A cost management model for economic sustainability and continuos improvement of mining operations

Abstract

The management of operating costs is essential to the efficiency and economic sustainability of mining operations and nevertheless, most cost management systems in the minerals industry are designed only and exclusively to meet financial accounting and reporting needs and lack of focus on decision taking and continuous improvement. This paper describes the result of a research program aiming to develop an innovative cost management methodology that applies Activity-Based Costing (ABC) and PDCA’s Deming cycle tools to develop a cost management system for continuous improvement of operational efficiency and cost reduction. The implementation of this methodology in a mining operation would imply a breakthrough in the corporate approach to operations managements, from the conventional top-down approach to budgeting and control to a bottom-up integration of cost management and accountability. In this regard, the methodology was tested in the Andina underground mine III Panel sector of Corporation del Cobre (CODELCO), in Chile. The results of this test and its potential are also discussed.