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Producing Smart Tonnes Manish Garg
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Introducing HDR | Salva
HDR Inc. is a global, employee-owned architecture, engineering, consulting and
construction services firm. With more than 8,000 professionals in nearly 200
offices worldwide, committed to helping clients manage complex projects and
make sounds decisions.
HDR | Salva is a mining and resource industry consultancy providing
independent, strategic and tactical advice and personalised professional services
to exploration and mining companies, engineering firms, financial institutions and
investors.
HDR | Salva, delivers exploration, mining and commodities consultancy services
to some of the world’s largest mining and investment firms.
Markets to Exploration to Mining, HDR | Salva has the capabilities to assist in all
phases of the mining lifecycle.
Integral to our business approach is the quality of our consultants. Our
consultants have the experience and expertise to deliver critical business
improvements that drive sustained performance benefits for our clients. We
demand both intellectual and service excellence from every member of our team.
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Mining Office Locations
Resources Head Office Salva Pty LtdLevel 11, 82 Eagle Street | Brisbane, 4000 | AUSTRALIA
P: +61 (0) 7 3211 9911 | E: [email protected]
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List of Clients
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Manish is a leading practitioner in the
design and implementation of business
strategy and organisational capability
systems. With a strong technical and
leadership background, Manish has a
proven record in the implementation of
systems that drive an improvement
culture of increased profitability and
teamwork. Before working for Xstarct
Mining Consulting, Manish has held
operational and strategic management
roles with Rio Tinto, BHP-Billiton, WMC
Resources and Oceana Gold.
Professional Qualifications
Master of Applied Finance (Securities Institute Australia)
B.Engg (Minerals Engineering), MAusIMM, MAICD
Skills Summary
• Manish has significant experience in Project and Programme Management
including technical feasibility studies, design and implementation of
business improvement systems and improvement projects.
• Design of implementation framework for business improvement projects,
evaluation of cost saving opportunities, design and implementation of
business improvement systems.
• Design and implementation of integrated cultural and systemic systems and
tools to affect change.
• Mentoring of senior managers in change and delivery of leadership training.
Career History
2011-Present HDR | Salva : Director Consulting Services
2009 – 2011 Xstract Mining Consultants: Principal Consultant
2006 - 2009 Rio Tinto, Brisbane, QLD: Group Manager – Business Improvement
2005 - 2006 BHP Billiton, Wollongong, NSW: Manager - Business Excellence
2004 - 2005 Oceanagold Ltd, NZ: Manager, Business Improvement & Planning
2002 - 2004 WMC Resources Kalgoorlie, WA: Manager, Business Planning
2000 - 2002 Pasminco Limited Melbourne, VIC: Manager, Business Analysis
1999 - 2000 Pasminco Limited, Melbourne, VIC: Senior Business Analyst
1992 - 1999 Pasminco Limited, Elura Mine, NSW: Superintendent, Metallurgy
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Coal Mining in Indonesia
Current State of Play
Market leader in global thermal coal supply.
Estimated Coal Production in 2013 ~490Mt with Exports at ~400 Mt.
In 2013,coal production grew by 7.6% y-o-y while export registered a
growth of 5.4% y-o-y, despite of recent slump in coal price .
200 235
299 353
384 405
37 43 55 63 72 86
0
100
200
300
400
500
600
2008 2009 2010 2011 2012 2013
Exports (Mt) Domestic Demand (Mt) Production (Mt)
237 277
354
416
456 491
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More Tonnes or Smart Tonnes!
On the profitability front, current results from Indonesian coal
producers are not encouraging!
× 47% YoY decrease in Net Income for Adaro;
× 40.8 % YoY decrease in profit for Kideco;
× A net loss of US $ 7.2M for Santan Batubara;
× 42% YoY, decrease in profit for PTBA; and
× A net loss of US $31M for Bayan Resources
Result - An Ailing Coal Industry with significant job losses (much more
than 100,000) being quoted.
Are Coal Producers chasing just tonnes or Smart Tonnes !
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Maintaining High Volume at low Margins
A Short Term Strategy!
