Modular and Mobile Mineral Recovery Plants for High and Low Commodity Price Environments

Abstract

The concept of modular and mobile mineral recovery plants has been around for decades. However, there is still some industry confusion about the best application for these versatile and cost-effective plants. This article will first describe modular and mobile plants and then discuss the most useful applications depending on the current commodity price environment. Modular and mobile plants generate more revenue than traditional plants in rising commodity price environments, and reduce project risk in low commodity price environments.

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History and Overview

The Sala company from Sweden popu­larized modular and mobile mills in the 1970s. Figure 1 shows an early Sala ‘Cara­van Plant’ installation. The term “modular plant” describes a pre-engineered mineral recovery system consisting of pre-assem­bled process units. Typical process units include crushing, dense media separation, ore scrubbing, screening, grinding, gravity concentration, flotation, cyanidation, and dewatering. Figure 2 shows ore scrubbing, gravity concentration, and grinding mod­ules at a mine in South America.

Mining companies can easily transport these units to mine sites using standard sea, rail or road freight. Figure 3 shows Sepro person­nel preparing a mobile milling and gravity concentration module for sea freight. Once at site, the process units can be installed with little civil work and quickly connected. The modules only require a thin concrete or packed-earth pad for support.
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Figure 4 shows modular crushing, grinding and gravity concentration, and flotation mod­ules on a packed-earth foundation at a mine site in Central America. A mobile plant is a version of a modular plant constructed on a portable chassis made for direct road travel. Mobile plants are ideal when operators regularly relo­cate the plant or when asset security is a concern. There is a limit to modular and mobile plants’ milling capacity because of the weight and size requirements for easy transportation; typically, grinding modules will process up to 15 tonnes per hour of rock.

For many mineral types, operators can use pre-concentration by dense media sep­aration to increase overall plant capacity by up to 250%. Multiple grinding modules can also be used to improve overall milling capacity. Figure 5 shows a mobile grinding and gravity concentration module at a mine site in the USA.

Sala developed their modular and mobile mills to act as on-site pilot plants for large ore bodies. However, operators typically used them as small and medium-scale pro­duction plants during the commodity price boom of the 1970s. The remainder of this article will describe how mining companies can use modular and mobile plants effec­tively in both high and low commodity price environments.

As mining operators discovered in the 1970s, high metal prices create positive economic returns from small, short mine-life ore bodies. Mining is a cyclical industry, and high metal prices do not stay around forever. In high commodity price environ­ments, speed becomes a critical project success factor. The multi-year planning and execution cycle for a mining project can be long enough to miss the opportunity of high prices completely, especially for small and medium-sized mines. Using the gold min­ing industry as an example, Figure 6 shows the year-end gold price and the number of gold mines started by Canadian mining companies from 2002 to 2016.

Canadian companies brought new gold mines into production while the price of gold increased from 2002 to 2012. However, gold mines continued to be brought into production as gold prices fell because of the long lead time between the development decision and production. The engineering, procurement, construction, and commissioning time for a small or medium-sized recovery plant can easily be 24-36 months, especially during periods of high metal prices that increase demand for skilled personnel and special­ized equipment. Mining companies likely approved mines for development in 2010, 2011, and 2012, which started production in 2013, 2014, and 2015.

A study of asset impairments in the Canadi­an mining industry found that falling com­modity prices destroyed the most value for Canadian mining companies. In Canada, an asset impairment (or asset write-off) is declared by a mining company when a mine’s expected value falls below the costs incurred to develop or acquire the mine. 30% of mines reported an asset impair­ment because of falling commodity prices and, on average, these impairments re­duced the mine’s value by 34%. In total, falling metal prices were responsible for over $25 billion in destroyed value for Ca­nadian mining companies. Figure 7 shows the value destruction of falling metal prices in relation to other causes.

For example, suppose a mining company approved the development of a small, high-grade mine with a 3-year mine life in 2010. We will assume an average ore grade of 20 g/t Au and a 300 tonne per day plant ca­pacity with 350 working days per year and 95% gold recovery. Following a convention­al lead time of 36 months from project ap­proval to commercial production, the mine would start to generate revenue in 2013, and the project would be complete by the end of 2015. Table 1 shows the expected revenue for this project using the traditional engineering and plant construction method.

This information demonstrates how critical it is for mining companies to capture as much value as possible during rising commodity prices and, when possible, avoid operating after commodity prices have peaked and are rapidly declining.

Modular and mobile plants are pre-designed and pre-engineered, eliminating the lengthy design process for a standard mineral re­covery plant. Further, modular and mobile plants can be fabricated, assembled, and tested at the manufacturer’s facility to elim­inate complicated work on site. Building the plant modules in a controlled environment often reduces the lead time for delivery to less than eight months. Contracting with a single supplier for the entire plant reduces the risk that a critical long lead-time com­ponent will significantly delay the project.

