Local Content

3. Mining supply chain at a glance: seeking opportunities for intervention

The supply chains for the oil, gas and mining sectors are best understood by looking at the project lifecycle. The project life cycles for each sector divide into core technical and non-technical activities. In turn, these activities are sources of employment and require delivery of goods and services, as well as being subject to local content strategies and representing areas for policy intervention.

Each stage of a mining project presents distinct opportunities for a country to involve its own businesses and citizens. These stages are now set out below separately for mining, and, oil and gas.

1. Resource assessment and exploration 

In mining, the lifecycle begins with resource assessment and exploration activities to identify and assess mineral deposits, their quantity and quality, and their geographical occurrence, and then determine the most appropriate mining and processing methods.  During this phase, there is utilisation of geophysical and geological mapping services.  The assessment and exploration phase could be anywhere from five to fifteen years.

2. Feasibility studies

Next, feasibility studies outline the technical, legal and economic variables to determine the likelihood of a successful outcome. These include assessments of the mineral reserves and expected investment returns.

Both phases (1) and (2) may involve highly specialised services that may not be available in the host country. This, together with the uncertain nature of investment at this stage, reduces the potential for local content, particularly in new mining economies. 

3. Planning and construction

The planning and construction phase sometimes begins while feasibility studies are being concluded. It involves detailed preparation for the mining activities. Often, the technical processes required to extract the mineral deposits are planned in detail while site infrastructure needs, schedules for construction and commissioning of facilities, and all planning associated with environmental aspects of operations are completed.  Most importantly, during this phase, construction of the mine workings both on the surface and underground is completed.  Sometimes, exploration companies will acquire small mineral quantities during construction to further test technical handling and processing facilities that may be required. Collectively, these phases take anywhere from three to seven years. While the feasibility study and the environmental assessments involve specialist services that are often limitedly available in the host country, the construction of the mining facilities provide large potential for indirect services (for example, construction, electricity, logistics) that can be supplied through local firms with local staff firms.  

4. Commencement of mining operations

With construction completed, mining operations can begin.  Depending on the size of the project, mining operations can last for many years or just a few. There may also be periods of inactivity during the life of the mine due to changing market conditions, such as the market price of the mineral being mined, and this can affect the life of a mine. The extraction/operation phase provides larger opportunities for local content, as there is higher demand for less specialised labour and for a range of support services.

5. Closure and decommissioning

Once it is no longer profitable to recover the minerals that remain or the minerals are completely exhausted, mines will be closed or decommissioned.  Most of the work related in this phase aims to stabilise disturbed lands, ensure safety of wildlife and the general environment of the mine site. 

The diagrams below and on the following page summarise the goods and services required for each phase in the mining project lifecycle.