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Analysis

Scratching The Surface Of Cost-Effective Mining

Mon, 10/22/2018 - 10:43

While open-pit mines imply a lower initial cost, operators are starting to ponder the long-term costs associated with underground mining. For example, brownfield projects are preferable in the short term since the operator does not have to start from scratch. But as land becomes scarce, operators are realizing they have far more chance of striking gold with a greenfields deposit close to their existing operations than a brownfields deposit in an area with little to no infrastructure. According to Kenneth McLeod, President and CEO of Sonoro Metals, “The best place to find a mine is close to where other miners already discovered one.”
Miners are staying close to home, and as a result, many of the new mines popping up are a result of further exploration or underground extensions on surrounding properties. Fresnillo, for example, operates the Herradura mine in Sonora, which produced 473,638 ounces of gold in 2017. The company decided to dig deeper into the Centauro pit with the Centauro Deep exploration program, with 9,000m of drilling carried out to date. The project is expected to start production in 2020 with an average of 65,000oz/y of gold. Similarly, Coeur Mining is gradually transitioning its Palmarejo mine in Chihuahua into an underground project at the Guadalupe deposit.
Additionally, costs can be saved in underground mines through unexpected means. The Zacatecas Ecological Tax was introduced in 2016, placing a levy on waste and polluting activities. Pan American Silver operates the La Colorada mine in the state but Country Manager Christopher Warwick says the effects of the tax would have been much greater had it not been an underground mine. “Certainly, this tax affects our La Colorada mine but the effect is not as devastating to an underground operation in the same way it would be to an open-pit mine due to the waste movement and management that is required of waste dumps,” he says.
MORE SAFETY, FEWER PROBLEMS
It used to be the case that underground mining was incredibly risky due to potential collapse and inhalation of hazardous fumes. Now, emerging technology means underground shafts are more stable than ever and, in some cases, humans do not even need to be present in the mines. “Our company wants to show the industry that it is possible to operate deeper underground mines with cost-effective solutions and we know how to help them achieve this,” says David Juárez, Managing Director of Herrenknecht. The company has experience working in Russia and the UK and Canada, where a great deal of mining is underground.
Australian company GroundProbe knows the cost involved in stabilizing underground mines and is innovating ways to make it safer. “Sometimes about 20 percent of the cost of underground mining is in supporting the tunnels,” says Christian Bijsterveld, Business Manager North and Central America. The company developed an innovative technology to measure movement in the underground tunnel walls to less than 0.1mm in real time.
NONTRADITIONAL STATES
One factor operators need to weigh when searching for new deposits is the movement to nontraditional mining states. The potential unfolds as 2017’s biggest silver producers, according to CAMIMEX, were Goldcorp’s Peñasquito and three Fresnillo mines, followed by Fortuna Silver’s San José mine located in Oaxaca, which produced 7.5 million ounces and pipped Coeur Mining’s Palmarejo, Pan American Silver’s La Colorada and Peñoles’ Tizapa mines to the Top 5.
These areas are preferable for underground mining for two reasons. First, land packages in nontraditional mining states such as Oaxaca, San Luis Potosi, Campeche and Queretaro are broken into thousands of much smaller packages than northern states, meaning obtaining social license to operate is complicated for a large, open pit. In Sonora, for example while 4.03 million ha were concessioned in 2016 according to the Ministry of Economy, there were 3,632 mines, meaning an average land package of 1108.79ha. But in Oaxaca, 487,313ha were concessioned with 627 mines, meaning an average of 777ha per mine. Underground mining would negate the need to acquire several permits for mining activity.
Second, according to Sergio Almazán, Director General of CAMIMEX, there is more flora and fauna in these areas, entailing more work during the exploration, development and closure. “We believe that the south has just as much potential as the north,” he says. “The only thing is that the abundance of vegetation and flora in the south make it a little harder to find these deposits in a timely manner.” These factors mean underground mining could be a good alternative for miners looking in new areas.