If throughput improvements are sustained cost-effectively, then increases to output volume will lower the relative unit costs. In other words, it is imperative for Australian mines to do more with what they have already got.

Benefits achieved by sustainable throughput improvements outweigh short-term cost improvements, particularly considering the entire operational value chain. However, a common approach of engaging more resources to increase throughput is not sustainable and can result in increased marginal costs.

A more incremental system and focused approach to mining improvement is needed. Mines have to increase throughput, emphasising that it is a function of both operational time and rate and they have to achieve this with an integrated organisation, process and technological approach. Many mining operations are hindered by a number of constraints, which are limiting increases.

Economic, operational, geological and cultural factors have combined to place constraints on profitable and sustainable increases in margins throughout mining. Supply of key production inputs, skill and experience shortage, non-standard operational practices, complexity of resource allocation and utilisation, and increasing technical demands have been identified as five key constraints preventing break-out operational performance.

Reducing five key constraints is essential to delivering break-out operational performance.

In Australia, capital expenditure for the mining industry is expected to reach $73.7 billion in 2011-12. These investments are contributing to shortages of available parts and mine equipment, limiting productive output for operators who are unable to obtain parts when needed.

New projects are driving increasing labour demand, which results in disproportionate wage inflation, particularly for key roles, and high staff turnover for existing projects. An ageing workforce compounds the issue by reducing the pool of available human resources, and importantly the knowledge base of mining operations. Recruits replacing ageing workers will require significant assistance to progress along the experience curve.

There are disparate non-optimal standards for operations throughout the Australian mining industry. Management standards drive process compliance and performance – these standards are needed to promote sustainable, productive and safe work practices within mining operations, particularly with fresh recruits.

The complexity of coordinating resources across the mining operations value chain is increasing. Effectively coordinating these resources (e.g. people and equipment) to ensure adequate utilisation is an on-going challenge for the industry.

Challenging geological and environmental conditions, such as deeper seams, are increasing the technical demands of new mines and are limiting operational throughput. These specific challenges may not have been fully realised during early feasibility and production planning, creating variances in actual volume output and financial performance from plan.

Workforce, asset, managerial, technological and development approaches are needed for operational performance improvement.

There are a number of areas in which mining operations can effectively reduce the impact of these constraints and address under-performance. Taking a systems view to mining performance, incorporating workforce, asset, managerial and technological aspects, can be highly valuable and help identify integrated approaches for improving and sustaining performance in mine throughput.

Strategic workforce planning

Strategic workforce planning can assist mining operations to match staff to requirements, reducing variances in operational performance due to human resource constraints. Companies must be capable of identifying their global resource requirements and acquiring or developing necessary human capital. This should extend across the following:

• Identifying replacement workers for people about to retire;
• Developing graduates;
• Growing or recruiting leaders;
• Reducing turnover through development, health and safety initiatives; and
• Addressing potential skill gaps in the local talent pool.

A few points to consider when undertaking workforce planning activities include:

• Encourage more mature workers to continue or return into the industry after their normal retirement age. However, as rates and severity of mining injuries increase with workers age it is imperative to plan and devise standardised practice to use the skills of these workers judiciously and engage them where they can utilise their skills without increasing the risk of injuries. For example, using these workers for knowledge management initiatives and mentoring;
• Cross-training resources from other similar industries such as transport and manufacturing;
• Attract key talent and reduce turnover by developing global processes to ensure consistency in compensation packages, hiring practices and conditions of employment; and
• Building townships and creating more communities close to mines to attract workers for long term employment.

Utilisation management

The opportunity costs of a key asset such as a longwall or dragline not being available, due to overruns with moves or maintenance, is significant. For a typical surface mining operation, maintenance-related costs make up about 50% of all operating costs (30-40% in an underground mine operation). Although these maintenance costs are significant, lost production opportunity costs in the event of a break down is of greater significance.

Availability of key assets has a high impact on throughput and profits – a 1% improvement in availability can increase profits by up to 3%.

Improvement in availability and resulting increases to throughput can be achieved by:

• Measurement and management of key asset availability;
• Root-cause analysis of availability points of failure (maintenance, procurement);
• Deployment of centralised maintenance management systems;
• Development of life-cycle costing, reliability and maintainability; and
• Careful procurement of key assets to ensure that assets are procured at the correct time and place.

