Bits ‘n Pieces – The Driller’s Blog

Drilling - Avoid Hidden Costs with Total Cost of Ownership

Posted by Rod McCoremick on May 16, 2016 10:30:00 AM


Too few mining professionals and drilling organizations are paying attention to the total cost of ownership (TCO) when selecting suppliers of drilling equipment. A 2014 survey of mining professionals found that nearly half of Canadian mining professionals do not track TCO. Yet hidden costs such as downtime, late delivery and repairs can have a huge impact on the bottom line.



When purchasing managers consider only the price of equipment, they choose the lowest bidder in an attempt to save money, but in the long run that may not happen. If the equipment from one supplier is made from higher quality materials, performs better and has a longer lifespan, the higher price tag may still represent a better deal. The proverbial problem for buyers is to make sure they are comparing apples with apples, not oranges. 

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Consider the following example, Company XYZ buys core bits from a foreign manufacturer that cost 15% less than the bits from their current North American manufacturer. The cheaper bits have an average lifespan of 90 meters. The more expensive bit averages 125 meters before they must be changed. Company XYZ has a project that requires drilling to a depth of 1000 meters. With the more expensive bit, they will need to change the bit 8 times. The cheaper bits will have to be changed 11 times.

At 800 to 1000 meters, you may have to spend up to 2 hours to replace a bit, meaning that for 2 hours your drill is not turning, and you are not making money. Pulling the Rods to replace the bit 3 extra times could involve up to 6 hours of rod tripping. The further into the hole that you drill, the longer it will take to replace a bit. That 15% savings on the cost of a bit has disappeared pretty quickly.

Learn more about choosing the right bit here.

Other costs such as transport should also not be forgotten. If we take the case of additives for example, we can see that not all additives can be compared according to the price per pail. Advanced polymers and drilling additives such as Matex products, may cost more per pail but they contain a higher concentration of active ingredient, so again the right metric for comparison would be cost per meter.

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For example, you would need a pallet of bentonite to get the same viscosity as you would from one bucket of DD-2000. If you consider the comparative cost of freight and warehousing, especially for remote drill sites, you realize that the price per bucket is not the metric to consider. The less product that you need to use, the less you have to transport.

Other variables should be considered as well. Using the same products as above, if it takes you 5 tube pulls to get 100% core recovery without drilling fluids, but only one pull using DD-2000, then you will be much more efficient using Matex fluids. Even increasing your ability to recover more meters per day using a good drilling fluid system can result in a major increase in profit over the entire drilling program.

Learn how to mix drilling fluid additives here.

 



CONCLUSION:

Many companies are starting to look at calculating the cost per meter drilled as a way to better understand pricing differences and track the true cost of consumables and equipment. Is your organization tracking the total cost of ownership? What methods are you using to ensure that you are optimizing your budget?



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Topics: Basic drilling information



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