Advancing Mining Production in Russia - Insights from Mining IQ
Contributor:
Igor Epshteyn
Posted: 10/26/2012 12:00:00 AM EDT | 0
Mining IQ: What can Russia learn from more advanced mining countries in terms of IT and production engineering?
IE: IT-technologies are implemented very actively in the Russian mining sector. Particularly in engineering companies.
Posted: 10/26/2012 12:00:00 AM EDT | 0
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In this interview with Igor Epshteyn, Head of Mining at JSC Polymetal Engineering, he shed some first-hand insight into how Russian mining companies are managing their IT technology and what they need to learn from other mining countries to advance their production.
Mining IQ: Where do you think Russia is at in terms of its use of IT in mining? Is it ahead or behind such countries as Australia or Canada?
Igor Epshetyn: First of all, a few words about the company I’m working for: Polymetal International is the leading Russian company in terms of primary silver mining and one of the leading gold-mining companies. Annual production is about 1 million ounces of gold equivalent.
Polymetal is the first Russian company to receive premium listing on LSE; the company’s securities got FTSE 100 Index. The Company has its own engineering center - Polymetal Engineering.
Now a couple of words about Russia. Our country ranks 50-60th in world ratings in terms of IT-technology adoption. We fall behind not only from advanced countries but also developing ones. The level in the mining sector is higher than average in Russia but there is no reason to say that our level is high as compared to other developing countries.
Transnational companies are the driving force for IT implementation in the developing countries. In Russia there are few such companies, particularly in exploration. This is mainly due to the presence of artificial obstacles in the legislation.
Mining IQ: What can Russia learn from more advanced mining countries in terms of IT and production engineering?
IE: IT-technologies are implemented very actively in the Russian mining sector. Particularly in engineering companies.
For example, Polymetal has been using ?AE Datamine – one of the best mining and geological IT systems – from 1998 (the year the company was founded) to estimate Mineral Resources and Ore Reserves according to the JORC Code and for long-term planning.
This year we launched a large-scaled program for implementation of ?AE Datamine software at all existing subsidiaries for short-term and medium-term mine planning. In the headquarters we’ve created a classroom; several dozens of specialists have already done basic training. Special departments – mine planning divisions provided with required equipment – were created at our subsidiaries.
It’s a common practice for us to go and exchange experiences with leading gold-mining companies from Canada, the USA, Australia, Africa, South America, as well as participating in conferences, etc. This is certainly a fruitful practice.
One of the reasons that Russia tends to fall behind is because of the low quality of Russian education, mostly because it is not integrated into international educational systems.
Russian mining textbooks lack a lot with respect to modern IT technologies. Because of that, Polymetal made a decision in the near future to translate into Russian several key applied textbooks covering aspects of mine planning, including geostatistical methods of deposits computer modeling, computer-aided techniques for mine planning, creation of geo-mechanical models, etc.
Mining IQ: What sort of technological innovations can we expect in the next few years in Russian mining?
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IE: Polymetal is one of the most advanced companies in the field of innovations in Russia. Here are some examples:
1) First to implement heap leaching in Russia. First to use year-round HL process under conditions of Northern Urals (up to -35 degrees celsius in winter). Soon this technology will for the first time, be applied at our subsidiary under conditions the Far North (up to -50 degrees celsius in winter).
2) First in Russia to use gold autoclave leaching of refractory sulphide ore on a commercial scale. Autoclave at the hydrometallurgical plant in Amursk allowed mining deposits which were previously considered non-commercial since they lacked a developed processing method (on a commercial scale).
3) Semidry tailings storage instead of liquid tailings impoundment implemented by Polymetal is still a unique event in Russia. It allows reducing costs for tailings storage and creating favorable conditions for backfill at underground mining. Besides, environmental pressure is decreased significantly.
4) Modernization of the existing plants in order to automate processing of ore of various types from different deposits.
5) Enlarging of area of application of emulsion explosives by construction our own facilities to manufacture them.
6) Implementation of satellite dispatching system to control ore from face to plant (at open pit mines). This includes negotiations with Devex, the Brazilian company, regarding implementation of modern computer dispatch system in our underground mines.
