Abstract
Over the past decade in South Africa, there has been a significant increase in the number of
mining operations, both open pit and underground, that use independent contractors to
carry out mining activities. Frequently, mine owners will choose the contractor option
without fully understanding the consequences of this decision. Traditionally, contract
mining has come at a cost premium of about 15% to 20% compared to owner mining.
However, due to the large number of junior mining companies entering the mining arena in
South Africa, contract mining rates have increased, with cost premiums as high as 50%
being reported.
This paper looks at the merits of owner mining versus contract mining and describes
under what conditions each option may be favourable. In addition, the methodology of
entering into contract negotiations with the objective of establishing a fair and sustainable
relationship is discussed.