Life Cycle Reliability and Safety Engineering

https://doi.org/10.1007/s41872-022-00188-1

ORIGINAL RESEARCH

Development of an economic replacement time model for mining

equipment: a case study
Hussan Al‑Chalabi1

Received: 17 January 2022 / Accepted: 5 March 2022

© The Author(s) 2022

Abstract
In mining operation equipment replacement represents a strategic decision problem. This paper presents an economic replace-
ment time model for mining drill rigs. A total ownership cost minimization model was developed to optimize the lifetime of
a drill rig used in Tara underground mine in Ireland. The developed methodology allows an innovative practical evaluation of
the replacement process by applying sensitivity and regression analysis to rank the factors affecting the replacement time of
existing and new models of the production drill rig. Compared to previous studies presented in the literature, the present study
represents a further development in this field as it has resulted in a practical optimization model that can be used to estimate
the economic replacement time of repairable equipment used in the mining and other production industries. The proposed
model shows that the absolute economic replacement time of the drill rig investigated in this case study is 81 months and
the mining company operating the rig can replace it with an identical one within an optimal replacement range of 6 months
(i.e. from month 79–84) when the minimum total cost can still be achieved in practice. Sensitivity and regression analyses
show that the maintenance cost has the largest impact on the economic replacement time of the drill rig. The study finds that
decreasing the operating and maintenance costs of the drill rig will have the positive effect of increasing the economic replace-
ment time linearly for a new model of the drill rig. The proposed model helps decision-makers to plan the replacement of old
rigs and purchase new ones from an economic view point. Thus, this new model can be extended and used for more general
applications in the mining industry.

Keywords Economic replacement time model · Decision support model · LCC analysis · Mining drill rig

1 Introduction and effective replacement decisions are required for different

assets, for example personal computers in higher education
Rational production machinery replacement is a very impor- (Babbitt et al. 2009), public infrastructure assets (Al-Douri
tant issue for most companies in different branches of indus- et al. 2020; van den Boomen et al. 2019), machines and
try, and includes the replacement of mining rigs, aircraft, equipment in steel production (Šebo et al. 2013), machines
trucks, cars, buses for local transport, and production machin- and equipment in forestry (Diniz and Sessions 2020), navy
ery, indeed almost all types of machinery (Grinyer 1973; aircraft (Keating et al. 2014) and expensive mining machin-
Elton and Gruber 1976; Bean et al. 1994; Scarf and Hashem ery (Al-Chalabi et al. 2015a, b).
1997; Bethuyne 1998; Regnier et al. 2004; Rogers and Hart- Decisions on the replacement of old machinery with new
man 2005; Hritonenko and Yatsenko 2007; Mercier 2008; depend on many factors, for example the degradation rate of
Richardson et al. 2013; Nguyen et al. 2013; Yatsenko and the machinery, the market prices, technological changes, etc.
Hritonenko 2017; Huang et al. 2021). In modern industrial (Hartman and Tan 2014). This study focuses on a replace-
economics, the need for scientifically justified replacement ment policy for production drill rigs used in the mining
decisions is increasing at an extremely rapid pace. Practical industry, more specifically, the drill rigs used underground
in Tara Mine in Ireland. In this study, a practical optimiza-
* Hussan Al-Chalabi tion model for the economic replacement time of the drill
[email protected] rigs was developed. In the context of of mining in Tara mine,
drilling is the process of making holes in the faces and walls
1
Division of Operation and Maintenance Engineering, Luleå of underground mine rooms, to prepare those rooms for the
University of Technology, 97187 Luleå, Sweden

13
Vol.:(0123456789)
 Life Cycle Reliability and Safety Engineering

subsequent operation, which is the charging process. From problems. Their ADP approach used a rollout algorithm to
the mining point of view, the drilling process represents the formulate the problem in a rolling horizon, and their model
bottleneck of the mining production cycle, since drilling is was solved using a genetic algorithm. They implemented
the first process of this cycle (Hamodi 2014). The drill rigs their approach for a case study of 497 transformers belonging
used in underground mines are subject to degradation due to a power distribution company and found that their frame-
to their harsh working environment throughout their operat- work possessed favourable features, such as minimizing the
ing life. This reduces the rate of production and increases effect of uncertainties in the state variables and measurement
the maintenance and operating costs, causing a negative inaccuracies. Other researchers have considered continuous
economic effect. Given all these factors, it is important for technological changes in their approaches to calculating the
mining companies to perform life cycle cost (LCC) analysis equipment replacement time (Rogers and Hartman 2005; Hri-
to estimate the economic replacement time (ERT) of their tonenko and Yatsenko 2008; Roy et al. 2016). Furthermore,
production rigs, even prior to purchasing them (Markeset and several researchers have studied the optimal replacement
Kumar 2018; Galar et al. 2017). time of assets by considering discontinuous technological
The life cycle cost of equipment is determined by sum- changes (Goldstein et al. 1988; Mahrez and Berman 1994;
ming up all the potential costs associated with the equipment Yatsenko and Hritonenko 2009). In addition, the uncertainty
over its lifetime (i.e. the acquisition costs and the total cost of involved in determining the optimal replacement policy has
ownership). It is known that the value of expenditure today been considered by different researchers in various studies
costs more than the same expenditure next year because of (Apeland and Scarf 2003; Richardson et al. 2013; Zheng and
the decreasing money value concept in the “time value of Chen 2018).
money”. In this study, a discount rate was used to account for Although many researchers have studied the optimal
the time value of money. To compare costs incurred at differ- replacement time of different assets by applying standard
ent times, we must shift different costs to a reference point models and theories of dynamic programming to consider
in time. Therefore, the present value of the costs for the case general, discontinuous and continuous technological changes
study was calculated by considering the discount rate factor. and uncertainty in connection with determining the optimal
Standard models for equipment replacement decisions replacement policy, more practical models for economic
contain an estimation of the discounted costs by minimiz- replacement time estimation are required for easier applica-
ing the total ownership cost for the equipment. The assump- tion in industry. Thus, the aim of the present study was to
tion of these models is that equipment will be replaced at develop a practical optimization model using available cost
the end of its optimal lifetime by a continuous sequence of data from the mining industry. This developed model was
identical equipment (Hartman and Tan 2014). Recently, a used to estimate the ERT of a drill rig used in Tara Mine
number of researchers have studied the optimal replacement in Ireland as a case study. The available cost data were the
time of different repairable and non-repairable assets con- rig’s purchase price and operating and maintenance costs.
sidering different cost parameters and maintenance issues The production loss due to the downtime of the drill rig was
(Yun and Choi 2000; Moghaddam and Usher 2010; Wijaya not considered due to the availability of a redundant drill rig.
et al. 2012; Al-Chalabi et al. 2015a, b; Adkins and Paxson In this study, the equivalent present value of these costs was
2017; Yatsenko and Hritonenko 2020a, b; Petroutsatou considered by using a discount rate.
et al. 2021). Yatsenko and Hritonenko (2020a, b) analysed
a profit-maximizing serial replacement problem, taking into
account variable asset productivity, the operating cost, and a 2 Method
replacement cost that depended on the asset age and installa-
tion time. These authors examined and highlighted essential Figure 1 shows the flow chart for the method used in this
differences between profit maximizing and cost minimizing study. The study started with the collection of the mainte-
replacement strategies in the infinite horizon framework nance cost (MC) data, the acquisition cost and the infor-
for industrial asset replacement. Their study focused on the mation regarding the operating cost (OC) of the drill rig
complex dynamics of sequential asset replacements. Some investigated in the case study. The second step involved
researchers have applied the theory of dynamic programming investigating the data collected from a data quality point
to consider technological changes in their study of the opti- of view. After filtering and sorting the data based on cal-
mal replacement time, and have used different mathematical endar time, the maintenance cost were calculated and the
frameworks to solve different asset replacement problems in operating cost were estimated based on the information
connection with general technological changes. For exam- from Tara Mine for a period of 42 months. The planned
ple, Sadeghpour et al. (2019) presented a novel approxi- operating time for the drill rig was determined by Tara
mate dynamic programming (ADP) approach for solving Mine to be 10 years, and, therefore, data prediction (i.e.
large-scale nonlinear constrained equipment replacement extrapolation) for the period stretching from month 43–120

