Currently viewing Global edition

Agile Mining - The Future is Smaller. Bigger is not always better

Read more on how to streamline new projects, generate revenue early and reduce schedule risk

Agile Mining - The Future is Smaller. Bigger is not always better Agile Mining - The Future is Smaller. Bigger is not always better Agile Mining - The Future is Smaller. Bigger is not always better Agile Mining - The Future is Smaller. Bigger is not always better Agile Mining - The Future is Smaller. Bigger is not always better

Jon Wylie, President Natural Resources Proudfoot

What if you could flatten the CapEx curve and move cashflow forward through an optimized approach to mine-building? Well, now you can. Read more on how to streamline new projects, generate revenue early, flatten the CapEx spend curve and reduce schedule risk.

Before COVID-19, the delivery of mining projects on-time and to-budget was practically unheard of. Research shows that capital projects typically run over budget by 65 percent, and that half of all projects report schedule completion delays. According to EY, License to Operate (LTO) was the number one risk facing mining companies during the 2019-20 period causing such delays. Unfortunately, schedule overruns not only negatively impact a project's Net Present Value (NPV), but also the company's overall price performance.

Why rapid development of a capital asset is more important than ever

The world is continuing to suffer from the economic and productivity consequences of the pandemic. New complexities in the supply chain, limited access to on-site expertise, nervous investors and new government regulations are all negatively impacting capital requirements. In turn, this affects cash flow projections and NPV expectations, making them even more aggressive.

With these factors at play, it is more important than ever to move assets to a stage of profitability as fast as possible. Reducing the time-to-first-metal protects cash flow and fast-tracks time to revenue. The good news is that it is possible!

Proudfoot has consistently delivered productivity improvement for our mining clients at rates of between 25 to 40 percent during the construction phase, and 50 percent in the commissioning and ramp-up phases. We achieve this through our Agile Mining approach, based on lean management principles, integrated activity-based planning, and constraint management.

Proudfoot's Agile management solution, works collaboratively with Owners and EPCM's to improve capital project performance, reducing costs and schedules with award winning safety performance. Our Agile Mining solution streamlines and optimises process across the entire project life from feasibility and approval through to steady state operation; ESG and Stakeholder Engagement, Engineering, Procurement & Logistics, Construction (contractor) Management, Commissioning, Operational Readiness and the transition to steady state operations.

Today, with new techniques and methodologies available to accelerate the completion of your mining project while ensuring a safety-first culture, there are opportunities to reduce risk, cost and schedule blowouts. Firstly, a thorough upfront review of the capital budget is critical, ideally before the end of the initial feasibility study. Then there are additional opportunities for improvement at each of the three crucial stages of a mine build, as follows:

The engineering design stage

The most significant opportunity to effectively manage project risk, costs, and time to revenue is during the engineering design stage. An agile approach uses an iterative design review to create alignment on what we are designing and challenge initial design parameters. Once aligned, consider construction assumptions. Optimization in the Front-End Engineering Design (FEED) Phase will reduce the engineering packages, simplify procurement, reduce fabrication time, minimize complexity in the supply chain and reduce construction time on site. High involvement of the owner's team during this phase allows the owner's Project Management Team (PMT) to oversee project execution more effectively.

Project planning and scheduling

Review of the project plan and schedule should focus on how to achieve the first production in the shortest possible time through an Agile approach. Agile planning techniques allow planners to develop a pilot start-up where repetitive tasks can be optimized. These efficiency gains will be factored into further project schedules and plans, reducing the time to first ore and the overall project schedule. Project plans should highlight execution complexity with built-in reviews to address this complexity and remove constraints. The overall project priorities should guide decision-making. Otherwise, it will ultimately result in delays and cost overruns, which negatively impact NPV and Internal Rate of Return (IRR).

The execution stage

Optimizing execution requires a disciplined and structured approach with easy access to reliable information to compare actual performance against the project plan. Through our extensive history of CapEx projects, we typically find that most employees are between 60% to 65% productive, with a lot of time is spent on non-value adding activities and rework. We also find that 50% of Managements time is spent understanding the status of activities, identifying potential issues, and managing risk. Unfortunately, much of this is reactive management responding to issues after they emerge. Getting the right information to the right people at the right time is especially important when dealing with a remote and site-based workforce.

To tackle this typical problem, Proudfoot stands a "Results Hub," which aligns all contributors and facilitates focused, high-quality decisions, where key performance indicators are displayed, review meetings successfully track improvement, and every stakeholder in the project understands the impact of their performance.  A "Results Hub" is inclusive of a Project Management Office (PMO), procurement, supply chain logistics, risk tracking and stakeholder / ESG outcomes management. The Results Hub gives you the ability to ensure adequate focus, resourcing, and standardized reporting on progress so that the need for corrective action is detected early and actioned.  It also sends a visible message that the organization is serious about being high-performance. Having a well-defined, simple, and trusted improvement methodology such as Lean in Construction (LinC) also allows team members to understand and align around the optimization effort. More complex optimization efforts will require specific initiatives. The Results Hub is where these initiatives are evaluated, agreed upon and tracked to ensure timely and complete execution.

