ASSET MANAGEMENT FOR FLEETS OF MINING EQUIPMENT IN OPEN-PIT OPERATIONS

Vctor Barrientos Boccardo

Skype: victor.barrientos.boccardo, Chile


Abstract: The results obtained from three studies are presented in this article.
The first study was conducted on the performance of final drives in 100-ton trucks, the results
of which indicate that the repaired final drives have a cost of US$3.42 per hour, in
comparison with US$6.48 and US$8.71 per hour of new and exchanged components,
respectively.
The second study was conducted based on the optimum rebuild strategy for a pool of
components in a fleet of drills, where the results estimate that the optimum strategy will
generate a cost of US$19.34 per hour and approximately 546 annual machine shutdown hours
of fleet for 16 selected components.
The last study refers to the methodology CAE (Equivalent Annual Cost) to define the
optimum time to replace 100-ton trucks, based on equipment investment, component and
spares cost. The decision point is when major components such as diesel engine,
transmission, differential, etc. need to be replaced.
Keywords: Repairable system; Multi-component system; Age replacement policy

1 INTRODUCTION
As assets accumulate hours of operation, they become deteriorated by usage. Production capacity of the asset which is
gradually affected by the increase of costs is preserved by means of preventive maintenance, structural repairs, and major
and minor components change strategy.
In capital-intensive industries, maintenance costs are a significant portion of operating costs and production costs. In
studies conducted on open-pit mining operations in Chile, maintenance costs have been estimated at 44% of total
production cost of the mine. Likewise, it is estimated that the repair cost for major systems accounts for 9 to 18% of total
operating cost (Lugtigheid, Banjevic & Jardine, 2008) , (Topal & Ramazan, 2010).
In 2005, mine purchased new equipment for drilling, loading and hauling processes, as well as an ancillary equipment
fleet. The versions of such equipment were new and, therefore, there was no reliable information about the useful life of
their components at disposal. The only information available was that which was provided by the manufacturer.
In five years of operation, the history information about the useful life of new, exchanged and repaired components is
analyzed. By assessing the cost of the repaired components and overall operation and maintenance (O&M) costs, three
lines of study were developed with the purpose of reducing maintenance costs, increasing availability of the equipment,
and reducing the workload at maintenance workshops. The lines of study were:

Strategy to change the final drives of a fleet of 100-ton trucks.
Strategy to change a pool of components for a fleet of hydraulic drills.
Strategy to replace 100-ton mining trucks in open-pit operations.


2 DESCRIPTION OF METHODOLOGIES
The assessment methodologies for the three lines of study are shown below:
2.1 Strategy to change final drives of a fleet of 100-ton trucks
This methodology consists in determining the relevant repair cost and useful life for different types of components (new,
repaired, and exchanged). With the previous, one can determine different costs per hour in order to compare and identify
the rebuild modality that represents the most inexpensive alternative under a condition-based maintenance.

L
N
: Life of an original new component.
L
R
: Life of own component repaired by the dealer.
L
I
: Life of an exchange component purchased from the dealer.
Q
N


: Cost of new component, transport and acquisition management.
Q
R


: Cost of repaired component, transport, inventory, and acquisition management.
Q
I
: Cost of the exchanged component, transport and acquisition management.








Figure 1 Function to define the minimum cost per hour
For this assessment, the useful life of a component was considered such as its hours of operation until the time it
evidenced loss in its optimum performance, following monitoring of the condition (sample of oil, magnetic plugs,
magnetic grids, etc.) where the component needs to be restored.
For the purpose of the assessment, data corresponding to changes of components based on hours of operation and repairs
made by alternative suppliers other than the Dealer was not considered.
The cost of a component includes its value as a new, repaired or exchanged, in addition to transport expense, inventory
cost and expenses related to the acquisition management. The costs related to loss of profit caused by unavailability have
not been estimated in this study.

