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14
ASPECTS A OF A SMALL MINE
c.
MANAGEMENT ASPECTS
PLAYING A ROLE IN THE MANAGEMENT
OF A SMALL MINE
MR C HEEVER Managing Director
AFRICAN EXPLORATION COMPANY LIMITED
INDEX
lA. SYNOPSIS
lB. INTRODUCTION
2. MANAGEMENT ASPECTS
3. PRODUCT AND PLANNING ROUTINE AND REPORTING
4. GEOLOGICAL FUNCTION
5. ENGINEERING ROUTINE AND REPORTING
6. METALLURGICAL REPORTING
7. SAFETY
8. RECRUITMENT
9. CONSULTATIVE COUNCIL MEETINGS
10. LABOUR CONTROL
11. FINANCIAL ASPECTS
THE MANAGEMENT OF SMALL MINES
SYNOPSIS
1. Economies of scale have little relevance below 60 000 tons per annum but appear to become extremely valid above 60 000 tons per annum.
2. The principle costs in small mining are labour and stores. However. in mi nes bei ng reopened, the cost of development reopening can be as severe as primary development.
3. Area costing is critical to small mines, particularly when ore reserve blocks are widely scattered geographically.
4. Size of mine dictates cost distribution. There is no discernible pattern in small mines. As the mine expands, the growth of labour and stores has an unrealistic initial effect. Once the planned size, or a reasonable size, has been reached. inflation then becomes the real influence and relative costs remain static.
5. The statis of relative costs in small mines has been upset in latter years by the dramatic minimum wage levels for unskilled workers, and wage increases for semi/skilled lower category employees, set by some of the larger mining houses. This \I/ill ultimately jeopardize the future of small mi nes.
6. Growth of small mines is reflected in increased total expenditure but contraction of the mine does not have a direct effect upon expenditure, probably due to a resistance to decreasing costs.
7. Rate of growth of rate of growth of growth is really 40% p.a.). Then, are two categories:-
tonnage throughput has little effect on expenditure, except when the rate of significant (probably greater than
in these hi gh growth small mi nes, there
(a) Small mines less than 5 000 tons per month and
(b) Larger mines greater than 10 000 tons per month.
In the small mines, no economy of .scale is manifest in growth, the cost growth being proportional to tonnage gro\l/th. In the larger mi nes, rate of growth of expendi ture drops with growth of tonnage.
8. The dilution effect of cost efficiency in growth mines, tends to cause inelastic curves due to the large amount of unskilled labour, because mean wages drop as increased production requires more labour, at lower rates than those rates for labour already in service.
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9. In a strong concern level of
country with high unskilled employment, there is a influence to mechanization and, therefore, the to meet a realistic level of earnings, at the lowest labour, is influenced.
10. Skilled labour at affordable levels is in undersupply. in a country with high levels of unemployment due to political and union constraints.
11. There is clearly a direct correlation between the level of supervision and the tonnage duty, but the relationship is meaningless because it does not take cognizance of all the variable factors related to mines of different size. Tonnage duties vary from 1:200 to 1:250.
12.
The relationship between black and white employees vary from 1:8/10 for small mines in South Africa and 1:12/15 for the larger mines, to equivalents of 1:31 and 1:40 respectively. for similar mines in Zimbabwe.
As a corollary to 250 tons per man, important is that, can be referred to as
this, optimum duty per skilled person is or 25 tons per total employee. More on a small mine, the figure of 250 tons the management duty.
13. Growth mines in general show improvements in duty and cost producti vi ti es.
14. Rate of growth apparently has a detrimental effect on cost efficiency.
15. Independence and the disassociation from external formal bodies e.g. Chamber of Mines. as well as responsible formal labour organisation. has assisted in both skilled and unskilled labour cost efficiencies.
16. No reliable inflation factors exist from which to estimate future economic behaviour. Currency behaviour plays a greater role and its behaviour is less predictable.
17. Location of the mine appears to effect both efficiencies and labour experience effects.
18. Communication and training are almost always lacking and this can be seen by poor quality cost allocation, attention to standards etc.
19. The price of gold is central to profitability. despite a delicate equilibrium being required to be maintained between the ratios of profit. working costs and capital expenditure on the one hand. and grade control, ore reserves, primary development or reopening. on the other hand.
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Distortion of the equilibrium negates the effect of gold price. A factor which plays havoc with the equilibrium is the Rand/Dollar parity. and the unreliable predictions of the formal sector.
20. Factors common to management on small mines:-
(a) Hands on experi ence by mi ne management and head offi ce consul tants.
(b) Line experience,
(c) Perception of responsibility at all supervision on the mine and at head office.
levels of
(d) The ability of the mining industry to train managers to be all-round managers and businessmen, probably 'due to little or no training to other diciplines. such as geologists.
Recommenda ti ons
1. The optimum size of a small mine, in terms of economy of scale, is greater than 60 000 tons per annum.
2. Growth is attractive in theory. but almost always results in detriment to efficiency.
3. To move from one quantum in growth to another must be rapid rather than gradual and planning. particularly in terms of capital expenditure, must be sophisticated and detailed.
4. Cost control on small mines must be concentrated on stores and labour.
5. Duty effi ci ency can be optimi sed where supervl Sl on accounts for approximately 250 tons per person (skilled).
6. Hands on education is more vital to efficient management rather than academic qualification.
7. [)raw; ng on thp upper 1 eve 1 s of management in the greater industry is almost always detrimental to success.
8. The mining industry. and its various controlling bodies, mllst meet the next decade wi th an educa ti on system that meets the cri teri a for sma 11 mi ne I s management.
9. The Mines and Works Act. as applicable to competent persons and superVl Slon. is outdated. outmoded and needs urgent revision to overcome too many legal levels of supervision.
10. A review of taxation. possibly with elimination of tax, particularly as Government will earn its share from employee tax and General Sales Tax.
I NTRODUCTI ON
The primary focus in the mlnlng industry in South Africa, ;s on the management and the technological development of medium to large mines. Small mining ;s truely the "Ugly Duckling".
Small mining has been, is, and will continue to be, a profitable business but it is by no means simple. The problems small mlnlng face are more likely to be crippling. Had Barberton been in Australia, it would have been an internationally recognized mining field.
Unfortunately, in South Africa, financial institutions, due to ignorance and their inability to take risk because of the many opportuni ti es offered by large mi ni ng houses, have offered insufficient venture capital for small mining. to be fully developed. These same institutions, if they study the developed countries, must realize that, faced with higher energy costs and cyclically depressed metal prices, smaller, higher grade deposits will offer equal or better returns. The advantage of lower capital cost to commenCe production. is more attractive and suggests that cut off grade for a mineral deposit will be lowered. Due to the shortage of venture capital, new small mines are invariably under capitalized, suggesting better returns. This breeds a lack of future investment confidence and greater restriction on future small mining opportunity. Ultimately one would hope that the major institutions take a direct interest in small mining, by investing in their management holding companies. For success in small mining. management must display adaptability, practical skills, cash fl OvJ management, rather than prof; t reporti ng; and equally important. the financing of the venture must be adequate and must be controlled. Perhaps the best piece of advice is that of an old saying:
"l have six honest serving men. They taught me all I know, Their names are WHO and WHAT and WHEN, and WHY and WHERE and HOW.
In small mlnlng, when invariably there is no "Big Daddy" to finance shortfalls, the small mine manager has to ensure the availability and/or appropriate flow of some kind of business resource. As the production team works towards a flow of good output. he must be constantly aware of his need to have a good cash flol>J. at the right time, to correct utilization points and at economic cost. Simultaneously. his financial support has to ensure good daily information flow, again at the right time and at an economic and justifiable cost. To sum uP. the small mine manager. not havi ng the human resources hi s larger mi ne counterpart has, has to measure, in constant units, what goes into and what comes out of the business.
One of the greatest difficulties confronting the small mine manager, is to maintain ore reserves and then at a steady grade; both of which can only be achieved if a very positive policy is being made towards balanced exploration and development, and in the case of old mines towards the reopening of areas, with fixed sums of money being set aside specifically to meet these objecti ves.
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Good labour relations are vital and here too the small mine manager is -in direct contact with all labour authorities. including the unions. Our experience is that unions have adopted a very responsible attitude to small mining and have a good understanding of the contribution it makes to employment.
An examination of successful small mining operations shows that the United States of America, New Zealand. Mexico, Finland, Sweden. 110roeco and. more recently. Austral i a, where government has played a substantial role in providing all facilities, i nel udi ng easy fi nance. cheap equi pment and excellent back-up technology. These governments have also provided committed education and training. having recognized the small mines' needs in contrast to the needs of the bigger mines. i.e. Government participation in the provision of these needs and facilities has resulted in a thriving 'small mine' industry.
