Value engineering: more than just cost cutting

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With ongoing challenges of securing project finance these days, it is important to leave no stone unturned when trying to optimise your mining project during the feasibility study stage or in production. Thus, the importance of the “value engineering” study has been elevated.

Some think that value engineering is just about cutting costs. Costs are, without a doubt, important to scrutinise carefully when looking to improve a study, but there is only so much you can cut. Often there is the ability to maximise revenue or reduce risk by employing smart mine planning and modelling. In some situations, these have the ability to trump any cost related improvements. Two particular areas where opportunities can be found are:

  • Cut-off grade, schedule and stockpiling strategy: In a precious or base metals project, the ability to bring higher grade forward in a project often brings enhanced immediate returns (depending on the size of the plant and the mining constraints). Stockpiling low grade for later in the mine life allows a means to retain your Ore Reserve size whilst maximising net present value. If you have a project with little or no stockpile, or if you have grade that increases or is flat over the like of the mine, then perhaps this is a good opportunity for value improvement.
  • Geometallurgical optimisation: High grade is good, but it doesn’t guarantee higher value. The reality is that revenue equals throughput x grade x recovery x net realisation, and it is revenue, not grade, that we should be maximising. There may be high grade blocks that have lower recovery or low grade blocks that can be processed at a higher throughput. Are these relationships understood and modelled? The symptoms of opportunities (and risks) are “flat” assumptions for throughput and recovery, despite variability within the orebody. Often this is constrained by the test work undertaken and more may be required to fully realise the opportunity.

Snowden has developed Evaluator as a strategic optimisation tool to optimise these aspects. It can often improve returns by over 10% without a change in costs (i.e. in addition to any cost savings found). Often all it takes is a review of a report to identify whether there is latent value within a project due to these two aspects. Identification of these key opportunities should be included in every value engineering exercise.

If you would like help finding the latent value opportunities in your project, please contact us at .

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