Coal Producers producing more tonnes in to maintain same revenue level and
profit.
– A short term strategy with a fundamental flaw— a very high market
penetration rate is required which is tough to achieve for commodity like
coal.
Companies generally push large tonnes in the market because of
– Decommissioning and recommissioning cost for mining equipment is high
– Not very flexible mining plan which allows flexible production ( may be
governed by geological issues)
– Labour related issues
– Contractual Obligation (Take or Pay arrangement for Australian Coal
Producers)
Long term losses always outweigh short term gains
– Excessive production always ends in oversupplying coal in the market
resulting in a long term low price environment
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What needs to be done in difficult
price environment !
Focus on Quality - monitoring can be done a mine site to demand
centres
Demand Driven Planning - similar to metal mines can be done in
Indonesia by selective mining
Better Overall Equipment Efficiency (OEE)
Improved mine planning techniques
Productivity improvement
Better labour and contract management
Reduce waste in Mining Processes
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Need for Change!
The mining industry needs to simultaneously improve productivity
and reduce costs
Achieving More with Less Resources is perhaps the industries
greatest challenge
This is really the management dilemma
– “ How can I achieve more with less?”
– Developing organisational capability to perform in a cost-driven
environment is perhaps the most difficult leadership challenge facing
today’s managers in the mining industry
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What Really Works?
Major Techniques
Strategy into Action/Plan
Six Sigma
Theory of Constraints
Top Down - Deep Dive Approach / Break-through
Lean Manufacturing
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Means Owner Measures Targets Milestones
Objective:
Owner:
Measure: Target:Ref. no.
Q1 Q2 Q3 Q4
Dept.
Business
Plans
Business
Strategy to 2018
Business Plan
for FY14
KEY BUSINESSPROCESSES
LEAN OPERATIONSPEOPLE DEVELOPMENT
GoalsGoalsGoals Targets
SHAREHOLDER VALUE
GoalsMeasures TargetsMeasures TargetsMeasures TargetsMeasures
KeyObjectives
KeyObjectives
KeyObjectives
KeyOutcomes
Mission: CUSTOMER VALUE
YEAR:
KEY BUSINESSPROCESSES
LEAN OPERATIONSPEOPLE DEVELOPMENT
GoalsGoalsGoals Targets
SHAREHOLDER VALUE
GoalsMeasures TargetsMeasures TargetsMeasures TargetsMeasures
KeyObjectives
KeyObjectives
KeyObjectives
KeyOutcomes
Mission: CUSTOMER VALUE
YEAR:
P r o e c
D e s c p t o n
K e y m e a s u e m e n s a n d a r g e t s :
S c h e d u e s s u e d a t e P e p a r e d b y :
K e y a c i v i y c o m p e o n d a e :
Project Charter
s
Business Plan
for FY14
KEY BUSINESSPROCESSES
LEAN OPERATIONSPEOPLE DEVELOPMENT
GoalsGoalsGoals Targets
SHAREHOLDER VALUE
GoalsMeasures TargetsMeasures TargetsMeasures TargetsMeasures
KeyObjectives
KeyObjectives
KeyObjectives
KeyOutcomes
Mission: CUSTOMER VALUE
YEAR:P r o e c
D e s c p t o n
K e y m e a s u e m e n s a n d a r g e t s :
S c h e d u e s s u e d a t e P e p a r e d b y :
K e y a c i v i y c o m p e o n d a e :
Project Charter
s
Means Owner Measures Targets Milestones
Objective:
Owner:
Measure: Target:Ref. no.
Q1 Q2 Q3 Q4
Individual
Score Card
Business Planning
Strategy into Action
Drives Clear message & Accountability !
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Business Planning:
Balance Scorecard
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Balance Scorecard – Outcome
Australian Coal Mine
Employee Perception
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Six Sigma
Six Sigma is a means of measuring and managing processes to consistently
deliver outcomes that meet customer and other stakeholders’ expectations.
It is a structured data driven methodology for reducing waste from process,
products and other business activity while having a positive impact on Cash
Flow.