2.2 Strategy to change a pool of components for a fleet of hydraulic drills
This methodology consists in determining the relevant costs of repair and useful life for every new and repaired
component, as well as the hours of shutdown required to replace the component. Those values allow the determination of
the different costs per hour and machine shutdown hours, in order to compare and assess the rebuild modality that
represents the most relevant alternative.
The following nomenclature is defined for the proposed methodology:
L
n
: Useful life of an original new component
L
r
: Useful life of a component repaired in workshops
C
n


: Cost of new component, transport and acquisition management
C
r


: Cost of repaired component, transport, inventory and acquisition management
HM : Machine shutdown hours required to change the component
HMaqYear : Annual machine hours of operation for the equipment fleet

Minimum =

d : Total costs per hour for a decision vector
f : Total machine shutdown hours for a decision vector
Point (d,f) : Pair of costs per hour and machine shutdown hours for a decision vector

A rebuild strategy or replacement strategy may be defined for each component or classes of components i -, which may
be a new one ( x
j
= 0) or a repaired one ( x
j
= 1). Each rebuild strategy represents a sequence of component changes that
define a cost per hour and machine shutdown hours.
A similar definition is used in other studies (Aissani, Chateauneuf & Laggoune, 2010).
When defining a particular rebuild strategy, this may be represented as a decision vector X= [x
1
; x
2
; x
i
;x
i+1
.; x
p
],
which defines an ordered pair Point (d,f) and where the values of d and f may me calculated as shown in Figure N
2.


Figure 2 Calculation of Point (d,f) for a decision vector

2.3 Strategy to replace 100-ton mining trucks in open-pit operations
This methodology consists in determining the optimum time to replace equipment for a new one. This assessment uses
the equivalent annual cost (CAE) calculation methodology that establishes the minimization of the current value of future
costs as the optimum point, considering the following variables:
CAE
n
: Equivalent annual cost in life year i= 1, 2, 3 . n
A : Value of the initial investment or acquisition cost in year zero
T
n
: Residual or trading value of the asset in year n of life
C
1
: Operation and maintenance (O&M) cost in year 1 of life
C
i
: Operation and maintenance (O&M) cost in years i= 2, 3.n of life
n : Years of life for equipment replacement
r : Agreed discount rate

The mathematical expression that needs to be resolved is shown in Figure N 3.
Decision vector
New or repaired component cost
Useful life of new or repaired component
Machine shutdown hours
Useful life of new or repaired component
Point ( d , f )










Figure 3 Equivalent Annual Cost (CAE)

The objective of this expression is to annualize two different behavior terms: on the one hand, the total costs of operation
that increase as time passes by; and, on the other hand, the net equipment investment that tends to decrease when
considering more years in its annualization. The combination of both criteria may lead to a point where the equivalent
annual cost (CAE) has a minimum value. The number of years for which the equivalent annual cost (CAE) is minimum
accounts for the economic life of the equipment being analyzed.

The assessment methodology consisted of resolving the Equivalent Annual Cost (CAE) function mathematically shown
in Figure N 3. The optimum replacement point corresponds to the minimum value of the function, where the condition
shown in Figure N 4 must be met.


Figure 4 Criterion to define the optimum replacement point

3 RESULTS
The results obtained according to the assessment methodologies for the three lines of study are shown below:

3.1 Results for final drives of a fleet of 100-ton trucks, durations and costs per hour
Once the history data of useful life and the costs per hour for final drives of 100-ton trucks have been collected and
tabulated, it is concluded that:
The time of useful life for new components is 2.72 times (18,485 hours vs. 6,786 hours) higher than that of repaired
ones.
The value of exchange components is 2.61 times (US$60,667 vs. US$23,201) higher than that of repaired ones.
In 85% of the cases, the hour cost of a new component is higher than that of a repaired one.
In 100% of the three existing cases, the hour cost of an exchange component is higher than that of the repaired one.

When comparing the rebuild modalities, they show that the repaired components have a cost of US$3.42 per hour, in
comparison with US$6.48 and US$8.71 per hour for the new and exchange components, respectively.

A repaired component is defined as one owned by the operation and subjected to successive repairs; therefore, its
history is known.


An exchange component is defined as a component of unknown history and acquired from dealer, giving a core as
partial payment.
