Obviously a major consideration in small mining is the operating cost per ton mi ned, whi ch in turn reflects fundamentals such as mining method and degree of mechanization. In small mines the latter is very limited - while the former is dictated by ore width, grade, dip and host rock strength and then personal preference. The cap; ta 1 cost per ton of capac; ty for mi ne development and 'equipment is relatively high for small mines, and overhead costs and interest on capital low. A much shorter time is required for construction of a small mine and its treatment plant and cash inflow is therefore accelerated. As in large mines, plant capacity is carefully matched against size of orebody. in order to maximize the life of mine against revenue. So too is it obvious that life of mine is influenced by both capital costs. (and investment discount rates), as well as operating costs. The optimum plant capacity for larger mines is less critical than for small mines. because required revenue per ton is relatively insensitive to capacity in the large mines, \'Jhereas the sensitivity curves are progressively far more cri ti ca lover narrower tonnage ranges in smaller tonnage orebodies. With this thought in mind, the optimum plant capac; ty for SOla 11 orebodi es mu s t be chosen wi th more care, because capacities markedly greater or smaller than this optimum, require a higher revenue per ton. This can be achieved by either grade or mineral price.
In $mall mines, whether new or being reopened. geological exploration -is the biggest pre-production cost. and accuracy of geological. or expected. ore reserve forecasting will be negated by inaccuracies of estimation of dilution, extractive metallurgy, mine call factor, capital cost and operating cost.
Probably surprlslng to many engineers is the fact that, in the late 1800'S. the same factors were also important. In 1890, the Wi twatersrand Gol d Mi ne was closed after 4 short years of opera ti on. Reasons for closure were gi ven as shortage and waste of both working. and intitial. capital expenditure, over i nves tment in fi xed assets, hi gh cost of transport, inappropriate and poor quality of machinery. inappropriate
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mining practice, shortages and costs of both unskilled and skilled employees, poor siting of treatment plant and a shortage of water.
In one form or another, similar shortcomings have been evidenced over the years, in one form or another, in both small and large mines. e.g. Lorraine, Freddies, Free State Saaiplaas, Afrikander Leases, Beisa, Western Deep Levels uranium plant and the Writers' Modder B Gold Mine. The risks related to mining will always be prevalent although minimized because of the inaccuracies related to human optimism or pessimism and the fact that mining. unlike industry, has so many variable factors.
The success of small mining today rests on the following factors;
1. Hands on. innovative, flexible consulting engineers/owners. 2. Hands on versatile managers. 3. Provision of capital to avoid early cash flow problems. 4. Financial back-up. 5. Technical back-up. 6. Control of working costs, 7. Ore reserve generation and replacement, 8. Grade control, 9. Adequate reliable equipment. both new and secondhand.
10. Labour productivity. 11. The commodity price and the Rand/Dollar parity. 12. Government and local authority support.
Ivlanagement Structures
A fundamental requirement of small mine managers and sub managemen t is the versatil i ty requi red of the manager and hi s immediate management team. It is not easy to quantify or qualify this statement, save that to experience it is to "feel i t". Some managers are graduates, others have progressed from the position of miner. Indeed, in small mining it is clear that the more successful are those with "ha:1ds on experience" and not necessarily educational qualifications. This also applies to the consulting engineer category. with one difference, the graduate educational background is neccessary but complemented by an ability to want to assit from a "hands on approach".
r~anagement behaviour in small mines appears to hinge around the following factors;
(a) (b) . (c)
(d)
Involves numerous regular duties, Informal verbal communication, rather than formalized i nforma ti on. Activities characterised by brevity. variety, strongly oriented to action with the disadvantage of discontinuity. Management is not a science - its most important ingredients being intuition. flexibility. judgement and timeous decision making.
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An interesting facet of small mine management is the informality of the hierarchy, as compared to the larger mines. This breakdown of rigidity probably arises because of the manager's role in having to possess, as his best attribute. the ability to practice "hands on" management and the amount of contact he enjoys with his subordinates. The small mine manager is often the chief surveyor. the ventilation engineer. industrial relations officer and the first level of metallurgical expertise, while his counterpart in a large mine may never have had that full exposure. Experience has shown that the more senior an official is in a large mine, the less likely he is to cope and adopt to change for small mining success.
MANAGEMENT ASPECTS PLAYING A ROLE IN THE MANAGEMENT OF A SMALL MINE
1. Tra in i n£1
This is probably the single most underestimated aspect in starting and managing· a small mine. Having no training facilities "ON THE JOB TRAINING" is what in effect takes place, but which is more often underestimated in time and cost.
Although I feel that it is not warranted to train separately, enough teething time and money must be allowed when commissioning every aspect of the operation.
2. Personnel
Adapting Mining Supervisors to the "small mine" is always a problem. Most Supervisors are from larger groups and are not used to the small scale "hands on" type operation. and are often not used to such close cost control. .
The r~anager finds himself very involved with all personnel and. although this is good from a motivation point of view. often he becomes the only decision maker. It is important that all Departmental Heads and Supervisors be given the freedom of decision making at their level.
3. General t1anagement Principles
I have found that the best style of management is a combination of decentralized and centralized management.
Decentralized from the point of view of decision making and controls. It is important that all levels be given the opportunity of hi ri ng and fi ri ng theVsubordi na tes. and of making standards and policies suitable to their environment. Centralized from the aspect of cost control. A 11 expendi ture against budgets must be controlled di rectly by the Mine Manager and Financial Manager. and if this is not done then costs become the downfall of the operation. It is only the Manager that has the overall feeling and view of income versus expenditure in relation to expected production.
4. Cost Contro s
4.1 Budgets - All Supervisors must be involved in budget setting. Once set. it must be controlled by the Manager. Production forecast versus actual must be updated and budgets adjusted accordingly.
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4.2 Black timekeeping Again this is an area where i nsuffi ci ent control coul d mean great losses. Often this is left to a clerk and not given enough attention. Clock cards and overtime records must be strictly monitored by a RESPONSIBLE, RELIABLE PERSON.
5. Planni ng
In a situation such as exists at Rogold, where a mine has been reopened, one has to, for cost reasons. attempt to mechanize. but at the same time design production around existing shafts. loading boxes and haulages. which were used for hand tramming.
Faces, in those days. only advanced some 20m a year and modern planning pushes faces to 15m or more per month. This obviously causes rock handling problems. Planning ahead and keepi ng 5 year, 12 month and 3 month plans. as well as normal monthly planning, is critical.
6. Grade Control and Sampling
With a reopened mine, underground tonnage is plentiful, existing stopes are full of waste stonewalls and if the manager adopts a tonnage attitude, tonnage 1S what he will get. In order to ensure gold tons, emphasis must be placed on meeting planned face advances and blasted tons. To achieve face advances, working places will have to be cleaned daily and tonnages will automatically flow.
Faces must be sampled regularly. as well as grab samples from hoppers etc.
7. Works' Council
Small mines still have labour relation problems and probably more so in that hostel and change house facilities either do not exist or are sub-standard. Regular communication with all employees, helps to relieve the anxieties of the labourers and grievances must be dealt with promptly. Again Uti s must be implemented by the Manager but he must. as soon as possible, let these meetings take place at a lower level, otherwise he will find himself being called in for minor grievance problems. It is imperative that they be handled by Supervi sors.
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8. Metallurgical Balance
Gold accounting must be given full attention, as is the case on larger mines. Accurate records mLlst be maintained and proper balances made on a monthly basis.
9. Securi ty
Security must always be of a high standard. Gold theft is an increasing problem and the small operations are not exempt from this. Vulnerable areas in the gold plant must be securi ty ti ght, and systems implemented to ensure that no losses take place.
10. Safety
The small mine Manager tends to lose sight of safety on his mine. due to frequency rate. Months can pass without an accident, but if figures were put in perspective. shifts lost per thousand often exceed larger, deeper mines.
Again he must ensure that proper safety instructions are given and standards are set.
Because of the irregular conditions when stoping. some pillars need to be mined differently. liMINE HIDE 11
standardization is impossible. I have found it better that, once a block has been prepared for stoping. the Shift Boss and Mine Overseer submit to the Mine Manager a recommended standard and. once approved. it then becomes the standard for the mining of that particular block and each area is treated separately.
11. Maintenance
Small mines carry relatively small complements for Engi nee"; ng Departments. often it is the case that everything goes wrong at once and the Engineering Department find themselves in a "fire fighting" situation. Once the Mine Manager realises that this is happening. he must act immediately. even if production must be reduced temporarily until "back log" maintenance is caught up. Sma 11 mi nes do not have "spares". A mill breakdown stops all production. A compressor breakown stops all dri 11 i ng. APump breakdown s tops a 11 pumpi ng. BreakdowilS"must not happen. mai ntenance must bemstituted and fully controlled.
12. Administration
The Financial Manager on a small mine must be strong and competent. Cost control and administration systems must be implemented and monitored. The Mine Manager must be updated daily on cash flow and expenditure/revenue information and it is thi s i nforma ti on tha t the Manager reacts to and then plans accordingly.
13. Legal Aspects and Returns
The sma 11 mi ne r~anager the legal aspects and mine Manager. As on making decisions for authori ti es.
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is probably more directly exposed to government returns, than the larger Rogold, establishing the mine and production often clashes with
The small mine Manager finds himself reading his law book at night, making sure that all statistical returns are met and that all relevant authorities agree with permits etc, applied for.
14. Staying in Touch
Mos t small mi nes are not members of the Chamber of t~i nes and often find themselves too tied up to attend Mine Managers Association Meetings. This results in him loosing touch with developments within the industry that affect the small mine .as well as the large mine. He must attend these meetings and make sure that he keeps abreast of developments. It is worthwhile. It is often the case that the small mine Manager can contribute a great deal to these meetings and benefit the industry as a whole.
