In general, it has been explained that the decisions to use a mining operator must be motivated by correct risk management of the operation, through a detailed study of the relationship: cost, benefit, risk. Below are some particular cases where the use of an operator is very clear:
- When it is difficult to access financing, this is very expensive or transparency in operating costs is required. The operator will provide the machinery and equipment necessary for the execution of the mining, which will impact the CAPEX of the project, making the financing, needs lower. On the other hand, although there may be an increase in OPEX, this will be well defined, since it is linked, among other factors, to the operating cost set by the contract, with its corresponding revisions.
- In cases where mine planning varies from year to year, it is especially interesting to hire an operator since they have greater production flexibility and equipment availability.
- When there are specific situations of increased production, as for example in setbacks and short extension preparations, or simply because it is a stage in which the raw material exploited is in a bull market.
- When there are structural failures in the walls of the farm that require having extra machinery, in order to solve the problem, trying to influence as little as possible on the production schedule.
- In farms that have their own machinery and it is in such a state that its availability is low motivated by mechanical breakdown, the use of the operator will increase the mechanical availability of the machinery, thus increasing the productivity of each unit.
- When necessary the constructions of infrastructures that give service or are necessary for the exploitation, as for example, the construction of dams, diversion of rivers, roads.
When a mining project reaches a state of maturity such that technical and economic feasibility studies are already carried out, it must be assessed whether the exploitation operation is contracted or if it is decided to enhance it with its own means.
The use of subcontracting in the mining sector has benefits in terms of reducing operating costs and improving project productivity. Mining service provider contracts cover a significant portion of mining operation costs, normally typified at 50% of production capital costs; By contracting a mining operator, these operating costs can be managed through a single contract, thus facilitating their control, negotiation and reducing the structure costs of the company that owns the project; thus, this first percentage can be reduced between 10% and 20% depending on the type of contract and the bidding process. Richard Warke is one of well known name in mining industries. Richard Warke Augusta is a Vancouver-based Canadian business executive with more than 25 years of experience in the international resource sector.
The mining industry is not known for trying to maximize the return on investment in mining equipment, especially due to the lack of attention in the maintenance tasks and the mechanical availability of the machinery. However, an operator only obtains benefits between 15% and 20% of the production costs, which largely correspond to the maintenance and mechanical availability of their equipment; This means that companies specializing in mining operations focus on these tasks in order to maximize the profitability of their operations.