Recognising Innovation

Australians on the whole are not overly innovative and regularly fall below average in measures of innovativeness across countries around the world.  There is little doubt that this contributes to poor equipment performance.  I noted a little while back where Dr Peter Lilley of CSIRO was lamenting the lack of “transformational” R&D.  I was staggered (although maybe I shouldn’t have been) that the Minerals Down Under group has a budget of $100+ million per year for R&D.  Think about that for a minute.  Over $100 million per year and they can’t come up with some workable transformational ideas?  You have got to be kidding.

A project which my company undertook was one of the outstanding engineering projects which won Engineers Australia State awards and competed for National Awards in Canberra recently.  What a privilege to be amongst some truly transformational engineering.  Our project – Optidrag, had a budget of $276,000 (thank-you to ACARP).  Now Optidrag really is transformational and is being embraced by a number of the major mining companies.

I am sure this industry suffers a serious case of Myopia when it comes to innovation.  Here you have a project which is one of the outstanding engineering projects in Australia in 2009, as judged by Engineers Australia, and the Australasian Institute of Mining and Metallurgy rejected it as being unsuitable for one of their Mining Conferences.  Quite apart from the fact that it is my project and I was prepared to fly across the country to present it in Perth, how can a project recognised by the pre-eminent professional engineers association in Australia as one of the outstanding engineering outcomes in 2009 be not recognised by my esteemed colleagues in the mining industry? 

Sour grapes?  You are joking.  I got to sit in Parliament House in Canberra with the engineers who were recognised as having the most outstanding projects in Australia in 2009.  I happily saved my money and did not attend the conference in Perth but I am distressed for the industry I work in.  I side with Dr Peter Lilley in so far as believing this industry needs transformational change.  However, I believe it is needed in R&D, technology and attitudes.

The biggest problem with research and development in Australia is they are too focussed on the process rather than the outcome.  Tick the boxes, get your government money and if it costs more than budget or you don’t get an outcome then so be it.  Move on to the next project.  Compare that with the private sector.  We are currently developing a new product.  Exciting and terrifying at the same time.  We went to Westpac, cap in hand and asked them to finance a shoestring budget.  They took mortgages over our properties, a fixed and floating charge over the business, personal guarantees by the owners of the company (my wife and I) and security on our souls in case we decide to depart this world (watch out - banks have contacts in high and low places, although not too many above).  If we can’t produce a product when the money runs out we are screwed.  If the product fails to sell we are screwed.  Despite our patent protection, if a big company steals the idea, I can’t afford to fight it for 10 years in the courts – we are screwed.  If a Rio or BHP fund it they will rightly tie it up so not only does nobody else get it, we also can’t do any further work on it.  The research organisations haven’t delivered and small people have incentive not to be innovative.

Transformational changes in technology don’t come along too often.  You can think about draglines, hydraulic shovels, etc as being major advances but they are few and far between.  The thing which concerns me is that sometimes ideas are not advanced for the wrong reasons.  Politics in our large mining companies and our research institutions ensure some truly transformational ideas will never see the light of day.  Consider the following.  After presenting Rio Tinto's automation work to the Austmine conference in Brisbane last May, Rio Tinto's head of Innovation, John McGagh, was asked how we, as small, dynamic innovators could get our products in front of Rio Tinto.  His response was distressing. "Rio have people and resources working in this area.  If you have something of value to us, we will find you."  I really don't know where to go with that.  I suppose it is the golden rule; He who has the gold makes the rules.

I have said much in recent weeks about transformational changes in attitudes towards productivity.  Productivity is largely about attitude.  I fear for Rio's investment in automation for this very reason.  Attitude is the key input into the differences between best practice operations and the other 90%.  Some have given up and accept mediocrity or pay contractors to be mediocre or make huge investments in technology.  Some mines and contractors have grabbed the opportunity and have moved to fill the gap between average and best practice performance.  They are the companies you really want to work for and with.

Graham Lumley 

BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Cost and Mine Planning

In the area of cost prediction and financial analysis the same issues with OEM and third party provision of information exist as in production information.  The bottom line is financial analyses are regularly not delivering the right answer for appropriate decision making.  In most cases production estimates are higher than what is achieved and cost estimates are lower.  I previously asked the question, is it a human trait to be optimistic or is it pressure to produce results which are good enough to gain shareholder or Executive Management approval?  I suspect it is a combination of both.  The issue I identified last blog about the continual challenge to turn mineral deposits into a financial return is not easy.  If the mine plan says it is not economic then shareholder money is wasted and employees don’t have a job.  We in the mining industry live in hope that something will change.  About every 25 years they do (and it lasts for 6-8 years) but there is an unmistakable longer term downward trend in commodity prices.