15. General
In summary, the small mine Manager enjoys a more direct control of all the operations of the mine. He gains experience in all departmental operations due to a much closer involvement.
Starting a small mine, and where NO "hand book" all systems--and produce prescribed manual.
with little Head Office assistance exists, the Manager has to develop
documentation and forms without a
PRODUCTION AND PLANNING
MINE OVERSEER: R. S M I T
SHlfTBOSS: :r v. VUU,Q.€,N
CONTRACTOR: fi. 5,/,-<, E.S
DATE:
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I) M I N ERR E SOP 0 N SIB LE _ ~:-. V OI\A ~~~-!. _ _ _ _ _
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GEOLOGICAL FUNCTIONS IN RESPECT OF SMALL-SCALE OPERATING MINES
Geological functions in respect of small-scale operating mines are two fold, namely direct and indirect functions. Direct functions involve work carried out by the geologist, such as geological mapping, stope control, diamond drilling and evaluation of blocks of ground in the form of mine layouts. Indirect functions involve multidisciplinary teams that are formed to address particular aspects such as grade audits, mine planning in respect of the 'Life of Mine', loss control and capex allocations etc.
A brief description of direct functions is as follows:-
Geological Mapping of primary. secondary and tertiary development ends, together with working stopes, to delineate stratigraphy, structures and controls of mineralization.
Grade Control of working areas with particular reference to monitoring geological parameters as opposed to bad mining practice.
Diamond Drilling programmes. Supervision of diamond drilling, either for exploration-evaluation purposes or cover drilling ahead of primary development for water precautions etc. Budgeting on a cost per metre basis for incorporation into working costs or capital.
. Mine Layouts include evaluation of blocks of ground into the mine ore reserve and hence 'Life of Mine Plan'. This involves categorizing the reserves into proven. probable, possible and their availability for mining. It also includes s\·teepings etc.
Identifying the geochemical and geophysical reef signatures \'/hich enables compilation of a data base for evaluation and prospecting purposes.
Geostatistical evaluation of reef for sampling intervals with relevance to the distribution of
. mi nera 1 i la. ti on,
Compilation of cross sections and plans with recorded gl~ological detail for interpretation of known/unknown areas.
Reporting work carried highlighting productivity. proposal s etc.
out to the Mine Manager, recommendations and budget
- 2 -
Indirect functions are multidisciplinary, that operate to ensure good mining practice. These involve;-
Participation in Grade Audits which occur either monthly or quarterly. Results highlight the correlation between planned and achieved and problem areas which require attention. e.g. Metallurgical problems where refractory ore is encountered related directly to a geological situation.
Mine Planning by assisting the t1anager of Planning and Surveyor in planning mine development schedules into areas of potential ore reserve.
Recommendations to the Mine Manager as to allocation of Capex for best results.
ENGINEERING ON A SMALL MINES
1. Staff
In tile engineering field, on a small mine. the artisans and black labour mllst be a dedicated team. capable of doing any task asked of them. With a dedicated team the complement can be kept to a minimum. thus keeping down labour costs.
2. Maintenance
For the small mine to operate efficiently. with a 90% machinery availability. ma-intenance is of vital importance.
All maintenace must be planned, executed. and then check inspected.
(a) Planni ng
A maintenance schedule has been drawn up for each day of the week. and each task has an amount of hours allocated to it.
The scheaule is split up into areas of the plant and areas underground.
(b) Execution
Before any machine is stopped, the artisan gathers all the necessary equipment together. then he and the operator switch off the machine and lock it out.
The artisan then inspects and repairs any defects in the machine.
Any major repair work that is required. and which cannot be undertaken during the allocated hours, is logged and is done as soon as possible thereafter.
(c) Check inspection
After the artisan has completed the tasks allocated, either the Engineer and/or the Foreman. inspect the tasks done. Only then is the instruction given for the machine to be res tarted.
At the end of each shift the artisans log a,ny defects in the machinery log book.
This procedure i nspecti on only and Foreman.
includes all underground machinery. The takes place on a weekly basis, by artisans
Extensive use is made of check lists, which are kept at each machine and completed by the operator.
- 2 -
The operator checks and cleans the machine and repor~s any defects.
The check lists are scrutinised by all the engineering personnel concerned, as well as Shift Bosses and Plant Foreman, on a daily basis.
Flow Chart
I Breakdowns ~--' ----1'--_-.--__ -.1
[S tore stock items I Repa i rs .,
I 3. Stores
It must be remembered that the store is the life blood of the engineering department. If an item is not in the store, unnecessary down time is caused. On the other hand, high stock levels tie up capital.
Hith good maintenance records, a stock level can be created and adjusted where necessary.
The engineering over the mi ne. th is, the 1 0 ca 1 procedure.
4. Breakdowns
department does not have satellite stores all They lead to wastage and high cost. Because of
supplier plays a vital role in the stores
Mos t machi nes are a one-off item and any breakdowns are di rectly related to production. When any machine is damaged or worn, leading to a breakdown" it is repaired immediately. These situations, however. are avoided by doing complete and regular planned inspections.
The Foreman repa i r it. requi red.
and artisans are moved to that machine and jointly The Engineer is also on site to arrange any spares
5. Call out Procedure
The call out procedure is as follows:~
(a) The. Shift operator/Shiftboss inspects the machine where a problem ex; sts.
- 3 -
(b) Once he has, established the problem, he calls the appropriate artisan, by either phoning or paging him.
(c) The artisan has thirty minutes to get to the mine and start repairing the machine.
(d) After the artisan has been on site for more than one hour, and if he finds that he cannot repair the machine, he phones or pages tile Foreman.
(e) The Foreman will be on site within thirty minutes.
(f) After a further thi rty mi nutes. and shoul d the Foreman deem it necessary, he calls the Engineer out.
A ca 11 out record is kept by the Shiftboss or Shift opera tor and handed in the next morning.
The next morning a follow-up is done, from the sheets, by the Engineer. Any problems or late arrivals are dealt with immediately. This includes any unnecessary calls.
6 Conclusion
For a small mine to operate effectively. the engineering department must consi st of a dedi cted crew, supported by a stores system which ensures that all equipment required is procured and delivered as soon as possible.
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J.C.B. DAILY CHECK LIST
To be done on a shift basis and signed by shift Operator.
l
1. Check diesel
') Check engine oj] L.
<3. Check hydraulic oil
4 . Check battery terminals
5. Check hydraulic pipes
6. Check tyres
7 • Open & clean filter
8. Clean air filter container
9. Check lI'a ter
Down time Reason why
SHIFT SUPERVISOR
METALLURGY
No attempt is made to discuss the different metallurgical flow sheets for each of the mines we manage. save to say they are all sma 11.
They are:-
Modder B Gold Mine
Roodepoort Gold Mine
Vansa Vanadium
Dalny Mine (Zimbabwe)
Venice Mine (Zimbabwe)
Moser Hha t Cheer
Dawn Mine - Sands
Old Nic Mine
- 10 000 ton Gold Plant -Conventional Filters
- 10 000 ton Gold Plant -Carbon in Pulp
- 27 000 ton Run of Mine - 16 000 ton Concentrate
300 ton Product Output
- 20 000 ton Gold Plant -Conventional Filter
- 10 000 ton Gold Plant -Carbon in Pulp
- 2 000 ton Gold Plant -Carbon in Pulp
- 6 000 ton Leaching -(Carbon Circui t)
- 2 000 ton Conventional Filter
We have experienced one failure and that is in the case of Madder B. where an initial 5 000 ton heap leaching plant was installed after extensive laboratory work was undertaken by externa 1 spec; a 1 i st meta 11 urgi cal consult; ng engi neers. The performance was below that specified and resulted in havoc being played Iflith our cash flow. from inferior gold recovery. This was follovled up by a conventional filter plant. designed to use mllch of the existing heap leach establishment. Again the plant di d not meet up to expecta ti ons. not in terms of the desi gned f1 01'1 sheet but rather the techni cal desi gn and competence of various components of the plant. In retrospect we believe that, unlike our other plants. our engineers did not have sufficient "hands on" involvement in the design and construction.
Outside contractors need to have full hands on involvement of the; emploYEr. for success to be acnleved. As this aspect is likely to form the basis of a separate technical paper in the future. indicating failure, its causes and hO'.'J to minimize its recurrence, 1 i ttl e further is di scussed.
The metallurgical information called for in a reporting system, on even a small mine, requires a great deal of accuracy. quality and timeollsness, for a gold plant to operate at peak efficiency. However, a small mine plant, be it gold or base metal. is often staffed by no more than 4 skilled and 36 (semi and skilled) ass'istants. The mine metallurgist. under these conditions, is very much a "hands on" specialist and in charge of his own training, research and innovation, which complicates his role.
