Industry Q&A: Enterprise Optimisation for Mining in Today's Market Climate
Achieving enterprise optimisation across the entirety of a mining organisation's value chain is incredibly challenging, but is vital for many miners and METS companies to be able to survive in the current economic environment. Therefore, we took some time to catch up with Mark Jones,
Partner at Whittle Consulting, in order to get a better understanding of enterprise optimisation in a mining context, what the biggest pitfalls are and opportunities that exist for improvement in 2015. Mark is responsible for Whittle Consulting's Australian, Asian and African clients, and brings some impressive experience to the table!
What exactly is “business/enterprise optimisation” when it relates to mining businesses?
The challenge faced by mining businesses is to harness a project or operations data on geology, geotechnical, mining engineering, process engineering and metallurgy, finance and marketing, and combine this data into an integrated Enterprise Optimisation Model that maximises cash flow. Our approach creates models that can simulatenously direct underground or open pit mine design, processing configurations and product specifications. This leads strategic LOM plans increase the NPV of the asset by 5-35% or significantly more.
What is usually the biggest mistake made in the mining sector when it comes to really optimising an organisation’s value chain?
There is a lot of time and effort spent on optimising the silos of mining or mineral processing within the operation or project. Whilst important, these efforts tend to yield only marginal improvement of cash flow and often lead to increased CAPEX. Until recently, the tool set and methodology to effectively data mine the entire enterprise and understand the strategic bottlenecks to cashflow over the LOM was not available. Now it is.
Why is it even more critical in a tougher market economy for miners to have more available cash than during a boom time? What kind of an impact can this have on shares, the agility of the business and the general health of a company?
The industry is suffering from capital constraints at present with investors and banks reluctant participants in new projects and refinancing operations. Our approach gives an asset owner the confidence to self-generate more cash flow in the short term, reducing their reliance upon outside financiers, and improving capital effectiveness as measured by Returns on Capital Employed (ROCE). The share market tends to reward companies that are able to demonstrate their ability to manage their cash flows from operations an improve the ROCE of CAPEX utilised in projects.
Where are the biggest opportunities in 2015 for miners to improve financial results? Any potential pitfalls for people to look out for?
We believe it's crucial to review the entire operation based on the current / projected $A commodity values. This is especially important for gold, nickel, zinc and bauxite companies for opportunities that lead to short term to boosts in cash flow. A change in product specification or grind size, throughput or recovery setting can make a significant difference to cash flows.
If you'd like to see more about Whittle Consulting, their services or investigate any of the courses they have running, you can see more on their website.