Here are some strategies to consider, from Deloitte’s “Mining spotlight on sliding productivity and spiraling costs.”
- Strengthen Mine Planning
To improve sector productivity, companies can:
- Refocus on high-quality production by increasing cut off grades.
- Reduce capital expenditures in properties with lower production potential and shorter mine lives.
- Consider the benefits (and potential risks) of reducing reserves.
- Optimize mine sites through enhanced sequencing.
- Ramp up production from lower cost mines and prioritize lower cost projects.
- Attract and retain experienced mine planners capable of improving operational performance and tracking daily adherence to production volumes, mining locations, and mineral content.
- Improve Budget and Risk Management
Independent project analysis in Australia shows that approximately 65% of mega-projects in excess of AU$500 million fail to deliver targeted value. To improve project outcomes, mining organizations can:
- Establish a clear line of sight on actual expenditures, including costs per unit of production.
- Share key metrics with engineering, procurement and construction management (EPCM) operators, mine operators and manufacturers.
- Strengthen working capital management.
- Get Serious About Workforce Planning
To maximize workforce productivity, companies must properly define their workforce assumptions and improve management across the talent lifecycle.
- Strengthen the owner’s team by clarifying the business model governing mines, plants, infrastructure, and sustainability.
- Foster a culture that discourages rampant spending.
- Keep employees engaged through programs such as flexible rosters, training, and long-term career development.
- Have a system for identifying global resource requirements.
- Adopt less cost-intensive work practices, such as work clusters, cross-training, and automation.
- Train local populations in key job functions.
- Improve Efficiency through Technology
Productivity is about maximizing throughput per unit of time, per unit of quality and per unit of cost. Mining companies may wish to apply a better use of technology to achieve these goals:
- Seek out innovative technologies capable of unlocking deposits and improving productivity on the mine site.
- Use system transformation to address core business drivers, such as operating time and rate.
- Replace disjointed reporting systems with streamlined management dashboards that report on actual operational performance.
- Use production visibility tools to get an automated visual of mining operations from pit to port.
- Pursue Operational Excellence
To bring costs down in a sustainable way, mining companies can:
- Re-evaluate their operating models to ensure they have the management and reporting systems necessary to build a cost management culture.
- Adopt Lean/Six Sigma methodologies and techniques such as shareholder value analysis to identify and close operational efficiency gaps.
- Look to lessons that can be learned from other industries, e.g. process manufacturing.
- Instill a culture of sustainable operational improvement.
- Invest in Analytic
It is impossible to reduce the costs of safety, maintenance, and other cost-intensive programs on a sustainable basis simply by examining component costs. Using analytics, companies can:
- Assess the costs of entire processes to uncover the underlying cost base and identify exceptions and outliers.
- Improve decision-making and asset performance by measuring both financial and non-financial indicators that affect overall profitability.
- Transport data from a wide range of disparate sources to deliver on-demand reports, enabling miners to improve asset utilization and reliability, minimize downtime, streamline mine planning and optimize fleet resources.
- Use emerging metrics to manage operational costs, such as measuring the mineral content of each shovel load to determine whether or not it is below cut off grades.
- Rationalize the Supply Chain
To reduce costs, companies frequently ask suppliers for steep—and often unsustainable—cost concessions. Rather than pushing the service sector to the wall, companies can:
- Establish global sourcing contracts.
- Build partnerships with those suppliers who have delivered demonstrable value.
- Renegotiate with major suppliers to win price concessions.
- Streamline supply chains by integrating processes with key input producers.
- Right-size Capital Projects
To get capital costs under control, miners can:
- Transition to quick-start modular plants and projects that can be expanded as industry fundamentals improve.
- Put marginal mines into care and maintenance.
- More appropriately scale operations to suit individual projects.
- Build stronger funding practices by better understanding the difference between a project’s value and the price the market sets.