Measuring labor productivity in the
gold mining industry

By Adam Webb | 31 March 2017

Labor productivity in the mining industry is often expressed as tonnes of ore mined per man hour and, as a consequence, open pit mines are often described as being more productive than underground mines. However, looking at productivity in terms of revenue generated per man hour accounts for both primary grade and valuable byproduct metals in the ore and shows a different regional picture compared to that suggested by the more simplistic measure of ore mined per man hour. This metric shows that underground mining is more competitive in terms of labor productivity when compared with open pit mining than is sometimes suggested by the more conventional metric of ore mined per man hour.

For this study, S&P Global Market Intelligence looked at 137 primary gold open pit and underground mines across 30 countries in 2016. Figure 1 shows the average ore mined per man hour for all 30 countries. Employees in the United States are apparently the most productive, while in some more developed nations, such as New Zealand and Chile, the workforce seems surprisingly unproductive. Generally, it is expected that employees in more developed countries are more productive, as they require higher wage rates, compared with less developed countries, where wage rates are lower. Looking at these figures on a country level does not take into account the distribution of open pit and underground mining, and this leads to some skewed results.


Figure 1 and 2

productivity of man labor at gold mines
Figure 2 shows the same data but further split into open pit and underground mining operations. This would appear to support the idea that employees at open pit mines are able to be more productive than their counterparts at underground operations, due to the large equipment and bulk-mining techniques that can be utilized at open pit operations. However, a further problem is that looking at labor productivity based solely on ore mined tonnage does not account for the value of metal that can be liberated from these mined ores.

Underground mining exploits higher-grade ores in lower volumes, whereas open pit mining exploits lower-grade ores at higher volumes. Figure 3 shows the weighted-average head grade of gold in grams per tonne (g/t) for underground and open pit mines in each country covered in this study. Average underground grades in the United States, Russia and Argentina are particularly noteworthy in their superiority when compared with open pit gold mines, although the same trend can be seen to a lesser extent across most of the population.

In addition to the amount of gold that can be liberated from the ore mined, there are often valuable byproduct metals present, such as silver or copper. The measure of tonnes of ore mined per man hour also ignores the value of these secondary metals. To adjust for both gold and byproduct metal content, we looked at productivity in terms of the gross revenue generated in U.S. dollars per man hour for each mine. This represents the value generated per man hour at each property, allowing for fairer comparison across regions and between open pit and underground mining.


Figure 3

average gold head grades across the world

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By this measure, the underground gold mines we looked at in the United States, Peru and Russia are more productive on average than the open pit gold mines operated in the same countries. Employees at underground gold mines in New Zealand are more productive in terms of gross revenue generation than those in open pit gold operations in most of the covered countries, which contradicts what is suggested by the ore mined per man hour values for New Zealand in figures 1 & 2. This difference is further demonstrated when comparing figures 1 & 4. Figure 1 shows that for total average labor productivity, in terms of ore mined per man hour, New Zealand is ranked 23rd out of 30, whereas figure 5 shows that for total average labor productivity, in terms of gross revenue per man hour, New Zealand is ranked 4th out of 30.

At the other end of the spectrum, figure 5 shows that South African employees at underground gold mining operations are the least productive of the covered countries when using the gross revenue per man hour metric. This is a result of the deep, narrow orebodies that are exploited for gold in South Africa, which cannot easily be mechanized and therefore rely on labor-intensive mining methods. This is further reflected in figure 4, with average gross revenue generated per man hour by South African employees in both underground and open pit primary gold operations lower than all other covered countries.


Figure 4 and 5

average productivity in gold mines measured as gross revenue

Comparing the position of countries in figures 1 and 4 shows that looking at mining employee productivity using different metrics can lead to vastly different conclusions being derived from the same data set. Using the conventional measure of ore mined per man hour is useful when comparing mines that use similar mining methods at similar grades, but its use is limited when comparing labor productivity across different mining methods and deposit types. The measure of gross revenue per man hour allows for better comparisons across mines that utilize different mining techniques exploiting ores with differing metal contents, as it also accounts for the value of liberated metal.


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