ROODEPOORT GOLD MINE PTY LTD
GOLD PLANT REPORT FOR THE MONTH OF
DATE:
TONS NIL LED
Tons in stockpile at ••..•..•.••••••••••• Tons in stockpile at ..•.••••••.••••••••• Tons crushed • III .......... " •••••••••••••• It •
Gold to Ni 11 • • • • • • 0 ••• tons @ • • • • • • • • Cl •
Gold to Leach . . . . . . . . . tons @ o •••• 0 " •••
Gold to C.I.P. • • • • III • tons @ • • • • • • • eo ••
g/t = ••••• 0 0 •••
g/t = ••• 0 .......
g/t III •••••••••
kg. kg. kg.
Nill running time hrs = % of possible ......... . hrs.
TAILINGS
C.I.P. C.I.P.
Solids Solution
Total Residue
Gold declared and banked
tons tons tons
Gold declared and progressive
Theoretical call Progressive call
kg. kg.
@ @ @
• •••••• Cl ••
• ••• 0 •• III ••
• •• 0 •• 0 •••
kg. kg.
Recovery & Residues •••.•••••••..••• kg.
g/t • ••••••• 0 •
g/t = • ••••• 0 0 ••
g/t • 0 ••••••••
Rec. & Residues progressi ve .•••••.• kg. . .••••.••• g/ t
Unaccounted +/- .•..•••.•.••.•••.•••• kg. Gold plant +/- progressive •.••••••.• kg.
Gold Plant recovery •.••..••.••. Gold plant recovery progressive
% %
kg. kg. kg.
Loaded carbon removed New carbon added Carbon inventory
kgs. kgs. kgs. year to date ••••• months
Ore processed progressive ••.••••••. tons @ ...... g/t Tailings progressive ......... e •• o.oo ••• (lO ••••••••••• g/t
Grading analysis Crushed ore •••••••••• Leach .• 0 •• 0 ••••••••
Residue
% % %
l2mm 75 micron 75 micron
I
I ,
I
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,
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~JiFt ForEfIBn Signature
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/>bming 91ift
Au In
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i , ,
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D.41E:
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Au In Au In Au In Au In Au In
S:Jlution Grading Solid S:Jlution Grading S:Jlid Solution
I
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lWlJF1Wl(f (J)UJ MINE PIY UJ)
Date : et •••••••••• " ••••• Cl •••
Shift Start Shift End Shift Start Shift End Shift Start Ehift End
Cn- Tank FIB .
Lime Silo FIB
Lime Tank FIB
Lime Tank RD
Flock Tank FIB No.l
Flock Tank FIB No.2
Flock Rotameter
Steel fulls
Sil ver Ni trate
Oxilic Acid
Bra.m Paper fug
Shift Forenan Sign.
I I I I I I
ROODEPOORT GOLD MINE PTY LTD
(bid Plant Mete lEbour l?etum
Ehift D/Off Date Gang Camp. Present Sick Leave AWP Awol Total Ehort
A-Ehift 7
B-Shift 7
C-Ehift 7
D-Ehift 7
Crush 6
Slime llim 2
Totals 36
A. W.O.P. NuniJers
A-Ehift
B-Ehift
C-Shift
.
D-Ehift
Crusher
D.d..e:
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No.
Cn- Ringruin Pwr.p No.
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No.
U.eCiAUviJUng Pump No.
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tlcctro klnni/~
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1ku:J Sanpl" Taken No.
Tails ~)lc Tal"" ."0.
frtr ren 'Un[; d cur
ROODEPOORT GOLD MINE (PTY) LIMITED
SAFETY AND ACCIDENTS
As we are all aware, accidents are caused by people and due to a variety of reasons
1. Carelessness
2. Incorrect instructions
3. Dangers in work not properly understood
4. Poor maintenance (equipment failure)
5. Machinery neglected (not properly guarded)
Studies show that 85% of all accidents are caused by unsafe actions of people. Faulty equipment or conditions account for the remaining 15%. Many accidents, however, are a combination of both these factors. On a small mine, therefore, it is imperative that senior personnel such as Team Leaders are of a high calibre so as to instill in the workers the necessity to develop safe habits and to encourage them with on-the-job training (where necessary and when other means fail, safety regulations must be enforced).
Supervision on a small mine is of the utmost importance as this is the starting point for accident prevention. Therefore, good supervisors (Mine Supervisors, Shift Bosses, Mine Overseers. etc.,) must be dedicated to safety and prevention of accidents. Please note the attached flow chart for the reporting of accidents.
Mine Manager
ACCIDENT REPORTING
Local Hospital
If reportable
" , .. "
MD 16
A c c i d e n t
ROODEPOORT GOLD MINE (PTY) LIMITED
RECRUITMENT
On a Small Mine such as Roodepoort Gold Mine, recruitrr~nt can become a problem. Roodepoort Gold Mine has overcome this situation by being assisted by a local Placement Consultant and the Department of Home Affairs (illegal work seekers). The Placement Consultant would supply the ordered worker who would then be introduced (at no charge) to the Mine by letter containing the basic information we require.
When dealing with aliens, i.e. Shangaans, Lesothos. Botswanas and Zimbabweans, they would first be referred to the local Department of Home Affairs for clearance. prior to being offered employment. It is most important to work hand in hand witn the local authorities as it is the onus of the employer not to employ illegal residents as a rather heavy fine per head is attached. The applicant would then be taken to the M/O, Shiftboss or Foreman where final selection is done and, if successful, he would be signed on and required to work a 3 month's probation period before becoming a permanent employee. This method works extremely well as a lot a administration time is saved. Please note the attached flow chart of recruitment.
M/a S/Boss
Foreman
Signed 1--_ _.. on camp 1 e-
Applicants screened
ment labour control
RECRUITMENT
Mine
Local Placement
Consultants
\ I
vacancies exist
Order placed
CONSULTATIVE COUNCIL MEETINGS
It is imperative to have Consultative Council meetings at least every 8 weeks on a small mine. This gives Management the opportunity to meet with the workers (who elect their representatives) via their representatives to communicate policies and procedures. It is also informative for Management to be made aware of workers· feelings, ideas, and attitudes. etc. These meetings are held on an informal basis. creating an atmosphere of trust and an open channel for communication. In this way workers· perception of the mining environment is brought to Management·s attention.
The attached flow chart outlines the Consultative Council·s Constitution.
Labour Control
CONSULTATIVE COUNCIL
H.O.D.
BLACK LABOUR CONTROL
1. TIME AND ATTENDANCE - DAILY CONTROL FLOW SHEET
1.1. Physical Control
1.1.1. Employee removes clock card from rack outside Shift Boss' office.
1.1.2. Hands card to lamp house attendant. who issues him with a lamp and clocks the employee.
1.1.3. Employee proceeds underground and reports to Ganger/Team Leader. who completes Gang Card Attendance.
1.1.4. After shift has been completed, the employee hands his lamp to the lamp house attendant. who clocks him off and hands him his clock card.
1.1.5. Employee places clock card back in rack outside Shift Boss' office.
1.1.6. Ganger/Team leader hands gang card to Shift Boss.
1.1.7. Shift Boss checks for abnormalities and endorses clock cards accordingly - signs gang cards.
Note: Once the shift has completed clocking, the remalnlng clock cards are removed from the racks and handed to the respective Shift Bosses in terms of 1.1.7. above.
1.2. Labour Control
1.2.1. Labour Controller monitors the clocking process.
1.2.2. Checks absenteeism and overtime.
1.2.3. Ensures that unclocked cards arc withdrawn to be handed to Shift Bosses.
1.2.4. Completes Daily Absenteeism and Manager's Daily Labour Analysis.
1.2.5. Updates Time and Attendance Registers.
2. TIME AND ATTENDANCE - WEEK AND MONTH END REPORTS AND CONTROLS
2.1. Labour Controller (Weekly)
2.1.1. Removes completed clock cards.
2.1.2. Replaces new clock cards for ensuing week.
2.1.3. Checks that clock cards and all overtime, abnormalities and absentees are signed by Shift Bosses.
2.1.4. Updates Time and Attendance Register.
2.1.5. Extracts all overtime and completes report for Mine Manager.
2.2. Labour Controller (Monthly)
2.2.1. Collects gang cards.
2.2.2. Compares Attendance Register against gang cards.
2.2.3. Communicates queries and abnormalities to Shift Bosses.
2.2.4. Finalises the Attendance Register.
2.2.5. Completes Monthly Overtime summary.
2.2.6. Authorises and submits Time and Attendance Register to Time Office.
2.2.7. Completes Monthly Labour Returns to Department of Mines, etc.
COMPILED BY:
J.J. BOTHA FINANCIAL MANAGER
J.L. BOUWER LABOUR CONTROLLER
LABOUR CO,WROLLER
CODES:
Sick & X.N.A.
,I!ine Accident
.. lbsen t td th permission
Absent without permission
Ce>mpensate leave
Convalescent (,IJine Acc.)
Convalescent (Sick)
L'naccounted for
ROODEPOORT GOLD MINE PTY LTD
BlACK APPARENTLY ABSENT - REASON UNKNOWN
DAILY ABSENTEE REPORT
The undermentioned Blacks h'ere unccounted for on the dates shown :
Date of Results of Company missing in ve.stiga tion number shift Gang no. code
Day Mth.
