Total Drilling Cost

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Total Drilling Cost

• AC BHMT's Value Proposition
• Prepared forIndiana Society of Mining and
  Reclamation19th Annual Technolocy Transfer
  SeminarDec. 5th 6th, 2005

2
What is "value"?

• The AC BHMT "value proposition" is based on drill
  productivity, not "bit life".
• Drill productivity costs a mining company much
  more than "bit life".
• Let's take a few minutes to talk about and
  understand what YOUR value proposition is based
  on.
• Then we will explain ours.

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Total Drilling Cost

• Total Drilling Cost is a value concept that
  places its' emphasis on the cost of drill
  productivity.
• Progressive customers understand and adopt the
  philosophy that the cost of productivity drives
  the economics of a mine.
• Total Drilling Cost captures and shows the cost
  of drill productivity.

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The Total Cost of Drilling

• TDC includes everything it takes to run a drill
• Labor
• Power fuel or electricity
• Drilling tools and supplies
• Maintenance labor parts
• Supervision, administration
• Cost of equipment ownership (lease, purchase, or
  rental payments)
• With all things considered, drill operating costs
  can exceed US300 per operating hour.

5
Total Drilling Cost

• Method 1
• TDC
• (Bit Price / Meters Drilled)
• (Drill Operating Cost per Hour / ROP)

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Total Drilling Cost

• Example 1
• Bit cost US5,000
• Bit life, meters 6,500
• Penetration Rate 52 meters/hour
• Rig Cost US200 per hour

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Total Drilling Cost

• Example 1
• TDC
• Bit Life Productivity
• (5,000 / 6,500m) (200 / 52 m/hr)
• 0.77 / meter 3.84 / meter
• 4.61/meter

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Total Drilling Cost

• Example 2
• Bit cost US5,000
• Bit life, meters 8,000
• Penetration Rate 40 meters/hour
• Rig Cost US200 per hour
• TDC (Bit Cost / Bit Life) (Rig Cost / Pen
  Rate)

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Total Drilling Cost

• Example 2
• TDC
• (5,000 / 8,000 m.) (200 / 40 m/hr)
• .625 5.00
• 5.63 / meter

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Total Drilling Cost

• Example 2
• TDC
• (0.63 / m.) (5.00 / m.)
• 5.63 / meter
• 1.02 MORE!
• for a bit that is less productive but has longer
  life?!
• (52 vs. 40 m/hr., 8,000 vs. 6,500 m)
• Where is the advantage really found?

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Total Drilling Cost

• TDC Method 2
• TDC
• (Bit Price / Meters Drilled)
• Fixed Cost
• (Variable Cost / Rate of Penetration)
• Where
• Fixed Cost Annual Overhead Cost / Annual Meter
  Budget
• Variable Cost Labor Fuel Supervision
  Repair Parts Repair Maintenance Repair Labor

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TDC Method 2

• Fixed Cost Calculation
• For example 1.50/meter fixed cost
• 1.50 / meter 900,000 overhead cost for drill
  fleet / 600,000 annual budget meters
• Ownership cost of the drill fleet (lease, rent,
  purchase payments)
• Drill Maintence budget for fleet (PM parts,
  fluids, normal wear parts, etc.)
• Budgeted drilled meters.

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TDC Method 2

• Example A
• Bit cost US5,000
• Bit life, meters 6,500
• Penetration Rate 52 meters/hour
• Fixed Cost 1.50 / meter
• Variable Cost 95 / hour
• TDC (5,000 / 6500) 1.50 (95 / 52)
• TDC .77 1.50 1.83
  4.10

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TDC Method 2

• Example B
• Bit cost US5,000
• Bit life, meters 8,000
• Penetration Rate 40 meters/hour
• Fixed Cost 1.50 / meter
• Variable Cost 95 / hour
• TDC (5,000 / 8000) 1.50 (95 / 40)
• TDC .63 1.50 2.38
  4.51
• .41 / meter MORE for every meter
  drilled!(246,000 per year based on 600,000 m
  drilled/yr)

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Production Cost Only

• What is the cost of producing a single blasthole?
• Cost Drill Cost per Hour x Time spent drilling,
  hrs
• 150 per hour x 30 minutes
• 150 x .5
• 75 per hole drilled
• 150 per hour x 20 minutes
• 150 x .33
• 50 per hole drilled
• Productivity costs less!

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Total Drilling Cost

• With Total Drilling Cost calculated by any
  method, the productivity (ROP) and drill cost are
  the drivers of the calculation.
• Bit Price per Meter is a small part of theTDC.
• Ex. 1, bit price/m, .77 is 17 of 4.61/m.
• Ex. 2, bit price/m, .63 is 11 of 5.63/m.
• Ex. A, bit price/m 19, FC VC 81
• Ex B, bit price/m 14, FC VC 86

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Total Drilling Cost
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Total Drilling Cost

• The cost of productivity is the largest part of
  TDC
• Spend less time drilling each hole.
• Choose faster drilling bits.
• Run bits to give high Penetration Rate and
  reasonable bit life.
• This will keep the TDC low.

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Results
Western USA Copper Mining Company
Total Drill Cost (TDC)
2.40
2.00
1.60
BHMT
US Dollars
1.20
Manuf 2
0.80
Manuf 3
0.40
0
01/01/2002 thru 12/31/2002
1/01/2003 thru 12/31/2003
01/01/2004 thru 12/31/2004
01/01/2005 thru 12/31/2005
11/15/2005
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Results

• Western USA Copper Mining Cost Savings
• 2003 vs. 2002 -84,735 1.89/ft
• 2004 vs. 2003 837,561 1.65/ft
• 2005 vs. 2004 228,637 1.58/ft
• Total savings year on year 981,463
• If no change in TDC
• Would have spent 22,921,117 (at 1.86/ft, 2002)
• Actually spent 21,254,869
• Saved 1,666,248

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Results
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Results

• Canadian Coal Miner Operating Cost Savings
• 2003 vs. 2002 1,235,237 7.58/m
• 2004 vs. 2003 520,781 6.30/m
• 2005 vs. 2004 120,268 5.85/m
• Total savings year on year 1,876,286
• If no change in TDC
• Would have spent 13,888,389 (at 9.91/meter,
  2002)
• Actually spent 10,101,431
• Saved 3,786,958

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Thank You!

• Questions??