13
Life Cycle Reliability and Safety Engineering

3 Data collection
Opmizaon
model
Start
development The data used in this study were collected from the MAX-
IMO database of the computerized maintenance manage-
Cost data ERT esmaon ment system (CMMS) for a drill rig used by a mining com-
collecon for exisng pany. A case study was conducted on the Epiroc Simba drill
equipment rig used underground in Tara Mine in Ireland, utilising cost
Maintenance
cost calculaon data collected for a period of around 3.5 years (April 2016
Sensivity to September 2019) for the analysis.
analysis
Operang cost The cost data in the MAXIMO database include correc-
esmaon
Regression tive and preventive maintenance costs. In the CMMS, the
analysis cost data are recorded based on work orders for the main-
Present value
tenance of the drill rig. Every work order contains a work
esmaon for
OC & MC
ERT esmaon order number, the reporting date, the repair time in hours,
for new model the labour, material and service costs, a failure description,
of equipment
Data and a description of the maintenance actions performed.
extrapolaon Table 1 presents a sample of the raw data for this study. The
End
operating costs, equipment purchase price, installation cost
and other costs relevant to the case study were collected
Fig. 1 Flow chart for the ERT estimation method used in this study as well. The maintenance instructions from the company
manufacturing the drill rig were also collected. Because
drilling is not a continuous process, the operating cost was
estimated by considering the utilization of the drill rig. For
was performed for the operating and maintenance cost. The this study, all the cost data were encoded and expressed as
optimization model for estimating the ERT of the drill rig a number of currency units (cu) to comply with the regula-
was created in the next step of the LCC analysis. To iden- tions of the company operating the rig. It is important to
tify the effect of the various cost factors and their correla- mention here that all the cost data used in this study are
tion with the ERT of the drill rig, single and multi-variable real costs unadjusted for inflation.
sensitivity analyses were carried out, followed by regres- The data in MAXIMO are gathered from a variety of
sion analysis, to provide the company operating the rig sources and, if they are incorrect, incomplete or inaccurate,
with a mathematical model that could be used to estimate the decisions based on them will be incorrect as well. The
the ERT of a new model of the drill rig before purchasing issue of data quality problems has been investigated in a
it from the manufacturing company. study conducted by Castaño Arranz et al. (2020). MAX-
In this study, a practical optimization model was devel- IMO includes basic modules for the identification and codi-
oped based on the total discounted cost. The MATLAB™ fication of assets, work orders, preventive maintenance, and
software was used to vary the replacement time for an opti- actions taken by equipment purchasing managers and ware-
mization time horizon of 10 years (120 months) and to house managers, as well as tools for analysing information.
permit sensitivity analysis. The TableCurve 2D software These basic modules provide the foundation for an effective
was used to show the behaviour of the operating and main- system of maintenance management.
tenance cost data after the period covered by the data col- Figure 2 shows the calculated maintenance cost per cal-
lected (i.e. to predict the operating and maintenance cost endar month for the period covered by the data collected.
for the period after that covered by the data collected).
Regression analysis was carried out for the results obtained
from the MATLAB codes by using the Minitab software. 3.1 Estimation of the operating cost for the drill rig
In summary, the research described herein proposes an
approach to life cycle cost optimization of drill rigs used The operating cost can be defined as the sum of the recurring
in the mining industry. The proposed approach is based on costs for efficiently operating the equipment in question. The
estimation of the operating and maintenance cost, as well operating cost data were collected from the mining company
as the purchase price, for a case study on the Epiroc Simba. for the same period as that covered by the maintenance cost
A discount rate of 10% was used to account for the time data collected (i.e. April 2016 to September 2019). The infor-
value of money. mation and data regarding the Epiroc Simba drill rig opera-
tions include the following details:

