What Most Mine Managers Miss
You can see the rate card.
You can see the invoices.
You can see the variations.
But what most mine managers never get is a clean view of what the contract is really costing them per tonne, per metre, or per unit of production over time.
That is where the money goes.
Not in one big event. Not in one obvious mistake. Not because the contractor is necessarily doing the wrong thing.
It happens quietly, month after month, while everyone is busy managing the operation.
The Contract Looks Normal
Most contract mining arrangements do not look broken from the outside.
The contractor is on site. The crews are working. The equipment is moving. Monthly meetings are happening. The rate card is escalating at something that looks reasonable. CPI. Labour. Fuel. Parts. Normal industry pressure.
So when costs rise, the explanation feels plausible.
But the rate card is only one part of the story.
The more important question is:
What are you actually paying per tonne, per metre, or per unit of output?
That number tells a different story.
Because a contract can have reasonable rates and still become expensive.
A contract can be retendered and still carry the same problem forward.
A contractor can be working hard and still be set up under a deal that no longer fits the mine.
The Number Nobody Plots
The missing chart is usually simple.
Cost on one axis. Output on the other. Tracked over time.
Not just total spend. Not just rate escalation. Not just monthly variance.
Actual cost per output.
That is the number that shows whether the contract is still working.
And in many operations, nobody is plotting it.
Finance sees invoices. Procurement sees rates. Operations sees production. The contractor sees their own cost to serve. But very few people see the whole picture in one place.
That is why the problem survives.
Everyone is managing their part of the system. Nobody is looking at the contract as an operating model.
A $40M Example
On one $40M contract at a tier 1 miner, the client had retendered multiple times over 10 years.
Costs kept rising. Everyone assumed inflation was the main driver.
The business came under financial pressure and management asked for a 10% saving from the contract.
That was the target.
What we found was not a 10% opportunity.
It was a major underlying cost improvement opportunity that had been sitting inside the contract for years.
Working with the client and the existing supplier, we delivered a 50% cost reduction without changing contractors, while significantly reducing the management overhead.
The important point is not just the saving.
The important point is that the contract had already been through the normal process. It had been retendered. The rates had been tested. The supplier was capable. The client was sophisticated.
And the opportunity was still there.
Because the problem was not visible in the way the contract was being managed.
Why Retendering Often Misses It
Retendering can be useful.
But retendering does not automatically fix a contract that nobody properly understands.
If the next tender carries forward the same assumptions, the same scope, the same production volatility, and the same unclear link between cost and output, the result is often familiar:
Same problem. New logo.
The rates may look different. The monthly meetings may restart with fresh optimism. But the underlying economics have not changed.
That is why some mines go through two or three contractors and still feel like the contract is not working.
The issue is not always the contractor.
Sometimes the issue is the contract mining arrangement itself.
The Pressure Lands on the Mine Manager
This is the hard part.
The mine manager is accountable for tonnes, cost and safety.
But the means of delivery often sit with a third party.
The trucks, crews, supervision, cycle times and productivity are inside the contractor’s operating model. When production slips or costs rise, the mine manager still has to explain it.
That is a difficult position to be in.
You are asked to deliver savings from the biggest line item on site, but you may not have a clean view of what is driving the cost.
You are asked whether to retender, but you cannot tell whether a new supplier would fix the problem.
You are asked whether to insource, but the owner-operator case and the contractor case are rarely built on a true like-for-like view.
You are carrying the outcome, but not all the levers.
That is what most mine managers are dealing with.
What To Look For
If you manage a contract mining arrangement, the first questions are simple:
Are costs rising faster than production?
Are variations becoming normal?
Has the contract been retendered, but the cost problem remained?
Are you being asked to find savings from the contract without a clear view of where the money is going?
Is insourcing being discussed because nobody trusts the current arrangement?
If the answer to any of those is yes, the next step is not necessarily to retender, squeeze the contractor, or build an insourcing case.
The next step is to make the contract visible.
What We Do
At Acquire Insights, we help mine managers understand what is really happening inside their contract mining arrangements.
We look at where the costs are going, where the friction sits, how the contract fits into the broader mining value chain, and what the work should cost under the conditions the mine is actually operating in.
Then we benchmark that against our production and cost data so the real opportunities rise to the surface.
The goal is not to blame the contractor.
A deal the contractor can profitably deliver is better for everyone than a broken one.
The goal is to help the mine owner see the contract clearly, make better decisions, and get the arrangement working again.
When To Have The Conversation
It is worth a conversation if:
- Variations keep climbing
- Rates look fine but invoices keep growing
- You have retendered and costs still went up
- You inherited a contract you do not fully trust
- Management wants savings from the biggest line item
- You are thinking about insourcing and want the real numbers first
Most contract mining problems are not invisible because they are complicated.
They are invisible because nobody has put the right numbers in the same place.
That is what most mine managers miss.
And once you can see it, you can do something about it.
Contact: Simon Thompson
M : +61 433 847 909
E: sthompson@acquireinsights.com.au
https://www.linkedin.com/in/simondavidthompson/
Brisbane, Australia