Benchmarking mine equipment productivity against industry standards

If I can reiterate what I put in my last blog; worldwide best practice excavator performance is up to 42% higher than average; best practice shovel performance is up to 37% higher than average; best practice trucks are up to 65% better than average; best practice draglines are up to 32% better than average and best practice drills are 282 per cent above average.

So why do mines continue to ignore what others are doing with the same equipment? If the best practice for a 28 CuM class excavator is 23Mt per annum and the average is 13.5Mt, why don’t mines do something about it? Is the $15 million lost from the bottom line of no consequence? The chasm between average and best practice remains partly through ignorance of what best practice is and partly because it is just too difficult for some.

Consequently, many mine engineers and management need excuses for poor performance and comparing their performance against industry standards (benchmarking) is definitely not on the agenda.

“But my operation is different”. It is the standard response when talking about comparing mining equipment. Sure, every operation is different. Some dig deep and others are shallow. Some dig ore and some dig prestrip. Some have hard digging and others soft digging. Some have long hauls and some are short. Comparing with other mines (benchmarking) won’t answer all questions. In fact it will raise quite a few questions which will need to be answered. What can I learn about areas for improvement? What are others achieving which I should be able to do? Many mines are shocked by first time benchmark results and dismiss it through “But my operation is different. We can’t do much better than we are now.” These mines are consigned to mediocrity.

There are many reasons I am given for mines not benchmarking their equipment performance against mining industry standards from mines around the world. You probably can’t come up with an excuse I haven’t heard. If you are looking for an excuse then let me help you out.

• The Stock Exchanges – don’t the mines already do this?
• Executive Management and Boards of Directors – of course our mines do that…….don’t they? We have enough mines to have a reflection of equipment capability somewhere in our company………..don’t we?
• Mine Managers – don’t let the Executive Management and the Board of Directors know how we are really performing; just don’t take the risk. Emphasise how “we are different” and a comparison with others is not helpful.
• Superintendents and Engineers – we are doing better than last year so we only compare against last year – that is our only real measure of how we are going.
• Consultants – we don’t have a wide range of actual performance data so we don’t use industry standards for equipment in our mine plans; besides if we use real rates, the client may not be happy with the result.

Productivity is more than having the right equipment and processes. It is about the people. It is about you. You can continue to be mediocre – just keep doing what you have always done. But the day is coming soon where this industry will no longer accept mediocrity. My crystal ball says that we have entered another extended period which will see mining companies struggling with low prices not too long from now. In fact my crystal ball says that the next boom won’t start before 2023. The last extended downturn from the mid 1980’s to around 2002 was characterised by mines improving output per person, (ie. getting rid of excess people). People are now pretty thin on the ground and the next extended downturn, which we entered in 2009, will be characterised by those mines and companies which survive through improvements in equipment efficiency. If you want to survive, you won’t have a choice. You can’t keep cutting employee numbers to give an illusion of improved efficiency. Mines will have to stop making excuses and follow the lead from that group of mines which actively compare themselves against others and use the knowledge to actively implement change.

I would like to recount the experience of a truck and loader operation here in Australia. They were poor; very poor. A new manager stepped in and refused to accept the way the fleets were being run. They contracted a trainer to help them improve and they did. In fact they doubled annual output. A new pit layout, a new focus on utilisation, new dippers, etc. We then benchmarked their performance against best practice around the world. They were amazed when they found that their equipment was still on average 38% below best practice. That was five years ago and we have worked with them since then. In 2009 this mine achieved best practice across their fleets.

In summary, it is up to you. There is a lot of knowledge out there so acquire it, absorb it and apply it.

Graham Lumley - CEO GBI Mining
BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Productivity inefficiencies in the Australian mining industry

Many mine operators believe that 21st century open cut mining in Australia is a mature and efficient exercise.  These people are wrong!  It might be mature but it is certainly nowhere near as efficient as it should be.  This is a fact supported by our 6,000 years of mining equipment data.  This is despite significant changes achieved over the last 20 years which have come about through the reduction of restrictive work practices and structural change in the industry. 

Shareholders and Boards of Directors are been informed that Australian open cuts are now among the most efficient in the world.  The bottom line is that the average mine or contractor is not doing the right thing by their shareholders and utilising this very expensive equipment at anything like best practice productivity.   Mine operators have cut worker numbers substantially which has created the illusion of efficiency through improved output per employee but the average mine is currently underperforming across their equipment fleets by 20-50 per cent depending on the equipment.  Best practice is achievable and is what the best operators are actually achieving worldwide, not some fictitious and unachievable number.

You start to get a picture of what this industry is doing when you consider a 500 tonne class excavator, which on average under-performs best practice by 43%, is actually costing the mine in lost potential margin upwards of $50 million per year for one fleet.

A brief look at the last 50 years provides an interesting insight into the development of the current situation.  Until the early 21^st century, the mining industry, with the exception of a few isolated commodities over short periods of time, provided little in the way of profitability to its owners.  During the 1960s and 1970s, an industry-wide culture of industrial deadlock and regulatory institutions that quarantined Australian operations from global competitive pressures made workplace reform very difficult. The wealth generated from mining operations provided relatively little for the shareholders.  Australia’s mining companies went through difficult times described by Leigh Clifford as ‘profitless prosperity’.

By the mid-1980s, parts of the Australian mining industry started to respond to the opportunities and threats of globalisation.  For example, the experience at Robe River in Western Australia where Peko Wallsend terminated the workforce in 1986 due to restrictive work practices was one of the first attempts to address restrictive work practices.  They achieved over 200 per cent improvement in output per person.  More than 10 years later Rio Tinto eliminated similar restrictive work practices in their coal mines. The coal mines in the Hunter Valley increased output per employee by over 100 per cent.  Most of this was simply less people shifting the same amount in the same inefficient ways that they had always done; they just had less people sitting around watching.  But what the mines did achieve was to get Executive Management, Boards of Directors and shareholders off their backs about efficiency.

So how do mines in 2011 perform with respect to large equipment productivity?  Best practice for a piece of mining equipment is defined as the 95^th percentile of annual output / tonne of rated capacity.  This means that one in 20 similar pieces of equipment achieve this level of performance.  In excavators best practice is 42 per cent higher than average and rope shovels the difference is 37 per cent.  In draglines the average difference between best practice and average is 32 per cent.  Best practice drills are 282 per cent above average.  Drills are an interesting case.  There is a group of South American mines which drill 200 per cent more metres than the best practice in Australia.

The losses incurred by the Australian mining industry due to inefficient use of expensive equipment are large and are costing shareholders a lot of money.


Blog Written By:
Graham Lumley - CEO GBI Mining Intelligence
BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