PROJECT & INFRASTRUCTURE LIFE CYCLE PLANNINGFOR NEW MINE DEVELOPMENT

QME Conference 24 July 2012

Presented by Steve CuttingProject & Infrastructure Life Cycle Planning for New Mine Development 1

TOPICS

1. Introduction

2. Challenges in Mine Development

3. Supply Chain Infrastructure Planning

4. Integrated Approach for Mine Development

5. Whole of life cycle considerations

6. Statutory Planning and Approvals

7. Asset Management

8. Project Planning Success Factors

Project & Infrastructure Life Cycle Planning for New Mine Development 2

1. Introduction - Queensland Coal Industry

1.1 Coal Mine Infrastructure

4

1.2 Coal Handling and Preparation Plant (CHPP) Infrastructure

5

1.3 Coal Preparation Plant (CPP)

6

1.4 Rail Infrastructure

1.5 Port InfrastructureAbbot Point Coal Terminal T1

1.6 Wiggins Island Coal Terminal

• Design Throughput 25Mtpa• 5.6km overland conveyor from 

rail receival to stockyard• Stockyard – overhead Bridge 

Stacker and underground reclaim operation permits high levels of blending

1.7 Coal Industry – The Media Battle

• 156 Mtpa incrementally developed over the past 30+ years

• Significant media coverage and hype surrounding 6‐fold increase in the industry by 2020

• Completely unrealistic timeframes being circulated in the media

1.8 Coal Industry – The Media Battle

• Mining is becoming more challenging, more complex

o Environment

o Community

o Decreasing ore qualities - Increasing waste

o Remoteness / challenging topography

o Length and cost of ore chain

o Climate change/ Carbon tax/ Mining Profits tax

o Approach of “Peak Minerals”?

o Global mining companies using global resources

• New mine projects have big risks

• Corporate Social Responsibility is a key factor

• Jobs need to have realistic timeframes and sufficient resources

• Solutions need to consider full lifecycle costs and planning

• Engineering needs to take a rigorous staged approach for project lifecycleProject & Infrastructure Life Cycle Planning for New Mine Development 12

2. CHALLENGES IN MINE DEVELOPMENT

Projects must consider the overall supply chain and required infrastructure from pit to portwhen planning investment decisions.

Project & Infrastructure Life Cycle Planning for New Mine Development 13

3.1 SUPPLY CHAIN INFRASTRUCTURE PLANNING IS KEY

1000 Mining (Open Cut) and 2000(Underground)

3000 ROM Coal Handling and Processing

4000 Raw and Product Coal Handling andProcessing

5000 On‐Site Infrastructure

5400 Rail to siding

5500 Power Distribution

5600 MIA Facilities and Site Infrastructure

6000 Off‐Site Infrastructure

6500 Port Contribution

7000 Plant Services & Utilities

8000 Indirects

9000 Owners Costs & Contingency

10000 Preproduction Costs

10400 Spares

Project & Infrastructure Life Cycle Planning for New Mine Development 14

3.2 Project Capital Cost Distribution

Infrastructure Capex costs often dwarf the costs of the coal handling and preparation plant.

GeologyGeology

MiningMining

ProcessProcess

InfrastructureInfrastructure

• Exploration drilling =>>

• Geological model of resource =>>

• Ore quality in blocks =>>

• Mine model =>>

• Pit shell / mining plan =>>

• Processing plant design =>>

• Product ore production =>>

• Infrastructure – transport, power, water,

accommodation Project & Infrastructure Life Cycle Planning for New Mine Development 15

4.1 LINEAR APPROACH MODEL TO MINE DEVELOPMENT

GeologyGeology

MiningMining

ProcessProcess

InfrastructureInfrastructure

“An integrated approach

becomes vital as the cost

and demand for power,

water, steel and other

inputs increase.”

How useful is the traditional model

in the new mining climate?