13
 Life Cycle Reliability and Safety Engineering

Table 1 Sample of the raw data used in the study

Work order Asset Date Hours Labor cost Material cost Service cost Description

017 2016–04-18 09:46 0,00 0,00 53,41 0,00

017 2016–04-18 09:46 0,00 0,00 56,81 0,00
017 2016–04-18 09:46 0,00 0,00 98,51 0,00
017 2016–04-18 09:49 0,00 0,00 0,00 5 300,00
017 2016–04-19 11:47 0,00 0,00 1,80 0,00
017 2016–04-19 11:47 0,00 0,00 2,74 0,00
017 2016–04-19 11:47 0,00 0,00 423,24 0,00
384,390 017 2016–04-19 17:58 2,00 100,00 0,00 0,00
384,390 017 2016–04-19 17:58 2,00 100,00 0,00 0,00
385,893 017 2016–04-21 02:54 2,00 100,00 0,00 0,00
385,893 017 2016–04-21 02:54 2,00 100,00 0,00 0,00
017 2016–04-25 15:23 0,00 0,00 424,09 0,00 018,045,030 OIL FILTER GA 5
017 2016–04-25 15:24 0,00 0,00 424,09 0,00 018,043,330 FILTER
387,224 017 2016–04-25 17:37 1,00 50,00 0,00 0,00 018,043,518 FILTER
387,224 017 2016–04-25 17:37 1,00 50,00 0,00 0,00 018,041,191 FILTER
388,168 017 2016–04-27 17:02 2,00 100,00 0,00 0,00 018,047,440 SAFETY CARTRIDGE
017 2016–05-01 17:11 0,00 0,00 3,21 0,00 018,048,153 FILTER (A/C UNIT)
017 2016–05-01 17:11 0,00 0,00 424,91 0,00 018,045,049 OIL SEPERET FILTER GA 5
391,074 017 2016–05-04 16:24 2,00 100,00 0,00 0,00 018,043,577 FILTER INSERT****
391,074 017 2016–05-04 16:24 2,00 100,00 0,00 0,00
017 2016–05-09 17:07 0,00 0,00 424,91 0,00 017,948,029 AIR FILTER ELEMENT (COM-
PRESR.)
017 2016–05-12 12:28 0,00 0,00 482,96 0,00 017,938,139 COVER (FOR SHANK)
017 2016–05-15 17:05 0,00 0,00 288,00 0,00 878,311,106 PLASTIC STEEL PUTTY (5 MINUTE)
017 2016–05-15 17:08 0,00 0,00 4,10 0,00

Real historical MC data • the electricity price = 0.09 cu/kwh,

45000 • the actual electric power time (in hours).
40000
35000 where (cu) represents the currency unit.
Cost (cu)

30000 The data for the actual electric power time (in hours)
25000
20000 were collected for the same period as that covered by the
15000 maintenance data collected. The data were sorted based
10000
5000 on calendar time for each month of operation and the
0 actual electric power time was calculated.
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42
Time (month) The operating cost for the electric power motor was
estimated for each calendar month of operation using
Eq. 1:
Fig. 2 Historical maintenance cost data per month for the case study
OCel =Motor power × Electricity price
(1)
the electric power consumed, × Actual electric power time
the diesel fuel consumed,
Three different operating time values were calculated:
the drilling consumables (bits, rods, etc.) used during the • the electric power time,
drilling operation, • the drilling time,
the cost of training and employing operators. • the diesel engine working time.
The electric power time is recorded when the electric
To estimate the operating cost of the electric motor of the
motor is running and represents the time spent at the
Epiroc Simba, the following factors were considered:
mine face. The drilling time is only recorded during
the drilling process. The diesel engine working time
• the motor power = 16 kw,

13
Life Cycle Reliability and Safety Engineering

is recorded during transportation of the drill rig in • the cost for training = 50 cu/hour.
the mine. The drilling times are different for different
months, depending on the drilling plan, the maintenance The operating cost for the operator training was esti-
plan and other mining-related factors. mated for each calendar month of operation using Eq. 4:
To estimate the operating cost for the diesel engine
Training period × Shift duration × Cost for training
of the Epiroc Simba, the following factors were consid- OCtr =
ered: 12
(4)
• the diesel fuel consumption (in litres/hour),
• the diesel fuel price = 0.6 cu/litre,x The total operating cost for the Epiroc Simba was estimated
• the actual diesel engine working time (in hours). for each calendar month of operation using Eq. 5:
OC = OCel + OCdi + OCdc + OCtr (5)
The engine fuel consumption data concerned the same
period as that covered by the maintenance data collected Figure 3 shows the estimated operating cost data per month
and were generated as random numbers between 15 and for the same period as that covered by the maintenance data
25 L/hour based on information received from the experts collected.
at Tara Mine. In general the operating cost of the drill rig should increase
The data for the actual diesel engine working time (in with time due to the degradation of it. However in this case the
hours) were collected for the same period as that covered operating cost showing slightly decrease with the time. This is
by the maintenance data collected. The data were sorted due to the unavailability of the exact data for drilled meters per
based on calendar time for each month of operation, and month for this particular drill rig. Therefore, a random numbers
the actual diesel engine working time was estimated. of drilling metres per month is used to estimate the operat-
The operating cost for the diesel engine was estimated ing cost for the drilling consumables based on the information
for each calendar month of operation using Eq. 2: received from the experts at Tara mine.

OCdi = Fuel consumption × Diesel fuel price× 3.2 Present value estimation of the maintenance
(2)
Actual diesel engine working time and operating costs
To estimate the operating cost for the drilling consuma-
The maintenance costs (the sum of the corrective and preven-
bles (bits, rods, etc.), the following factors were considered:
tive maintenance costs) for each month of operation were calcu-
lated. The present value (PV) of the maintenance and operating
• the number of metres drilled (metres/month),
costs, as well as the rig purchase price, was estimated using the
• the cost of the consumables used for drilling one metre
following equations:
(cu/metre).

