Going Lean at Oyu Tolgoi

By Alexandre
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by Dan Headrick originally published in COMPASS Magazine

At Oyu Tolgoi on Mongolia’s vast, windswept South Gobi Desert, where nomads still watch over their herds, a new copper and gold mine stands poised to lead a struggling industry on a great leap forward. The mine, developed by British-Australian multinational metals and mining firm Rio Tinto Group, is a test case for applying the same lean principles that most manufacturing industries adopted at least three decades ago as protection from the buffeting winds of rapidly shifting markets.

Miners know rapid economic shifts all too well. After years of boom, in which demand outstripped capacity and efficiency was a luxury few had time to consider, commodity prices have sagged and new strikes are rare. Many mining companies are responding by slashing capital expenditures and pulling back on critical investments. It’s a no-growth strategy the industry has turned to time and again, closing mines, laying off workers and hunkering down until the next boom.

For the first time, however, a few innovative mines are following a different path.

“We’re in the early stages of a paradigm shift in mining,” said Mike MacFarlane, a Canadian engineer, industry consultant and retired executive vice president of AngloGold Ashanti, one of the world’s largest mining companies. “In the United States, the auto industry in the 1940s and ’50s had no peers; in the ’60s and ’70s, still no peers. In the ’80s, little Japanese cars changed everything. I would say the mining industry, in the little Japanese car analogy, is in the mid-’80s.”

An auto exec tackles mining

Sam Walsh, a 20-year auto industry veteran who is CEO of Rio Tinto, is among mining’s most outspoken champions of lean manufacturing.

“If I had to name one thing I have transitioned from what the automotive industry taught me across to what Rio’s mining operations are doing today, it would be an intense, laser-like focus on value and efficiency,” Walsh told the Australian and New Zealand Chamber of Commerce in Japan during Rio Tinto’s Lean Japan Tour in 2012. “At base level, it represents a concentrated intent to eliminate variation or waste at every stage of production.”

But miners don’t work in sheltered, automated factories with repetitive, predictable processes, and many mining executives argue that the industry’s unique nature makes it prohibitively difficult to apply lean practices. Mining companies, they argue, steer colossal-scale discovery, extraction and processing operations across remote, far-flung regions under conditions so harsh that the word “harsh” is an understatement. The markets for mining’s products are harsh as well, fluctuating with world markets and political upheavals, weather and natural disasters.

Walsh, and others like him, counter that mining is a factory and should be run like one. Rio Tinto, for example, is banishing waste by pioneering new technology that includes driverless, autonomous hauling vehicles and centralized operation control centers located far from the mines themselves. More important, however, is Rio Tinto’s emphasis on collecting and analyzing data and then using those insights to coordinate automation and technology and realize efficiencies. Such efficiencies have lowered production costs, which allow Rio Tinto to invest in expanded operations such as Oyu Tolgoi, which mines the copper critical to emerging clean energy markets.

Finding cross-silo efficiencies

Lean principles also require different functions within an organization to cooperate and coordinate seamlessly. “Mining companies are very sophisticated within their operational silos,” said Emilie Ditton, a mining industry consultant with International Data Corporation (IDC) who is based in Sydney. “They do everything from optimizing truck performance to minimizing fuel costs and conveyor belt material handling efficiency. But if a production operation meets its goals and delivers products to a processing operation that can’t handle all of the material coming in, the ultimate production outcomes are not improved.”

“Mining companies have assets, technology and access to data, Ditton said. “What they require is an enterprise-level data strategy.” Far more than new technology, she said, mines need organizational investment in data interpretation as a business strategy. But, she admits, taking a risk on a new idea requires strong leadership. “We don’t yet have a convincing story to tell on why we would take that risk.”

Oyu Tolgoi may provide that “convincing story.” This year, while most mining operations sell off assets and cut expenditures, Rio Tinto will begin construction on the mine’s US$5.4 billion underground expansion phase, which is expected to reach full capacity by 2021.

Oyu Tolgoi will deploy the latest mining technology. But the mine’s real game changer may turn out to be its application of proven, 30-year-old manufacturing industry ideas about extracting value from the business, not just the land.


Watch this customer story video  to find out how Dundee Precious Metals realized significant productivity through the application of lean methodologies and enabling software.

Follow Dassault Systèmes Natural Resources Industry on Twitter: @3DSNR

On the web: 3DS.com/natural-resources/

Managing by Metrics

By Alexandre
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Extract from the article by Dan Headrick originally published in COMPASS Magazine

Growing support for ‘lean’ mining

A growing chorus of industry leaders is calling for more mining companies to invest in lean business processes. The industry’s future, these leaders say, depends on how well mining companies coordinate dynamic information across complex operations.

