Development of an economic replacement time model for mining equipment: a case study

Abstract

AbstractIn mining operation equipment replacement represents a strategic decision problem. This paper presents an economic replacement time model for mining drill rigs. A total ownership cost minimization model was developed to optimize the lifetime of a drill rig used in Tara underground mine in Ireland. The developed methodology allows an innovative practical evaluation of the replacement process by applying sensitivity and regression analysis to rank the factors affecting the replacement time of existing and new models of the production drill rig. Compared to previous studies presented in the literature, the present study represents a further development in this field as it has resulted in a practical optimization model that can be used to estimate the economic replacement time of repairable equipment used in the mining and other production industries. The proposed model shows that the absolute economic replacement time of the drill rig investigated in this case study is 81 months and the mining company operating the rig can replace it with an identical one within an optimal replacement range of 6 months (i.e. from month 79–84) when the minimum total cost can still be achieved in practice. Sensitivity and regression analyses show that the maintenance cost has the largest impact on the economic replacement time of the drill rig. The study finds that decreasing the operating and maintenance costs of the drill rig will have the positive effect of increasing the economic replacement time linearly for a new model of the drill rig. The proposed model helps decision-makers to plan the replacement of old rigs and purchase new ones from an economic view point. Thus, this new model can be extended and used for more general applications in the mining industry.