\
[late __________________ 19 ______ Lamphouse Supervisor
Roou~rOORT co~n HIN~ PTY LTD
HANAC~RS DAILY LABOUR ANALYSIS
BLAC}; k!lITe'
CU.'lJ' • % AT k'OII}; CO!IP. STRLI'TlI
Nfl. PLAST
A V ,'I I,\'
Sfl<l'ICt'
Sd'l'R I 7T
ruTA!.
BLAr:K A BSt;,vTt'/:;S k'iI I Tt"
A.'OP SICK Ace. eO.lTAL AWP LEAVt: DOl< Ak'OP SICK ACC. CONIAL A.P D0R
Nl.\'l,\I~
t',VCJ.I't'ER LIG
'1fT. PLA.IT
AD,'IlS
St'HI'ICt'
SECLA'ITY
roTAL
LllJOLR CQ,ITh'OL
ROOD
EPOO
RT G
OLD
MIN
E (P
ROPR
IETA
RY)
LIM
ITED
TIM
E AN
D AT
TEND
ANCE
DAI
LY C
ONTR
OL
End
of S
hift
hand
s
plac
es
On S
hift
Off
Shi
ft
Gang
Car
d to
Shi
ft B
oss
-C
ontro
l w
ith
Car
d Ra
ck
Che
cks
Abs
ente
eisR
C
heck
s O
verti
me
ROODEPOORT row MINE PTY LTD
BLACK & WllITE OVERTIME SUMMARY:
HaiRS HOL'RS HOURS Rf.IJARf.:S ,\'ri0.'-',r .. \ L 0/1' S[.',\'{)A }' O/T TOTAL
ENGINEERING
OFFICIAL
:mrn'
BUCK
SCT! TOTAL
MINING
OFFICIALS
lI'HITE
BLACK
SL'B TOTAL
METALLURGICAL
OFFICIALS
BLACK
::LB TOTAL
ADMINISTRATION -
OFFICIAL
BLACK
Sl.'B TnTA'
CR,1.\'D TOTAL
REJU?TI!I'G NJi\'JH PR1::VIars KJtVIH
!IHITE R
BL.J.CK R
TOT:lL R
Form no. 1'F020188
ROODEPOORT GOLD MINE PTY LTD
PROMOTION FORM
D A Tc~ : 0 •• 0 • 0 ..... 0 0 ••• 0 • 0 II ••• 0
J \1'isiJ to promote coy no . •...••••...••.•.••.••• from a
t C) •••••••••• 0 ••• 0 ••••• 0 • • • • •• on code 0 ........... 0 ••• 0
[)irect Supervisor: 000 ••••••• 0 ••••••••••••••• 00 •••• 00.
Experience on pre\'ious code ...••••••.•.•••.•••• months
Probational period .••.........••...•••••..•.••• months
Recor!:r!7cnded by: 1. l\finer / Artisan .... 0 ••••• 0 •••• 0. eo •• 00. III .0 •• 0 ••• D •••• " 0 ••
2. Sh iftboss I Foreman 0 •••• 0 0 •• 0 " ••••• 0 ....... 0 ... 0 ••••••••• 0 •
Approved by 1. J\/ine O\lerSeer .. Cl ••• " 0 0 • Cl " Cl ... 0 ••• " ••• 0 •• 0 ••••••• 0 ••• 0 •••••
2. En.?ineer . .... " .•.. " 0 •••• 0 0 0 ••••••••• 11 • " ...... 0 .... 0 ••••••••
3. Finance / Nine Nanager .••••.•••..••••••..•..••.••..•••.••
Record card checked by Labour Control Clean Endorsed
('C r t. ;\'0. :
,\'a t i. onc] 1 i t j/ . 0 0 • 0 • 0 Q • 0 ••••• 0 • 0 ••••••• 0 Labour Control
t'r'JT!)otion acknoldedged b}' : L.T.P.
:\FhR CO\!PLl:JIOX SfiYD TO LABOeR CONTROL
Complement HIO Sect. Category Expected returnees month
C0cplement Strength ± Code I
ROODEPOORT GOtD MINE PTY LTD
LABOUR RETURN
GANG NO. WORKING PLACE :
cor. so. JOB CODf JOB Dl:..'5CRIPTION PLANX[D ACTUAL RfASo.\'
.
7DTAL
CQ.lfPLfTt.'D BY o 0 0 0 ••• It •••••• '11 • 0 • 0 •• 0 •• (I III • 0. • 0 • (> <> 0 0 DATE
Fonn no. Vl3080188
I? Wf1Wl(J' (JJ[J) MINE PlY LID
S-xtion Date: ------------------------------------
C.cmp-my Old NB'; Process Cate- ,\E:W TiIre :\'um/Jcr From Gmg COl11p-Jny To Qmg Code Code Code gory zone .
I,
I
\line ,IJanager / Responsibility In
f'in.mcial Manager lhlder CUt
~lbOUT Controller CcmPJter Clerk
(])ecker
Fom no. VB101287
ROODEPOORT COLD MINE PTY LTD
AfffllORISATION FOR OVERTIME/BLASTING
Permission to I~'ork abnormal shift and for overt ime parades.
To: Nine Nanager
Day
Pl ease permi t the follolving Afternoon
Night
a) to proceed underground on overtime abnormal shift OR
b) to be cleared for blast as they are ll'orking in a clean air zone
Date :
shift workers
r~'eekday Statutory
Holiday Sunday
Sunday Free Saturday Shift
on the following date __ / __ / __ to the follolving date __ / __ / __
h'orking Coy. No. Gang Coy. ,Vo. Gang Place Description of work
.
.
Submitted by Section ___________________ Signature
Approved by Section _________________ Signature
Labour Cont rol
ROODEPOOR7 ({OLD ftINE P7Q L7D
I azf£ IJryzkJn(J PI(JrJ?/DeAC~ I . PliJJ7!Ull 11dJ.x.zl
tJhde Nou/I."> Beaek HeV/'1./.) l/hi.te fJ..{'UJV) Beaek HDU'00
f'Z/nJng
Sut I(A:af'.. .
Eng<~
Su;; Ictal.
g'J}!d Iota!!.
PiannRd
Xl.5 R C X2.0 R C X7.5 I iT. C I X2. 0 IRe l-...-!---,--L----'-----" I I I
~
Pfunned AciJ.Jo1.
Xl.5 i? C X2.0 R C X7.5 i7. C X2.0 R C
BLAC
K LA
BOUR
Hin
e M
anag
er
ROOD
EPOO
RT G
OLD
MIN
E (P
ROPR
IETA
RY)
lIMIT
ED
TIM
E AN
D AT
TEND
ANCE
-W
EEK
AND
t10NT
H EN
D RE
PORT
AND
CON
TROL
SUPP
ORTI
Ne;
DOCU
MENT
S
1)
Aut
hori
sati
on f
or O
verti
me
2)
Labo
ur T
rans
fer
Adv
ice
3)
Inte
rnal
La
bour
Ret
urn
(Cen
sus
Form
) 4)
Pr
omot
ion
Form
5)
O
verti
me
Sum
mar
y 6)
Su
mm
ary
of H
ours
W
orke
d
MANAGEMENT ACCOUNTANCY FOR SMALL MINES
As for large mines, the vital resources of a business are the four Mls, MANPOWER. MONEY, MATERIALS and MACHINERY. To complement these important parameters, a fifth is necessary -t~ANAGEMEtH i nforma ti on. I nforma ti on for sma 11 mi ni ng needs to be established on the KISS theory. "Keep It Short and Simple", for rapid movement in the direction laid down and is consequently designed to promote quick decision making.
Cash flow management is a real life domestic issue - helping individuals to deploy limited resources to optimum effect - yet in the business scene it all seems so complicated. Cash flow management does not necessarily focus on million Rand decisions.
This discussion will not be held on management support. management authorisation. staffing, budgeting. and control of costs, as much has been wri tten in the mi ni ng industry and little if any innovation has occurred. Because flexible budgetary control is so important in small mining. it is this parameter which receives more attention. At best, flexible budgetary control enables all levels of management to:
(a) Take decisions which will exploit and accelerate beneficial purple patch deviations from plans in a controlled manner, so that they become routine, and
(b) Nail harmful deviations before they cover the business like a blanket. The small mines manager establishes a master budget, a targeted balance sheet. profit and loss account and most important, a Cash flow forecast. The objective of high profits is constantly shadowed by the need to have acceptable liquidity. Timing of costs and income. day by day throughout a budget period, is more important than ever before, particularly with limited bridging finance. (so readily available to large mines in the traditional mining houses. but unavailable to their smaller counterparts).
Labour in small mining. like larger mining. forms upwards of 55% of the monthly expenditure and a check list of factors taken into account illustrates the urgency directed at this expense:-
(a) Identi fy tasks to be performed. (b) Prepare standards of performance; e,g, per hour. analysed by
employee grade etc. Tasks at (a) can then be converted to hours l equivalents.
(c) Recognise operating conditions in these standards. with different standards for each set of conditions. e.g. according to shift.
(d) If machine or departmental capacity is paramount. identify capacity available and the percentage utilization planned and prepare a labour budget which provides the necessary manning levels. t1anagement is informed of the labour cost of idle capacity and monitors trends.
