🎓 Lesson 2
D2
Direct Labor Cost: From Payroll to Unit Attribution
Direct labor cost is the total wages paid to workers who physically perform mining or blasting tasks, directly tied to a specific job or unit of production.
🎯 Learning Objectives
- ✓ Calculate direct labor cost per meter of drill hole using crew composition, wage rates, and cycle time data
- ✓ Apply labor productivity benchmarks to diagnose underperformance in drilling or loading operations
- ✓ Explain how shift structure (e.g., 12-hr vs. 8-hr shifts) and crew size impact unit labor cost attribution
- ✓ Design a labor cost allocation template for a surface blast operation that links payroll data to tons blasted and meters drilled
📖 Why This Matters
In mining economics, labor is often the largest controllable cost—accounting for 30–50% of total operating costs in surface operations. Misattributing labor costs (e.g., assigning all payroll to 'blasting' without distinguishing between drilling, stemming, and initiation crews) distorts unit cost models, leading to flawed equipment selection, inaccurate reserve valuations, and poor capital budgeting decisions. Precision here directly impacts NPV calculations and mine plan optimization.
📘 Core Principles
Direct labor cost attribution rests on three pillars: (1) Traceability—only labor hours *physically consumed* in executing a defined task (e.g., operating a rotary drill) qualify; (2) Time-activity linkage—using validated cycle times (e.g., ISO 8564-2 drill cycle breakdown) to assign minutes/hours to specific outputs; and (3) Cost layering—incorporating not just base wage, but statutory burdens (FICA, FUTA, workers’ comp), shift differentials, and mandatory allowances (e.g., remote site premiums). Industry practice distinguishes between *productive time* (e.g., actual drilling) and *non-productive but attributable time* (e.g., repositioning, minor maintenance)—both are included in direct labor if crew-specific and task-bound.
📐 Unit Direct Labor Cost
This formula converts total labor cost into a production-based unit (e.g., $/m drilled or $/ton blasted), enabling cross-equipment and cross-shift comparison. It requires accurate measurement of both labor input (hours × loaded rate) and physical output (drilled meters, tons fragmented).
Direct Labor Cost per Unit Output
DL_u = (Σ(n_i × R_i × T_p)) / QCalculates direct labor cost per unit of physical output (e.g., $/m, $/t)
Variables:
| Symbol | Name | Unit | Description |
|---|---|---|---|
| DL_u | Direct labor cost per unit output | USD/unit | Cost attributed to each meter drilled, tonne blasted, or hole fired |
| n_i | Number of workers in role i | persons | Count of drillers, blasters, helpers, etc., assigned to the task |
| R_i | Loaded hourly rate for role i | USD/hr | Base wage × (1 + burden rate) + shift differential + allowances |
| T_p | Average productive time per shift | hr | Time during which crew actively performs the task (excludes breaks, meetings, travel) |
| Q | Physical output per shift | unit | Measured output: meters drilled, tonnes blasted, holes initiated, etc. |
Typical Ranges:
DTH drilling (hard rock): $8.00 – $14.00/m
Blast initiation (surface, per tonne): $0.18 – $0.32/t
Drill & blast cycle (per tonne fragmented): $0.45 – $0.85/t
💡 Worked Example
Problem: A 4-person drill crew operates a DTH rig for 10.5 productive hours/shift. Base wage = $32/hr; payroll burden = 28% (taxes + benefits); shift differential = $4/hr (night shift). Total drilled meters/shift = 185 m. Calculate direct labor cost per meter drilled.
1.
Step 1: Compute loaded hourly rate = $32 × (1 + 0.28) + $4 = $32 × 1.28 + $4 = $40.96 + $4 = $44.96/hr
2.
Step 2: Compute total labor cost/shift = 4 crew × $44.96/hr × 10.5 hr = $1,888.32
3.
Step 3: Compute unit cost = $1,888.32 ÷ 185 m = $10.21/m
4.
Step 4: Verify against typical range: $8–$14/m for DTH in hard rock (see SME 2022 Benchmark Report)
Answer:
The result is $10.21/m, which falls within the safe and typical range of $8–$14/m for DTH drilling in hard rock.
🏗️ Real-World Application
At Newmont’s Boddington Mine (Western Australia), engineers revised their direct labor attribution model after noticing 12% higher-than-expected unit costs in Phase 3 blasting. Investigation revealed that previous models assigned all shift wages—including 1.5 hrs of pre-shift safety briefing and post-shift reporting—to ‘drilling output’. By implementing RFID-tracked crew movement and integrating GPS drill telemetry, they isolated only the 7.2 hrs of actual drill-bit-on-rock time. This recalibration reduced attributed labor hours by 18%, lowering reported $/m drilled by $1.37 and triggering a 7% reduction in planned fleet size for the next expansion phase.
✏️ Student Exercise
A surface blast crew consists of 2 drillers ($38/hr), 1 blaster ($45/hr), and 1 helper ($29/hr). Payroll burden = 31%. All work 11.2 productive hours/shift. In one shift, they drill 210 m, load 1,420 kg of explosives, and initiate 1 blast fragmenting 12,500 tonnes of ore. Calculate: (a) Direct labor cost per meter drilled, (b) Direct labor cost per tonne blasted, and (c) Identify which crew member’s time *cannot* be fully attributed to drilling—and why.