Contract Mining versus Owner Mining – The Way Forward

Abstract

Mining involves many operations such as rock breakage, materials handling, equipment maintenance, mine design, scheduling and budgeting. At one stage or the other mine managements often have to decide whether to undertake a major mining operation using their own equipment and personnel or to contract the operation out to a specialised mining contractor. By contracting out one or more of their mining operations, the mining companies can concentrate on their core businesses. This paper reviews contract mining and owner mining to determine the merits and demerits of each and how they affect the economies of the mining companies. The results show that the decision to adopt owner mining or contract mining is influenced by the life of the mine, the availability and use of capital, and that contract mining helps to reduce the cost of mines with short life spans. The general trends in the mining industry show that contract mining will be the way forward for most mines under various circumstances in the future.

Benhaus - a landmark decision, one less hoop for contract miners but a clarion call for an overhaul of the South African mining regime

“…The mine owner bears the risks of geological modelling, grade control, mine design, geotechnical stability, environmental and community issues, and the instability of the market price for the end product (Kirk, 2002). However, when evaluating contract and owner mining, the main comparative risk areas are equipment selection and matching, equipment performance (productivity, availability, and utilization), quality and control of the ore, health and safety, human resources management, contractual and litigation issues, and production or operating costs (Suglo, 2009). Not to mention the fact that contracting companies have traditionally followed a very specific remuneration and benefit model so as to operate at a lower cost base and to remain profitable.…”

Service Risk Evaluation of the General Contract for Coal Mine Production and Operation: Case Study at Shendong Jinjie Coal Mine in China

“…Dunlop [28] studied five dimensions of risk: equipment performance, production schedule adherence, latent conditions, force majeure, and general litigation risk. Anon [29] and Suglo [30] classified contract mining risks into four broad categories: technical, managerial, commercial, and economic, which covered risks associated with equipment, consumables, human resources, and costs. Rupprech [31] studied nine types of risks: tender invitation, site survey, job definition, contract duration, contract review, payment and fines, contract escalation, contract management, and contractual dispute resolution, from a contract life cycle perspective.…”

“…On this basis, we considered four aspects: macroeconomic condition, coal prices, market demand, and market competition. [27], Dunlop [28], Anon [29] and Suglo [30] studied contract mining risk. Monitoring contract execution is a main method [26].…”

Mining Contract Lifecycle Management Maturity Assessment: Case Study PT Kaltim Prima Coal

“…Mine management is frequently faced with the decision of whether to execute all major mining activities with their own equipment and employees or to outsource some or all of them to specialized mining contractors. When a mine's owners hire professional contractors to undertake various mining operations like drilling, blasting, material removal, equipment maintenance, processing operations, scheduling, and budgeting, they are known as contract mining [1]. Contract mining or owner mining systems are used by the majority of mining businesses in Indonesia and around the world.…”