The LOM plan is the blueprint of operations for the entire life of a mine project; it determines the schedule for the extraction of mineral, the pace of production, assumptions on processing, capital expenditure, and time frame until closure of the operation. The LOM plan is essentially the officially approved long-term plan for the mine that is developed in view of more immediate mine plans on an annual basis when new information comes to light.
An effective LOM plan reflects the flow of ore, waste rock, and saleable material per annum based on the mine’s resource/reserve position, mining method, processing route, cut-off grade, capital equipment and any sustainability aspects/closure considerations. Due to its long-term nature, it forms the basis for developing the five-year plan, budget, and schedule.
In addition, the LOM plan is not only a calendar; it is an important tool in strategy formulation through aligning short-term actions with the longer-term company objective. Through making comparative assessment of alternative mining methods, rates, and capital program, management will be able to make the right choice on what will add value and mitigate risks. Another important function of this plan is that it guarantees the longevity of the mine since management is forced to verify whether the orebody, limitations to operations, and market conditions allow for the desired production schedule.
LOM planning influences financial planning since the former will become the foundation for mine’s cash flow model, budget considerations, and the case for investments. Management will be able to estimate future revenue, operating cost, sustaining capital expenditure, development expenditure, and closure expenditure for each year in the future. Thus, the mine plan will convert geology and operations of the mine into a timeline of numbers useful for making decisions about capital investments.
One of the outputs of LOM planning is net present value (NPV), which calculates the value of future cash flows discounted into their present value. This means that LOM planning becomes important when it comes to making decisions concerning expansions, fleet replacement, plant modernization, pushbacks, and infrastructural development since such actions determine the timing and magnitude of cash flows. This planning will enable the company’s management to examine its sensitivity to changes in price, quality, recovery rate, and costs – an important consideration in mining.
On the corporate level, the results of LOM planning will help in performing feasibility analysis, year-to-year business plans, five-year forecasts, negotiations with lenders, and board approval. Besides, the LOM plan is important for compliance purposes as any declaration of reserves and long-range plans should conform to the approved strategy for mining and economic considerations. Any mine without an up-to-date LOM plan may have problems with capital and poor sequencing since there will be no link between immediate and long-range planning.
The point here is that the LOM strategy is that very link between the orebody and the financial statement because it determines what needs to be mined, when it should be mined, how much it will cost, how much it could potentially earn, and what level of capital investment will be required. From the financial planning standpoint, it provides all of the data for all kinds of financial calculations.