Project & Infrastructure Life Cycle Planning for New Mine Development 16

“An integrated team

working together on all

aspects produces an

improved result”

4.2 Integrated Approach Model – Linking Infrastructure to all Geometallurgy Operations for Life of Mine Results

• Approvals and Mine Planning • EIS Project Update• Community  Issues • Project Statutory Approvals • Project Financial Approval Processes• Location issues• Mining Issues• Coal Marketing Issues• Coal Processing Issues• Mine Services ‐ Power• Mine Services ‐Water• Mine Services – Transport, rail, road• Engineering – Civil, Structural, 

Mechanical, Electrical and General Design Issues

• Financial Issues• Capital Costs• Operational Costs• Return on Investment Requirements• Debt Funding Issues• Cash Flow Issues• Technical Issues• Schedule Issues• Schedule and Production Sequencing 

Issues• Operational Issues• Asset Management Issues

Project & Infrastructure Life Cycle Planning for New Mine Development 17

4.3 Enterprise Wide Project Planning

• Optimal balance between investments o Mine establishmento Mining equipmento Process planto Enabling infrastructure

• Capital Expenditure (CAPEX)o Mine establishmento Plant and equipmento Transport infrastructureo Enabling infrastructure – Power, Water, Logistics chain

• Operational Expenditure (OPEX)o Mine and process plant operationo Transport operationso Energyo Asset Management

• Option Analysis o Net Present Value – ore quality, cost to mine, effort to extract, cost to transport

may all vary

Project & Infrastructure Life Cycle Planning for New Mine Development 18

5.1 WHOLE OF LIFE PROJECT COST MODELLING

• Offshoring can only contribute to plant and equipment supply and fabrication• Business case must exist for future trends

Project & Infrastructure Life Cycle Planning for New Mine Development 19

5.2 Need to Respond to Rising Infrastructure Costs

% of Project CostsInfrastructure vs Plant & Equip

Area Legislation Applicable? Timeframe

Cultural Heritage Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Commonwealth)

Cultural heritage duty of care  Cultural Heritage surveys and liaison will need to occur.

Aboriginal Cultural Heritage Act 2003Native Title Act 1993 (Commonwealth) If Native Title has not been extinguished

Native Title (Qld) Act 1993

Key Approvals Environmental Protection & Biodiversity Conservation Act 1999 (Commonwealth)

If project is a Controlled Action; could require an EIS 

2‐3 years (for an EIS preparation & assessment )

Environmental Protection Act 1994  1. An environmental authority (mining activities) 

2. Approval of EMP

12‐18 months

Mineral Resources Act 1989. Mining tenement  12‐18 monthsPetroleum and Gas (Production and Safety) Act 2004

If petroleum or gas activity

Sustainable Planning Act 2009 & associated regulations and policies

Material Change of Use under local planning scheme

6‐12 months

Pre‐construction Fisheries Act 1994 & Fisheries Regulation 2008

If fish habitats are disturbed

Forestry Act 1959 Clearing of forestry material Nature Conservation Act 1992 Interference with species listed under 

the RegulationsTransport Infrastructure Act 1994 A permit is required to work in, or 

interfere with a state‐controlled road.Water Act 2000 Licensing for bores 

Riverine Protection  Creek diversions for dams

Workplace Health and Safety Act 1995 and Regulation 2008

Major Hazard Facilities

Construction & Operations

Environmental Protection (Air) Policy 2008

Dust monitoring 

Environment Protection (Noise) Policy 2008

Noise monitoring

Radiation Safety Act 1999 Licence equipment

2 May 2012

Project & Infrastructure Life Cycle Planning for New Mine Development 20

6. STATUTORY, PLANNING & APPROVALS

Project & Infrastructure Life Cycle Planning for New Mine Development 21

7. PROJECT LIFE CYCLE: ASSET MANAGEMENT CONTEXT

1. Mine Developments are complex

2. Large scale projects have big risks

3. Consider all inputs in an integrated way

4. Infrastructure requirements are major cost components

5. Take a phased approach, refine the details in each phase

6. Analyse if the project stacks up financially ‐ ‘Go’ or ‘No Go’ at Feasibility Phase

7. Professional project management is vital

8. Tight control of project execution plan needed

9. Develop an org structure befitting the size and complexity of the project

10. Set realistic timeline and cost estimates

Project & Infrastructure Life Cycle Planning for New Mine Development 22

8. PROJECT PLANNING SUCCESS FACTORS – Take Home List