Financial Evaluation of Implementing In-Pit Crushing and Conveying Systems for Waste on Open Pit Mines

Abstract

The South African mining industry has faced mounting challenges, especially rising expenses that threaten profitability. These escalating costs, driven by various factors including operational expenses such as mining costs, are critical. The distribution of mining costs across activities within the production cycle is crucial, with hauling operations in open pit mines representing a significant portion, as noted by Paricheh et al (2017) at 49%. Due to the substantial economic impact of hauling expenses on mining expenditures, there's a strong incentive to streamline these operations to lower overall costs effectively. Current research highlights a noticeable transition in the mining sector towards embracing in-pit crushing and conveying (IPCC) systems in open pit mines, acclaimed as a cost-effective substitute for conventional truck and shovel (CTS) systems (Awuah-Offei et al, 2009). This research assessed both the integration and financial viability of implementing a waste IPCC system in the loading and hauling operations of an open pit mine. A mixed-methods approach, combining quantitative data from production records and costs with qualitative insights from expert interviews was used. The findings of this research indicate that while the IPCC system can be integrated, there remains a degree of reliance on the CTS system for material transportation from the pit to the IPCC system. For the CTS system, 55 rigid dump trucks (RDTs) are required, constituting 57% of the initial capital expenditure of R1.27 billion. Conversely, the IPCC system requires only 31 RDTs, accounting for 29% of the initial capital costs of R1.37 billion. However, despite the substantial reduction in RDTs, the IPCC system requires significant investment in a crusher and conveyor belt system for waste management, which constitutes 32% of its capital costs. Examination of the operating costs over the life of the mine indicates that there are no cost advantages associated with operating an IPCC system compared to the CTS system. Operating expenses for the IPCC system exceed those of the CTS system by 58%, predominantly driven by the operational costs of the crusher and belt system, contributing to 67% of the IPCC system's costs. The financial assessment results show a positive and acceptable net present value (NPV), internal rate of return (IRR), and payback period for both systems. Nevertheless, the CTS system exhibits superior financial performance, with a NPV of R7.45 billion, an IRR of 83.1%, and a shorter payback period of 1.2 years, and is recommended as a viable option for the mine.