The data on the number of metres drilled concerned

the same period as that covered by the maintenance data
collected and were generated as random numbers between
3000 and 8000 m/month based on the information received 15000
Eemated OC data
from the experts at Tara mine. 14000

The operating cost for the drilling consumables was esti- 13000
12000
mated for each calendar month of operation using Eq. 3:
Cost (€)

11000
10000
OCdc =Number of metres drilled 9000
(3) 8000
× Cost of consumables for drilling one metre
7000
6000
To estimate the operating cost for operator training, the 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42
following factors were considered: Time (month)

• the number of training periods/year = 40 (shifts), Fig. 3 Estimated operating cost data per month
• the shift duration = 10.5 h/shift,

13
 Life Cycle Reliability and Safety Engineering

RT EPV (OC)
(RT−i+1)
Rank 1978 Eqn 89 y2=a+bx2lnx
∑ ( )
PVMC = MCi × (1 + r) 12 (6) r2=0.99464894 DF Adj r2=0.99437453FitStdErr=12179.576 Fstat=7435.161
a=6.7471722e+08
i=1 b=50535571
1.9e+06

1.5833e+06
RT
∑ ( ) (RT−i+1)
PVOC = OCi × (1 + r) 12 (7) 1.2667e+06

Cost (cu)
i=1 9.5e+05

6.3333e+05
RT
PVPP = PP × (1 + r) 12 (8) 3.1667e+05

0
where PVMC, PVOC and PVPP are the present value of the 1 24.8 48.6 72.4
Time (month)
96.2 120

maintenance cost, operating cost and drill rig purchase price,

respectively; MCi and OCi are the maintenance and operat- Fig. 5 Expected present value of the operating cost for the Epiroc
ing costs, respectively, for the ith months; r is the interest Simba
rate, equal to 10%, and RT is the replacement time of the
drill rig. The next step in the calculations was to estimate the pre-
When developing the ERT optimization model, a period sent value of the total ownership cost over each operating
of 10 years (120 months) was selected as the planned life- period. The expected present value of the total ownership
time of the drill rig based on information received from the cost was estimated using the following equation:
mining company, and this length of time represents the opti-
mization time horizon. Therefore, the MC and OC data were RT
RT
∑ ( ) (RT−i+1)

extrapolated (i.e. for data prediction) to generate data for the EPVTC =PP × (1 + r) 12 + MCi × (1 + r) 12
i=1
unavailable period (after September 2019). Figures 4 and 5
RT
illustrate the expected present value (EPV) of the cumulative ∑( ) (RT−i+1)
+ OCi × (1 + r) 12
maintenance and operating costs for a period of 10 years. i=1 (9)
Moreover, Fig. 6 illustrates the EPV of the rig purchase price
for a period of 10 years as well. where EPVTC is the expected present value of the total cost.
In Figs. 4, 5 and 6, the dots represent the present value of the
real historical data for the maintenance and operating costs and
the drill rig purchase price. Curve fitting was performed using 3.3 Optimization model development
the TableCurve 2D software to show the behaviour of these costs
after the period covered by the data collected. It is important to A life cycle cost optimization model was developed to
mention that the fitting would have been better if more data had estimate the ERT of the Epiroc Simba drill rig. The objec-
been available for a longer period than 42 months. TableCurve tive was to minimize the total ownership cost over all
2D uses the least squares method to find a robust (maximum the periods of the planned lifetime for the drill rig. The
likelihood) optimization for nonlinear fitting. replacement rig was assumed to have the same performance

EPV (MC) EPV (PP)

Rank 728 Eqn 4939 y=a+bx+c(lnx)2+dx0.5+ee-x Rank 15 Eqn 6003 y=a+bx+cx2+dx3+ex4+fx5+gx6
r2=0.99836432 DF Adjr2=0.99813714 FitStdErr=11062.308 Fstat=5645.8785 r2=1 DF Adj r2=1 FitStdErr=7.9303975e-06 Fstat=1.2511721e+21
a=2909731.8 b=83974.643 c=597599.7 a=925000 b=7346.8263 c=29.176154 d=0.077242131
d=-2152612.3 e=-2266312.9 e=0.00015349198 f=2.3991886e-07 g=3.8292886e-10
3.2e+06 2.42e+06
2.8444e+06
2.23e+06
2.4889e+06
2.04e+06
2.1333e+06
Cost (cu)

1.85e+06
Cost (cu)

1.7778e+06
1.66e+06
1.4222e+06
1.0667e+06 1.47e+06

7.1111e+05 1.28e+06

3.5556e+05 1.09e+06
0 9e+05
1 24.8 48.6 72.4 96.2 120 1 24.8 48.6 72.4 96.2 120
Time (month) Time (month)

Fig. 4 Expected present value of the maintenance cost for the Epiroc Fig. 6 Expected present value of the purchase price of the Epiroc
Simba Simba

13
Life Cycle Reliability and Safety Engineering

and cost as the old one (i.e. to be identical to the old rig). company operating the rig can replace it after 23,376 oper-
Therefore, the number of replacement cycles during the ating hours from an economic point of view. Figure 7 also
optimization time horizon was formulated as follows: shows that there is a range of 6 months (from month 79–84)
when the minimum EPVTC can still be achieved in prac-
T Planned lifetime
RC = = (10) tice. In this study, this was called the economic replacement
RT Replacement time range (ERR). Finding the ERR is an important result of this
where RC represents the number of replacement cycles and study as it can help the company operating the rig in their
RT represents the replacement time, 1, 2, 3,…120. replacement planning. Nevertheless, although 23,376 h of
The economic replacement time is the value of replace- drill rig operation generate the absolute minimum cost, the
ment time that minimizes the expected present value of the company operating the rig can replace it within an ERR of
total ownership cost for the drill rig, as shown in the follow- 22,800–24,250 operating hours.
ing equation:
[( RT RT
) ]
RT (RT−i+1) (RT−i+1)
(11)
∑ ( ) ∑ ( )
(Min)EPVTC = Min PP × (1 + r) 12 + MCi × (1 + r) 12 + OCi × (1 + r) 12 × RC
i=1 i=1