- 2 -
(e) Estimate absenteeism and lateness. In due course, management \'Ji 11 want to know whether unexpectedly hi gh or low levels could have influenced production volume surges or decl i nes. Absentee; sm and lateness are bes t ana lysed by labour category, so that causes can be suggested.
(f) Estimate machine downtime at (d), and its effect on labour requi rement.
(g) Estimate labour indirect time for items such as training, waiting for work, etc. It is useful for management to identify the labour cost of paid. non-productive time and to measure trends.
(h) Budget for labour turnover. Standards of performance at (b) are set with a certain labour turnover in mind, e.g. with, say, a team of four operators containing two experienced employees. plus one with, say, a year's experience, and one who is a comparative newcomer.
(i) Assess budgeted headcount, for productivity measurement in due course.
(j) Phase the budget over time periods to meet demand for labour when required.
During operations, a basic objective for the management accountant is to report the cost of unplanned events, such as disruption to production. Labour budgets need to be set up with this reporting aim in mind. Another is to discover developing trends before tlley go too far: for example. idle time can mean lost production which can mean devastation to cash flow. Consequently. labour budgeting can be fairly complex, including at least a wide selection from the following items of i nforma ti on:
(a) total labour hours available; (b) attendance hours; (c) capacity hours to be utilized; (d) headcount; (e) percentage absenteeism; (f) percentage machine downtime; (g) production in standard hours; (h) direct labour cost per standard hour produced; (i) indirect labour cost per standard hou~ produced; (j) total labour cost per standard hour produced; (k) labour cost per departmental operating hour; (1) labour cost as a percentage of total cost; In the smaller
company, (k) and (l) could usefully be used at very low adroinistra_tive cost; for example. (k) illustrates the importance of production level· coupled with high productivity levels when much of the labour cost in a department is fixed.
Purposes of Budgets and Budgetary Control
During the long. slow climb through the budget preparation process, some illusion of sparkle is achieved because managers are aware of purposes and advantages and have a stake. through the share incentive scheme. in the company_ Dedication to budgeting and control in the following main categories is therefore ensured.
- 3 -
(a) The provision of targets
Absence of motivation can muddy the clear view of individual managers for the need to aelli eve improvements in company performance.
(b) Relating targets to individuals
Budgets are usually set to be compatible with organisational structure. Budgets and budgetary control therefore segment company objecti ves i nto manageable proporti ons.
(c) Forcing teamwork
There must be a blending of effort. and a "trade-off" of expensive, and frequently scarce, resources among colleagues. This is more readily acceptable in a small mine because of colleague contact.
(d) Sparking off "brainstorming" about improvements
This is aided by good timing and by focussing attention upon each separate manageable portion of accountability and responsibility. Important ideas are not sent off in the mail to Head Office, they 'are discussed on site, and usually end up with only a stamp of approval.
(e) Forcing excuses into the open
Budgeting for failure is not condoned. Limitations on performance are recogni sed but for reasons whi ch are ai red, di scussed and authenti ca ted by the management team.
(f) Identification of limiting factors
The definition of a "limi ting factor" is "the factor which. at a particular time. or over a period, will limit the activities of an undertaking ... "
A limiting factor is sometimes a resource which. through short supply. inhibits the overall growth and increased well being of an organisation; an example is labour. At other times, the market for a company is output. lead/ zinc/etc may act as a limiting factor, in tha,t the company can produce as much as. and more than customers want. Few managers feel comfortab 1 e abou t condoni ng the former type of 1 i mi ti n9 factor.
(g) Ranking of limiting factors
Clearly all limiting factors can be -removed, but at a cost. A primary limiting factor is the first one to clamp the anchors on growth and wellbeing. A secondary limiting factor is one which would replace the primary limiting factor. were it to be removed. Most companies have a tert'iary limiting factor. and beyond. During budgeting. the sensitive entrepreneurial antennae on which management depend will tell them the position down the list to which limiting factors can be bought out.
- 4 -
(h) Provision of stepping stones towards the achievement of longer term plans
Good ti mi ng offers each manager in the team an opportunity to become suff; ci ently supporti ve of overall company objectives by removing obstructive deficiencies in his own areas of responsibility.
(i) Highlighting deficiencies
Good timing offers each to become sufficently objecti ves by removi ng areas of responsibility.
manager in the team an opportunity supporti ve of overall company
obstructive deficiencies in his own
(j) Cost sensitivity analysis
rlanagement are keen Lto know total costs and costs per uni t at various possible activity levels. They must also be able to flex costs in due course into line with actual activity levels. Cost behaviour patterns therefore can and should be di scussed.
(k) Challenge to habitual costs
Cost can be incurred because money in such ways. Again. management may have condoned aspects of budgeting act as justifi ca tion.
(1) Identifying critical activities
it is "in fashion" to spend the predecessors of current
such expense. The control a counter to such dubious
Clearly no company has a "bottomless purse ll and management can decide on priority activities and how scarce resources are to be a 11 oca ted.
(m) Identifying difficulties before they arrive
Most budgets "stretch" those responsible and success depends on squaring up to various difficulties en route through the period. r~ethods of coping with difficulties such as machine hreakdowns. absenteeism. potential supply failure, etc can be optimised if they are considered in advance.
(n) Promoting action
Budgets and budgetary control in the proper hands can remove lethargy and carelessness.
Because of the small operation and the close contact all members have with one another. budgets are practicable and result in hea lthy competiti on. The manager has a motto "work smarter not harder". Working hard may lower your golf handicap but will not necessari ly improve budgets. You actually need to "work smarter" .
- 5 -
Marginal and Area Costing
Many concepts of margi na 1 costi ng and area costi ng have been written or spoken about. In small mining, more so than in large mining. these two concepts need to be well understood.
In marginal costing, the greatest danger is misjudging the behavi our of costs. The spl it between FIXED and VARIABLE costs is often confusing and leads to erroneous conclusions. In mining. for instance. it is not uncommon to classify "direct labour" and direct stores as variable: insofar as production breakdowns are concerned, the labour force still receives wages and in tlli s case the effect wi 11 wreak as much ha vac on a bank account as will fixed labour costs. The redeployment of men, material, machinery. for one reason or another, often results in reclassification. While it is argued that this is the exception rather than the rule, it happens often enough to affect the budget.
To afford managers a simple classification, all costs defined in the budget are related to capacity. and if additional capacity exists, the manager will treat all costs within the budget as serving the various planned functions or disciplines. New areas e.g. waste washing. sorting, sand dumps, to fill that capacity wi 11 be approached on a margi nal cost; ng basi s.
Misgivings in the use of area costing are the following:Vari able cost rates per unit vary; ng up or down because of shift work (more than one shift). changes in the quality of resource i.e. higher labour productivity, less experienced or trained people to carry out the work, or use of less productive equipment.
In the field of area costing it is essential, particularly when ore reserves are geographically dispersed. for area costing to be carried out. The main factors which affect area costing are redevelopment. re-equipping, tramming distances and effective working hours. A simple computerised model has been developed to take account of these and it is often found that the profit generated from a lower grade area will far outstrip that from a very high grade area. Area costing may not necessarily be totally accurate. but will be effective provided the different areas are consistently costed relative to each other. Ultimately it is cash flow management which benefits from sound area costing.
Small Mining and the Control of Working Capital
The small mine manager. as has been explained. is responsible for his financial package beyond profit and loss. It is his duty to maintain liquidity rather than profitability alone.
- 6 -
He will have a good understanding of IIworking capital ll defined as tile capital available for conducting the day to day operations of a mine: normally this is the excess of current assets over current liabilities,
Liquidity and Profitability
A profitable company. where the sales of its product substantially exceed the cost of production, can and often does get itself into a tangle over liquidity. Most small mine accountants will recall examples, At one of our mines, the manager was delighted that his profit for the quarter was in excess of R200 000. On the strength of this he went out and spent money on projects approved. but which progress was linked to posit; ve cash flow. Not long after he l'Ias surpri sed to learn from his accountant, and the bank. that the company had extended its overdraft beyond that planned, Like many managers his attitude was one of total surprise. This point illustrates the importance of closely tying working capital control to the usual routine business planning and reporting of the mine.
Financing of Current Assets
If a definition for mining could be given. it would probably be apt to say lIit is like taking a bath without the plug inll.
Current assets, in common with fixed assets, need to be financed. Money has to be poured out before a production cycle allows for cash to be returned. The mine is out of pocket except to the extent that it too, can lean on its creditors by delaying payment. Wl1en commitments, contingencies for inflation, etc, are badly estimated in the capital component, total costs can be, and are often. hopelessly under budgeted. In small mining a single month at sub-standard performance can devastate future cash flows and jeopardise growth.
The Control of Cash
In a mine. good cash management is a valuable attribute. It is possible. by means of skilled cash management policies, to survive on a smaller amount of working capital than is considered preferable.
Plans can be made to ensure that proper use is made of surplus funds, and negotiations with a bank or other organisation can be carried out well in advance of the need to receive incoming financial support. For example. some medium term sources of finance require six months' notice. Approaching cash shortages are identified thereby enabling management to raise additional funds of the right type and amount. Within the framework of a cash flow forecasting system. a mine can compare actual with budgeted results and identify variances. In the light of the variances revealed by the comparison. the mine can take remedial action, or if this is impracticable. revise the cash forecast.
