparation typically measured in weeks and even months, the question should be asked whether the process of generating the required financial projections can also be transformed so that multiple mining options, scenarios, updates and revisions can be financially validated and tested at the same speeds?

Fortunately, with MineRP as enabler, the answer is Yes!

The format, granularity and cost coding flexibility with which MineRP delivers the cost driver and quality data, enables a seamless integration with most financial forecasting applications that are currently available. This integration, together with the configuration of the financial forecasting applications can effectively deliver automated, zero based financial forecasts within a few hours. In forthcoming chapters, we will expand on this aspect. (To do justice to this functionality requires at least a 3 to 5-hour presentation!)

For clarity, the output from these financial forecasting applications deliver full Income Statements, Balance Sheets, Cash flows, Funding Requirements, Costing Reports, Financial Ratios, DCF results, Loan Governance Calculations, Tax and Royalty forecasts to name a few and are able to adapt to the management accounting formats in use in the various organizations.

With the time constraints for mine planning and scheduling as well as for financial forecasting removed, it is now possible to deliver complete mine plans and schedules, fully supported by a comprehensive financial evaluation and adjudication for any time horizon selected.

AND NOW

The CFO can validate and evaluate every action, event, decision, option or scenario in terms of its

effect on shareholder value and can reconcile the shareholder value per a previous approved plan to the current plan with reference to every significant operational and economic variable.