7) Implementation of slurry operational RC drilling.
8) Application of laser scanners to map worked-out area (underground workings) where worker’s access is prohibited under safety conditions.
9) Implementation of 3D small-block deposit modeling using up-to-date geostatistical and conditional simulation techniques, etc.
Almost all of the aforementioned have appeared in western countries well in advance of us, and we are trying to catch up. But in the near term we can hardly expect any revolutionary improvements. First of all, it’s necessary to acquire the best international practices – for example, some ultra-modern automation elements successfully implemented in the developing countries (for example, underground equipment remote control) are still unknown in Russia.
Mining IQ: In this regards, what do you think are the challenges Russian mining companies will face in terms of production processes?
IE: Specific Russian production problem for not only Polymetal but all subsoil users which want to raise investments through stock exchange is the problem of double standards for reserves estimation – Russian Law and JORC compliant.
We have to be in line with the Russian standards to put reserves on the state balance upon completing appraisals of exploration results. This is required to get a permit to start designing and mining. According to JORC we have to report to the shareholders and stock exchange on an annual basis.
Yes, Russia has taken a step towards the capitalist market by privatizing of enterprises including mining ones and transfer of ownership for mined product to a subsoil user. But in general, the country is has a socialistic concept of the state’s role in control over a subsoil user which is a priori considered a dishonest “predator” requiring constant supervision.
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So exploration results need to pass the state’s expertise and reserves need to be put on so called state “balance”. Then a design is generated based on balance reserves which then undergo the state expertise, including expertise of industrial safety and completeness of mineral mining. Then a company will report on any losses and in case of an excess shall pay a fine for excessive losses.
All these procedures were natural for planned socialist economies when the state was the end-user of all subsoil resources. Though today this seems strange, especially for representatives of foreign mining business who are new to the day-to-day realities of Russia.
The state bears the burden of ineffective functions which lead to an extension of time for licenses and construction permits acquisition. As a result, investors lose interest in Russia.
The Russian government believes that it can estimate exploration results better than stock exchange institutions. However at that it carries out reserves estimation using primitive polygonal method of pre-computer epoch. A collegial entity represented by the State Reserves Committee is responsible for the estimate (which means that there is no personal responsibility) which is of no interest for raw exchange markets. And a Russian subsoil user has to pay big money for the state expertise and – above all – waste time since in some cases the process lasts for years.
In nowhere else do subsoil users face such problems except post-socialist countries.
Another function of the state, in my opinion, that is totally excessive is industrial safety control. This function should be and can be taken by insurance companies which are interested from a financial point of view absent of hazardous situations. But Russian officials are mainly interested in number of inspections since they can get extra income.
The same project is often subject to repeated inspections from the same authority under far-fetched reasons which result in lost time.
The government should care about proper licensing and ecological safety and as for the rest – the market will be much more effective than the government.
Polymetal’s progress was achieved not owing to the state policy. Cost of mining of gold ounce ($670/OZ) was a little bit lower in the company than at average top ten world leaders ($680/Oz) and worldwide average ($750/Oz). Every year Polymetal invests into exploration some 25% (about $75 mln in 2012) of the total scope of drilling among Russian gold mining companies ($300-350 mln). However, for example, in Canada they spend much larger.
Need in subsoil use reorganization is very pressing: old deposits are being depleted and still there is no prospect for discovery of new significant deposits.
Mining IQ: How can these companies overcome these challenges?
IE: One of the reasons for prolonged stagnation is that the key positions at the state authorities are still kept by people of the passing away epoch. Today a new generation is actively supplanting them and I believe that in the nearest future the investment climate in the Russian subsoil management will be improved significantly.
Igor Epshteyn is the Head of the Mining Department at JSC Polymetal Engineering. He is a speaker at the Russian Output Optimisation Russa & CIS Summit 2012 to be held on the 28-29th November in St. Petersburg, Russia. For more event information, please visit the event website: www.russiamining.com
CC Image by Andrew Kuznetsov | Flickr
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Igor Epshteyn |
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