smart toronto - smartmines.com · smart toronto surface mining ... includes draglines, rope...
TRANSCRIPT
©
SMART Toronto Surface Mining Association 5 May 2013
For Research & Technology
©
WHAT WILL HALT THE
WORLDWIDE DECLINE
IN MINE EQUIPMENT
PERFORMANCE ?
Richard Adsero,
GBI Mining Intelligence, Inc, Olathe, KS
Dr. Graham Lumley,
GBI Mining Intelligence, Brisbane, Australia
© Who says there is a decline?
• US Bureau of Labor Statistics shows the US mining and petroleum industries’ productivity is down by 7% since 2004
• Statistics Canada shows that mining sector productivity from 1997 to 2010 has dropped 43%
• Australian Bureau of Statistics shows the productivity of the Australian mining industry is down by 48% since 2001
• Mine recorded data shows equipment performance is down by 26% globally since 2006 (North America down by 11%, Australia down by 37%)
• Investors have disconnected mining company value from commodity price
• Driven by the “smart money” selling out – those large institutions which have inside knowledge of the mines and mining companies.
©
70
80
90
100
110
120
130
140
1501
98
7 /
88
19
88
/ 8
9
19
89
/ 9
0
19
90
/ 9
1
19
91
/ 9
2
19
92
/ 9
3
19
93
/ 9
4
19
94
/ 9
5
19
95
/ 9
6
19
96
/ 9
7
19
97
/ 9
8
19
98
/ 9
9
19
99
/ 0
0
20
00
/ 0
1
20
01
/ 0
2
20
02
/ 0
3
20
03
/ 0
4
20
04
/ 0
5
20
05
/ 0
6
20
06
/ 0
7
20
07
/ 0
8
20
08
/ 0
9
20
09
/ 1
0
20
10
/ 1
1
20
11
/ 1
2
Mu
ltif
acto
r P
rod
uct
ivit
y
Year
US All Manufacturing US Mining and Petroleum
Australia 12 Select Industries Australia Mining
Australian mining productivity
has fallen off the bench!
• Sources :
• Australian data - http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/5260.0.55.0022011-12?OpenDocument
• US data - http://www.bls.gov/mfp/data.htm Canadian Data -
Government Statistics
Canadian Mining productivity has
been declining since 1997!
http://www5.statcan.gc.ca/cansim
© Mining Woe
• The Australian Mining Industry productivity dropped 10.5% in 2011-12 after a 13% drop the previous year (ABS).
• Australian Mining multifactor productivity is barely more than half as efficient as in 2000-2001.
• Canadian Mining Oil & Gas productivity has declined 43% since 1997 (CanSim)
© Understanding Why the Decline –
A Lesson for All
• Government statistics indicate a precipitous decline in mining productivity in general but few details are available
• GBI Mining Intelligence maintains a database of specific mine equipment performance that can be studied for the details
• Other aspects of the decline will be left to others as this paper focuses on equipment performance
© GBI Has A Statistically Valid
Data Resource
©
© The Worldwide Decline
70
80
90
100
110
120
130
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ind
ex
(#)
Year
OPEN CUT MINING EQUIPMENT PRODUCTIVITY INDEX
* 2003 Result Set at 100
Includes Draglines, Rope Shovels, Excavators, FELs, and Trucks
A pure measure of mining efficiency
© GBI Open Cut Mining Equipment
Productivity Index by Country
70
80
90
100
110
120
130
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ind
ex
(#)
Year
Worldwide Australia North America
* 2003 Result Set at 100
© Reversing the Decline is Vital
• Essential for survival in Australia, important for ongoing viability in North America – The mining industry in Australia is facing
viability (short term) and sustainability (medium term) crises
– AusIMM – Australasian Institute of Mining and Metallurgy (similar to SME organization) is preparing a program for board approval to engage with industry on this subject.
• The outcomes will be a guide for all mining
• What is the Canadian Mining Industry doing?
© Industry Action is Warranted
• The viability crisis has already hit the Australian coal industry – Production cost has doubled in 4 years.
– More than 50% of Aust. coal mines are currently losing money
– Thousands of jobs cut
– Fast tracking cheaper coal mines (Indonesia –thermal, Mongolia and Mozambique – Met.)