4 Results and discussion 4.1 Single‑variable sensitivity analysis

Figure 7 shows the results obtained when the MATLAB™ In single-variable sensitivity analysis, one factor is varied
software was used to enable a variation of the replacement while the others are kept constant. The factors that were
time parameter in Eq. (11) for a period of 120 months. In this considered in the sensitivity analysis for the present study
figure one can identify the ERT of the drill rig that minimizes included the drill rig purchase price and the operating and
the expected present value of the total ownership cost. The maintenance costs. Figure 8 illustrates the effect of arising
figure shows that the lowest possible EPVTC can be achieved increase factor of the purchase price (IFPP) on the ERT of
by replacing the drill rig almost every 7 years (81 months) the drill rig.
if it is replaced with an identical rig working in the same Figure 8 shows that the ERT is an increasing step function
operating conditions and working environment. of the purchase price (PP) (based on percentage increases in
The total operating time of the drill rig (i.e. the sum of the purchase price); i.e. the ERT remains constant for a spe-
the actual electric power time and the actual diesel engine cific range of IFPP increments and then increases stepwise.
working time) is 12,121 h based on the data received from For example, if the purchase price factor increases from 1
the underground mine. The average operating time of the to 2%, the ERT remains constant. This means that the ERT
drill rig during 42 months of operation is 289 h per month. increases stepwise with specific PP percentage increments of
Since the estimated ERT of the drill rig is 81 months, the 3, 6, 10, 13, 17, 21, 25, 30, 34, 39, 44 and 50%. The results

106 ERT of Epiroc Simba drill rig

7.5

7.45

7.4
EPVTC (cu)

7.35

7.3

7.25

ERR
7.2

50 60 70 80 90 100 110 120

Time (month)

Fig. 8 Effect of increasing the purchase price of the drill rig on the
Fig. 7 Economic replacement time of the drill rig ERT

13
 Life Cycle Reliability and Safety Engineering

also show that the drill rig ERT will increase linearly for 12 a specific range of OC decrease. This means that the ERT
out of 50 percentage increments of the IFPP. is sensitive to a specific range of operating cost reductions,
Figure 9 shows the effect of the decrease factor of the i.e. 7, 22, 36 and 50%. The results also show that the ERT of
operating cost (DFOC) on the ERT of the drill rig (based on the drill rig will increase linearly for 4 out of 50 percentage
percentage decreases in the operating cost). It can be seen increments of the DFOC. Thus, the drill rig’s operating cost
that when the drill rig operating cost decreases, the ERT has a lower effect than its purchase price on the ERT.
will increase linearly, although it remains constant within Figure 10 shows the effect of the decrease factor of the
maintenance cost (DFMC) on the ERT of the drill rig. It can
be seen that when the drill rig’s maintenance cost decreases,
the ERT will increase linearly, although it remains constant
within a specific range of MC decrease. This means that
the ERT is sensitive to a specific range of maintenance cost
reductions (i.e. 3, 7, 11, 15, 19, 22, 26, 29, 33, 36, 39, 42, 45,
48 and 50%). The results also show that the drill rig’s ERT
will increase linearly for 15 out of 50 percentage increments
of the DFMC. Thus, the drill rig’s maintenance cost has a
larger impact on the ERT than the purchase price and operat-
ing cost of the rig.

4.2 Multi‑variable sensitivity analysis

Fig. 9 Effect of decreasing the operating cost of the drill rig on the
ERT To increase our understanding of the correlation of the input
and output variables in the optimization model, a multi-var-
iable sensitivity analysis was performed, considering three
Effect of MC decrease different cases. More specifically, MATLAB™ was used to
96
vary in conjunction the three variables of the IFPP, DFMC
94
and DFOC, to show their effects on the ERT of the drill rig.
92
In all three cases, the purchase price increased while the
ERT (month)

90
operating and maintenance costs decreased.
88
86
Case one considers the effect of IFPP increments of
84
1%-50%, with different percentage of the DFMC according
82 to the results obtained from the single-variable sensitivity
80 analysis (i.e. 3, 7, 11, 15, 19, 22, 26, 29, 33, 36, 39, 42, 45,
0 5 10 15 20 25 30 35 40 45 50 48 and 50%), and, at the same time, with different percentage
Maintenance cost decrease (%)
of the DFOC (i.e. 7, 22, 36 and 50%).
As Fig. 11 shows, increasing the purchase price by
Fig. 10 Effect of decreasing the maintenance cost of the drill rig on
the ERT 1%-50%, while decreasing the maintenance cost by the
above-mentioned percentages and decreasing the operating

Fig. 11 Effect of the IFPP and Effect of IFPP & DFMC for given 7% DFOC
DFMC for a given 7% of the 105
104
DFOC on the ERT of the drill 103 OC=7%, MC=3%,
102 OC=7%, MC=7%
rig 101
100 OC=7%, MC=11%
99
98 OC=7%, MC=15%
97 OC=7%, MC=19%
ERT (month)

96
95 OC=7%, MC=22%
94
93 OC=7%, MC=26%
92
91 OC=7%, MC=29%
90 OC=7%, MC=33%
89
88 OC=7%, MC=36%
87
86 OC=7%, MC=39%
85
84 OC=7%, MC=42%
83 OC=7%, MC=45%
82
81 OC=7%, MC=48%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 OC=7%, MC=50%
PP increase (%)

