Real-life examples: Managing costs versus managing expectations in mining

In the mining industry, the balance between managing operating costs and meeting leadership expectations is a challenge that has persisted since Guy Simpson – now Atlantech’s Technical Services Manager, Western Australia – began his career back in the late 1980s.

Over the years, he’s observed how a company’s attitude toward this balance can significantly impact its success – or failure.

Guy says effective leadership in mining requires more than just decision-making; it demands a deep, experience-based understanding of what certain activities should cost.

This practical knowledge, often earned through their time at the coal face, equips leaders to challenge their management teams when costs start to escalate, ensuring accountability and sustainable operations.

In this blog, Guy shares two real-world examples that demonstrate the stark difference between leadership grounded in cost understanding and the pitfalls of decisions driven by short-term gains.

Situation 1: Proactive leadership ensures cost control

I was working at the head office of a mid-tier mining company in a mine planning overseer role. One of our operations was struggling to meet production targets due to a wall failure that impacted a large section of the main pit, preventing access to ore. Additional mining fleet was brought in to catch up, and this was very effective.

However, when operations returned to normal, unit costs – particularly for drilling and blasting – remained stubbornly high, running at double the budgeted cost.

Despite multiple appeals from company leadership to site management, no improvement occurred. This was especially frustrating because the leadership team had a strong operational background and knew exactly what drilling and blasting in fresh rock should cost. Site management, however, appeared to have accepted the high costs as inevitable.

Frustrated but determined, the company leadership dispatched a small team to conduct a detailed audit of drill-and-blast activities and load-and-haul operations to identify the root cause and challenge the site’s assumptions. This demonstrated committed leadership.

The team (including yours truly) examined everything – from drill penetration rates to powder factors and hole diameter – but found no significant technical issues. The underlying problem turned out to be non-technical: the additional mining fleet brought in to catch up on production had never left.

Instead of demobilising the surplus fleet, site management had allowed twice the necessary number of drill rigs, drillers, and charge crews to remain on-site, generating fixed costs without a corresponding productivity increase. Extra diggers were parked, and the remaining fleet could easily match the required productivity levels.

Once the audit findings were presented, company leadership quickly directed the demobilisation of the excess drills and labour. Within two to three months, drill-and-blast costs dropped slightly below budget, productivity remained on target, and some site managers faced career changes.

Without this committed leadership, the company would have suffered significant financial losses.

Situation 2: Unempowered decision-making leads to long-term issues

In another instance, I was hired to take over management of operating open-pit gold mines here in Western Australia. These pits faced major challenges from wall failures and wet ground conditions.

The primary pits were cutbacks, and while some dewatering had been carried out before mining commenced, large volumes of water remained. Additionally, the pit walls were not fully drained. This was due to company leadership being pressured to start mining as soon as possible to generate cash flow, ignoring contrary advice and lacking a full understanding of mining cutbacks.

As the cutbacks deepened, conditions worsened. Wet walls and floors led to predicted wall failures, and mining rates suffered as production fleets were diverted to clean up wall debris and deal with wet floors. The extra work significantly impacted project value.

Once mining reached the base of the old pit, ore extraction began. However, wet conditions persisted, leading to slow production rates and constant re-sheeting of roads and ramps. The high moisture content in both ore and waste – 10% above budget – reduced truck volumes, requiring significantly more truckloads over time.

When the pits were eventually completed, a detailed analysis of the project’s cost and time performance showed a 40% cost overrun and a 30% time overrun compared to the original budget.

This was a textbook example of company leadership seeking short-term gain but ending up with long-term pain.

Lessons for miners

Both situations underscored the importance of balancing cost management with informed, realistic expectations. Strong, committed leadership grounded in practical experience is essential to ensure sound decision-making and sustainable operations.

Mining companies can draw critical lessons from these examples by:

• Investing in experienced leadership: Leaders with a strong operational background are better equipped to make informed decisions.

• Conduct audits and listen to operational leaders: Assessments of operational activities can uncover inefficiencies and prevent financial losses, plus present facts too hard to ignore by site management.

• Prioritise long-term sustainability: Avoid rushing into operations at the expense of careful planning and preparation.

These principles are essential for running efficient and profitable mining operations while maintaining a focus on sustainable practices.

Atlantech: Experienced leadership for safe, cost-effective mining

At Atlantech, we understand that mining success is built on careful planning, informed decision-making, and proactive leadership.

Let us help you navigate the complexities of mining operations to ensure your projects run smoothly and profitably.

We provide excellence and innovative mining engineering and environmental support solutions, backed by a highly experienced team of engineers and support staff.

Contact Atlantech today to discover how we can support your mining operations with expertise you can rely on. Alternatively, drop us a line at info@atlantech.com.au.