There is a large financial risk when investing in a mining and export operation. The price levels of resources and shipping rates are volatile, mine production and port congestions are unpredictable and other economic, political, legal, institutional, environmental and social variables are subject to change, especially in developing countries. As coastal reserves are depleting and as global demand increases, there is a general push towards inland reserves, increasing the distances between pit and port. The pit to port supply chain therefore often becomes the main cost factor of a mining and export operation. It is essential that the selected transport modalities for the operation fulfil the short and long term goals of the mining operation.
Due to this financing risk it is often inevitable in developing countries that mining operations start relatively small and with low capital expenditure (CAPEX). More financing becomes available as soon as production milestones are met and dividends are paid. The choice for a pit to port transport modality (eg. road, rail, inland waterways, slurry pipeline or belt conveyor) and the type of port operations are therefore also dictated by the available budget.
When mine production increases, the transport and port operations are upscaled in parallel but the modalities often remain unchanged. For example, by driving more trucks on a hauling road or sailing more barges down a river. In the long term, this approach may not be ideal from a total cost of ownership perspective as the transport modality is not optimally suited for the mine production level. The mine operation is locked into the modality as it was easiest to finance at the start-up stage. Therefore, at a certain mine production level a switch to a different modality may significantly increase the long-term profitability. This logistical re-evaluation is often not possible or overlooked because mining, transport and port operations have not been designed integrally. There are numerous pit to port mining operations worldwide which have outgrown their initial logistical concept and have sub-optimal profitability as a result. A few typical examples: The sunk costs into the continuous upgrading of the hauling road and increasing truck numbers make switching to another modality unattractive during the operational life of a mine.
However, the operational expenditure (OPEX) of this type of operation is very high when compared with an overland conveyor for the same annual throughput. There may be limited space for stockyard expansion to cope with increased annual throughput and larger barges. More optimal barge terminal locations are available; however the sunk costs in the existing terminal make relocation unfeasible. A jetty upgrade may also be necessary to cope with increased vessel sizes, while loading rates conflict with the ongoing export operations.
To avoid issues as described above, it is essential that an integral master-plan is made during the initiation phase which incorporates the envisaged mine production increases throughout the complete pit to port supply chain and also takes all significant risks into account (resource price levels, socioeconomic variables etc.). This has to be done for the nodes (mine, plant and terminal) and links (transport modalities). This approach ensures that no modality selection decisions are made during start-up which will be difficult to correct later on. This master-plan is a critical part of the bankable feasibility study. It should include bankable cost estimates of several alternative scenarios for the realisation and operation of the mine, the processing plant, the inland transport and the port operation. Ideally this approach results in a pit to port operation which can be scaled to the actual production, has manageable risks and near maximum profitability throughout its life span and production level. It is this solution which has the highest expected return when investments costs are corrected for risks.