- 7 -
Ideally. a cash flow forecast should:
1. highlight peaks and troughs related to incoming and outgoing cash flow. For example, a monthly comparison of actual and planned cash flow could easily disguise problems within the month. On the other hand, a daily comparison involves daily forecasting which although inaccurate and throws up daily variances causing unnecessary alarm or jubilation. is still important for the small mine manager.
2. project cash flow as far ahead as is possible without having to make nullifying assumptions.
3. help to identify the best pattern of mix between overnight money, and short and medium term fi nance.
4. segment forecast and actual results to take account of organisational structure and individual responsibilities.
5. blend with other reports, such as profitability and contri buti on statements.
6. show any borrowing limits.
7. point up trends, but remove distortions to these by, for example, showing exceptional items separately.
8. identify potential large negative cash flows. which might. for example. prompt management to set aside impending capital expenditure.
Conclusion
The most important objectives in this area can be summarized as (a) the speeding up of inward cash flows and (b) the slo\'I;ng up of outward cash flows. To maintain liquidity at minimum cost requi res expert; se to whi ch the managers of a 11 functi ons sholll d contribute. The major benefit of good working capital management and control is perhaps the reducti on of ri sks.
- 8 -
THE CONTROL OF CAPITAL EXPENDITURE
There is a sequence for budget preparation and the capital expenditure (capex) budget is within that sequence, A capex budget for one year sets out to bri dge the gap between where the mine wishes to be in one year and where it will be if no capital expenditure proposals are implemented, It is in a sense a servicing budget - making other budget fulfilments possible such as production and distribution,
Categorisation 'of capital expenditure into, say cost saving. replacement. expansion and hygiene/safety etc., may bring in its wake sub-budgets for each category. These sub-budgets are a true indication of the mine1s specific strategies. The capex budge t may be governed by a 1 i mi t imposed through capi ta 1 rationing, so that in times of scarce finance any category for which there is a high element of risk n~y be set aside.
Again, the capex budget may be based on a funds allocation so that the best projects brought forward for consideration are automatically selected provided they meet the finance charges involved and/or comply vJith some other criterion on profitability. The total budget will, however, be split and apporti oned on the basi s of a percentage to each segment of the organisation, so that the best projects within each segment will be selected.
Contents of a Request Form
A major role of management in the area of capital expenditure is to assess degrees of risk. Those who submit capital expenditure proposal forms for approval are taught that they must enable this role to be fulfilled.
The contents of a request form include the following:
Items in the "replacement" category would involve trying to maintain ex;st-ing facilities allowing neither decline nor expansion. lIeost reduction ll project would emanate from the need to produce the same tonnage at the same levels of activity but to do so more cheaply. (Frequently a measure of success is a reduced variable cost per unit). IIExpansion ll would bring about an increased output (kilograms or tons of product) and ;;Hygiene and Safetyll would frequently be provoked by government, local authori ty regulati ons or Un; on pressure.
Each category of project has its own risk level. Proposal forms are addressed to those who have author; ty to approve the expenditure concerned. Addresses find categorisation in the above manner useful in helping them to make decisions as to the acceptability of projects. For example, when capital rationing ex; sts. development projects must be regarded wi th great care.
- 9 -
The following table shows how each category of capital expendi ture attracts its own particular risks. For the purposes of this illustration, the categories used are: (1) Replacement; (2) Cost Reduction; (3) Development; (4) Expansion; (5) Hygiene and Safety. The asterisks are intended to suggest significantly important risks which apply to particular categories.
-----------------------------------------------------------------------------Hygiene
Description of Risk
Cost & Replacement Reduction Development Expansion Safety
I tern: -----------------------------------------------------------------------------1. Range of
assumpti ons * * * * 2. Obsolescence * 3. Missed
opportuni ties * 4. On-line timing * * 5. 'Knock-on'
effects
6. Labour relations * 7. May depend upon
high-volume output * 8. Additional worldng
capi ta 1 * * 9. Lack of
management experience * *
10. Sources of finance may have misgivings * *
11. 'Hidden' costs
Difficulties of Attempting Post-audit Pro~edures
After a project has been accepted and has been operational for some time, attempts should be made to assess its effectiveness against original estimates. Various factors can make this diffi cul t.
(a) In tile case of a replacement investment, the old equipment is often scrapped. Consequently. assertions made by the sponsors of such a project that "the old machinery would have broken down X times per week ••• " can never be proved or disproved.
*
*
- 10 -
(b) Most small mines do not have accounting systems which are designed to capture actual costs and income analysed by capital project. Thorough comparison of actual and budgeted capital costs and operating results becomes a manual analysis job.
(c) Changing conditions confuse the issue of whether a project has performed above or below target. At the time a waste sorting plant is installed, a ruling gold price dictates the economic level at which waste will be discarded. A major shift in gold price in an upward direction may well dictate that it is best to mill the product sorted. Deci di ng on v/hether the i nves tment was good ",oul d be somewhat' confusi ng.
(d) A company mi ght take the opportuni ty afforded by a project (and the upheaval caused) to make some non-project alterations. The greatest care would be needed to distinguish project and non-project actual cost during appraisal of purchase invoices, timesheets, stores requisitions, etc.
Conclusion
The evaluation of capital expenditure should be the responsibility of the management of all business functions. who should share opinions and support each other in the use of teamwork. Far more than perfunctory attention should be paid to those within an organisation who have had past experience of the introduction of capital projects.
- 11 -
PRODUCTIVITY AND IfS IMPORTANCE IN SMALL MINING
1. The value of high productivity
Productivity has always lagged behind profitability among mlnlng topics. The former still retains something of its IIcloth cap" image, but it is rapidly closing the gap on its over rated stable-mate. Productivity in small mining cannot be over-emphasised.
(a) Its raison d'etre is the exploitation of expensive resources to maximum advantage - in particular man hours. machine hours, machinery and materials, rather than money. A major challenge facing small mining is to tease more saleable output from each unit of input. be it a ton of sweeping, a ton of ore or a machine hour.
(b) Productivity yardsticks act as a major and increasingly important supplement to profitability measurements. The latter have (and still do) let through unnoticed i neffi ci end es, \I/astage. slow work; ng and poor techniques, and unfortunately in gold mining and to a lesser extent other metals and minerals the producer IIpi cks up the tab".
(c) Productivity can soak up some of the omnipresent salary. and wage awards with which South Africa is liberally doused each year. particularly by some of the larger mining houses. The benefits of productivity become increasingly obvious, the more such awards fly in the face of the buyer's market in base metals in which overseas customers can shop around before deciding where to make purchases, or in precious metals where inefficiencies lead to either smaller profits or early closure.
2. Product; vi measurement
Producti vi ty measurement ra ti os are developed by: measuring output, quantifyi ng input of resources used in achi evi ng thi s output. and then dividing the latter into the former: OUTPUT
INPUT .
The result obtained should be compared on a trend basis with previously set targets, earlier pei~iods and other' departments, locations or companies in the same field(s). The fact that a good or bad productivity trend is developing can be grasped so that action may be taken. The precise extent of the trend should not become a focus for attention. Precise figures provi de an aura of eredi bil i ty whi ch is usually unjustifi ed. Firstly. there may be difficulties in measuring the basic data precisely and/or it is vital to ferret out any distortions which could damage these ratio yardsticks as decision-provoking aids.
- 12 -
With the emphasis in large mining on vast tonnages, a lot of effort is required to get all employees to concentrate on units of measurement related to kilograms of gold, or tons of base metal at best grade.
3. Conclusions
Profi tabil i ty has of course 1 ed the ranks of objecti ves for many years but in small mining a new age has dawned, in which profitability without productivity is becoming a tinselly illusion. It is possible that in the quest for'profitability those at the forefront of mining and their financial advisers will ultimately set their sectors into a trap. Now that world markets have hardened more than ever, particularly with sanctions (gold aside), those who have laid the stress on productivity are bound to win. Only those who have also used productivity ratios as self-disciplining and self-assessment techniques are achieving the.best results.
- 13 -
fHE FII~ANCIAL 1'1ANAGER AND HIS ROLE IN MANAGEMENT ACCOUNTING
Mention must be made of the roles of management accountancy and financial managelTY2nt. Because of the size of small mines these activi ties are combined.
Unlike in larger organisations, where teanwork is required bec811se of the separate roles they each play. on a small mine tile combi ned acti vi ty ensures success. I cannot over emphasize ho\</ important tllese roles are in small mining.
1.. OutPllt reports
(a) There should be agreement in regard to the accuracy tolerances placed on information reports which are required. The greater the degree of accuracy demanded, the more expensiv(~ in time and effort a report is.
(b) The assumptions allowed by management, in preparing a report, should be explained. For example, a wide range of assumptions may initially be included in a costing report showing the comparative costs of choosing from severa 1 courses of acti on. Some of these assumptions may be unacceptable: unless they are exposed for discuss"ion, wrong decisions can be made.
(c) Timing tolerances are agreed to (as with production scheduling), and the management accountant, with the help of colleagues, produces information reports in good time. While tile provision of early reports is desit'able, he will need to employ extra staff to do so. In small mining the quality of data is more important than the timing.
