The owner of a mining property has 3 alternatives in development strategy for bringing the property into production.

The three alternatives are:

1) Develop the property solely as the owner and operator;

2) Employ a mining contractor to perform some or all of the mining development activities;

3) Project Joint Venture with another mining company.

Each of these alternatives has its unique advantages and disadvantages. The use of any particular alternative depends on the advantages and disadvantages of a unique set of circumstances, the economic consequences of the alternative, and the corporate philosophy of the property owner.
The first and second alternative is widely used in mining industry whish we will discussed.

1) Owner / Operator

The owner / operator may decide to contract some of the activities at the mine such as detailed design, construction of processing plant, the mobilization of mining equipment, construction of access to the property, and even including removal of overburden and still classified as owner / operator of the project.

Advantages and disadvantages

· The primary advantage of owner / operator alternative is the total control the owner has of the development and exploitation of the property.

In all other alternatives, the owner must relinquish control of some aspects of operations.

· The disadvantage is that the owner may experience higher cost per volume of commodity recovered using his own operations as compared to using a contract miner.

2) Contract Miner

For a surface mine, the contract miner operates the mine including the removal of overburden waste, mines the ore, and delivers the ore to a processing facility.

· Contract mining reduces the magnitude of initial capital investment required to bring the property to production.

· Contract mining reduces direct payroll and administrative cost such as recruitment, training, and supervision which will become the responsibility of the contract miner.

About the question of Saudization, this can be negotiated with the contractor to add (about 30 – 40%) Saudi labor force from the site to the contractor workforce using contractor payroll.

· Contract mining supplies a well-defined fixed cost for mining operations.

· A good contract mining agreement improves efficiency for the project.

· The owner relinquishes some control of the project. It is necessary for the owner to work closely with contract miner to ensure that the overall operations will enable the contractor to meet required production.

· Selection of inefficient and unreliable contractors is a risk. Choosing wrong contractors brings more problems than normally encountered when operations are conducted by the owner.