One the other hand, general punters might still imagine the world of Poldark, where men chip away at rocks underground for a few months before they are crushed to death. The truth is unfortunately somewhere in between, with deaths still common (Glencore had eight in 2020, but was keen to point out this was from a workforce of almost 150,000, including contractors).
Environmental destruction is also still a problem. Even beyond the disasters like Samarco and Juukan Gorge, miners see hills or forests as less of a natural endowment as ‘overburden’ which must be removed. Maybe ‘topography’ if a whole hill needs to go.
One problem for those interested in the sector - for investment or other purposes - is the linguistic 'overburden' of jargon. This is not limited to mining, but because there is little information between the usual “we produce materials essential to human progress” (thanks, Rio Tinto) and the technical operational details, newcomers will struggle.
This writer is certainly guilty of using jargon, mostly without realising, but sometimes to look knowledgeable. Try this: the pre-fease into the block cave, base metal project used USD8,000/t to get to 15 per cent IRR? With a pretax NAV (5% discount)? Crazy.
What that means is the pre-feasibility study (a financial study looking at a mine’s potential profitability) for a block cave mine (more below), 'base metal' means either copper, nickel or zinc, USD8,000/t means US$8,000 (£5,707) per tonne, a price that indicates it is copper, but this would be an extremely hopeful long-term average. IRR stands for internal rate of return, and is based on future cash flow forecasts.
Most projects need to have a projected IRR of 15 or even 20 per cent to be considered for production. Miners give their net asset value (NAV) estimates with a discount that reflects the potential difficulty of the construction, and some like to give an unhelpful pretax number that increases their perceived asset value.
But back to block cave. Oyu Tolgoi is the copper mine Rio Tinto (RIO) operates in Mongolia. It is a good example because it has an open-pit section (or open-cut, where rock is removed completely, making a giant, often miles-wide hole in the ground) and is moving underground. Rio explains block caving like this: “Put simply, a void is created under the ore body, which then collapses gradually under its own weight”.
Let’s try again. If an underground mine is easy enough to picture, with its tunnels snaking underground, then a block cave operation is that plus a series of bigger vertical holes where that ore body is encouraged to collapse into. The ore body is the bedrock with the most metals in it. That collapsed ore is then trucked out of the mine. These are big tunnels, wide and tall enough for huge mining trucks.
In traditional underground mines, the work that used to be done by tough miners with picks and hammers is now done by explosives, which are placed in holes drilled by fun-looking face drill rigs (ok there’s more jargon: the face is the bit of ore the miners are blowing and up and trucking out at that moment in time). I assume I’ve slipped even more jargon into this piece without noticing - sorry - but this is an attempt to ask the mining world to throw the generalist a bone sometimes.
Surely there's a positive IRR in doing that.