13
Life Cycle Reliability and Safety Engineering

cost by 7% has the positive effect of increasing the ERT of Figure 13 shows the correlation of decreasing the main-
the drill rig. Additional figures for decreasing the operating tenance cost by 1–50% and increasing the purchase price by
cost by different percentages (i.e. 22, 36 and 50%) are pre- the above-mentioned percentages with a given 7% decrease
sented in Appendix 1. in the operating cost. As the figure shows, there is a positive
Case two considers the effect of the DFOC with percent- effect on the ERT of the drill rig when the maintenance cost
age of 1%-50%, with different percentage in the IFPP accord- is decreased, the purchase price is increased and the oper-
ing to the results obtained from the single-variable sensitivity ating cost decreased. Additional figures for decreasing the
analysis (i.e. 3, 6, 10, 13, 17, 21, 25, 30, 34, 39, 44 and 50%) operating cost by different percentages (22, 36 and 50%) are
and with different given percentage of the DFMC (i.e. 3, 7, presented in Appendix 3.
11, 15, 19, 22, 26, 29, 33, 36, 39, 42, 45, 48 and 50%). In conclusion, it can be seen from Figs. 11–13 that
As Fig. 12 shows, decreasing the operating cost by decreasing the maintenance cost has a larger impact on the
1%-50% while increasing the purchase price by the above- ERT of a new model of the drill rig than increasing the pur-
mentioned percentages and decreasing the maintenance cost chase price and decreasing the operating cost.
by 3% has the positive effect of increasing the ERT of the
drill rig. Additional figures for decreasing the maintenance
cost by different percentages (7, 11, 15, 19, 22, 26, 29, 33, 36, 4.3 Regression analysis
39, 42, 45, 48 and 50%) are presented in Appendix 2.
Case three represents the effect of the DFMC with per- A regression analysis was performed on the results obtained
centage of 1%-50%, with different percentage of the IFPP, from the sensitivity analysis for the three cases using the
again according to the results obtained from the single-vari- Minitab software and the least squares method. The ERT
able sensitivity analysis (i.e. 3, 6, 10, 13, 17, 21, 25, 30, 34, was modelled as a linear function of an IFPP, a DFOC and
39, 44 and 50%) and with different given percentage of the a DFMC. The regression analysis resulted in the following
DFOC (i.e. 7, 22, 36 and 50%).

Fig. 12 Effect of the DFOC Effect of DFOC & IFPP for given 3% DFMC
and IFPP with a given 3% of 96
95
the DFMC on the ERT of the
94
drill rig MC 3%, pp 3%
93
MC 3%, pp 6%
92
MC 3%, pp 10%
91
ERT (month)

MC 3%, pp 13%
90
MC 3%, pp 17%
89
MC 3%, pp 21%
88
MC 3%, pp 25%
87
MC 3%, pp 30%
86
MC 3%, pp 34%
85
MC 3%, pp 39%
84
MC 3%, pp 44%
83
MC 3%, pp 50%
82
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
Operating cost decrease(%)

Fig. 13 Effect of the DFMC Effect of DFMC & IFPP for given 7% DFOC
and IFPP for a given 7% of the 105
104
DFOC on the ERT of the drill 103
102
rig 101 pp 3%, OC 7%
100
99 pp 6%, OC 7%
98
97 pp 10%, OC 7%
ERT (month)

96 pp 13%, OC 7%
95
94 pp 17%, OC 7%
93
92 pp 21%, OC 7%
91
90 pp 25%, OC 7%
89 pp 30%, OC 7%
88
87 pp 34%, OC 7%
86
85 pp 39%, OC 7%
84
83 pp 44%, OC 7%
82 pp 50%, OC 7%
81
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
MC decrease (%)

13
 Life Cycle Reliability and Safety Engineering

mathematical model, which can be used by the mining com- lected from the mine, and it maybe useful for companies
pany operating the drill rig to estimate the ERT of a new operating or manufacturing drill rigs.
model of the rig before purchasing it. The assumption is that • According to the results obtained from the optimization
the new model of the drill rig will be used in the same mine curve, the absolute ERT of the Epiroc Simba is approx-
under the same working conditions. imately 7 years (81 months). However, the ERT has a
range of 6 months (month 79 to 84) during which the
ERT = 81.95 + 0.19 IFPP + 0.06 DFOC + 0.27DFMC
(12) total ownership cost remains almost constant. This means
that the company operating the rig has the flexibility of
Example of estimating the ERT of new manufactured
making replacements within an optimum replacement age
model of drill rig based on assumption that the new model
range of 6 months. Therefore, there is no fixed date or age
of drill rig have higher reliability, easy to maintain, consume
at which the total cost is minimum. In general, a range
less energy and more productive (i.e. drill more number of
of 6 months provides the minimum total ownership cost.
hols for the same period of time compared with the existing
Finding the economic replacement range is an important
drill rig) than the existing case study is illustrated as shown:
result for the company operating the rig, as this can help
where IFPP = 10%, DFOC = 7% and DFMC = 10%. The
them in their planning for a drill rig replacement.
regression model calculated the ERT of a new model of the • The results of the sensitivity analysis performed to identify
drill rig as follows:
the effect of various factors on the ERT of the Epiroc Simba
ERT(new) =81.95 + 0.19 × 10 + 0.06 × 7 and the correlation of these factors with the ERT indicate
+ 0.27 × 10= 86, 9(months) that the IFPP, DFOC and DFMC have the positive effect of
increasing the ERT of a new model of the drill rig.
The ERT obtained from the regression model is compat- • The results of the regression analysis using three factors, the
ible with the values shown in Fig. 13. IFPP, DFOC and DFMC, show that the ERT of a new drill
The high R-squared adjusted value obtained from the rig depends linearly on these factors. These results confirm
regression analysis, 99.05, indicates that the ERT of the new the computation and the results of the sensitivity analysis.
drill rig depends linearly on the variables of the IFPP, DFOC • The results from the sensitivity and regression analyses
and DFMC. show that the maintenance cost has the largest impact on
Following the results of the sensitivity and regression the ERT of the existing and the new model of the drill rig,
analyses, the factors affecting the increase in the ERT of a followed by the purchase price and operating cost. Thus,
new model of the drill rig were ranked as follows: the company manufacturing new drill rigs has to focus on
decreasing the maintenance cost by increasing the reliabil-
1. the maintenance cost, ity and maintainability of the new drill rig. This will help
2. the purchase price, the manufacturing company to reduce the number of fail-
3. the operating cost. ures and decrease the operating and maintenance costs and
finally increase the ERT of new drill rigs produced by the
company.

