Total Drilling Cost AC BHMTs Value Proposition Prepared
Total Drilling Cost AC BHMT's Value Proposition Prepared for: Indiana Society of Mining and Reclamation 19 th Annual Technolocy Transfer Seminar Dec. 5 th & 6 th, 2005
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.
Total Drilling Cost is a value concept that places its' emphasis on the cost of drill productivity. Progressive customers understand 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.
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 US$300 per operating hour.
Total Drilling Cost Method 1 TDC = (Bit Price / Meters Drilled) + (Drill Operating Cost per Hour / ROP)
Total Drilling Cost • Example #1: – – Bit cost = US$5, 000 Bit life, meters = 6, 500 Penetration Rate = 52 meters/hour Rig Cost = US$200 per hour
Total Drilling Cost Example #1: TDC = Bit Life + Productivity ($5, 000 / 6, 500 m) + ($200 / 52 m/hr) = $0. 77 / meter + $3. 84 / meter = $4. 61/meter
Total Drilling Cost • Example #2: – – Bit cost = US$5, 000 Bit life, meters = 8, 000 Penetration Rate = 40 meters/hour Rig Cost = US$200 per hour • TDC = (Bit Cost / Bit Life) + (Rig Cost / Pen Rate)
Total Drilling Cost • Example #2: TDC = ($5, 000 / 8, 000 m. ) + ($200 / 40 m/hr) = $. 625 + $5. 00 = $5. 63 / meter
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?
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
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.
TDC Method 2 Example A: – – – Bit cost = US$5, 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
TDC Method 2 Example B: – – – Bit cost = US$5, 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)
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!
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 the. TDC. – – 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%
Total Drilling Cost
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.
Results Western USA Copper Mining Company Total Drill Cost (TDC) 2. 40 2. 00 US Dollars 1. 60 BHMT 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
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
Results Canadian Coal Miner Total Drill Cost (TDC) 10. 00 US Dollars 8. 00 6. 00 BHMT 4. 00 2. 00 0 01/01/2002 thru 12/31/2002 01/01/2003 thru 12/31/2003 01/01/2004 thru 12/31/2004 01/01/2005 thru 12/31/2005 11/15/2005
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
Thank You! • Questions? ?
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