Examining the Concept of Capacity Utilisation and Efficiency as Applied to Mining Equipment

The capital cost of major items of mining equipment is very high. The operating cost of such equipment is also high. It is therefore important that such expensive equipment is used productively. To this end mine management uses production data systems and management accounting systems to monitor events and provide data for analysis to enable management to make operating and business optimisation decisions. This could be done better if there was an understanding of productivity in terms of its utilisation and efficiency components. What has been missing has been a methodology to properly account for the productivity of equipment in terms of its contribution in dollars to the costs and profit of the mine. An explanation of the Productivity Accounting methodology will be given. It will then be shown that productivity has two components, that of capacity utilisation and efficiency. These are defined and the dollar contribution of each to costs and profit shown. The efficiency component tracks the effect of proportional changes in input cost quantities used in the mining process as mining production changes. The capacity utilisation component tracks the effect of step changes in the input cost quantities used in the mining process as mining production changes.