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Planning Process

What are the commercial considerations in bringing forward new aggregate sites or extensions to existing ones?

The value to a mineral operator of an aggregate resource and the timing of proposals to bring a site forward for mineral extraction are dependent on a number of factors. The emphasis in the planning system tends to reflect planning timescales (e.g. LDF processes, land allocations, landbank policy and application processes) but the commercial considerations of minerals companies are just as important in influencing their decisions.

There are three key issues relating to the commercial reasoning behind bringing a site forward. Firstly, the minerals industry reacts to the demand for aggregates and related products from society and this demand is stronger in some areas than others. Secondly, quarrying for aggregate is a high volume low profit margin business which means that proximity to the marketplace, minimising transport costs, is an important factor. Thirdly, quarrying companies will wish to maintain a presence in each market area and hence will generally seek to establish new operations or replace sites that are coming to an end, in order to contribute to supply to meet demand in each area. The financial and other commercial issues relevant to these decisions are summarised in this section.

Larger quarries can be more economic if there is sufficient demand .

Larger quarries can be more economic if there is sufficient demand .

Key factors
The closer a commercial operation is to the marketplace, the more competitive it will be will be.
Each mineral company seeks to maintain their presence within any given market area, subject to geology and planning contraints. Within any given market there will be a level of demand and established market requirements. This should in most cases be directly related to the level of supply and often to the number of operations in the area.

Companies will wish to be represented in most areas of demand within their operating area and will look to promote sites where opportunities arise in order to form part of the supply pattern available to meet such demand. This is especially so where companies have already had a presence in the area and they will wish to seek a succession in sites to maintain their sales network.

The closer the source of their materials to the market place, the more competitive the commercial operation will be.The site's location relative to ancillary concrete and mortar plants, if these are not sited at the quarry, is also a critical factor in achieving the optimum operation.

Mineral companies, within the constraints of planning control, seek to achieve economies of scale to maximise return.
Generally, extensions to existing quarries are preferable to a new aggregate site.
  Money bags To this end, it is more economic for an operator to have one large site in an area rather than two smaller sized ones as its investment can then be focused on one processing plant with the inherent savings on running and employment costs.There is often a need for several operations in any area, involving a number of different companies, in order to provide both the production capacity and the variety of products required by market demand.
As a very general rule, aggregate typically would not travel by road beyond 25 miles.
Generally, from a commercial perspective, extensions to existing quarries are preferable to a new aggregate site. This is because there has already been a capital outlay on a processing plant and associated infrastructure which would have been discounted against the aggregate that has been sold to date. Indeed, in some locations importation to an established facility from a satellite site might be more economic than the development of a new plant.

Transport, particularly the price of diesel, has a massive effect on the economics of quarrying for aggregate. As a very general rule, it is not economic to transport aggregates further than 25 miles - however, this varies according to a range of factors including overall supply and demand, the nature and quality of the aggregate, routing arrangements, congestion and other factors. Rail and in some cases sea transport are used to transport large volumes of aggregate over long distance (generally inter-regional) using economies of scale, into areas of high demand, e.g. Glensanda.

Whilst labour costs tend to be consistent and not determined by locational criteria, because of the significant transport costs of moving mineral, the location of quarries relative to urban centres is a critical factor in determining whether a site is to be brought forward.

For all of these reasons, the timing of an application for a new or extended site is often dependent on the needs of the market, of the exhaustion of a particular reserve or other commercial factors than it is to do with the stage of the LDF cycle or state of the landbank. These latter issues are part of the planning regime and have an important bearing on whether new sites or extensions are permitted and tensions may result where these do not coincide with normal commercial cycles.

Transport is an important commercial consideration.

Transport is an important commercial consideration.

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