Figure 5 Costs per hour by type of rebuild.
It is noted that eight of the components restored as repair and exchange have shown loss in their optimum cost. The
amount of information about the useful life of these rebuild alternatives is not sufficient in order to arrive at conclusive
results about the cost in dollars per hour. This information provides us with the first signs and trends of the repair costs
and useful life of the repaired and exchange final drives.
3.2 Results for pool of 16 components of hydraulic drills, costs and machine shutdown hours
Each one of the decision vectors X = [x
1
; x
2
; x
i
;x
i+1
.; x
P
] generates an ordered pair Points (d, f) indicating the costs
per hour and the machine shutdown hours for this decision vector. The total decision vectors or ordered pairs Points (d,
f) is of 2
p
, where - for the case study - the vectors are a total of 2
16
= 66,536 possible combinations. Some of them are
shown in Figure N 6.















Figure 6 Zone of result for vectors Points (d,f)

Each one of Point (d,f) in Figure N 6 represents a specific rebuild strategy for the 16 classes of components included in
this assessment. Table N 1 shows its decision vector and the name of the rebuild strategy for every relevant point in
Figure N 6.

Hours of Operation vs. Costs per Hours
C
o
s
t
s

p
e
r

h
o
u
r

[
U
S
$

/

H
r
s
]

Hours of Operation (hrs)
New
Poly. (Exchange)
Exchange
Poly. (New)
Repaired
Poly. (Repaired)
Rebuild Strategies represented by Points (d,f)
f

=

M
a
c
h
i
n
e

s
h
u
t
d
o
w
n

h
o
u
r
s

[
H
r
s
]

d = Cost per hour [US$/hrs]
Total Points (d,f)
of 66,536


Table 1 Decision vectors shown in Figure N 6









As an initial approach to find the New Rebuild Strategy (Point 2), we are looking for the strategy that meets the criteria
to reduce the machine shutdown hours and components expense reduction, which in this case corresponds to Point B. It
is estimated that the rebuild strategy represented by Point B will have a cost of US$18.12 per hour and about 586
machine shutdown hours for the fleet.
It is considered that the New Rebuild Strategy for the drill fleet which is referred to as Point 2 is located near Point B,
because Point B corresponds to a mathematically based decision vector that needs to be reviewed to make sure that it is
operatively executable. Some considerations that need to be taken into account when selecting the New Rebuild Strategy
(Point 2) are:
Accessibility of components in equipment
Components that should be changed as a whole according to technical recommendations
Availability and lead time of new and repaired components
When applying the foregoing criteria, the New Rebuild Strategy is obtained for the fleet of drills shown in Point 2. It is
estimated that the cost will be US$19.34 per hour and about 546 machine shutdown hours for the drill fleet. Table N 2
shows the details of the New Rebuild Strategy for the pool of 16 components under study.
Table 2 New Rebuild Strategy
N Component Classes
New Rebuild
Strategy
Point 2 (d**, f**)
1 Alternator Repaired
2 Starter motor Repaired
3 Turbo Repaired
4 Double pump New
5 Pulldown pump New
6 Rotation pump New
7 Fixed flow motor New
8 Variable flow motor New
9 Indexing motor New
10 Carrousel cylinder Repaired
11 Tower lift cylinder Repaired
12 Breakout wrench cylinder Repaired
13 Leveling cylinder Repaired
14 Pulldown cylinder New
15 Pump drive New
16 Rotational head Repaired






Decision vector
Machine shutdown
hours [Hrs]
Costs per hour
[US$/hrs]
Points
Restoration Strategy Description
Current strategy
Strategy with less machine hours
New strategy (proposal)
Strategy with less costs per hour


3.2 Results obtained when assessing the replacement of 100-ton mining trucks
The analysis compares operation and maintenance (O&M),t and investment costs for new equipment vs. existing trucks
with a residual value according to equipment remaining life.
The results from the various simulations of Equivalent Annual Cost (CAE) for different asset investment costs and
(O&M) cost profiles show an optimal replacement point. This point is mainly related to the cost associated to replace
major components such as diesel engine, drive and differential and cost of a new equipment and residual value.
In addition a key variable for mining trucks is the structural state of the chassis, which usually conditions its operational
projection in terms of extend equipment life.

