mining trends 2014 eng
TRANSCRIPT
Removing the Barriers to
Potential
Mining Trends 2014Are you ready for a seismic shift?
January 2014
DELOITTE – Tracking the trends 2014
1.Mining productivity hits new lows
2.Market imbalances wreak commodity price havoc
3.Exploring the innovation imperative
4.Debt up, deals down and juniors fight for survival
5.Record impairments call capital allocation practices into question
6.Local community demands intensify
7.Government relations marked by rising hostility
8.Zero tolerance regulatory environments complicate compliance
9.From zero harm to zero fatalities
10.The talent gap widens into executive suites
The top 10 issues mining companies will face in 2014
“It’s not a pendulum
swing, it’s aseismic shift”
Innovate or face the Consequences!
• Strategic Planning and Thinking • Asset Allocation
• Government and Community Relations
• Ability to secure Funding for growth Projects
• Mitigate risk of Commodity Price fluctuations
• Cost Management
• Improved Management of People and Processes• Raise Productivity
• Improve Safety
• Reduce Operational Risk
• Innovative Talent strategies
There’s no doubt the mining industry is experiencing tremendous pressure on costs. But cost constraints often lead to innovation. Mining has grown bigger over the past 200 years – bigger plants, bigger trucks, bigger blasts. But the industry itself hasn’t evolved much. Now is the time to make fundamental and dramatic changes.Glenn Ives, Americas Mining Leader
Responding to the Global Challenge
•Many Miners can no longer wait for Peaks in Commodity Prices to make up for questionable Business Practices
• TMS has pioneered an innovative Approach to solving Problems and continues to evolve this Approach through Practice and Research
•Over the last decade TMS has helped mining organizations address the challenges outlined in the 2014 Deloitte report
• The challenges are not new but have been exasperated by instability in Commodity prices
• The Depletion of Resources is causing Costs to rise while Productivity is falling
Cost Cutting ≠ Cost Management
• Reactive cost cutting is not sustainable
• Cost Creep tends to reset spending to historical levels
• Redundancies often need to get rehired at additional costs
• Focus must be on Return on Capital Employed (ROCE) and Shareholder Value
• Shifting from Asset Expansion to Operational Excellence
•Maximize Cash Flow from existing Assets
• Improve Productivity through better Management, Systems and Technology
Reducing costs over the long term requires mining companies to prepare for a hard campaign of changing the way they do work. This, in turn, should spur them to look closely at their culture to determine if that needs changing too.Andy Clay, Managing Director, Venmyn Deloitte, South Africa
The TMS Solution to improve Asset Performance
• Cost Management to decrease all-in cost and improve cash flow
• Strategic Business Planning to optimise the capital allocation for long-term benefits
• Effective People Management to mitigate the long term skilled shortage
• Managerial Capability and Accountability at all levels to deliver the results expected and
reduce operational risk
• Quality Production Management at the mine level to improve a manageability of the
operations
• Detailed Knowledge of the primary and Support Value Streams to optimise the value
generated by the business
• Capital Project Management to ensure the delivery of essential capital projects
Systematic Improvement of Mine Business Effectiveness
Mine Effectiveness Improvement Programme
• Short term Financial Performance• Improve short term Cash Flow with “quick wins”
• Increase Asset Value
• Sustaining Short Term gains over the Long Haul • Introduce systemic Improvements to boost Effectiveness
• Cultural changes to raise Productivity and reduce Risk
• Better Management for better Results • Effectively manage People, Structures and Work
• Improved Decision Making reducing Operational Risk
• Optimal Organisation Structures with clear Accountability from Top to Bottom
• Identification and Development of High Potential to fill Talent Gaps at all Levels
• Reduced Reliance on “foreign” Talent to cut Costs and improve Community Relationships
Multi Dimensional Nature of the Effectiveness Improvement Programme
• а
Mine Planning Effectiveness
Mine Organisational Effectiveness
Mine Technical Effectiveness
Mine Economic Effectiveness
Mine Long Term Effectiveness
The Elements of Mine Long Term Business Effectiveness
Mine Short Term Effectiveness Management
Mine Long Term Effectiveness Management
Ensure maximum economic return
from the planning, organisational and
technical systems of the mine
(quick wins) - short term activities that focus on identifying the opportunities foroptimising cost and increasing the value of the mines and their delivery within a shortperiod (up to 1 year). Such initiatives do not require system / cardinal changes
Ensure an availability of the mine production management system for improving the key mine effectiveness indicators on a constant basis every year
to sustain the short term achievements
Long term activities that focus on sustaining quick, short term results and that will require systematic / cardinal
improvement of operational and management systems of the mines within the long term period (to 3-5 years)
Mine Effectiveness Improvement Programme
Tasks:
• Analyse and optimise the current initiatives in regard to
improvements in the effectiveness of the mines (cost
and value)
• Identify the shortfalls in the current approach to
manage the cost and value of the mines
• Define key strategic initiatives to improve the cost and
value of the mines with clear and feasible advantages of
the initiatives
• Train managers at all the levels of the mines on various
methods to improve cost and value
• Provide support to the managers in their practical
application of the methods learned and achievement of
feasible economic effect.