Through the last resource downturn (1985 – 2002) we saw mines start with fanfare and substantial capital spent.  Eventually owners lose patience and look for a buyer / partner.  One from overseas who has no specific knowledge of the industry is always good because you can make ambitious predictions on future prices with no real basis for an expectation that they might be accurate.  The classic example of this was when Agipcoal purchased 25% of the MIM NCA coal mines in the late 1980’s.  Here you had two mines (and a port) which were running at an operating loss less than ten years after MIM had spent hundreds of millions of dollars building a mine and upgrading another.  The financial predictions of future costs and income were simply never achieved and Agipcoal did not remain as a long term owner.  What happens is that assets change hands at lower and lower prices until someone can make money or the mine is closed or we simply wait long enough for the prices to turn.

So who is responsible for the cost (and income) predictions.  Each of the major mining consultants will tell you they have the cost data for all the major equipment.  But my question is where does it come from as it often bears no relationship to reality.  Those that do bear some relationship to reality - well who actually owns the data?  There is a bigger problem here.  Cost allocation, reporting and control is done very badly by a large number of the mines around the world.  While the quality of production monitor output is reasonably consistent and is getting better I am aghast at the quality of financial control.  When a cost benchmark is done it takes 2-3 weeks on site to access the data and put it into a format which is firstly credible and secondly can be compared with others.  This makes the quality of financial analysis on a mine very dubious because very few people have the time to get the data into an appropriate form.  In the majority of cases the cost of an individual piece of equipment is (much??) higher than what the mine thinks it is.  So the situation evolves whereby people on the mine have a very poor idea of cost and they seek confirmation from others of costs.  Unfortunately they often turn to mining consultants and suppliers of equipment.  Mines seem to think that just because they do it badly most others must do it well so consultants and suppliers must know equipment operating costs.   Wrong!!!  For starters suppliers have a vested interest in telling you low costs and consultants have a vested interest in making the economics look good to continue to further studies.  Both groups readily use low cost data.

Apart from the poor financial control demonstrated by most mines, the following are actual reasons why overly ambitious (low) costs have been used (some are mine and some have been provided by Rob Beckman of Red Button group);

• The data that is used can be many years old and does not include appropriate escalations,
• The costs can simply be wrongly estimated, taken from a small sample of cost that is not the long term average,
• The cost is often gained from contract prices that are only a subset of total cost of the assets,
• There is no consideration of duty cycle which as a dominant factor in the cost of the equipment (eg. Steep grades, ripping for dozers, double benching for excavators etc etc)
• Finally, the costs are a $/hr average in most cases which do not take into account the lifecycle variation of equipment cost.  The cost of a single piece of equipment will vary by 50% from year to year depending on the work that is done and it can be shown that even over very large fleets this does not average out year to year. 

In my next blog I will provide some examples of costs which were provided by a number of mine planning consultants and were just simply wrong.

Graham Lumley 

BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

White Paper - Mine Planners Lie with Numbers

White Paper - Mine Planners Lie With Numbers

White Paper - Trends in Performance of Open Cut Mining Equipment

GBI is excited to announce the release of Graham Lumley's White paper on Performance Trends of Open Cut Mining Equipment. 


Using our extensive (and rapidly expanding database), Graham has been able to glean some interesting and sometimes disturbing trends across the various makes and models of machines in the open cut mining space.


Take a look at the White paper here.


If you would like to discuss the findings of this white paper in further detail with Graham or perhaps understand how you can use the information held by GBI to further your productivity improvement please contact us at GBI (gbi@gbimining.com) or Graham directly (graham.lumley@gbimining.com).

Productivity and Mine Planning - Part 3

Mining companies don’t have the equivalent of the magic pudding (with apologies to Norman Lindsay for the analogy).  They have limited resources with which to create a return for their shareholders and as they are mined they deplete.  For all mining companies there is continual pressure to turn what is in the ground into a financial return.  This is one side of the issue which sees productivity rates and costs used in mine plans almost always optimistic.  I suspect the old saying, “Don’t let the truth get in the way of a good mine”, or something like that, is pretty apt.  The other side of this problem is that despite what most mine planners (consultant or company) say they don’t have enough data to provide (statistically) credible inputs.  The decision-making process by executive management and many Boards of Directors is at best doubtful, usually flawed, and in some cases, just downright dishonest.