Example of the methodology applied to a 100 ton haul truck fleet.
Figure N 7 shows the results of the simulation for the acquisition price for trucks in 2005 (Equip Price 1) and the
estimated investment cost at 2011 price list (Equip Price 2). The trend is similar in both cases, in the case of higher
equipment investment (Equip Price 2) CAE after 36.000 operating hours is almost flat, and reflects mainly the impact of
equipment purchase, no major variations after 42.000 hrs.
The first major component change is around 24.000 hrs, period associated with an increase in CAE from 612 KUS$/year
that continues up to 42.000 hrs which is around 700 KUS$/year, afterwards CAE is relatively similar.

500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96
C
A
E


(

U
S
$

)
Equipment Operating Hours ( x 1.000 hrs )
Equivalent Annual Cost (CAE)
Equip Price 2
Equip Price 1

Figure 7 Equivalent Annual Cost (CAE) for different Equipment Price

4 CONCLUSIONS
Case 1 : Final drives in 100-ton truck

The limitation of this methodology is that it does not include overall costs such as unavailability.
When comparing rebuild strategies, they do not indicate that the repaired final drives have a cost of US$3.42 per hour, in
comparison with US$6.48 and US$8.71 per hour of new and exchange final drives, respectively. Thus, the strategy
adopted to have own components repaired as the preferred alternative is reaffirmed.


Case 2 : Drill fleet components

This methodology requires a significant amount of reliable information related to the costs and useful life. As more
components are included in the assessment, an exponential growth of rebuild strategy options is evidenced.
Conclusively, for the study of the pool of 16 components of the drill fleet, it is established that a cost of US$19.34 per
hour and 546 machine shutdown hours a year are possible to obtain. An annual expense reduction of about US$60,000 a
year and an availability increase of 1.5% to 2.0% is estimated.

Case 3 : Replacement of 100-ton trucks

This methodology has various limitations, such as:
It does not consider availability and increased productivity in case of replacement for new equipment.
It requires an estimation of operation and maintenance (O&M) costs, which may be particularly inaccurate in the
case of new equipment that lack consolidated design and cost.
The estimation of asset sales value may be an inaccurate variable due to the variables that impact the value. The
sales value will depend on aspects such as the number of equipment to be replaced, the conditions of the rental
and sales market and in general terms, on the world economy and local activity level, and the geographical
location.
Once it is determined by means of the equivalent annual cost (CAE) method that the optimum replacement time for a
piece of equipment is today and not tomorrow, it is important to calculate the NPV (Net Present Value) and IRR (Internal
Rate of Return) indicators in order to make this type of projects comparable with others of similar characteristics.

5 GENERAL COMMENT

The amount of information on repair costs and useful life of components for mining equipment may be scarce in
the case of fleets composed of few equipment, as in these three cases.
The models and serial numbers of the mining equipment change every eight to ten years. This fact introduces an
additional variable of technical obsolescence when some major components have been discontinued.
Considering the importance of expenses in components in comparison with total maintenance, it is important to
conduct similar studies, both on major and minor components, taking into account the benefits derived from
keeping rigorous record of the changes and repairs made, as well as an adequate control of information if
maintenance is conducted with own, external or combined resources. Such information will serve as a data base
for more accurate analysis of maintenance processes.
An extended version of these three lines of study was presented at the 6 Encuentro Internacional de
Mantenedores de Equipos Mina (www.mantemin.cl) held in Chile in September, 2011.

6 REFERENCES
Aissani D., Chateauneuf A., Laggoune R. (2010) Impact of few failure data on the opportunistic replacement policy for
multi-component systems. Reliability Engineering and System Safety 95 108-119
Lugtigheid D.; Banjevic D.; Jardine A. (2008) System repairs: When to perform and what to do. Reliability Engineering
and System Safety, pp. 604-615
Topal E.; Ramazan S. (2010) A New MIP Model for Mine Equipment Scheduling by Minimizing Maintenance Cost.
European Journal of Operational Research, pp. 1065-1071.