Aspects that can possibly affect your gold mine’s profitability.
By Denzel T Chimene
Whether you are an aspiring gold miner or an artisanal small-scale miner (ASM), there are possibly some aspects that might affect or are already affecting your mine’s profitability. Sometimes, you may be comfortable with the current mine performance whilst it has a lot of potential to do better. Gold mining is a business and like any other business, it has 3 important figures in its financial statements, which are: Expenses, Revenue and Profit/Loss. Also like any other business, miners should thrive to increase their profitability or efficiency in the most professional way.
From pegging and exploration, a miner should ensure that he or she is going for a claim with the best grade of ore. Grade is the amount of gold found in an ore body, it is usually measured in grams per tonne (grams of gold found in a tonne of ore, g/t). It is wise to prospect a number of claims and conduct further exploration to those promising better grades. Even when it comes a point of establishing a shaft, it must be established at a point where the richest ore body is found.
When you are in operations, it is very important to determine your mine’s cut-off grade. This is the ore that you can mine profitably. Cut-off grade differs from mine to mine, as costs tend to vary per mine. For example, if mining and processing a tonne of ore costs you US$135, you should not mine and process anything less than 3 grams per tonne (assuming a gram of gold is being bought at US$45), as that will not be profitable to the mine. Since a mine should get a profit from every tonne it processes, the mine can set its cut-off grade at least 3.5g/t depending on its output per hour or quality of ore.
When you have established cut-off grade, you now need to control whatsoever comes off the ground to make sure that it is not below 3.5g/t, that’s grade control. As a miner it should be your mandate to find out ways to best control your grade.
Cost of production
Cost is another important aspect on mine profitability and this should be managed as much as possible. As highlighted above, the cost of producing 1 gram of gold should be below gold buying price. As a mine owner, you should be able to ascertain the cost of mining and processing 1 tonne of gold and experiment to reduce the cost as much as possible. For example, in a processing plant you should be able to determine cyanide, hydrogen peroxide or lime’s consumption rate per tonne. Make sure that you are not feeding it in excess (wasting) and establish the most favourable consumption rate.
On exploration, you should also determine if your ore is easily accessible and if it can be processed and still brings a favourable return on investment. Cost of production can be affected by ore hardness and even its properties when it comes to processing it. Some ores require special pre-treatment methods before leaching, whilst others do not, so all these need to be put into consideration when doing feasibility studies.
Accessibility of water, road networks and electricity/energy can be other factors that influence your cost of production. Cost of producing a gram of gold should always be below gold price per gram.
Production rate also influence profitability as much as grade does. A mine processing 576 tonnes of ore per day with an average cost of production of US$135/tonne at an average grade of 3.5g/t can possibly have a profit margin of US$3,888 per day, at an average recovery rate of 90%.
A mine processing 24 tonnes of ore per day with an average cost of production of US$135/tonne at an average grade of 5g/t can possibly have a profit margin of US$1620 per day, at an average recovery rate of 90%. By the end of the month, Mine A would have made a profit of US$120,528 whilst Mine B would have made a profit of US$50220.
Whilst a production rate matters, justice should also be done on efficiency. In the instance of Mine A that has an average recovery of 90%, if efforts were to be made to increase recovery to 95%, that means they would be getting margins around US$8,424 per day, 166.7% greater than the initial margin of US$3,888.
Efforts should also be put in place to limit operations downtime. Mine production rate should always be much larger than the Plant’s production rate to ensure that operations are not affected by any down times. If possible, the plant should always be having ore in excess to ensure that any breakdowns in the mining department do not affect the plant. In addition, to limit downtime within the plant, the crushing rate should be higher than the milling rate. They should be a storage facility between the two, such that any breakdowns in the crushing area will not affect milling rate and flowrate in the leaching plant. A mine should always limit its downtime at what so ever cost. Scheduled machinery maintenances can be of great assistance.
Above we discussed the contribution of recovery to profitability. Not recovering the largest possible amount of gold in ore will result in low profit margins. A mine should do test works and determine its optimum recovery rate (highest possible recovery in the most cost effective way), that optimum recovery rate becomes the recovery target. Some aspects affecting recovery are leaching technology or method in use, grind, reagents concentration, residence time, agitation only to mention a few. Whenever you miss recovery targets, investigations should be done to ensure maximum recovery is met. Recovery differs with leaching technology being used, agitated leaching (CIP & CIL) with the highest recovery rates of 90-95% in 24hrs. Vat and Dump Leaching have lower recovery rates. In the next article, we may look at gold leaching technologies ASM can consider in their operations.
Production level or model
Production level or model in use also affects mine profitability. A mine operating at 120tonnes per day may never compete with a mine operating at 500tonnes per day. The same comparison goes for a mine using agitated leaching and the one that uses heap leaching (of course depending on the nature of ore). It is however very wise to start very small with what you have, reinvest profits in operations and create sound business systems that will promote efficiency.
Also not every mine is meant to grow in operations, some ventures you go in as a starting point, harvest profits, exit and reinvest in a more feasible ore body that is more sustainable.
Artisanal Small Scale Miners should find ways to implement strategies that can boost their mine profitability. It may be difficult to implement some of the above-recommended ways at the best industrial standards, but they should find a starting point towards handling their ventures like serious businesses.
Denzel T Chimene is a Zimbabwe School of Mines Graduate in ND Mineral Processing and Extractive Metallurgy. He has a passion for Mining Business. For feedback, he can be contacted on +263784213938 or firstname.lastname@example.org.