In the era of technological innovations, the rule is simple: adapt or lag behind. But for such a traditional industry as mining, resistance to change may be an issue. “Companies need to adapt quickly to the changing environment or risk becoming non-competitive in an ever-competitive market,” says EY. For the mining industry competitivity is about having efficient and productive operations, but how is productivity achieved and most importantly, how can it be measured? Keep reading!
According to expert reports from McKinsey and EY, mining productivity is on the decline, driving operators to dig deeper. Industry leaders, from explorers to technology suppliers, believe there is a set of practical techniques that mining companies can implement to have more efficient and productive operations. The first thing is to envision such a future. “Real and sustainable productivity requires a holistic and top-down approach that aligns production activities to their strategic value and contribution, and they need to be planned and executed in a coordinated way across the value chain,” writes EY.
When making operational efficiency a reality, technology is indispensable. The goal is to do more with less. “For companies that are not afraid to incorporate new technology, we can help them to increase productivity rates considerably in the same window of time as more traditional systems,” says Héctor Miranda, Mexico Country Manager of Orica.
Mining machinery providers believe it is key to automate processes in other to better gaze at the whole production picture. For example, SKF strives to be at the forefront of industrial digitalization, helping mining companies switch their models to the IIoT and the Industry 4.0. “The trend is moving toward the development and implementation of sensors at mine sites and with mining machinery,” explains Nacip Fayad, Industrial Sales Director at SFK Mexico. “We can efficiently and remotely supervise the equipment’s vibration, temperature and productivity, among other key indicators.”
But technology is not the only input to develop. For many Mexican explorers and operators, to ensure a sustainable and responsible productivity improvement the node pushing any innovation must be human capital. “The industry will always seek to cut costs and drive up productivity,” says Jesús Herrera, Director General of Detector Exploraciones. “We focus on developing our human capital and also on modifying our technologies to have more autonomous equipment.”
Technology and innovation are shaping what the mines of the future will look like, but the future is already here. “Rio Tinto has launched a new phase of its “Mine of the Future” technology and innovation program, which is driving value by optimizing the performance of key international copper and coal operations,” explains EY. Rio Tinto’s approach for boosting productivity is quite practical: invest in high return assets and divest operations that fall outside this category. “It is expected to raise US$3.3 billion through announced or completed divestments by 2014,” adds EY’s report.
How to Measure Productivity
When focusing on productivity, managers often weigh up operational decisions on prioritizing product outcome, overlooking other measures such as total material moved, just to mention a few. But gauging productivity levels by one variable is counterproductive as it disregards certain factors, such the geological conditions of ore quality, that affect the output.
Then, to come up with an objective measurement of productivity levels becomes as important as having operational efficiency. “A crucial piece of the industry’s ability to confront the challenge centers on the ability to measure productivity performance in such a way that managers can see if and when any progress is being made,” says Mckinsey.
Holistic productivity measurement becomes a puzzle to be filled with different survey pieces. When completed, managers are enabled to make smarter decisions for their operations by an accurate guidance of a mine’s performance. “Over the broad spectrum of different mining operations, it is difficult to define the size of the productivity problem. To overcome this, economists typically measure productivity across a range of factors referred to as multifactor productivity (MFP), with the most common factors being labor, capital and materials,” proposes EY.
The labor metric evaluates workforce efficiency through the total material moved per person in a said period. Another key indicator is the overall equipment effectiveness (OEE), which calculates equipment productivity times, delays and “provides important insights about availability, utilization, and tempo performance, but is focused on component parts of the operation such as shovels or a processing plant, rather than the whole operation,” explains McKinsey.
Reducing Costs: The Productivity Byproduct
Just as producing gold often yields another mineral byproduct, productivity derives in cost-efficiency. However, this rule does not apply both ways, as cutting costs could harm production. “Many companies have been dealing with this substantial drop-off in productivity through a series of cost-cutting exercises,” writes EY. A cost-centered view of productivity can also detriment the environment. “It is also imperative that we not lower our costs at the expense of the environment,” warns the Director General of Detector Exploraciones.
To address this issue, Godfrey Walton, President and COO of Endeavour Silver, proposes to make the best use of each asset and expenses will shrink on their own. “We are going through the process of making our mines more efficient and productive,” he says. “We are striving to make our mining processes leaner as quick as possible. We are simply trying to make better use of our equipment and people, which are our two biggest assets.”
Herrera agrees with Walton. “I believe that productivity is more dependent on human capital and the training that companies provide. If the mining industry invests in the development of its people, it will achieve higher returns. As our costs will also go down, we will be more competitive and our clients will give us more work,” he says. This strategy ultimately follows what Bradford Cooke, CEO of Endeavour Silver, calls the philosophy of continuous improvement for reducing costs. “Historically we have embraced a philosophy of continuous improvement at each of our operating mines,” he says.
Standing out from its competitors, Endeavour Silver has a three-step method to achieve this goal. “We are currently focused on improving our metallurgical recoveries by doing more research and introducing different equipment and chemicals. We are also conducting programs to improve the productivity at each mine by upgrading our operational and management systems. But the biggest difference could be the construction of new, higher-quality, lower-cost mines,” he explains.
Whether it is research, human capital training or asset modernization, it is clear that when it comes to cutting costs, boosting productivity or measuring it, diversification is the ultimate key. Bet on multiple factors and aim to improve them all in the long run, says EY. “Getting the right skills mix, the right culture and the right measures is the key to long-term success,” the report advises.