Companies shift focus to cost containment
The focus on costs, unsurprisingly, runs in tandem with the cyclical nature of the mining industry’s fortunes. Miners have had to perfect their ability to sharpen pencils and improve productivity over the past few years as the sky-high prices of the commodity super cycle retreated.
Spurts of efficiency and cost improvements obviously help to curb corporate failures in times of financial stress, although the industry has maintained a steadfast focus on longer-term measures to improve overall efficiencies.
“Cost containment has been a significant focus by the mining companies in terms of improving their cost base and driving down the cost of production,” says Dennis Gibson, chief technical officer for mining at engineering consultancy Black & Veatch. “Major companies such as BHP Billiton, Rio Tinto and Anglo American, among others, have been cutting back dramatically on their overheads and trying to get more productive in terms of their assets.
“Capital rationalisation is still impacting greenfield prospects, so mining companies are being laser-focused on where they spend their capital.”
This is especially important given the glut of the super cycle, during which time miners had adopted a production at any cost attitude.
“There was such high demand for output that the marginal cost of production was not really a consideration because profits were so high. The dynamism of the market led to inefficiencies within mining sector operations and I believe that mining companies, service providers and others have learnt a number of lessons from the correction.”
Notable advances in mining, digital and energy-generation technologies have helped miners to reduce inefficiencies and costs.
Mushir Khan, manager of engineering at WorleyParsons RSA, says one of the ways the consulting firm has adapted to this need is by developing a new integrated project design platform that offers cost reductions and improved efficiencies for new projects.
The effectiveness of this approach was demonstrated in the work done for Royal Bafokeng Platinum’s second phase 100ktpm Merensky Concentrator.
“This is the first project where the integrated technology was applied to its fullest potential and it has proven to work efficiently. We were able to identify value improvements by picking up optimisation from the previous design by using 5D technology.”
Given this increased reliance on technology to improve efficiencies, innovation will be a discussion point at the indaba.
Deloitte’s head of energy and resources, Andrew Lane, says the imperative to innovate has become far more real and that the digital debate has moved from being an interesting concept to actually being a practical, essential way of improving performance.
Some of the innovations and technology that Gibson says have grown in prominence over the recent past are a greater reliance on renewable energy to ensure security of supply, and internet-connected devices to enable remote monitoring and data gathering.
“The rate of use of renewable energy is going to accelerate, not only in the mining space but more widely, for a number of reasons. One of those is cost: renewable energy generation has become more competitive with traditional fossil technologies. The second is climate change, greenhouse gas reduction and the corporate social licence to operate.
“If I compare the interest in technology based on topics at a major Australian mining conference two years ago, I would say last year it was maybe 20% of the focus. Last year it was 85%. It has ramped up really quickly.
“We are talking to the top players globally in the mining space about how to leverage our technology and data analytics expertise that we have developed over the last number of years. This has specifically been in the power and water utility space, and we’re now seeking to leverage for the benefit of our mining clients.
“Mining firms traditionally had a fragmented approach to technology, but now they are looking in a more holistic way to improve productivity and efficiency and enhance safety.”
An interesting development for firms such as Black & Veatch and WorleyParsons that also consult to other industries heavily reliant on engineering expertise is that they are able to bring insights and successes to bear on the mining industry.
“What mining companies are looking for is a fresh set of eyes and new perspectives from other industries on how to improve productivity and ways of doing business,” says Gibson.
MINING FIRMS ARE LOOKING IN A MORE HOLISTIC WAY TO IMPROVE PRODUCTIVITY AND EFFICIENCY AND ENHANCE SAFETY