Mine Cost Models

Everyone in this business claims to have a model that estimates mine costs. The expensive mine cost analysis all seems to be done on "proprietary" computer models developed "in-house". However in most cases, the major international research organizations disclose sufficient details of their models and operational variables to validate their cost analysis, and usually provide their models in electronic for to purchasers. All in all, the industry leaders take a very professional attitude to their research.

But some of the second tier players do not provide the internal consistency checks that should give comfort. They may claim to have mine cost models, all no doubt developed by expert mining engineers, but if you press them for more information on the models and their authors, they usually retreat into a cloud of vague assertions about how good their people are, the extensive man-hours put into the model development and maintenance, the number of mines they visit, the quality of their databases, their (un-named) teams of analysts, etc. etc.

We have even seen foolish claims that "all our cost estimates are accurate to within 10 percent". What does this mean? How do they know? In fact, any mining engineer will tell you that such claims are nonsense. Cost estimates accurate to within ten percent are only realistic for "bankable" feasibility studies or better, prepared by reputable industry professionals with full access to the company's own technical onformation.

Beware of exaggerated accuracy claims!

To be credible in this business, cost models must be based on engineering principles and detailed flowsheets for the operation.

If you haven't got a flowsheet, you don't know what's happening

The other ingredient to credibility is transparency. Transparency means that data sources and references are disclosed, and that model formulas and calculations are available for inspection. Naturally all minecost.com models contain fully referenced data sources. Model formulas are available for inspection in the User Guide to minecost models which is downloadable for free. Model formulas are included in the editable versions of all our models, and the User Guide contains annotations and descriptions with each formula, plus line item definitions and explanations.


One of the best mine cost modelling systems around is the US Bureau of Mines Cost Estimating System or CES, which was developed in the USBM's Field Operations Centers and by well known mining engineering consultants such as STRAAM Engineers, Kaiser Engineers and Pincock Allen and Holt. CES is used in US government agencies and private industry and has been presented at conferences hosted by AIME-SME. Support for CES is currently available from CostMine (formerly Western Mine Engineering), one of the best sources of cost estimation data for the mining industry.

Our mine cost modelling is based on CES but also uses estimates of specific consumption of supplies such as fuel, power, explosives, grinding media and reagents and labour requirements, plus adjustment factors for materials consumption and labour productivity. This allows us to combine the features of statistically-derived models such as CES with the "bill of goods" approach which specifies actual costs and usage of production inputs. The end result is a more accurate cost estimate that can be verified against known or assumed usage rates of consumables and labor.

As far as possible, all calculations are explicitly shown in the downloadable spreadsheet models. For copyright reasons we do not provide any of the equations from CES, but we again point out CES can be purchased from the US Government Printing Office. Note that the CD-ROM version of CES is incomplete because of the 1995 closure of the USBM and its absorption into the US Geological Survey, and for this reason our models use a composite of the latest version of CES and updated equations and routines from the paper-based system.

Our composite models, based on the two versions of CES, work like an expert system in that they provide default values for unknown input variables which can be overwritten as better information is obtained. And because the models automatically calculate the amounts of consumables used in the various parts of the flowsheet, the results can be checked against known or reasonable consumables consumption levels for the operation.

Have a look at the free sample of one of our mine cost models. And if you decide to become a registered subscriber, you can download the free User Guide to minecost.com models whcih shows precisely how the models work.

CES - The USBM Cost Estimation System

CES was developed by the US Bureau of Mines (now the US Geological Survey) as a systematic method for estimating the capital and operating costs for development and operations at mineral properties. The system can be customized to suit the user's particular needs and to "fine tune" cost estimates according to the availability of engineering and other operating data. Equations are provided for administrative, environmental, exploration, infrastructure, and long-distance transportation costs, in addition to surface and underground mining costs. Cost models are also included for a wide variety of mineral processing plants as part of the system.

