Kambalda Nickel Mines (KNM) currently have eight operating
underground mines, three on care and maintenance and other orebodies at
various stages of development. Each operation differs greatly in scale,
ore grade, milling characteristics and cost structure. The optimum
number of mines operating at any one time and their level of production,
within the constraints of mill blending requirements and overall mill
capacity, is the key to maximising profit in a climate of fluctuating nickel
price. Cost models are developed for each mining operation which relate ore
tonnes mined to total cost per pound of nickel produced from that mine.
Aggregating the mine cost models provides a composite cost model for
the entire operation. The cost models provide the operating levels necessary for each of the
mines and hence Kambalda as a whole, to operate at the lowest cost per
pound of nickel produced. However, lowest operating cost does not
necessarily lead to maximum profit. The level of nickel price above
operating cost can dictate maximum profit positions which are contrary to
the lowest cost position. In addition, the decision to temporarily shutdown mines or reopen
mines in response to nickel price movements comes at a cost. In
considering the optimum operating position, the price of production
capacity flexibility needs to be taken into account. This paper describes the process used to assess all these factors in
arriving at the optimum operating position for Kambalda Nickel Mines
for varying nickel prices. The same methodology can be used by
corporate management in managing multiple mine sites as well as mine
management managing multiple orebodies or stoping blocks for
maximum profit.