Management operating systems

Mining operations need processes such as operating and control systems to control behaviours, ensure standards are met, allow analysis and improvement and respond to change. Mining companies often overlook standardisation of processes. However, in our experience standardisation of process results in higher productivity, decreasing reference points to be managed, better utilisation of time and resources and the reduction of complexity.

The use of standardised, technology agnostic approaches such as management operating systems which apply closed loop principles to drive process compliance and performance (Forecast, Plan, Execute, Review, Revise) is an increasing trend in the industry. MOS delivers improvements and develops sustainable, productive and safe work practices across mine sites, providing management with:

• An integrated set of processes from life of asset, to monthly planning, to weekly and daily planning, shift handovers and short interval control;
• Single point accountability to control the processes;
• Tools to drive an improved focus upon measurable actions and follow up;
• Increased data accuracy enables accurate monitoring of performance against plan;
• Robust processes that are followed diligently help enforce a high performance culture;
• Greater accountability and transparency of safety and production;
• A set of analytical tools to develop problem solving skills and help identify improvement opportunities; and
• An action log to collate and manage improvement tasks.

Technology and equipment innovation

Large scale automation in the mining industry in the past decade or so has increased productivity.

The industry needs to take a step further in this direction to diminish the impact of workforce shortages, increase throughput and improve worker safety.

Innovative technology such as automated equipment, haulage systems, mine-to-port operations and integrated operations centres will assist to increase operational performance. However, a systematised approach to innovation can improve the capacity of a mine, this may include:

• Technology search and assessment;
• Management of research and development projects; and
• Partnering and JVs with research bodies, suppliers and customers.

Operational readiness

An operational readiness approach facilitates improved assurance for big ticket capital projects.

This approach, in the case of brownfields projects, pro-actively identifies and integrates critical operational readiness tasks into the overall capital planning and execution processes.

It also involves a rigorous risk management focus that is linked to financial outcomes through world-class statistical modelling techniques.

This assessment focuses not only on the broader business environment, but also on the project and operating environment.

Systems-enabled mining transformation

Benefits from mining improvements including developing the behaviours around a MOS have been short lived.

Typically, systems of linked spread-sheets and meeting forums are used, which can lack the rigour required for sustainability, particular considering the transient nature of today’s workforce.

Therefore, it is important to look for a more robust and advanced solution that provides the structure and analysis required to run a complex operation with an increasingly inexperienced management team.

Deloitte has a software application called UltiMine that supports the planning and execution of shift level activities in underground mining environments and supports MOS and utilisation management efforts. UltiMine has been used to drive material productivity improvements in underground coal mines shifts. The core capability provides the basis to manage shift activities in one hour intervals. This short interval control enables management to more effectively monitor, manage and redirect shift level activities than is common.

UltiMine has been developed for underground coal operations to enable integrated planning through to short time frames, resource balancing and performance reporting with a reduced reliance on individual tacit knowledge.

In managing a business improvement initiative, simply concentrating on individual functional improvements or simple cost initiatives will not ensure holistic business performance at a higher level.

Simultaneous usage of technology enabled MOS and an operational readiness approach can facilitate a mining process to better deliver big ticket capital projects.

Such simultaneous usage can also facilitate higher starting throughput for a mining project.

Similarly, applying strategic workforce planning, technology and equipment innovation provides an improvement in business performance.

Action required for mining operations

A variety of tools are needed to tackle the increased amount of complexity in the mining process and a much broader set of operational levers are available to increase performance resulting in greater volume output.

Mining operations should think in terms of improving performance of each element of the value chain on a continuous basis, independent of market prices and rising costs. Long-term sustainable results of lower production cost per unit are achievable when improvements are embedded through accepted practices and robust standardisation.

Mining operations are experiencing production variances and ultimately diminishing margins.

A greater focus on current mine operations, leveraging existing reserves and resources to achieve greater volume output, is necessary.

Mining operations can manage constraints using a number of methodologies such as strategic work force planning that assists them have the right people for the right jobs at the right time.

Performance improvement involves each element of the value chain and sustainable results will happen when improvements are incorporated into accepted practices and procedures.

Julian Dolby is a partner at Deloitte Consulting. This article first appeared in the September edition of Australian Longwall magazine.