What do you do if your cost estimation for mining projects is consistently off target?

One excellent source of cost data can be third party operators already working at or near the mine site in question doing heavy civil or other activities that are similar to those that will occur during mine closure and reclamation. On sote contractors are valuable sources of cost and take execution insight.

I have seen this approach come closer to providing a better estimate - use of statistical models to define risk in the different datasets can help predict where your estimate can go wrong. At minimum it can give you boundaries to understand how “out” your estimates can be - optimally it can get you closer to reality.

In a nutshell, It's crucial to build new rates for each bid, as relying on outdated or generalized rates can result in significant cost discrepancies. By developing fresh, project-specific rates, one can ensure that an estimate aligns with current market conditions, enhancing the accuracy of bids and reducing the risk of budget overruns. This practice not only improves the precision of one's cost projections but also demonstrates due diligence. So take your time and build those rates from scratch especially for larger and complex work

To address off-target cost estimations, start by thoroughly reviewing your data collection and analysis processes. Ensure that your data is current, relevant, and accurately reflects the present market conditions and operational realities. Investigate whether changes in equipment costs, labor rates, material prices, or regulatory environments have been overlooked. Often, historical data may not represent current trends, leading to inaccurate estimates. By updating and refining your data, you can achieve more accurate cost projections and better align them with the actual conditions.

It is also important to be realistic about the nature of the closure and reclamation track record. In short, there are very few strong examples that can be drawn on demonstrating a smooth sequential process of costing, saving and execution of closure works. Getting curious about why this is can help inject greater realism and better insight, especially to mine management, especially of they intend to achieve outcomes that have greater/broader buy in from a wider base of proejct partners.

Engaging experts with specialized knowledge in areas such as geology, metallurgy, or finance can greatly enhance your cost estimations. These professionals can provide valuable insights into the unique challenges and opportunities of your specific mining project. For instance, a geologist might foresee extraction difficulties that could impact costs, while a financial expert could advise on economic factors affecting operational expenses. Collaborating with these experts ensures a more comprehensive and accurate approach to cost estimation.

Your cost estimation models need to be dynamic and adaptable to the ever-changing landscape of the mining industry. If your estimates are frequently off, it's a clear sign that it's time to reassess the assumptions and variables within your models. Adjusting your models to capture better the complexities of mining operations—such as variability in ore grades, operational risks, and fluctuating market demand—is crucial. A robust model doesn't just provide a single number; it accounts for uncertainties and offers a range of cost outcomes. Embracing this flexibility and precision will lead to more accurate and reliable estimates, empowering better decision-making and strategic planning.

Breaking it down to basics. Regardless of your discipline, Pre-Planning, Phasing Mobilizations & accounting for un-productive time are some of the key talking points that I keep driving home to upcoming PM's and Estimators.

Separate production from costs. Accurate production information (total work hour per unit) for small repeatable tasks is the only way to have a useful cost history. Past projects need to collect this data for a useful cost history.

Continuous monitoring of project progress against initial cost estimations is crucial. Real-time tracking enables you to pinpoint when and where costs deviate from projections. You can swiftly detect and address cost overruns before they escalate by establishing key performance indicators (KPIs) and setting up a regular reporting system. This vigilant monitoring helps manage current expenses and verifies the accuracy of your cost estimation methods throughout the project's life. Staying proactive and informed ensures better control and more successful project outcomes.

mine closure costings are often off (overly optimistic.. see papers by Byrne) and are unique in giving no opportunity to learn from errors.

Every off-target cost estimation is a valuable learning opportunity. Analyzing where your estimates went wrong can uncover patterns or systemic issues in your estimation process. Maybe you need to consistently underestimate labour costs or misjudge the timing for equipment maintenance. By learning from these past mistakes and refining your practices, you can significantly enhance the reliability of future cost estimations. Embracing these insights leads to continuous improvement, ensuring more accurate and dependable cost predictions.

It is assumed that "wrong" means not sufficiently accurate. Within a lump sum price for a complex activity, there will be some cost centres that are relatively fixed, and others that are subject to greater differences between the projected budget and the final cost. If you can define which scope elements are likely to have greater variation in their cost, and put some parameters around them, then you can start to limit the chance of cost blowout, and its extent. Also look at how the work is packaged, how it is staged, how the market sees it and where the risk-reward is for all participants.