Coal margin ranking improves mine planning

GENERATING an economic mud map of an underground coal deposit can lead to improved mine planning writes Mike Rowlands, mining consultant at Brisbane-based consulting company Runge.

Staff Reporter


As part of our systematic mine planning methodology, Runge have pioneered the development and application of cost and margin ranking in underground coal operations.


The purpose for undertaking a cost and margin ranking study is to generate an "economic mud map" of an underground coal deposit. The resultant mappings graphically show the relative variation in costs and margins as you move across the deposit clearly highlighting areas of high and low cash operating margins. (See Figure 1)



Relative Unit Operating Cash Margin$ per Product Tonne




By using margin ranking to map the inherent economic characteristics of the deposit, the mine planning engineer can now develop mine plans and schedules to more reliably optimise the company's business objectives.


The following bullet points and associated plots provide a brief overview of the process and samples of the resultant output.


The Process


The basic steps to build a margin ranking are as follows:


1. Identify the key production and cost drivers: typical roof conditions, floor conditions, seam gas concentrations, stress magnitude and direction etc.


2. Identify the key revenue drivers: typically yields, key quality parameters etc.


3. Divide the deposit into a regular gridwork of reserve blocks (typically 200 metres square) and generate reserves inclusive of the data characterising the variation in the production, cost and revenue drivers mentioned above.


4. Develop an estimate of the longwall to develop ratio and overall expected extraction percentage.


5. Determine the impacts on both development and longwall production resulting from variations in the key production drivers. A resultant plot showing annualised output can then be established which highlights the potential high and low production areas. (See Figure 2). Apply the fixed and variable mining process costs to then build a relative cost ranking across the deposit. (See Figure 3).



Annualised Tonnage(ROM tonnes x million)




Relative FOB Unit Costs$per Product Tonne


6. Establish a revenue ranking across the deposit based on yields and variations in coal price to coal quality parameters. (See Figure 4)



Weighted Avg. Unit Revenue$AUD per Product Tonne


7. Generate the final margin ranking results by taking the cost ranking results from the revenue ranking. (Refer Figure 1).




In the past most underground coal planning and design has been based primarily around technical mining parameters. The key objective has been to ensure production continuity and to maximise recovery.


Whilst these are important considerations, Runge believe that a more thorough understanding of the economics of the deposit will provide the planning engineer with a better basis on which to make strategic planning decisions to optimise business results. (See Figure 5).



Relative Unit Operating Cash Margin$ per Product Tonne

Should you wish to find out more about how margin ranking and Runge's systematic approach to underground coal mine planning can provide benefits to your operation please contact Mike Rowlands.


Runge has recently completed a margin ranking study of Kestrel Mine for Pacific Coal as part of their strategic planning process. The results of this work, together with other considerations, led to the development of a new mine plan which shows significant improvements over previous plans.