• Allocate accountabilities for managing cost and value
(effectiveness) among the Managers at all levels
Key Mine Effectiveness Indicators
Mine Planning Effectiveness
Ensure effective planning of all functions of the mine at various planning horizons, starting with hourly and finishing with long term
plans (life of mine)
M2P for the mine > 90% in all planning horizons from hour
to 3-5 years
Mine Organisational Effectiveness
Ensure minimum required conditions (structure, people, management) of organisational effectiveness for delivering the mine
plans (short- and long-term) utilising mine employees at their full potential
Mine Organisational Effectiveness Index > 90%
Mine Technical Effectiveness
Ensure efficient utilisation of the mine’s technical resources for an achievement of maximum return on equipment and technologies
Mine Overall Equipment Efficiency Index > 45%
Mine Economic Effectiveness
Ensure maximum economic return from planning, organisational and technical systems of the mine
General Economic Effectiveness Index > 1
Mine Long TermEffectiveness
Ensure an availability of the mine production management system for improving the key mine effectiveness indicators on a constant
basis every year to sustain the short term achievements
Mine Production System Effectiveness Index >90%
Objective: Define and deliver a set of improvement activities to optimise the cost and increase the value of the assets
to achieve feasible economic effects in short- and long-term perspectives
Activities
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Express analysis of the Mine Business Effectiveness based one Mine
Stage 1 – Analysing and Optimising Mine Expense Profile
• Analysis and identification
• Implementing initiatives
Stage 2 – Expert Cost & Benefit Analysis
• Analysis and identification
• Implementing initiatives
Stage 3 – Accountable Cost & Benefit Management
• Module 1 – Developing Minimum Required Conditions of Organisational Effectiveness
• Module 2 – Back to Basics
• Module 3 - Optimisation
• Module 4 – Linking optimisation with budget
• Module 5 - Implementation
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erm
Eff
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anag
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Phase 1 – Analysing the effectiveness of the current elements of the Mine Production management System
Phase 2 – Designing the improved Mine Production Management System
Phase 3 – Implementing the improved Mine Production Mangement System
• Short Term Initiatives to improve Mine Production Management System
• Long Term Initiatives to improve Mine Production Management System
Phase 4 – Audit the Effectiveness of the Mine Production Management System implemented
Sample Implementation of such a Programme in one mining company
• The use of highly qualified external experts for auditing the key minesystems and processes
• Total value of short term cost reduction and value benefit up to $263M,including:• $89M within one year (2014) – short term initiatives and additional benefits,
including $35M in the processing plants (improvements in extraction)• $76M US additional benefits (2015)• Optimising the number of employees in the underground mine (currently 850, target
450 employees) by optimising equipment and improving mine planning• Strong downward trend in both cash costs and all-in sustaining costs, which were
down 17% and 7% respectively on Q2 2013 and 28% and 25% respectively on Q32012.
• Located in Africa
• 4 mines
• London Stock Exchange – FTSE250
• 5 000 employees
• Income - $1.087B
• 600 000 ounces per year
Activities
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Min
e S
ho
rt T
erm
Eff
ect
ive
ne
ss m
anag
em
en
t
Express analysis of the Mine Business Effectiveness based one Mine
Stage 1 – Analysing and Optimising Mine Expense Profile
• Analysis and identification
• Implementing initiatives
Stage 2 – Expert Cost & Benefit Analysis
• Analysis and identification
• Implementing initiatives
Stage 3 – Accountable Cost & Benefit Management
• Module 1 – Developing Minimum Required Conditions of Organisational Effectiveness
• Module 2 – Back to Basics
• Module 3 - Optimisation
• Module 4 – Linking optimisation with budget
• Module 5 - Implementation
Min
e Lo
ng T
erm
Eff
ecti
vene
ss M
anag
emen
t
Phase 1 – Analysing the effectiveness of the current elements of the Mine Production management System
Phase 2 – Designing the improved Mine Production Management System
Phase 3 – Implementing the improved Mine Production Mangement System
• Short Term Initiatives to improve Mine Production Management System
• Long Term Initiatives to improve Mine Production Management System
Phase 4 – Audit the Effectiveness of the Mine Production Management System implemented
Sample Implementation of such a Programme in one mining company
• Implementing the Accountable Management System that focuses on improvingpeople, structure and work management Organisational structure - Significant changes to staffing structures and levels
resulting in a reduction of 27% of international employees in 2013 and a reductionof 37% in contractors on site.
• Improving the system of integrated planning :• Long term mine planning• Capacity planning with constraints• Short term planning and scheduling• Integration of maintenance planning
• Delivery of the production plan for the first time in 3 years• Reduction in cost below the planned indicator of $925 per ounce
• Located in Africa
• 4 mines
• London Stock Exchange – FTSE250
• 5 000 employees
• Income - $1.087B
• 600 000 ounces per year
If YOU had started last Year YOU would see the Improvement now
1.October, 2012 - the start of the analysing the
current business effectiveness (operation review)
2.January, 2013 – the start of the implementation of
the mine effectiveness improvement programme
3.May, 2013 – the announcement of the first results of
the implementation of the programme
4.July, 2013 - the announcement of first Half year
(2013) result
5.October, 2013 – the announcement of the production
–financial results for the third quarter and
intermediate results of the implementation of the
effectiveness improvement programme (cost
reduction and additional benefits generation)
2 3 45
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