Rio Tinto’s Kestrel mine, 40 km northeast of Emerald in central Queensland, is an underground operation supplying world markets with up to 4.2 million tonnes of coking and thermal coal per annum – and it is getting bigger. The $US2 billion Kestrel mine extension project, due for completion in 2013, will extend the life of the mine by 20 years and increase mine capacity to up to 5.7 million tonnes per annum.

In 2010, Kestrel mine executed a contract for a turn-key longwall system for the Kestrel mine extension project. It went through a rigorous process choosing the longwall. Uppermost in the minds of the team was achieving a step change in safety, ergonomics and sustainable development. The process of choosing the longwall turn-key solution was divided into two areas and ten steps.

The first area is the pre-tender issue to market which includes: understanding the study; research; scope and tender development; customer and peer reviews; and senior management review.

The second area is after tenders are received. This area includes evaluation and clarification; identifying key points; defining the “vital few”; the negotiation process in line with the key points and the “vital few”; and understanding the risks.

The following is an overview of each of the steps in the process of choosing Kestrel mine’s longwall.

1. Understand the study

It is critically important to gain a solid understanding of what is supposed to be delivered. There has to be a clear understanding of what has been approved and under what assumptions. What is it the customer has actually asked for and is that what has been approved? If not, there are going to be some stakeholder management challenges before the project even starts.

Has the study covered the important points required to allow you to commence the compilation of the scope and tender documentation? Do you understand the strata and ventilation requirements, are all of the interfaces and battery limits defined? If not you are probably back into study phase during execution, most probably without a budget for it.

Importantly following review of the study, the project manager must understand the required outcomes, understand what they know about the physicals and the constraints and most importantly they must know what they don’t know and have a plan to fill the gaps. Only then can you move to step 2, research.

2. Research

Yes, the study has been completed, you have read and understood it in step 1, so now it is time to get out there and do some research, step 2. What is in the market place that shall deliver the business case that the study promised?

Now is not the time for more options but the time for opportunities to deliver outcomes in line with the study; the opportunity for improved safety, ergonomics, reliability and sustainable development. What are other mines doing, what works well and just as importantly what does not work well should all be considered.

Safety implications on longwalls were researched in detail and on several levels, these being all Kestrel mine longwall historical incidents; equipment maker industry alerts; departmental directives; coroner’s enquiries; and significant international incidents.

The focus of this research was to challenge the hierarchy of controls to eliminate the hazard or ensure a hard barrier over a procedural solution. Where we did not have the technical expertise to specify the corrective action the successful OEM was required to provide a solution.

Early in the process Kestrel engaged the services of a physiotherapist familiar with the longwall environment to gain an understanding of what realistically could be done to improve the ergonomic layout of the typical longwall. This early focus and mindset has reaped rewards throughout the latter stages of the project. Ergonomics is not an afterthought and just moving some “bits and bobs” around; the equipment is designed with the operator and the maintainer in forefront of the process.

A detailed review was undertaken to analyse and categorise all equipment downtime events at Kestrel mine historically. A very similar approach was taken to safety; that is, where we did not have the technical expertise to specify corrective action, we required the successful OEM to provide a solution to eliminate or minimise the known reliability issue.

Longwalls traditionally use very large amounts of water for cooling underground electric motors. The standard is a set number of litres per minute per hundred kilowatts of motor power – approval testing historically has been in line with these figures. Our research and discussion with the manufacturers initially did not bring us any closer to the origin of the approved water quantities. Whether running at 100% load or 10% load, hundreds of litres of water per minute is pumped onto the floor – not only environmentally wasteful but also potentially creating hazards.

Further research did deliver the origin of the water flow rates. This has been challenged, tested, flow rates adjusted for multiple load settings, and as a result we expect only a fraction of the water will be pumped onto the floor. This outcome is much more environmentally friendly and will lead to a potential reduction of hazards.

Why re-invent the wheel? Most underground mines are happy to share safety improvements and opportunities to share identified hazards and what works well and what doesn’t. Not all ideas are transferable as they may be specific to seam height, immediate floor or roof structure, but usually a good indication can be gained.

A number of workshops were held with a cross section of the workforce to gain their understanding of the requirements of a new longwall. At the end of the day the teams that mine and maintain the longwall on a daily basis, along with the teams that coordinate and supervise the overhauls, know the gear best. Survey your OEMs. How many of their project managers or their design team have worked on a longwall underground for any significant period of time? It is unfair that we assume that the OEMs need to have the answers or even fully understand the issues.

The workshop participants were given a blank canvas with the following scenario, “starting from scratch, forget the budget, what would you change and why”. After you cull the items like “we must have a cappuccino machine on the main-gate” the real value of this exercise becomes immediately evident, a real divergent and convergent thinking exercise. Value adding options and ideas from the people that know mining equipment best, the people that call it their office and are putting up with the issues that they already have answers for, almost every day.

3. Scope and tender development

Once the study is understood and your research has opened up a whole new world of opportunities, you are ready to commence step 3, scope and tender development. The key point here is to ensure you effectively communicate to the market what you want, and why you want it. Be clear on the outcomes. We are a mining company, not an equipment design and manufacturing company. We don’t specialise in telling them what to build but what it safely needs to do and what it needs to achieve.