This week I will use an example of a job we did for a mine planning consultant as a demonstration of how the mine plan goes seriously pear shaped. I should emphasise that in this case the consultant is using real inputs; they do understand the issues; and will be using the information correctly.  Shame they are in the minority!!!

The request was for benchmark information for an RH 340 hydraulic excavator with 34 CuM bucket capacity.  The first point to note is that in the particular application being looked at, the worldwide, average annual output for these machines was 12.6 million tonnes while best practice (average of the top 10%) was 23.1 mt.  Just a small difference there.  Can you believe a best practice RH340 moves twice as much as the average?  The natural tendency for the mine is to think, “of course we are good” and for the consultant to want to provide the best outcome.  More often than not a rate somewhere in the vicinity of, or above 75th percentile is used.  However, you have to be realistic.  Only one in four mines using the RH340 will achieve 23 mt or higher and maybe you are one of the 3 out of 4 who won’t.  If you have always had average performance then why would it suddenly improve?

The second issue is why do some people believe that a piece of equipment will move well over best practice?  This example provides the perfect demonstration.  The request from the mine planning consultant was for a benchmark of availability, utilisation and dig rate.  That is, they wanted 25th percentile, median, 75th percentile and best practice of these three KPI’s.  The availability, utilisation and dig rate combine to produce the annual output.  The problem is that there is no mine in the world using this loader where they achieve best practice availability, best practice utilisation and best practice dig rate.  In fact if you take best practice for these three KPI’s the output is in excess of 27 mt compared with the actual best practice output of 23 mt.

A number of human factors are at play here.  Firstly, different companies have different definitions of the KPI’s.  Availability for one company is not availability for another company.  So for mine X to say they achieve 90% availability and that makes them good is wrong.  Worse still is the executive who just simply applies numbers without understanding what they mean or what is included in them.  Secondly, people use results achieved for short time frames and apply them to longer timeframes.  Availability or utilisation achieved over one to three good months normally bears no semblance to what is achieved over 12 months.  A third problem is people extrapolate rates in a straight line up from smaller equipment and this is often not correct.  There are a range of factors at play as sizes get bigger.  For example, a best practice 218 tonne truck will carry 208 tonnes (95.4%) while a 327 tonne truck will carry 301 tonnes on average (92.0%).  Another example is draglines.  An M8050 with 50 CuM bucket will carry 107.5 tonnes of payload (2.15 t/CuM) on average and an M8750 with 100 CuM bucket will carry 200 tonnes at best (2.00 t/CuM).  Add to this the fact that bigger equipment operates for less hours and you will understand why you can’t just extrapolate up.  A fourth mistake which people make is to apply results from one manufacturer and say that the same equipment from another manufacturer will be the same.  It isn’t.  As an example the difference in actual annual output between different manufacturers’ hydraulic excavators in 2010 with 30-34 CuM buckets was up to 84%.  (Oh by the way, which one did you buy?)

At the end of the day we are interested in what the equipment will move in a defined time.  The defined time will depend on the level of accuracy required of the plan.  If it is a really short term plan (next shift or day) we might use the dig rate, (what is moved per operating hour).  As the time frame goes up more and more operational factors come into play.

I have a real issue with what some mine planners (company and consultants) are doing.  They don’t have sufficient data nor knowledge about performance but tell you they do.  I simply ask that if they have the information then why are mine plans continually wrong? 

OK, some companies don’t want the truth but some do.  The "mine development industry" will continue to get away with  producing poor plans until we as an industry plus shareholders and stock exchanges hold them accountable; now, 3 years, 5 years, etc into the future.

Graham Lumley 

BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Productivity and Mine Planning - Part 2

Before Christmas I started writing about the issue of mine planning.  This entry follows that same theme.  This week, I will again visit the area of mine plans not delivering quality information for appropriate decision making.  Why haven’t shareholders and the stock exchanges held Boards of Directors accountable for their poor decisions on how to proceed with mining a particular resource or whether to proceed at all.  When shareholders and stock exchanges start holding mining companies accountable for the decisions they make, the people doing the planning might need to start explaining themselves.  Development engineers may need to dust off their CV’s and mine planning consultants might need to become acquainted with their Professional Indemnity insurers. 

The scheduling side of Mine Planning Tools is letting the industry down badly.  As new logging and monitoring technologies are being developed, the amount of and complexity of the data is becoming overwhelming and decisions are often made based on only a small portion of the available data.  In most cases production estimates are higher than what is achieved.  Is it a human trait to be optimistic or is it pressure to produce results which are good enough to gain shareholder or Executive Management approval?  We work in an industry which is wildly optimistic about what could be achieved and then prepared to accept mediocrity in what is delivered.