5 Conclusions 6 Appendices
Based on the results obtained from this study the following
conclusions have been reached. Appendix 1
• This study proposes a practical approach to determine Multi‑variable sensitivity analysis
the economic replacement time of a mining drill rig, the
Epiroc Simba, used in Tara Mine in Ireland. The approach Effect of the IFPP, DFMC and DFOC on the ERT of the Epiroc
presented herein is based on financial data on the pur- Simba drill rig.
chase price and the operating and maintenance costs col- See Figs. 14, 15, 16.

13
Life Cycle Reliability and Safety Engineering

Fig. 17 Effect of the DFOC and IFPP for a given 7% increment of the
Fig. 14 Effect of the IFPP and DFMC for a given 22% increment of DFMC on the ERT of the drill rig
the DFOC on the ERT of the drill rig

Fig. 15 Effect of the IFPP and DFMC for a given 36% increment of Fig. 18 Effect of the DFOC and IFPP for a given 11% increment of
the DFOC on the ERT of the drill rig the DFMC on the ERT of the drill rig

Fig. 16 Effect of the IFPP and DFMC for a given 50% increment of Fig. 19 Effect of the DFOC and IFPP for a given 15% increment of
the DFOC on the ERT of the drill rig the DFMC on the ERT of the drill rig

Appendix 2 Appendix 3

Multi‑variable sensitivity analysis Multi‑variable sensitivity analysis

Effect of the DFOC, IFPP and DFMC on the ERT of the Epiroc Effect of the DFMC, IFPP and DFOC on the ERT of the
Simba drill rig. Epiroc Simba drill rig.
See Figs. 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, See Figs. 31, 32, 33.
30.

13
 Life Cycle Reliability and Safety Engineering

Fig. 20 Effect of the DFOC and IFPP for a given 19% increment of Fig. 23 Effect of the DFOC and IFPP for a given 29% increment of
the DFMC on the ERT of the drill rig the DFMC on the ERT of the drill rig

Fig. 21 Effect of the DFOC and IFPP for a given 22% increment of Fig. 24 Effect of the DFOC and IFPP for a given 33% increment of
the DFMC on the ERT of the drill rig the DFMC on the ERT of the drill rig

Fig. 25 Effect of the DFOC and IFPP for a given 36% increment of
Fig. 22 Effect of the DFOC and IFPP for a given 26% increment of
the DFMC on the ERT of the drill rig
the DFMC on the ERT of the drill rig

13
Life Cycle Reliability and Safety Engineering

Fig. 26 Effect of the DFOC and IFPP for a given 39% increment of
the DFMC on the ERT of the drill rig
Fig. 29 Effect of the DFOC and IFPP for a given 48% increment of
the DFMC on the ERT of the drill rig

Fig. 27 Effect of the DFOC and IFPP for a given 42% increment of
the DFMC on the ERT of the drill rig Fig. 30 Effect of the DFOC and IFPP for a given 50% increment of
the DFMC on the ERT of the drill rig

Fig. 28 Effect of the DFOC and IFPP for a given 45% increment of
the DFMC on the ERT of the drill rig
Fig. 31 Effect of the DFMC and IFPP for a given 22% increment of
the DFOC on the ERT of the drill rig

13
 Life Cycle Reliability and Safety Engineering

the article's Creative Commons licence and your intended use is not
permitted by statutory regulation or exceeds the permitted use, you will
need to obtain permission directly from the copyright holder. To view a
copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.

References
Adkins R, Paxson D (2017) Replacement decisions with multiple sto-
chastic values and depreciation. Eur J Oper Res 257(1):174–184
Al-Chalabi H, Lundberg J, Ahmadi A, Jonsson A (2015a) Case study:
model for economic lifetime of drilling machines in the Swedish
Fig. 32 Effect of the DFMC and IFPP for a given 36% increment of mining industry. Eng Econ 60(2):138–154
the DFOC on the ERT of the drill rig Al-Chalabi HS, Lundberg J, Al-Gburi M, Ahmadi A, Ghodrati B
(2015b) Model for economic replacement time of mining pro-
duction rigs including redundant rig costs. J Qual Maint Eng
21(2):207–226
Al-Douri YK, Al-Chalabi H, Lundberg J (2020) Risk-based life cycle
cost analysis using a two-level multi-objective genetic algorithm.
Int J Comput Integr Manuf 33(10–11):1076–1088
Apeland S, Scarf PA (2003) A fully subjective approach to capital
equipment replacement. Journal of the Operational Research
Society 54(4):371–378
Babbitt CW, Kahhat R, Williams E, Babbitt GA (2009) Evolution of
product lifespan and implications for environmental assessment
and management: a case study of personal computers in higher
education. Environ Sci Technol 43(13):5106–5112
Bean JC, Lohmann JR, Smith RL (1994) Equipment replacement
under technological change. Naval Research Logistics (NRL)
41(1):117–128
Bethuyne G (1998) Optimal replacement under variable intensity of
utilization and technological progress. Eng Econ 43(2):85–105
Fig. 33 Effect of the DFMC and IFPP for a given 50% increment of Castaño Arranz M, Gustafson A, Al-Chalabi H (2020) A generic
the DFOC on the ERT of the drill rig framework for data quality analytics. Int J COMADEM
23(1):31–38
Diniz C, Sessions J (2020) Ensuring consistency between strate-
gic plans and equipment replacement decisions. Int J for Eng
Acknowledgements The author gratefully acknowledge Boliden 31(3):211–223
Mineral AB and Epiroc Rock Drills AB for their financial and infra- Elton EJ, Gruber MJ (1976) On the optimality of an equal life policy
structural support. Thanks are extended to VINNOVA, the Swedish for equipment subject to technological improvement. J Oper Res
Energy Agency and FORMAS for financing this project through the Soc 27(1):93–99
SIP-STRIM programme. The author are also grateful for valuable input Galar D, Sandborn P, Kumar U (2017) Maintenance costs and life
and support from Seán Olwell (Mobile Equipment Maintenance Coor- cycle cost analysis. CRC Press
dinator) at Boliden Tara Mines and Andréas Espeborn (Project Man- Goldstein T, Ladany SP, Mehrez A (1988) A discounted machine-replace-
ager—Serviceability & Reliability Engineering MRS Project Office) at ment model with an expected future technological breakthrough.
Epiroc Rock Drills AB. The author would also like to thank Anna Gus- Naval Res Logistics (NRL) 35(2):209–220
tafson, Associate Professor at the Division of Mining and Geotechnical Grinyer P (1973) The effects of technological change on the economic life
Engineering at Luleå University of Technology, Miguel Castano, Senior of capital equipment. AIIE Trans 5(3):203–213
Lecturer and Uday Kumar, Professor at the Division of Operation and Hamodi H (2014) Reliability and life cycle cost modelling of mining drill-
Maintenance Engineering at Luleå University of Technology for their ing rigs. Doctoral dissertation, Luleå University of Technology
valuable input into the project work. Hartman JC, Tan CH (2014) Equipment replacement analysis: a literature
review and directions for future research. Eng Econ 59(2):136–153
Funding Open access funding provided by Lulea University of Hritonenko N, Yatsenko Y (2007) Optimal equipment replacement with-
Technology. out paradoxes: a continuous analysis. Oper Res Lett 35(2):245–250
Hritonenko N, Yatsenko Y (2008) The dynamics of asset lifetime under
technological change. Oper Res Lett 36(5):565–568
Open Access This article is licensed under a Creative Commons Attri-
Huang Z, Chen Y, Shen L, Huang Y, Li S (2021) An improved stochas-
bution 4.0 International License, which permits use, sharing, adapta-
tic life-cycle cost analysis model for examining the impact of envi-
tion, distribution and reproduction in any medium or format, as long
ronmental policy instruments on construction equipment replace-
as you give appropriate credit to the original author(s) and the source,
ment. Environmental Impact Assessment Review 90:106627
provide a link to the Creative Commons licence, and indicate if changes
Keating EG, Blickstein I, Boito M, Chandler J, Peetz D (2014) Investigat-
were made. The images or other third party material in this article are
ing the desirability of navy aircraft service life extension programs.
included in the article's Creative Commons licence, unless indicated
Defence and Peace Economics 25(3):271–280
otherwise in a credit line to the material. If material is not included in