Pre-assembled units from a single supplier require less manpower for installation and commissioning at the site, typically requiring only 4-6 weeks from delivery to production. Further, using standard, proven equipment dramatically reduces the process risk. Plant operators can be trained on-site, and the supplier can provide support and consulta­tion for the complete process.

Table 2 shows the economic impact of using a modular or mobile plant on the same small, high-grade gold mine described above. In this case, the mining company has reduced the the lead time from project approval to commercial production from 36 months to 12 months. The mine starts generating revenue from 2011 and is able to capture the higher gold prices in 2011 and 2012 compared to the traditional plant.

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This comparison assumes that the capital costs of the modular plant and the tradi­tional plant are similar. However, a modular or mobile plant is less expensive while also carrying less risk of cost overruns. Modular and mobile plants have proven to be less expensive compared to traditional plants over the past 40 years.

Modular and mobile plants are typically 30% less costly than comparable conventional plants.

1. Using a pre-designed modular or mobile plant saves significant engineering costs.
2. Completing the construction of process modules at the factory generates savings in labour and material costs.
3. Dealing directly with the equipment manufacturer saves additional overhead and project management fees.
4. The structure of modular and mobile mill contracts reduces the risk of project cost overruns. Cost escalation is common during rising commodity prices as the demand increases for labour and material.

However, Sepro supplies modular and mobile plants on a fixed-price basis, eliminating the risk to operators of labour and material cost escalation over the plant build.

While the use of modular and mobile plants for small, high-grade deposits has been the most popular application over the past decades, they also have a useful application for evaluating larger orebodies and reduc­ing project risk.

During low commodity price environments, mining companies and mining company investors want less risk and more certain­ly before they develop a mining project. There is less commodity price risk during low commodity prices because there is less room for prices to decline; however, many project risks remain.

Looking at the same study of Canadian mining companies described earlier, 16% of mines recorded asset impairments caused by technical problems like lower than ex­pected grade, poor geotechnical conditions, or lower than expected process recovery. While fewer mines experienced technical issues compared to falling metal prices, the impact of technical problems was much more significant. When a mine encountered a technical problem, it reduced a mine’s value by 45% on average. In total, impair­ments associated with technical issues de­stroyed almost $15 billion of value. Figure 9 shows the value destruction of technical problems in relation to other causes.

It is not surprising that significant technical risks exist for mining projects. Mines are typically designed with information from surface drilling and, relative to the size of the orebody, the information is extremely limited. Mining engineers must make many assumptions about grade continuity, geo­logical structures, and ground conditions. Engineers often design recovery processes using hundreds of kilos of rock to represent millions of tonnes of ore. For large projects to move forward during low commodity price environments, mining engineers must mitigate these risks to give mining compa­ny owners and investors more confidence in the project’s success. A pilot plant or demonstration plant can be an effective way to mitigate project risk for a relatively small capital cost. Pilot plant costs can also be offset or recovered through metal sales during operation.

For example, suppose that a large copper mine with an average grade of 1.0% Cu will cost $500 million to develop. Using the in­formation from the study of Canadian mining companies, we can assume a 16% chance that a technical problem will occur. If a tech­nical problem occurs, we can also assume 45% of the mine’s value will be destroyed. In this example, the value-at-risk is $500 million x 16% x 45% = $36 million. Assum­ing the capital cost of a 125,000 tonne per annum modular plant will be in the order of $4 million, Table 3 illustrates the pro forma operating cost and revenue offsets for the pilot mining program operating during a low commodity price environment.

In this case, a modular pilot plant that runs for one year has processed 125,000 tonnes of ore and generated $1.75 million of free cash flow.

The pilot program has also achieved two main objectives. First, the operating compa­ny and potential investors now have more confidence in the technical assumptions used to design the larger mine. Rather than relying on hundreds of kilos of drill samples for mine and process design, over 100,000 tonnes have been excavated and processed to confirm ore grade and ground conditions. Second, the pilot program has proven the favourable economics of the deposit on a small scale. It is reasonable to assume that the project economics will improve with a higher mining rate and larger processing plant. Also, the modular pilot plant has gen­erated free cash flow to offset the initial cap­ital cost. The pilot plant can continue to run, and the mining company can use the cash flow for corporate purposes until the larger plant is financed and constructed.

Conclusion

This article has demonstrated that mobile and modular plants have significant bene­fits for mining companies in high and low commodity price environments. In high commodity price environments, mobile and modular plants can quickly generate reve­nue from small and medium-sized deposits while reducing the mining company’s risk of missing peak metal prices. In low commod­ity price environments, mobile and modular plants are a cost-effective way to reduce technical risks and give mining operators and investors more confidence in project economics.

The final benefit of modular and mobile plants is that owners can quickly and eas­ily relocate them to the next project once a mine is exhausted or once the plant has served its purpose by validating a larger deposit’s economics. In this way, the capital cost can be shared among several projects over many years, allowing for high flexibility and project risk mitigation. Please contact Sepro to discuss the possibilities of using a modular or mobile plant for your mining project.