Most of the inputs are based on ‘ideal’ values or values that are given by OEM’s or third party experts.   The biggest mistake made by planners and their managers is not linking the detail of the plan to the requirement of the stage of planning.  A good example is a long term plan which plans a shovel or excavator down to payload, wait on truck, fill time, swing time, etc. and then ties it all together in some impressive-looking Monte Carlo simulation.  Surely for a long term plan you should use realistic annual production numbers.  Detailed analysis follows.  Then we have the problems with planners not using enough detail for short term plans.  Now this is a fine line.  We can collect data ad nauseum but then something changes in the pit so the ongoing optimisation of the plan becomes a balance between collecting and using data and the dynamics of the pit.

The following are actual reasons why overly ambitious production rates have been used from personal experience;

• Dig depths and face heights not considered, 
• Variation in seam dip not considered,
• Planning done in 2D and then merged to 3D,
• Scheduling using maximum potential rate for KPI’s and productivity rather than what can be achieved over a longer period,
• Scaling performance from equipment of different capacity,
• Overestimating hours of work,
• Not considering fleet interactions,
• Not understanding operational limitations, eg. Double side loading vs single side loading
• Not understanding densities and bucket fill

While most mining executives have encountered plans which have gone pear shaped they haven’t always understood why.  Well the answer is in many occasions the poor use of realistic production rates.  The following are actual examples from our work in the past for loading units and trucks:

• Truck fleet actual operating hours 21% below plan.
• Electric rope shovel actual annual output up to 33% below plan. 
• BER (payload / bucket capacity) 25% below plan
• Payload for trucks being assumed at design load, when on-site performance was 14% underloading (limited by tray volume)
• Dragline swing time used in plan was 14 seconds when actual time was 22 seconds.
• In 2008 the average shortfall in dragline coal uncovered was one million tonnes per dragline, (for 20% of draglines there was a shortfall of over two millions of coal)

In each of these cases (partly the reason I chose them) the actual performance is not vastly different from the worldwide average for the make and model. 

You can’t plan effectively without accurate inputs.  You can’t make good decisions without good planning.  You don’t have to accept inaccurate inputs.  Just use the data available.  Benchmark against industry standards.  It seems too obvious.

Graham Lumley 

BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Data Analyst/Engineer Position at GBI

GBI is the sole provider of intelligent mining production information worldwide, providing data-based solutions proven to support major improvements in mining operations. GBI’s services help mines understand and extract the strategic value of equipment performance data to improve efficiency.

GBI requires a Data Analyst/Engineer to assist in the production, analysis and intelligent use of equipment performance data at their Brisbane office in Brisbane Technology Park, Eight Mile Plains, Qld. The successful applicant will be exposed to expansive mining equipment data from around the world including Draglines, Rope Shovels, Dump Trucks and Dozers.

 

Australian Permanent Residents and Australian Citizens are preferred.

Technical Skills & Experience Required:

•  Moderate - Advanced SQL is essential.

Experience in the following is desirable:

• Microsoft Office Suite(Access, Excel, Word,  Power Point etc)
• Oracle
• Business reporting tools – Crystal Reports, Crystal Enterprise or similar
• A recognised degree in information technology is an advantage

We are looking for a confident, motivated individual with a positive attitude who is able to communicate effectively with current and new clients in the mining industry.

The successful candidate will given the chance to make their mark as a dynamic problem solver and innovative data analyst against the backdrop of the ever-changing worldwide mining industry.

This is a permanent position which provides the opportunity to grow within this expanding company.

5 Star Benefits

• Employer of Choice, with an excellent work/life balance;
• Scope to work on Global Projects;
• Travel and career opportunities;
• Work in an environment that embraces the values that have sustained the company since inception – Teamwork, Respect, Innovation and Ethics;
• A generous market driven remuneration package is on offer, commensurate with experience and exposure; Salary Negotiable
• Flexible work hours, 40hrs per week 
• Challenging and rewarding career.

For more information about the position please contact Laura Seviour on (07) 3147 8300.

 

To learn more about GBI please visit our website www.gbimining.com

 

Application procedures

 

Please email your application to Laura Seviour - laura.seviour@gbimining.com.

For more details please feel free to contact Laura Seviour on (07) 3147 8300.

Applications close 29st January 2012. Interviews will be scheduled for the 30th/31st January.

Please email your application to Laura Seviour - laura.seviour@gbimining.com

For more details please feel free to contact Laura Seviour on (07) 3147 8300.