Zero-Base Budgeting for the Mining Industry

CIM Bulletin, Vol. 71, No. 792, 1978

Henry C. Knight, Manager, Currie, Coopers & Lybrand Ltd., Toronto, Ontario

A number of improvements in the techniques of budgetary control have been developed in the 1970's. The most significant of these is zero-base budgeting. This procedure is a marked improvement, because it overcomes some of the key weaknesses inherent in most traditional approaches to budgeting. It incorporates techniques and disciplines which improve the quality of both the budgeting effort itself and the documents that most senior managers will need to evaluate. The end result is a budget that establishes and improves cost effectiveness. This budget is based on resource allocations using cost-benefit criteria and on a system of prioritization for making funding choices. Zero-base budgeting is applied only to costs and expenses that are not conducive to control using industrial engineered standards. Therefore, the benefits attributed to zero-base budgeting will only hold true for administrative, selling, exploration, safety, fire protection and overhead, and other indirect types of costs and expenses. It is in this context that the question of its attractiveness for the mining industry is dealt with.

Keywords: Mineral economics, Zero-base budgeting, Mining industry, Budgetary control, Financing, Cost control.