Mining for value - a new focus on grade

Welcome to the inaugural Resourceful Paths sustainability in mining blog, where I share insights on making a safer, more profitable, environmentally friendly and socially accepted industry.

First, let’s reflect on safety. Friday marked the 50th anniversary of the Aberfan disaster, where 116 children and 28 adults were killed when a coal waste dump in Wales collapsed and engulfed a school and homes in this village. The harrowing events and aftermath are described here. Preventing incidents like these is part of what gets me up each day.

Back to mining. 

In the last 2 weeks, I’ve been to three mining related events in Vancouver:

• SRK Cave Mining Forum 
• CIM Vancouver Branch presentation “Jericho Mine – Lessons Learned”
• University of Exeter Global Conversations “Mining – Is Bigger Always Better?”

Each covered the important topic of managing ore grades. Mining strategies can span between:

• Big and cheap – use bulk mining methods that extract low grade ore, accept dilution and deal with it downstream, and operate at high tonnages for economies of scale
• Selective and expensive – use careful, precise underground mining methods that extract high grade ores and minimize dilution, and operate at low tonnages and focus on high recoveries

The terms "cheap" and "expensive" relate to costs per t of ore. In practice the most important indicator of economic viability of a mine is costs per unit of payable metal produced, which is driven by the feed grade and metal recovery, as well as the cost per t of ore. 

The premise of bulk mining is that the lower operating costs outweigh downstream impacts of processing a low grade feed. The result - large open pits mines, which have installed large conveyors, crushers, SAG and ball mills and flotation cells to process ores, and built massive (> 100 Mt) rock dumps and tailings dams for the wastes produced. If metal prices are high enough, and the ore is amenable to low cost processing, the huge capital costs of such facilities can be economically justified. The environmental impacts of the large waste footprints and water and energy consumption can be high, especially in certain geographical areas.

BC, Canada has several copper-gold-molybdenum metal sulphide mines and low grade operations such as Highland Valley Copper dominate. I compiled a chart of net smelter return (NSR) from Q2 2016 Management Discussion and Analysis (MD & A) from operators, and NI 43-101 Technical Reports for the projects. The NSR represents cash flow from payable metal recovered after deducting transport, treatment and refining charges to the customer.  Of these, New Afton (0.85% Cu, 0.7 g/t Au) has by far the highest NSR. It is the only operating underground mine shown on the chart - the others are open pits, and mostly have NSR of $20/t or less (e.g. Mount Milligan – 0.55% Cu, 0.22 g/t Au).

New Afton, a block cave mine, was featured at the Cave Mining Forum. The mine is heavily instrumented, and carefully models and monitors fragmentation and dilution by low grade picrite material to manage mine and concentrator production. It is also collaborating on research to include ore sorting to reduce dilution and maximize mining ore recovery. While New Afton has the smallest ore tonnage (approx. 15,000 t/d) of any of the mines charted, it made a healthy cash margin of $48 M in Q2 2016 based on New Gold’s MD&A. It's an example of a profitable, moderate scale underground mine that has lower environmental footprint (e.g. less tailings, minimal waste rock dumps) than open pit copper-gold mines in BC. 

The CIM talk was a case study on the small Jericho diamond mine in Nunavut. It holds some of the same lessons that apply to large metal mines. It failed primarily because the owner fast tracked studies and scaled the pit and process plant production too far. As a result, it mined low grade, uneconomic ore that neither contained the expected diamond values nor achieve design recovery. It’s a case of diseconomies of scale, and it can easily sweep a mine out of existence. A smaller Jericho operation, focused on the higher grade central zone may have been profitable. It’s still not clear who will pay for the rehabilitation of the failed mine. In such cases, it is usually borne by society.

Professor Jeffrey, Head of Camborne School of Mines, University of Exeter, described the challenges of “bigger is better” - capital cost overruns, long delays, complex logistics, risks of tailings failures and, in some developing countries, potential nationalization. This is making some large projects, which have increasingly larger tonnages at lower metal grades, difficult to justify, i.e. too big to build. He described initiatives by mining companies, Original Equipment Manufacturers and researchers to develop new machines, automation systems, robotics, miniaturized equipment, ore sorting systems and data analytics techniques that could allow more selective mining and arrest the decline in ore grades. These in turn could reduce the scale, capital cost and complexity of downstream processing and tailings storage facilities. He emphasized that mining education and inter-disciplinary engagement to design better mining and processing systems underpin the solutions to future industry challenges.

While New Afton has higher grades than open pit mines in BC, the block caving method that it uses is generally a higher tonnage, lower grade, mass mining method compared to selective mining methods used for some high grade vein deposits. For example, the Macassa Mine, in the Kirkland Lake region of Ontario produces ore with >15 g/t Au. There, methods such as cut and fill and long-hole stoping are used, in combination with paste backfill. Paste backfill, which allows a significant portion of mill tailings to be returned underground, and hence reduces surface tailings disposal footprint and risks of tailings embankment failures. It also helps increase water recycling and support ground conditions in underground mines which can extend mine life.

Some of the innovations described by Professor Jeffrey may make selective underground mining methods much more cost effective and widely practiced, by reducing feasible minimum mining widths, reducing the size and complexity of mine ventilation systems and allowing access to previously inaccessible veins. The processing facilities and environmental impacts for such mines could be of modest scale, and the resulting costs per unit metal produced could be highly competitive.

Each deposit is different, and its geology and geometry may limit the mining method (open pit vs. underground, bulk vs. selective). In any case, mining companies should enthusiastically explore for moderate sized, high grade deposits, not just massive, low grade ones. They should properly study and test mineral resources and assess mining and processing systems incorporating new technologies that reduce dilution, waste production and energy and water use. These strategies could improve profitability, reduce environmental impacts and lower project risk. Here’s to a revival in profitable, socially accepted, moderate scale underground mines, producing high grade ore with minimal waste footprint, low energy and water consumption and negligible risk of tailings failures.