13
Life Cycle Reliability and Safety Engineering

Mahrez A, Berman N (1994) Maintenance optimal control three-machine Šebo J, Buša J, Demeč P, Svetlík J (2013) Optimal replacement time esti-
replacement model under technological breakthrough expectations. mation for machines and equipment based on cost function. Meta-
J Optim Theory Appl 81(3):591–618 lurgija 52(1):119–122
Markeset T, Kumar U (2018) Application of LCC techniques in selection van den Boomen M, van den Berg PL, Wolfert ARM (2019) A dynamic
of mining equipment and technology. Mine Plan Equipment Selec- programming approach for economic optimisation of lifetime-
tion 2000:635–640 extending maintenance, renovation, and replacement of public
Mercier S (2008) Optimal replacement policy for obsolete components infrastructure assets under differential inflation. Struct Infrastruct
with general failure rates. Appl Stoch Model Bus Ind 24(3):221–235 Eng 15(2):193–205
Moghaddam KS, Usher JS (2010) Optimal preventive maintenance and Wang KJ, Nguyen PH (2017) Capacity planning with technology
replacement schedules with variable improvement factor. J Qual replacement by stochastic dynamic programming. Eur J Oper Res
Maint Eng 16(3):271–287 260(2):739–750
Nguyen TK, Yeung TG, Castanier B (2013) Optimal maintenance and Wijaya AR, Lundberg J, Kumar U (2012) Robust-optimum multi-attribute
replacement decisions under technological change with consideration age-based replacement policy. J Qual Maint Eng 18(3):325–343
of spare parts inventories. Int J Prod Econ 143(2):472–477 Yatsenko Y, Hritonenko N (2020a) Analytics of machine replacement
Petroutsatou K, Maravas A, Saramourtsis A (2021) A life cycle model decisions: economic life vs real options. Management Decision
for estimating road tunnel cost. Tunnelling and Underground Space Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/
Technology 111:103858 MD-12-2019-1704
Regnier EVA, Sharp G, Tovey C (2004) Replacement under ongoing tech- Yatsenko Y, Hritonenko N (2020b) Optimal asset replacement: profit
nological progress. IIE Trans 36(6):497–508 maximization under varying technology. International Journal of
Richardson S, Kefford A, Hodkiewicz M (2013) Optimised asset replace- Production Economics 228:107670
ment strategy in the presence of lead time uncertainty. Int J Prod Yatsenko Y, Hritonenko N (2009) Technological breakthroughs and asset
Econ 141(2):659–667 replacement. Eng Econ 54(2):81–100
Rogers JL, Hartman JC (2005) Equipment replacement under continu- Yatsenko Y, Hritonenko N (2017) Two-cycle optimization in replacement
ous and discontinuous technological change. IMA J Manag Math models with non-exponential technological improvement. IMA J
16(1):23–36 Manag Math 28(3):359–372
Roy R, Stark R, Tracht K, Takata S, Mori M (2016) Continuous mainte- Yun WY, Choi CH (2000) Optimum replacement intervals with random
nance and the future: foundations and technological challenges. CIRP time horizon. J Qual Maint Eng 6(4):269–274
Ann 65(2):667–688 Zheng S, Chen S (2018) Fleet replacement decisions under demand
Sadeghpour H, Tavakoli A, Kazemi M, Pooya A (2019) A novel approxi- and fuel price uncertainties. Transp Res Part D: Transp Environ
mate dynamic programming approach for constrained equip- 60:153–173
ment replacement problems: a case study. Adv Prod Eng Manag
14(3):355–366 Publisher's Note Springer Nature remains neutral with regard to
Scarf PA, Hashem MH (1997) On the application of an economic jurisdictional claims in published maps and institutional affiliations.
life model with a fixed planning horizon. Int Trans Oper Res
4(2):139–150

13