For mining companies: Are your drill contractors charging you what they want?

The high costs of hidden costs

There’s no way around it - out of control drilling costs are a major headache.

Take this scenario: Your team identified a promising gold exploration target. You secured a contractor with a seemingly reasonable metre rate of $150 per metre.

As you’re progressing you’re noticing that you’re not getting the metres you planned a quarter of way through through the program, but you’ve used up more than half the drilling budget. A whole 50% increase in the effective cost per meter. Why?

This discovery could have been extremely valuable to expand the portfolio, grow the reserve, or turn things around in your junior exploration company but the extra blow to your budget prevent you from taking the next critical step.

Why your contractors seem to have the upper hand

It’s true that drillers often seem to have the upper hand when it comes to pricing and seem to be charging you what they want. But why?

Lack of transparency: Traditionally, drilling contracts have been crafted with highly complex conditions and clauses in the spirit of charging accurately for work done. But sometimes the calculation of these charges may not be as straightforward, especially during a live drilling program.
Limited Availability: Exploration frequently ventures into remote areas with challenging geological conditions. Finding a qualified driller with the specific expertise and equipment needed for your project, while also being available on your desired timeframe, can be a challenge. This limited pool of options can make you feel pressured to accept a less-than-ideal contract, simply because there might not be many other qualified drillers readily available in the area.
Time pressures: Exploration projects often operate under tight deadlines. The pressure to meet these deadlines can force you to accept contracts with less-than-ideal terms fearing delays that could jeopardise your entire program.

Empowering exploration managers: Strategies for cost control

The good news: you can reclaim control. Here’s how:

Advocate for transparency: Once you’ve signed the contract and started drilling ask for transparent daily review of activities and costs.
Proactive planning & project management: Develop comprehensive timeframes and contingency plans. This proactive approach will help you anticipate potential delays and allows you to negotiate your contracts from a position of strength.
Open communication: Regular and open communication with your contractors is key. Discuss your project’s specific needs and timelines to minimise misunderstandings and ensure everyone is aligned on expectations.
Invest in contractor training: Provide your preferred contractors with best practices on efficient drilling operations. This can help minimise unnecessary downtime, optimise resource allocation, and ultimately reduce costs for both parties.
Regular cost reviews: Schedule regular reviews with your contractors to analyse drilling costs and identify potential areas for optimisation.
Incentivise efficiency: Partner with your drilling contractors by implementing performance-based incentives. For example, offer a bonus for exceeding agreed-upon drilling metres per day or for completing the program within budget. This could motivate your contractors to prioritise efficiency and cost-effectiveness, benefiting both parties.

Shifting the power balance: How CorePlan can help

A lack of visibility into your drilling operations can easily lead to budget overruns of 30% or more. Here’s where CorePlan comes in.

CorePlan is a cloud-based solution built on best practices within the mining and exploration sector. It’s designed to give you real-time data and insights, ensuring you’re never caught off guard by unexpected costs.

Real-time cost tracking: Monitor drilling expenses line-by-line, with clear breakdowns of metre rates, mobilisation costs, and other charges. Identify any discrepancies or potential overruns immediately.
Performance monitoring: Gain insights into drilling rig performance metrics like activity levels and downtime. This allows you to hold your contractors accountable and ensure they’re delivering on agreed-upon productivity rates.
Data-driven decisions: CorePlan provides a central repository for all project data, enabling informed decision-making. Use historical data to negotiate better contracts and make strategic adjustments that optimise budget allocation.

Don’t let drilling costs dictate your project’s success. CorePlan equips you with the tools and transparency needed to take control.

Ready to take charge?

Schedule a demo today and discover how CorePlan can help transform your drilling operations into a digital powerhouse of efficiency and cost control. Check out coreplan.io or book in a demo today.

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For mining companies: Are your drill contractors charging you what they want?

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