2 . F.: ff e c t s [) f Cos ts
Tile management accountant does not spend di sproporti ona te amounts of time on trivial elements of cost; and he disco~rages others From doing so.
3. Responsi bi 1 i ti es/Accountabi 1 i ty
The management accountant on a small mine has few colleagues only clerical employ~~es. and whereas in a larger organ-isdtion intt~rpretation would be by more than one person, his role requires him to do everything from defining information needs, preparing budgets, answering the questions raised by variances, and "who does what" is his functi on too.
4. Objectives for the Operation and Head Office
The management accountant serves both local si te management and also the head of his own function at Head Uffice. He must ensure that the requests for aid to be given to the operation are n0t in contention with those for Head OfFice.
- 14 -
In a large organisation, specialists develop in each of the fields of accountancy and the possibility always exists that he l'Iill suffer from a narrOloJing of his experience and training. In the s:nall mine his accollntability and responsibility extend into all Fields, hmvever, his promotional route is very restricted. Unfortunately in small mining, many of the senior roles suffer from an apparent confl i ct between the i ndi vi dua 1 s needs and those of tile company as a \'IflO le. Sma 11 mi nes draw on large company's hr their employee needs, and a criticism that can be levelled is the specialisation that seems to be taking place. Very seldom do high powered individuals possess the skills required of a small mine Financial Manager, in particular, and then the skills required in Mining, Metallurgy and Engineering in tllCl t order.
Crisis Attention
No mattet' how good the planning or organisation, CrlS1S do occur when t"esources, deployed to meet specific objectives, fail to do so. Invariably the financial employee finds himself performing i n an~as beyond il-j s job descripti on to recti fy ma tters, however his understanding. in a broad sense, of the different functions -is very good and his ability to assist is real. In small mining I do not believe it is possible to plan out the unexpected.
Establishing the Facts
The canfi dence of other functi ons on the Fi nanci a 1 Department is evidenced by the continuous call for information to either correct or establish an action plan. Top management provide a level at \lJhich facts are necessary and set objectives for that fact finding. Surprisingly harmony across functional frontiers is always in existence. without management support, indicating the strong influence of the department.
Conclusion
Fi nanci al and management accountancy recei ve the hi ghest approval (Board level) for the provision of the right information to achieve organisational objectives. By having good financial and management information, it facilitates not only rapid husiness decision making but also function decision making. Continuous effort at achieving the right level of accuracy, timing and meaningfulness is only achieved by constant attention in calculating the financial side of business as a way of 1 i fe.
One of the goals of the financial department must be to determine the particular sets of circumstances and conditions which will optimise, not only individual but also functional. contribution. If one were to liken the financial role on a small mine to a game of soccer. it is quite conceivable that his position is that of centre forward or. in rugby. the f1yhalf.
- 15 -
Finally, on our small mines the financial manager is responsible for establish"ing his own credit facilities, borrowing. investing and fitting all these parameters to his own individual cash flow.
References:
Opencast r~ining at the Swaziland Iron Ore Development Company Limited, C Heever, R Attridge - Association of Mine Managers 1970/1971.
Managers Accountancy by J Batty.
Various internal memoranda ; ssued at mines and African Exploration Company Limited.
ROODEPOORT GOLD MINE (PROPRIETARY) LIMITED
BUDGET AND COST CONTROL
FLOW CHART
1. Financial Manager establishes budgets against planned production.
2. Issues copies to Heads of Departments and Cost Control.
3. Production user authorized by Department.
issues Purchase and Stores Requisition. Head of Department. Sends to Stores
4. Stores Controller checks for stock items (PR) and prices Store Requisition and sends to Cost Control.
5. Cost Control commits against budgets.
6. Authorizes expenditure and obtains Financial Manager and Mine Manager's approval.
7. Sends Purchase Requisition to Buying Department for procurement.
8. Sends Stores Requisition to Stores Controller to issue materi al.
9. Compiles weekly Operating Results and graphs for Mine Manager.
10. Sends copies of graphs and Budget S~anding Report to Heads of Departments.
11. On receipt of order updates Budget Status I/lith regard to variance between actual order value and estimated commi tments.
12. Sends copies of orders to Stores Controller.
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:IT .
ROODEPOORT GOLD MINE (PTY) LTD
BUDGET COt\TROL
DEPARTI-1E!'l .•.• ~ 1.0.0.1.0, , , , , , . , , ..
R[Sf'. };o: ...•....•.•••.•.• ~10t\TH •••••••.••••••••• BUDGET GRAt\TEn .. f{,5.2. PPP.,PP . .... .
REO. 1\0. AHOUl\T REO. NO. AMOllNT REO.t\O. A~1C)l'~T
02250 99 00 PR 01731 32 50 03606 16 57
02299 37 40 PR 01723 640 00 20 166 29
02300 16 84 PR 01724 175 04 03335 68 33
02297 115 80 20 234 62
03317 15 37 3 592 38 PR 01744 80 00
02292 119 58 02298 287 46 PR 01728 124 I ! 00
03242 31 60· 03601 65 00 PR 01743 140 00
02293 30 64 02296 59 79 PR 02303 138 ,80
02294 428 92 03558 145 21 PR 01935 400 loo
03243 65 00 03603 8 55 PR 01727 1 000 loo
02295 89 69 4 158 39 PR 01729 300 loo
PR 01726 200 00 03560 66 62 PR 01846 27 \17 PR 01292 50 00 4 225 01 22 444 59
PR 01716 500 00 05/04
15 853 74 11/04
115 Re-agents Re-agents 6 455
PR 01725 500 00 30 078 ~5 28 899 74 I I
PR 01734 45 00 03233 32 45 PR 1.735 30 lOO ,..---
I
;
!
PR 01733 300 00 03234 21 r35 28 929 1_. I !Iq.
~
PR 01732 100 00 03605 16 a7 03333 85 42
AUTHORISED: • , ••• , , ••••• , •• , ••••• , •••••• , HUD (IF DEPARTNE:\T
APPROVED: , , , , •• , •• ',' • , •• , •••••••••••••• APPROVED: •••• ""., •••• , •• , •••••••••••••• , FI1\ANCIAL MANAGER MINE MANAGER
ROODEPOORT GOLD MINE (PTY) LTD
BUDGET CONTROL
, 810010 DEPARTI1ENT ................... .
RESP. NO: ................. MONTH ................. BUDGET GRANTED .... ~~0.6.6 ......... .
REO. NO. A}10UNT , REO.NO. AMOUNT REO. NO. AMOUNT
03553 144 33
03571 65 00
03607 8 54
03608 315 19
29 548 22 . 01941 66 62
03369 68 33 '
03370 65 77
03610 33' 44
29 782 38
AlrrHORISED: ......................••..... HEAD OF DEPARTMENT
APPRO\1ED: ... 11 11 11 .. Cl 0 11 .... 0 .. 11 0 ..... 11 11 • 11 11 11 11 0 11 ... APPROVED: 11 .. 11 11 11 13 • Cl 11 et 11 Cl I\) 11 11 11 • 11 Cl • 11 .. 11 • tI 11 11 11 .1111
FINANCIAL MANAGER MINE MANAGER
ROODEPOORT GOLD MINE (PROPRIETARY) LIMITED
WORKING COST BUDGET - APRIL 1988
Total Tons Milled (Planned)
Mill Feed - Blasted Tons
- Surface Dump
7900 @ R5,74
2100 @ R3,20
Engineering
Major Stores Provision
Administration - Mining Service
45 346,00
6 720,00
52 066,00
20 000,00
20 000,00
2 500,00
10 000
7 900
2 100
RECLAMATION
SHIFT BOSS -
Tons From Development
Reclamation - Stripping
Explosives
Drill Steel
Sundry Stores
Total Mining Budget Planned
10% Incidentals
Grand Total
Cost Per Ton
Shifts - 22
Tons Per Day
Cost Per Day Allowed
189
1 000
Ton 1 189
600,00
1 740,00
2 842,00
5 182,00
R 79 470,58
7 947,00
R 87 417,58
10,90
365 tons
R 3 978,50
ROODEPOORT GOLD MINE (PROPRIETARY) LIMITED
WORKING COST BUDGET - APRIL 1988
WILFORD SHAFT
Shift Boss: 41 Cl •••••••••• Cl ••••
Total Tons Planned (Blasted)
Explosives
Support
Drill Steel
Sundry Stores
4 SHAFT
14 803,90
24 190,60
4 670,00
6 491,30
50 155,80 ===========
Shi ft Boss : ••••••••• ID •••••••••••••••
Total Tons Planned (Blasted)
Explosives
Support
Drill Steel
Sundry Stores
7 122,99
11 639,46
2 247,00
3 123,33
24 132,78 ===========
4670 tons
2247 Ton
ROODEPOORT GOLD MINE (PROPRIETARY) LIMITED
WORKING COST BUDGET - APRIL 1988
Tons Blasted - Reclaimed - (Planned) 7900
Tons Milled (Planned) 10000
Mining 87 417,58
Plant 52 066,00
Engineering 20 000,00
Major Stores Provision 20 000,00
Administration - Mining Services 2 500,00 ---------- .....
181 983,58
Variable Cost Per Ton R18,19
Z4-
."..
,.
""*
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