Economics Of Mining & Metal Detecting

Economics is a key consideration in mining, but it does not typically decide whether a coal seam is surface mined or deep mined; that is determined by geology and topography.  Once the factors dictated by nature such as seam height and geologic setting have categorized a reserve as suitable for surface mining, economics generally determines the mining methods to be applied to that reserve.  Three basic factors must be considered: (1) how many cubic yards of earth have to be moved to recover one ton of marketable coal (this relationship is commonly known as the mining ratio), (2) what is the total cost of moving that material, and (3) what is the sales price of the coal

Mining Ratio

The mining ratio is outside the operator’s control for a mountaintop removal project; that is, a fixed volume of earth overlies a fixed volume of coal.  There is nothing a mine designer can do to improve the ratio if the full seam is to be taken.  However, any reduction of marketable coal will increase the mining ratio.  Any surprises, such as the coal being thinner than thought or the unexpected need to improve the coal’s quality by “washing” in a coal preparation plant, will have a negative impact on the mine ratio.

For a contour or area mine, the ratio increases as the mine digs deeper into the mountain so the mine designer can adjust the depth and the corresponding volume of material that is being excavated.  For example, using our 30 degree hillside again, a contour cut 100 feet into that mountain would generate about 106 cubic yards of earth per linear foot.  Let’s say we’re mining a 24 inch thick coal seam and recovering 100% of the in-place coal (which is actually not possible.)  We would get 200 cubic feet of coal, which is equal to 8.5 tons (at a perfectly clean 85 pounds per cubic foot.)  So, our mining ratio would be 106 divided by 8.5, or 12.5:1.  Now, to take a cut 150 feet deep, we would generate 239 cubic yards per linear foot and produce 300 cubic feet or 12.75 tons of coal for a ratio of 18.75.  If the total cost to mine was $3.00 per cubic yard, the coal sales price per ton would have to be $37.50 to break even at the 12.5:1 ratio and $56.25 at the 18.75:1 ratio.

Mining & Metal Detecting Cost

The total cost of mining will include everything, starting from the beginning of the project to active mining and through land restoration to the final release of the mine permit and surety bond, which will be years after the last ton of coal is sold.  Taxes, royalties, fees and all other costs of operations have to be covered in this cost per cubic yard.

Sales Price

Like most other commodities, the price of coal is set by the market.  Electric utilities and steel making companies generally purchase coal on the basis of competitively bid supply contracts of one to three years duration.  Price adjustments are made for coal characteristics such as ash, sulfur content, heating value, and metallurgical qualities.  A mine operator has little control over the sales price for its product, some control over the mining cost, and can sometimes adjust the mine plan to alter the effective mining ratio.  Most Appalachian surface mines use combinations of mining methods such as mountaintop removal, area mining, and contour mining where appropriate to develop an effective and economical overall mine plan.  Different types of equipment (rubber-tired loaders, hydraulic shovels, electric shovels, etc.) are matched to the specific mining application based on capabilities.  For example, it’s common to use shovels to excavate thick strata near the top of a ridge but use rubber-tired loaders due to their mobility to contour mine lower on the mountain.  Striking a balance between the more expensive cost per cubic yard of the smaller equipment with the more efficient larger equipment is a key to successful surface mining.