Fast-tracking time to revenue through agility

To create a truly agile organization, core functions and non-core functions must be identified at the very start of the design process. When designing non-core functions, consider the following:

  • Centralize non-core functions.
  • Implement the right technology for certain functions to be remote.
  • Define the interface points between core and non-core functions.
  • Define clearly processes and workflow. 
  • Share underutilized resources between steady-state and project organizations.
  • Develop key performance indicators measuring both internal and service level performance.

And when designing core functions, it is essential to remember that not everyone must be on site. Instead, do the following: 

  • Allow only personnel directly involved in executing, supervising, and coordinating work on site.
  • Clearly define and explain levels of work to be conducted.
  • Design processes to allow complexity to be dealt with in the planning stage, leaving site-based employees to focus on execution and optimization.
  • Build control rooms and planning functions offsite, but still, support operations.
  • Manage and integrate LTO risk into the operation. Establishing a single digitized source of truth helps with this.
  • Design site visits by managers into the management process and behavior models.

Further, some functions can be considered hybrid. Scrutinize all work for the following:

  • Are there any safety impacts, either negative or positive?
  • Is there a core function that can absorb the work? For example, scheduling?
  • Can the work be automated or digitized? For example, transactional procurement?
  • Is the schedule at risk if the position is not site-based?
  • Will time to first ore/metal be reduced?
  • Will the schedule be compressed?
  • Is LTO risk management integrated into the operation of the mine, or is it an add-on?

Which functions to outsource or insource depend mainly on the internal skillset of the organization. Like most project issues, the answer is in how this impacts the project NPV or IRR. If the organization has no internal project management capability, then the right answer might be to implement an Agile project management solution, inclusive of a Results Hub, vs outsourcing project management to an EPCM. A quick solution is to bring procurement and construction management in-house. This allows the owners' team to optimize efforts and fast-track time to revenue. 

Proudfoot has extensive experience evaluating and optimizing the NPV and IRR of capital projects of different sizes and complexities while delivering optimal ESG outcomes. Many organizations use Proudfoot's Results Hub to assess, coordinate and manage capital projects, thus ensuring improved productivity, safety performance and risk management across the project life cycle. 

Just recently, Proudfoot supported the planning and execution of the world's largest underground mine project, a Rio Tinto endeavour in Mongolia, the region's largest event investment.  Together with Rio's leadership, through an Agile Mining approach supported by our Results Hub, we developed a scalable system that supported decision-making for the overall project, not just isolated parts.  A project of this scale, like any other capital project, requires systems that consider operating and planning experience, the utilization of digital systems to track performance, employment of artificial technology to reduce overall procurement spend, a thorough and continuous review of all the end-to-end project risk elements - internal and external, and most importantly, make people and behaviours the center of it all.   By doing all of this, we were able to engage all stakeholders at every level while implementing an Integrated Planning Process (IPP) that aligned all departments and functions, reduced shaft sinking cycle time by almost 50% and improved development rates by 300% in a matter of 3 months.  We delivered this massive project on-time and to budget while achieving zero harm to any of the organization's people, making it the safest operation in Rio Tinto's underground mining division. 

Community Investment through Capital Projects

If companies plan and invest correctly in the right engineering design stage, project planning and scheduling and focused on a detailed yet agile execution phase, it will undoubtedly accelerate the commissioning of the project.  Early commissioning and ramp up benefits the local community through employment, taxes and royalties. Utilization of local labour simplifies mobilization and people logistics, generates revenue locally and provides the organization with advocates in the community. Implementing an Agile Mining project solution improves local engagement, enhancing the positive contributions the company brings to the community and cementing the company's social License To Operate, thus also reducing project associated risks with LTO.

In Summary, smaller is better!

A history of most industry projects being delivered over budget and over schedule combined with a global pandemic and recession that may spook investors and owners whom are trying to ensure costs are reduced and profits maximized, it's time to reverse the capital project trend and begin flattening the CapEx curve.  Through Agile Mining, we propose a smaller footprint, supporting a straightforward and aligned project structure utilizing engineering design technology, allowing project engineers and planners to use iterative scheduling techniques on narrower spaced milestones.  It also creates the foundation to utilize constraint management techniques which allow for improved sharing of resources, resulting in opportunities to compress schedules and reduce costs. Agile scheduling techniques in a Results Hub environment are ideally suited for repetitive tasks where we focus on optimization efforts to improve efficiencies in individual tasks and task sequences. These optimizations are immediately included in the planning and work assignment iteration, capturing best practice, and employing Lean management principles. This agile approach dramatically reduces the project schedule while safely compressing time to first ore and improving the cashflow of the project.

What if you could finance, develop, ramp-up and operate your project within budget, to schedule and with zero harm to your people? With Proudfoot's Agile Mining approach, you can.  

Author:  Jon Wylie, President Natural Resources Proudfoot

Contributors:  Strategia Worldwide

category-img

We design, implement and accelerate operational and digital transformation through people. Realizing tomorrow's results, today.

HEAD OFFICE:

category-img

We design, implement and accelerate operational and digital transformation through people. Realizing tomorrow's results, today.

HEAD OFFICE: