The cost of running a quarrying or mining business in South Africa is escalating as energy, maintenance, and labour are becoming significant drivers. Quarrying relies on various inputs and efficiencies based on an accurate budgeted cost per ton for aggregate and acceptable margin from a typically fixed sales price. Costs need to be managed stringently and throughput increased to achieve higher returns.
Solar Mining Services describes itself as a new dynamic entrant to the explosives and explosive related services for the mining sectors in South Africa, and says it can offer “a tailor-made approach to assist their customers in understanding the price curve. As explosives form a large cost of operations, one needs to understand what defines ‘a good blast’, and the impact on profitability. Using known and consistent values of raw materials, in the manufacturing process of explosives, will equate to measurable results.”
“This means that the procurement of vetted raw materials in the manufacturing process for explosives, will ensure the consistent quality and cost proposition of the final product. So that customers can have confidence in the explosives products they purchase and that they perform in a reliable and consistent manner.”
This allows operations to form a departure point or baseline to measure improvements and concentrate on other areas that need attention. “In explosives, this could include consistency of viscosity, chemical stability of emulsions and predictable velocity of denotation ‘VODs’. If these parameters are all in ‘check’ the explosives will perform work down the borehole predictably.”
“Of course, the real measurement of a good or brilliant blast can be complicated to assess, given all variables. Typically, the blame game of poor explosives quality, poor drilling control, sub-optimal timing designs, to name a few are often used. Management of these, poor planning and controls add to the mix.” Part of this solution Solar says lies in ensuring the quality and reliability of the explosive used, as this can rule out a potential issue attributed to explosives performance.
“Manufactured quality ‘down the hole’ is of paramount importance as this can affect energy values and reliability of detonation which have bearing on the fragmentation and ‘dig-ability’ results. One could apply a similar logic to companies in the automotive industry take similar uncompromising positions on stipulating what fuels, coolants, oils and even tyres are used with their vehicles to ensure their marketed performance and reliability meets customer expectations. Quarrying operations are no different. It is the sum of all of the components that make for a successful blast. Proper planning, bench preparation, correct drilling and checking of boreholes to planned spacing and depth are the departure point.”
“This is underpinned by an effective timing design of the blast together with ‘fit for purpose competitively priced’ explosives and then ensuring that proper procedures and safety at all times are adhered to. It is imperative that each of these stages is given the time required. If the ‘basics’ are taken care of properly then one will achieve a successful blast. Successful blasts form a large part of production and processing costs as this speaks to efficiency. To establish a total ownership model, one has to focus on each component. Blasting costs form a notable percentage of mining contractor costs, in explosives, nitrate prices along with the fuel phase is one of the highest cost drivers. Ammonium nitrate is a significant component for emulsion explosives.”
In South Africa explosives could be priced based on international ammonium nitrate based indexes where relevant but Solar argues that keeping tabs on the ammonium nitrate price index is also a transparent mechanism. “In understanding these dynamics, a customer can see which methodology allows for better comparison of explosives prices. Once you complete these steps, you’ll have the information you need to start negotiating which supplier to use without compromising quality.”
“To remove the risk component in suppliers’ prices, typically a rise-and-fall price formula or adopting monthly or quarterly pricing is used. One should link the pricing to third-party price indexes. Good examples include the ammonium nitrate index, or for grinding media, the Scrap or CRUspi Longs Index. Study indexes for information to help you understand prices when making purchasing decisions. If one doesn’t proactively look into pricing components, companies may not end up getting competitive pricing. At the same time, suppliers may promise you that it is the best price for that type of service delivery, which may cost more for value added services. However, it is important to consider what you are paying for and what service you are getting, and how this affects the bottom line.”
“If you keep track of prices and market indexes, it becomes easy to anticipate legitimate price increases from suppliers. It’s also easier to avoid what is referred to as ‘formula creep’ This is where a pricing formula over extended periods of time either pushes the prices up or lowers prices too much. These formulas need to be revisited at least once a year and validated.”
“We price for ‘’fit for purpose’ where we don’t use a generic pricing model as prescribed by an ammonia index but use an ammonium nitrate indexed formula that reflects our business model, to keep the input costs for our customers as competitive and transparent as possible. The bottom line is, it’s time to consider ammonium nitrate-based index pricing.”