So your heavy mining equipment costs are going up and availability is going down; you need to make a decision: rebuild or replace?
Before you can answer this question, you need to know and understand what some of the important factors are that should be considered.
Maybe you have asked, thought, or heard the following:
- What are the advantages of rebuilding a 10-year-old piece of equipment?
- Are these advantages real and worth it?
- Our production schedule does not allow for enough time to conduct a rebuild; we can barely keep up as it is! How can we find the time for a rebuild?
Having been involved in mining nearly all my working life, I have found that in order to be able to answer the question, “When is it time to consider a rebuild or replacement?”, first you will need to get a clear understanding of a number of variables. Some of these variables are beyond your control, some are site/location–specific, and others are within your control. Once you can answer these questions, then the decision is easy (or so you would think, right?)
In reference to issues being beyond your control, some of the things you need to know and consider are:
- Geological Factors.
- What’s the life left in the ore body and will it support the expenditure of new equipment? Is the ore body shape/formation going to change the current mining methods, which would result in different demands on equipment, possibly beyond the current capability of the equipment?
- Budget Constraints
- These can be altered year by year as a result of influencers such as mentioned above, or the market price for the mineral you are mining. Often when mineral prices are low, or grades are marginal, it’s hard to convince investors that they should spend more Capital expenditure (Capex) on replacing equipment, whereas Operating expenditure (Opex) is easier to get a hold of and makes more sense financially in these scenarios.
In reference to site/location specific concerns, some of the things you need to know and consider are:
- Local skill set.
- Do you have access to quality supporting services/rebuilding industries? It is nice to have access to local repair centers to redo transmissions, cylinders, etc., but it is important to know that even if you cannot get major components rebuilt/repaired locally, you can still conduct full machine rebuilds using new components while still achieving economic growth.
- Local operator skill set
- One of the major benefits to buying new equipment is the updated technology that you can get, which can be a double edge sword, however. What’s important to ask or consider in this is:
- Can it (the updated technology) be sufficiently supported by the OEM where you are in the event of a break down?
- Are the operators able or willing to utilize this new technology and if so, does it add up to reduced costs and improved productivity and safety?
- Is the new technology compatible with locally available fuels, oils, and environmental conditions? For instance, when Tier 3 engines started to be used widely in Western Africa, there were some teething problems with the high Sulphide fuel that was then available. These problems were eventually resolved but not without the pain of engine failures that caused loss of production and abnormally high maintenance cost.
When considering things within your control, you have a number of things that you can control or influence:
- Life Time Operating Cost (LOC)
- Whilst you cannot control all aspects of the LOC, you can heavily influence the outcome. Where a lot of people go wrong in considering this is they oversimplify the calcuation of the Cost per Hour (CPH). In order to be able to measure and make a decision based on facts associated with CPH, you cannot simply divide the total LOC by the time. This method will give you a flat line spread of your costs, where in fact you need to know the CPH based on a schedule of operating hours, usually rounded to the average hours of operation in year.
- Availability, not utilization
- This is beyond your control but it’s important to note that the higher the utilization, the higher your LOC/CPH, but then your asset is producing income so that’s good. Additionally, there is a direct correlation between High CPH and High Availability, as there is a fine line between value for money and uneconomically high availability. At some point in time, your extra availability percentage is costing you more than its worth. There is also a point in the equipment’s life where the CPH increases but your availability does not. In fact, availability often struggles to maintain an acceptable level. It is exactly this point you need to discover, and monitoring the CPH on a per-year basis will allow you to do just that.
Lifetime Operating Cost and Availability (see Table 1)
Table 1 shows how over the years, the CPH changes in correlation to the required maintenance demands/needs. You can also see where there was a significant increase in the CPH but there was a drop in availability. Part of the CPH increase is due to some major component repairs/rebuilds, but a significant part of this is a result of the machine becoming less reliable and breaking down more often.
It is important to note that you can see that there is also a point in time where your CPH is rising but your availability does not. In fact, it is struggling to maintain an acceptable 85%, which is the point at which to ask yourself: “Rebuild or replace?”
Table 1 – New machine data
|Start hours||End hours||OPEX CPH||Total OPEX||Availability|
|1||2000||$ 4.35||$ 8,700.00||90%|
|2001||4000||$ 4.80||$ 9,600.00||88%|
|4001||6000||$ 6.90||$ 13,800.00||84%|
|6001||8000||$ 5.90||$ 11,800.00||86%|
|8001||10000||$ 7.25||$ 14,500.00||85%|
|10001||12000||$ 7.20||$ 12,400.00||84%|
|12001||14000||$ 7.40||$ 14,800.00||85%|
So you have raised the question, you have considered the other major factors identified earlier, and now you want to know: rebuild or replace?
A good quality rebuild, conducted by duly Authorized Equipment Dealers, can cost you somewhere in the range of 60% to 75% the cost of a new machine, and in many cases you have the advantages of mixing and matching technologies.
By this I mean you are often able to incorporate some of the new features or benefits that the new showroom floor equipment can offer, whilst retaining the technology that your staff are familiar with and still get a whole new lease of life on your equipment. The other big advantage is the commonality of parts you have in stock. With a rebuild of an existing machine, there is not the need to increase inventory, and your current parts holding will not become redundant. Assuming your answers to the above are favorable towards rebuilding, and you don’t have an open checkbook for CAPEX expenditure, it then comes down to simple economics.
“Value for money”: A savings of 25% minimum on a CAPEX expenditure alone makes rebuilding a viable option, let alone the other positive gains you will achieve as identified in this document.
So here is a quick recap on the advantages of rebuilding:
- Lower cost (60 – 75% that of new equipment)
- Ability to choose and select useful “new technology”
- Shorter lead times/turn around than new equipment
- Often funding comes from OPEX, so it is easier to obtain
- Commonality of parts, reducing parts obsolescence
- Familiarity of equipment for operators and maintenance personnel
Oh, and I almost forgot to respond to this question: “Our production schedule does not allow for enough time to conduct a rebuild, we can barely keep up as it is! How can we find the time for a rebuild?”
The answer is, if you can’t afford for a machine to be inoperable for the duration of the rebuild, then you need both: a new machine and to rebuild your older one. Efficiency and utilization are great metrics, but in mining, you need some redundancy to cover you during the times when those things beyond your control take over and you are without a critical piece of equipment.
To establish equipment Economic Life Span, thereby establishing your LOC check your equipment manufacturer, there are also a number of studies such as https://ujdigispace.uj.ac.za/bitstream/handle/10210/5723/B.J.%20STEYN_2003_MA.pdf?sequence=3&isAllowed=y & https://ujdigispace.uj.ac.za/bitstream/handle/10210/1728/ArticleLifeCycleManagementforMiningMachinery.pdf?sequence=1