– Big push for alternative energy sources
– Aust. electricity prices rising exponentially
– Aust. mines have closed and others will close
© Understanding the Details - Using
Historical Performance Data
• Excavators
• Rope Shovels
• Mining Trucks
• Draglines
• Front End Loaders
© Impact of Boom/Bust Cycle
Draglines
©
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
t /
Cu
M o
f C
apac
ity
Tho
usa
nd
s
Year
Australia Africa North America South America Asia
Impact of Country
Excavators
© Impact of Commodity Mined
Electric Rope Shovels
© Impact of Make and Model –
Mining Trucks
50,000
55,000
60,000
65,000
70,000
75,000
80,000
CA
T 7
77
CA
T 7
85
CA
T 7
89
CA
T 7
93
CA
T 7
97
Eucl
id R
17
0
Hit
ach
i EH
45
00
Hit
ach
i EH
50
00
Ko
mat
su 6
30
E
Ko
mat
su 7
30
E
Ko
mat
su 8
30
E
Ko
mat
su 9
30
E
Ko
mat
su 9
60
E
Un
it R
ig 2
60
Un
it R
ig 2
70
Tere
x M
T 4
40
0
Tere
x M
T 5
50
0
Tere
x M
T 6
30
0
Lie
bh
err
KL2
45
0
Lie
bh
err
T2
62
Lie
bh
err
T2
82
tkm
/To
nn
e o
f N
om
inal
Cap
acit
y
Make and Model
-22% -12% -16%
Ultra Class Mining Trucks
The different colored bars are different manufacturers
© Summary Performance
Class of Equipment Year Peak Occurred Median Performance Decline to 2010
Best Practice Decline to 2010
Draglines 2003 15% 15%
Electric rope shovels 2003 41% 8%
Excavators 2008 39% 17%
Front End Loaders 2007 39% 5%
Mining Trucks 2006 41% 44%
Class of Equipment Best Practice better than Median in 2010
Draglines 32%
Electric rope shovels 124%
Excavators 168%
Front End Loaders 169%
Mining Trucks 112%
The potential
For significant
Improvement
is real!
© It Is Not Just Equipment Performance
Example –
Gold Industry since 2006
1. Grades dropped from 2.0 g/t to 1.3 g/t
2. Strip Ratios up by 18%
3.Equipment performance down by 40%
Consequently, gold mines in 2012 require, on average,
[(1.18 / (1.3/2.0)) / (1-0.4)]-1 = 200% more mining
input per ounce of gold produced vs 2006
Equipment performance is the only reversible factor!
© Mining Challenges Noted by
Investors • PIERRE LASSONDE C.M., OQ
• Chairman, Franco-Nevada Corporation
• Keynote Speaker – Denver Gold Forum, 10 September 2012.
• In the last 10 years gold equities, as represented by the XAU, have gone up 250%. However gold bullion has outshined the equities being up over 500%.
• From the lack of meaningful discoveries, to low grading, to an ever lengthening schedule to production, to the increasing risks brought by resource nationalism, the challenges faced by the producers are not likely to go away soon.
• On the other hand, the Demand side of Gold has never been more robust.
• Investors' disappointment and downright disillusionment is seen in the lowest valuations ever for equities.
©
• Sources :
• USD Gold Price - - http://finance.yahoo.com
• Barrick Data - http://finance.yahoo.com
Commodity and Equity
values disconnected
©
• Sources :
• Commodity Prices - http://www.rba.gov.au/statistics/frequency/commodity-prices.html
• BHP ASX Graph - http://www.etrade.com.au
Disconnect
© Turmoil in Mining
• “In the past twelve months, gold mining companies have been on the receiving end of heavy criticism from investors and shareholders. Disappointing returns, cancellations of projects, failed acquisitions and questions over reporting accuracy were all reasons for this criticism – and this led to changes in senior management at some of the largest gold producers.”
© WHY The Decline in Performance?
1. “Good times” do not promote the focus
required to increase (or even maintain) high
equipment output (Australia)
2. When mine strategy is to produce “as much as
possible” the easiest response is get more
equipment (or contractors); combined with
new unskilled labour
3. New developments with cash available,
deliberately acquired excess capacity for a
bright future of increasing sales
© GBI Open Cut Mining Equipment
Productivity Index Aust. and N.A.
70
80
90
100
110
120
130
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ind
ex
(#)
Year
Worldwide Australia North America
* 2003 Result Set at 100
Perf
orm
ance t
o C
apacit
y G
ap
© Reversing the Decline
• Understand the details of past performance
• Analyze internal and external data carefully
• Determine the true capability or capacity
• Measure the gaps - performance to capacity
• Take action for
change – Use data and analytics
to micro-manage
Class of Equipment Best Practice better than Median in 2010
Draglines 32%
Electric rope shovels 124%
Excavators 168%
Front End Loaders 169%
Mining Trucks 112%
© Reversing the Decline
Top 10 actions leading to best practice
mining operations.
1. Transformational leadership
2. Value-focused safety systems
3. Accurate mining/engineering
plans/schedules
4. … Best Practice actions for Mining, Truck & Loader, and Dragline
operations are presented in a GBI Best Practice Seminar Series
© Leadership Styles
Full Range Leadership Model - Bass and Avolio
GBI Subscribes
to the full range
leadership model
of Bass and Avolio
briefly described in
this graphic.
Transformational
leadership practices
seem to coincide
with Best Practice
operations.
© A Challenge
• As an industry, why leave all that productivity (money) on the table?
• All equipment has the ability to be Best Practice (within a comparable population). – Do you know your real productive capacity / potential?
• Wrt Internal and external performance.
• Compare with a valid and statistically significant population?
• Use a valid timeframe (e.g. 2012 vs 2011-2012 industry performance)?
• Use valid metrics?
– Do you know where you stand?
• If your operations are Best Practice, keep it going - keep improving – that is what best practice operations do!
• If not Best Practice, why not? – take action to make them so!
©
Thank-you!
Richard Adsero GBI Mining Intelligence Inc
North America
913-839-3973
913-901-7443
www.gbimining.com