“It is important for mining companies and practitioners of lean to make a clear distinction between lean thinking and automation,” said Paul Smith, director of Shinka Management, an Australian consulting firm that helps mining companies develop lean business practices.

Adopting new business models

Mining is a volatile business that traditionally operates on boom-or-bust cycles subject to the swings of nature, local politics and share prices. New technology improves production, but industry experts agree it’s not enough. Not just operational practices, but also business models, must be lean to eliminate waste, smooth out the peaks and valleys of production, avoid accidents and adjust to the always-present unforeseen.

“Open pit is easier to automate, but the underground mine is like a mini-city,” said Mike MacFarlane, a 35-year mining industry veteran who, as a consultant, urges companies to think differently. “Every day the road changes; all kinds of complex decisions have to be made along the way. The biggest lever point is engagement with employees.”

Therein lies the opportunity, and it’s not just earth-moving operations that must be managed.

Learning from other industries

Some companies are already working to retool their business models. British-Australian multinational metals and mining giant Rio Tinto Group, for example, launched an industry-first operation at its new Analytics Excellence Centre in Pune, India, to analyze massive volumes of research, productivity and sensor-collected data from the company’s fixed and mobile equipment, aiming to predict and prevent downtime and improve safety and productivity.

“The center will help us pinpoint with incredible accuracy the operating performance of our equipment,” said Greg Lilleyman, Rio Tinto’s chief executive of technology and innovation. Rio Tinto is headed by Sam Walsh, a former auto industry executive and passionate lean business proponent who is focused on mining big data to squeeze greater profits from the business and using computer simulations to predict and plan its future.

Proving the value of lean mining

At the Meadowbank open-pit gold mine in northern Canada, which has recorded 1.2 million ounces of proven and probable reserves since it opened in 2010, Agnico Eagle is demonstrating Walsh’s point. The mine has saved US$1.4 million and increased output by 70,000 troy ounces in recent months, just by managing information more smoothly to achieve efficient dump design.

It’s exactly the kind of outcome Taiichi Ohno, the Japanese industrial engineer and father of lean manufacturing, envisioned in the late 1940s as he observed that communicating information correctly was key to the smooth operation of modern supermarkets in the United States.

Ohno took his ideas back to Toyota and changed the world. Armed with the same concepts and new information tools, the mining industry today has a similar opportunity to transform itself for the future.

Read the full article here

Follow Dassault Systèmes Natural Resources Industry on Twitter: @3DSNR

On the web: 3DS.com/natural-resources/

Sustainable Innovation for Business and the Planet

By Alexandre
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The world’s population is expected to reach 9.7 billion people in 2050. There are already 7.3 billion of us today. This population is also becoming more and more urbanized.

With an increasing population comes ever greater demand for the planet’s finite resources, such as minerals, water, agriculture, forestry, and oil and gas. Along with growing appetite for fuel, food, and inputs into the products we depend on in our daily lives, there is of course also a price to pay – the impact on the environment.

How can we best manage the limited resources we have while ensuring we are being respectful of the most precious thing we have – the home all 7.3 billion of us share? Will increased competition lead to clashes over water resources, or can we find a way to manage them more effectively? Is it inevitable that we turn to outer space to find minerals when we have exhausted them here? Some predictions have commodities such as copper, vital in many consumer goods, expected to be in production decline in less than 20 years.

At the same time questions are being asked the future of Natural Resources and humanity globally, communities are demanding greater social responsibility from the enterprises that operate projects locally. Communities are seeking better environmental management and more insight into how a project will benefit the local citizens over the course of its life.

Businesses are asking the questions about how they can respond to increasing social license obligations and maintain profitability at a time when commodity prices are variable and unpredictable.

Through the world of 3DEXPERIENCE, it is possible to bring all stakeholders together in the virtual world. With this, natural resources projects and their impact on the environment and communities can be simulated and communicated clearly.

The virtual world of collaboration and visualization will bring with it social innovation, uncovering new ways of managing natural resources, improving the efficiency of how they are recovered. This will result in a win-win for people and business as fuel consumption and emissions are lowered, decreasing the impact on the environment and lowering operating costs.

In parts of the world where water is scarce, it would be possible to bring together scientists from anywhere in the world, along with planners, and government officials in the virtual world to find ways of using a limited water supply more efficiently. They could test ideas such as the utilization of alternative types of crops, which were dependent on less water.

The time to start thinking differently about how we manage natural resources is now, not 2050. Populations are growing rapidly, putting pressure on natural resources in even the richest countries. The good news is, many are starting to have conversations now.

Follow Dassault Systèmes Natural Resources Industry on Twitter: @3DSNR

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