The first edition of the USBM costing system was prepared by STRAAM Engineers Inc. in 1975 as a USBM report "Capital and Operating Cost Estimating Handbook, Mining and Beneficiation of Metallic and Nonmetallic Minerals Except Fossil Fuels in the United States and Canada". The report was published in 1977 as USBM OFR 10-78 and revised in 1978 and 1979. This report was often referred to as the STRAAM handbook. In 1987 the USBM revised the handbook and published it in two volumes as IC 9142 and 9143, "Bureau of Mines Cost Estimating System Handbook", usually referred to as CES. The revision was done by engineers and scientists at USBM Field Operations Centers in Denver and Spokane. Consulting contributors to CES were Pinnock, Allen & Holt.

Between 1988 and 1994 the USBM periodically updated and expanded CES into Lotus 123 spreadsheet form. Work on the spreadsheet edition was done by Western Field Operations Center, Spokane, Washington, Intermountain Field Operations Center and the Minerals Availability Field Office, both in Denver, Colorado, and by Alaska Field Operations Center.

CES can be used to estimate capital and operating costs for an undeveloped deposit, or to verify costs for an existing operation, even with relatively little engineering and geological information. But the flexibility of CES allows internal program defaults to be overwritten and equations and adjustment factors altered on the basis of known engineering details for a property. The more information available, the more accurate CES estimates become.

Applications of CES include: cost estimates of mineral deposits proposed for development, exploration targets, comparison of several mining and mineral processing scenarios, comparison of costs at various production capacities, regional studies of mineral deposits, and cost estimates of existing operations for comparison purposes.

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CES Methodology

The cost equations in CES are based on individual cost estimates for a variety of capacities, based on current technology applicable to each section. Regression analysis is then applied to the individual costs at the various capacities or size ranges using actual mine operating data to produce the resulting cost equations. Each section of CES has capital and operating costs appropriate for the specific unit process, plus descriptive text explaining what aspects of a typical operation are included in the cost equations for that section. Capital and operating costs are usually expressed in three equations: labor, supply, and equipment. The equations include the following categories:

  • Labor: production labor, maintenance, construction, equipment installation.
  • Supply: steel items, steel pipe, lumber, explosives, construction materials (includes cement and gravel), industrial materials (includes plastic and ventilation pipe, electrical wiring, insulation, etc.), reagents, electricity.
  • Equipment: capital purchase, repair parts, fuel, lube, tires.
For each section, a range of applicability is stated for the independent variable, usually daily production in metric tons. Using the cost equations for daily production outside this range could produce inaccurate results. In most cases, the range will cover any likely values that would occur in most mineral operations. Other units include face area in square meters for drifts, shafts, and other underground openings, width of road for access road sections, and amount of material in starter dam for tailings dam construction.

CES is available on CD-ROM from the Superintendent of Documents, US Government Printing Office.

Bill of Goods Models

Bill of Goods models are based on direct estimates of the use of each item of fuel, supplies and other consumables. While in principle this approach produces better results, the detailed data is simply not available in most cases as the information is invariably regarded as commercially sensitive.

Bill of goods cost estimates therefore come from data provided by equipment manufacturers. The cost estimator applies typical consumables usage rates to the equipment believed (or assumed) to be in use at the operation to work out operating costs for each step in the flowsheet. The estimates are then adjusted to reflect actual working conditions at the operation. In practice, this approach requires an immense mount of detail and is generally limited to the preparation of pre-feasibility studies or better by 'insiders'.

For outsiders with limited access to the necessary data, the fallback position is to use (as we do) some form of expert system modelling that plugs in valid assumptions to fill the gaps. Which brings us back to the CES approach. One organization that tries to blend expert systems modelling with the bill of goods approach is Aventurine Mine Cost Engineering's Sherpa suite of computer programs available through Western Mine Engineering. The Sherpa programs cost up to two thousand dollars and require the user to be familiar with mining engineering concepts, but they produce good results and are well regarded by the mine cost estimation community.

We try to combine the statistical approach in CES with the Bill of Goods approach used by professional cost estimators. We have our models back-calculate the labor requirement for each step in the flowsheet and the levels of consumables such as fuel, power, explosives, reagents, grinding media and other consumables that are impled in our conceptualization of the flowsheet. These can then be checked against actual experience.

But a model is just a model. The real skill lies in collecting the necessary data, filling in the gaps and getting the flowsheet right. Plus going out on site and kicking a few tires.

Have a look at the free sample of one of our mine cost models.

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