There may be areas where we are very specific due to our research in step 2; however, in general Kestrel’s scope and tender documentation is developed to communicate the required outcome. Also in this step is where you stop, go back to the feasibility study and ask yourself: “Does this scope and tender documentation reflect the approved feasibility study scope? Is it delivering the outcomes and aligned with the assumptions as detailed in the approved feasibility study?” If it doesn’t, you have two choices. Either change it back to what you were approved to do or seek a scope variation. Better to do this now than after you have gone to market.

4. Customer and peer reviews

Once you have the scope and tender documentation written it is time to go back to your customers once again. Did you really understand what they were asking for? Have you captured it effectively? Have you communicated it correctly? Are you that close to the process that you cannot see the forest for the trees? Ask your customers to review the outcomes, battery points and the interfaces. Ask your customers to identify any scope gaps or overlaps that may not be clear to you or you have assumed.

In Kestrel mine’s case we had well known, reputable mining consultants assisting throughout much of the early stages of the process. During the scope, tender development and the peer review especially, their assistance and knowledge in this area was invaluable.

5. Senior management review

You have the tender documentation to a point where you are happy to go to market. Key team members from your customers have reviewed the documents, peer reviews have been undertaken. One final check has been done against the feasibility study requirements and the assumptions behind it, one step left prior to going to market, senior management review.

This is where you provide the senior management an opportunity to review, request modifications and changes, confirm required outcomes and verify assumptions have not changed. Do not rush this very important step; provide adequate time for the review to be effective and value adding. This is not just a “tick in the box”.

Once this is complete, send the tender out to market and now the real work begins.

6. Evaluation and clarification

Initial evaluation commences on the days that the tender boxes are opened. The initial focus is strongly on the technical proposals. At the end of the day, if the OEM cannot provide the technical solution required by the mining conditions or strata, delivering the required outcomes of the feasibility study in line with the assumptions, it does not matter what the commercial terms or cost is – the proposal is not going to progress.

In Kestrel mine’s case we ranked all of the responses. The logic was if we have gone to the trouble of reviewing the feasibility, conducting research, consulting our customers and having workshops followed by peer review and approval, then the OEM has provided a response, surely the least you can do as a project team is compare the OEM’s responses and rank them accordingly. Clarifications were submitted to suppliers as required to ensure the responses were understood by the evaluation teams.

To avoid “group think”, we ran a completely separate evaluation process on the same submissions – this was a value adding exercise undertaken by mining consultants.

7. Identify key points

Once the initial clarifications and high level evaluation was completed, we ran a number of workshops with a selection of our customers. This customer team consisted of a cross section of 12 people including the longwall manager, maintenance personnel and operators from the longwall face.

Over a number of weeks we ran workshops on all of the longwall subsystems with the intent of identifying key points of importance to our customers. These included items that were important to them with the OEM submissions, both positive and negative. Going forward into the negotiation process this gave the negotiation team a great insight on areas of focus that are important to the customer.

This effectively gave us a list of items that had to be negotiated to improve the OEM’s tender offer and a list of items that we knew we could not trade off as they were important to our customer. We were aligned as a team and our priorities had been set by the customer, a clear, agreed direction, ratified by the end user.

8. Define the vital few

The vital few were items that our customer felt so strongly about with the OEM’s submission that if the negotiation team were unable to negotiate a better outcome for the mine the OEM would not be progressed in the process. Typically these items were related to a safety concern or part of the OEM’s proposal not meeting one of the key assumptions or required outcomes.

These items were not taken lightly; they were well understood and agreed by all concerned.

9. Negotiation process in line with the key points and the vital few

The negotiation process needs to be well planned. Team members know their roles and understand their specific areas intimately. For the Kestrel mine longwall technical negotiations we had content experts from Kestrel involved at the negotiation table.

This provided opportunities for the Kestrel mine team to effectively communicate the importance of the key points and the vital few to the OEMs directly. They made no apologies for being passionate and determined, as the process they had been involved with to date provided them with the context and understanding from their peers of why the item was critical or a key point.

10. Understand the risks

As with any negotiation process you commence at your point of aspiration and should you meet one of the vital few you walk away, however many of the items end up some where in-between. This is why the final step in the process is so important. Understand the risks.

If you go back to steps 1 to 5, these are all about getting the scope right, conferring with your customer, peer reviews, and approval to go to market. You may well have negotiated to a point where the current package looks very different to the package you were approved to go to market with.

The purpose of this step is prior to contract execution, assess the level of risk for each and every clause change in the scope of works and technical specifications. A formal risk assessment is facilitated and attended by the customer to rank the level of risk incurred for every change negotiated from the approved package that went to market.

From there, if it is an acceptable level of risk, we execute a contract.

So many months have passed, we have an agreed executed contract, and we have used the process of choosing the longwall turn-key solution in the two areas and ten steps: now the real work begins.

Alex Jones is principal advisor – mining equipment energy major projects, technology and innovation for Rio Tinto.

This article first appeared in the June 2012 issue of Australian Longwall magazine.