May/June 2013 - The ASIA Miner

Mine Design
Western Australia, where the initial $1 billion
cost more than doubled between 2005 and
2008. The mine failed, and BHP sold it to
First Quantum Minerals for $340 million in
2010. First Quantum in turn spent some
$370 million on re-engineering it and bringing
it back into production, which itself was
nearly double the company’s original $190
million re-engineering estimate.
In point of fact, cost overruns are more of
the rule than the exception. In November, the
management consultants Accenture published
a report titled Achieving superior delivery
of capital projects, which makes alarming
reading if for no other reason that it highlights
the scale of the overrun problem.
The survey that provided the foundation
for the report sought the views of 31 senior
industry respondents with responsibility
for capital projects around the world. Of
these, 22 respondents were involved with
mining projects, and the other nine with
metals. According to Accenture, “less than
a third (30%) of the respondents reported
staying within 25% of approved budgets
for all projects, and less than a fifth (17%)
said they completed all projects within a
10% budget range.”
Put in financial terms, the implications—
as well as the sums involved—are huge. Accenture
estimates that capex for metals and
mining projects will have been more than
$140 billion last year, with the prospect of
$1 trillion to $1.5 trillion being spent between
2011 and 2025. “With $100–$200
billion in annual spend, the impact of project
delivery overruns on individual companies
and the industry as a whole is enormous,”
the company commented.
“When asked what typically causes delays
in project schedules, survey respondents
cited the availability of talent (57%), new or
unconsidered regulatory requirements
(45%) and insufficient detail during the planning
stage (42%),” Accenture added, while
pointing out that mining projects are often
more complex than metals projects, so are
more likely to experience longer delays and
higher cost overruns. In some ways,
though, that seems counter-intuitive since
smelter and metallurgy projects in general
can be highly complex and, in consequence,
risk budgets being broken. The
high capex requirements for today’s nickellaterite
treatment plants is a case in point,
relying as they do on autoclaves and sophisticated
hydrometallurgy.
Leading Attributes and Recommendations
However, that is by far from being the whole
picture, since a host of other factors can come
into play. Looking purely at the key reasons for
cost overruns, and setting aside the question
of whether or not a company can attract competent
staff and contractors (which is an issue
in its own right), it is difficult to understand how
projects can fall foul of factors as obvious as
‘unconsidered regulatory requirements’ and
‘insufficient detail during the planning stage.’
Those, frankly, are fundamentals that any company
considering a major investment should be
capable of addressing, and it begs questions
that shareholders should be posing if they feel
that their interests (and investments) are not be
husbanded properly.
Still, there are some companies that can
and do deliver projects on schedule and
budget, even faced with the pressures of
skilled-labor shortages and rising equipment
costs. According to Accenture, a
number of common attributes identify them:
• They make fewer revisions to the
approved schedule;
• They make significantly fewer
changes during construction; and
• They have greater confidence in their
own culture in delivering projects.
In addition, these companies make wider
use of analytics, including key performance
indicators, and have better access to performance
data across multiple dimensions,
such as timeliness, accuracy, range and
source.
In its report, Accenture defined five key recommendations
for effective project delivery:
• Establish strong project governance
and risk-management tools;
• Proactively manage external stakeholders’
increasing expectations for
sustainability;
• Optimize scarce talent through portfolio
management, organizational
flexibility and training;
• Integrate information systems among
capital project players; and
• Accelerate operational readiness.
“Addressing cost and time objectives of
capital projects is a prime opportunity to
achieve competitive advantage,” Accenture
concluded. “Ideally, capital projects should be
run as high-stakes businesses with targeted
objectives, clear delivery strategies and careful
monitoring to track progress toward high
performance.” And this, of course, is where
good design has a major part to play.
Sector Movements
Among consolidations that have recently
taken place within the mine-design software
companies, the current wave of acquisitions
seems to have started in April 2010 when
CAE bought out The Datamine Group. It followed
this in January 2011 by adding Century
Systems Technologies to its portfolio,
thereby boosting its capabilities in geological
data-management and governance systems.
Shortly afterward, Switzerland-based ABB
acquired the Australian mining-software developer,
Mincom, bundling it into its existing
software systems unit as Ventyx. During
2012, meanwhile, the major change came
with the French 3-D specialist, Dassault
Systèmes’, $360-million purchase of Vancouver-based
Gemcom, now part of Dassault’s
Geovia brand. At the time, its CEO
Rick Moignard explained the potential benefits
of the move: “Advanced technologies
in 3-D modelling and simulation will not only
enable engineers and geologists to model
and visualize resources but also improve
sustainable mine productivity,” he said.
Orebody modelling led the way in bringing
computerization into mine design. Today’s
mine engineers have a plethora of competing
products to assist them in interpreting geological
data and optimizing resource extraction.
Some software focuses specifically on
geological resource data; other packages address
surface-mine layouts; yet more take
specific mining methods such as block caving,
providing the design department with the
tools to model the resource and apply ‘whatif’
tests to determine the effects of production
schedule changes or commodity-price
movements on the operation’s viability and
resource utilization.
In the remainder of this article, E&MJ
looks at some of the mine-design software
packages that are currently available. There
are, of course, many other providers; the
common thread here is that each of the
suppliers mentioned was among those that
exhibited at last year’s MINExpo.
RungePincockMinarco
In 2005, the Australian software developer,
Runge, took the unexpected step of buying
out U.S.-based mining consultants, Pincock,
Allen & Holt, with the subsequent addition
of Minarco-MineConsult boosting its
consultancy arm. In December, the company,
which today claims to be the world’s
largest independent group of mining tech-
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