The previous article in the series looked at mineral resources and ore reserves. We will now look at the main operations that occur on a typical mine site.
Mining operations
The mining industry might seem like an incredibly demanding workplace and it's true. The hours are long, the work is hard and each year many miners spend more time away from their friends and family than they do with them.
There are some perks: when you are on the mine site you don't have to clean, every meal is cooked for you by chefs (although, many miners would argue whether they should be classified as "chefs"), a six-figure salary is the norm and you have 30 flavours of ice cream to choose from every night.
Infrastructure
It costs companies many millions and in some cases even billions to develop a new mine and these costs are often magnified due to the remote location of many mine sites. Many Australian mines operate using a fly-in, fly-out (FIFO) workforce which requires an airport. Access roads are required to transport materials, equipment and importantly, beer. Services such as power and water must be connected or new power stations and water treatment plants built.
For example, Fortescue Metals Group Limited (ASX: FMG) recently developed its Solomon mine site in the Pilbara and it produces 60 million tonnes per annum (Mtpa) of iron ore which is enough to fill 12,000 Olympic sized swimming pools. The approximate cost of $3.6 billion to get the mine operational included $850 million to develop the mine, $700 million to build the ore processing plants, $1.2 billion for port facilities and $850 million for the rail link to connect the mine to the port.
Cockatoo Island, located near Broome in WA, was a fantastic place to work but reveals the true isolation of some mine sites. Following an hour flight from Broome, I would land on the dirt airstrip in a 10 seat Cessna aeroplane whilst supplies and machinery for the mine arrived days later by barge. Swimming in the ocean was not advised due to the resident crocodiles in the area. Luckily, in the 1980s Alan Bond converted the mining island into a resort which left behind a beautiful infinity pool at the top of the hill which was perfect to cool down in after work.
The Mine Production Cycle
The mine production cycle described below is typical of an open-pit iron ore mine that our big miners Rio Tinto Limited (ASX: RIO), BHP Billiton Limited (ASX: BHP) and Fortescue operate in the Pilbara, WA.
1. Mine planning and scheduling – essential for any mining operation. Digging up minerals and exporting them may appear to be a very simple task but this part of mining can be extremely complex and detailed plans are usually scheduled up to 5 years in advance.
The technical roles on the mine site are often filled by engineers and geologists. The machinery operators often refer to the technical staff by many names, but "propellerhead" is common and probably the only reference suitable for display here. Despite the banter between the technical staff and operators, a mine site wouldn't operate without either.
2. The drill and blast department is where you will find the pyromaniacs within the mining industry who love to blow things up. The drill rigs initially bore holes into the rock which is then packed with explosives and detonated, breaking the rock into a manageable size.
3. The broken rock is loaded into trucks by large excavators and hauled by trucks to its final destination. If the rock contains economic amounts of minerals (ore) then it goes to the ore stockpiles for further processing otherwise it is sent to the waste rock dumps.
The use of autonomous machinery on Australian mine sites is increasing. BHP, Rio Tinto and Fortescue all have significant projects in progress and these autonomous trucks, drills, excavators and trains provide a glimpse of what the Mine of the Future will look like.
Ore processing cycle
4. The mineral ore is moved from the ore stockpiles and loaded into a primary crusher or grinding mill circuit to break the rock down to a smaller size. The type and extent of processing required will vary with different minerals and different rock types.
5. The crushed ore then enters the ore processing facility (OPF). Once in the OPF, the ore is grinded and then scrubbed with water to remove as much waste rock as possible. The ore is then transported by conveyor to the train loading storage area.
Many ore processing facilities produce a waste product, known as tailings, through the mineral extraction cycle. This waste is usually pumped to the tailings dam storage facility. There have been catastrophic failures of tailings dams at mine sites resulting in significant environmental damage, loss of production and mine closures. This is another example of the countless risks facing mining operations.
Transport
6. The ore is then loaded onto the awaiting trains for transport to port. The iron ore trains in the Pilbara are the longest and heaviest in the world. The record was a train with 682 wagons and a total length of 7.3km – you'd better have a good book if you get caught at the crossing when these monsters pass.
7. At the port, the ore is offloaded and stockpiled. This is then loaded onto ships for export overseas. Australia's iron ore and coal ports are the busiest in the country.
That is a basic summary of mining operations that occur on a typical iron ore mine site like Solomon and Cockatoo Island where I have worked. Every mine site is unique and the processes, machinery and mining methods utilised vary across companies, industries and countries. Most company websites and presentations will provide a range of information on the specific processes in use.
Keep an eye out for the next article where we will look at exploration companies in detail. Exploration companies can provide investors with impressive returns but they also carry a high degree of risk.