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Six Sigma 6σ
Stable & Capable
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Six Sigma Method
Define
• Define the problem and process improvement opportunity
• Define customer Requirement
• Define current process
Measure
• What do we need to improve ? Can we measure this ?
• Understand the variation in the process (not average)
• Fix the base line
Analyse
• Analyse the process
• Develop hypothesis around root causes
• Validate root cause by data Analysis
Improve
• Generate improvement ideas based on root causes
• Evaluate & select optimal solution
• Implement improvement on pilot basis
Control
• Review Results
• Modify solutions if required
• Roll out solution
• Assure that improvement will sustain
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Theory of Constraint
An overall philosophy developed by Dr. Eliyahu M Goldratt
TOC is applied logically and systematically to answer three questions
– What needs to be change ?
– To what to change to ?
– How to cause the change?
TOC postulates any company can improve its profitability and profits by
– Increasing throughput
– Reducing Inventory
– Reducing Operating cost
Five Focusing Steps to achieve desired profitability and profits
Five Steps
1. Identify the
constraint
2.Decide how to
exploit the constraint
3.Subordinate everything else to the Constraint
4.Elevate the System
Constraint
5. If the constraint has been
broken, go back to Step
1
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Clear Strip Top
Soil Drill Inventory Inventory Inventory
Blast Strip Blast/Rip Inventory Inventory Inventory
Mine Crush Process Inventory Inventory Inventory
Load
Trains Rail
Unload
Trains Inventory Load
Ships
TOC in Mining
Identify the complete system
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Capacity Balance
0%
20%
40%
60%
80%
100%
120%
140%
160%
Drilling Blasting DRE SHE Trucks Coal loaders Coal Hauling Crushing CPP Loadout
Potential Current !00%
TOC Analysis
..Focus on Capacity & Utilisation
All these processes are constraining total system output due to either:
• Insufficient installed (potential) capacity or..
• Under utilisation of installed capacity (underperformance)
Different management responses are required…
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Capacity Balance
0%
20%
40%
60%
80%
100%
120%
140%
160%
Drilling Blasting DRE SHE Trucks Coal loaders Coal Hauling Crushing CPP Loadout
Potential Current !00%
TOC Analysis
..Focus on reducing cost
• Excess Potential Capacity
• Excess Actual Capacity
• Implies = not a constraint
• Focus = minimise cost
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Top Down – Deep Dive
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Top Down – Deep Dive
Analyse Find Root Cause Prioritise
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Lean Manufacturing
..the elimination of waste
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Lean Manufacturing
..some tools in mining industry
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Start with Safety Cross
‘Tell a story’, work from left to right
Metrics should be reviewed
Daily/Weekly/ /Monthly
KPI templates have very clear targets and control limits
Data is updated by hand, prior to the meeting start time
Report by exception, agree
action for non conformance
Strategic Pillars help to identify measureables and align the team to the organisational goals
Visual Factory The KPI Board…
Is a complete status of the process and people
Metrics must be measurable and controllable by the team
• If we cannot measure it, how can we control it?
• “What gets measured, gets done!”
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Benchmarking
..against Peers
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TOC v Lean v Six Sigma?
Suggest it’s not either or…but all of
the above!
6σ is a tool-kit that primarily
analyses individual process
variation/quality
Lean focuses on the elimination of
waste
TOC focuses on maximising
process flow/throughput
6σ TOC
LEAN
NB : - Most mining organisation uses “6σ”as a holistic term for
Business Improvement
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What works?
Executive must set the standard.
Targets must be stretch.
Create and articulate the vision – expectation that this is the “way we
do business at RTCA”
Drive accountability for KPI’s – “can’t manage what you can’t
measure”
Measure performance of KPI’s – timely, feedback, urgency
Review progress to targets – through Operating & Executive
committees
Human Resource to support
Audit sustainability of improvements – agree base case, counter KPI’s
Communicate – recognise successes
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Value Driver Tree: Linking business activities to the bottom line
30
Value Driver Trees (VDTs) are a useful mechanism to determine the affect of business activities on the overall value (eg. “if I improve X, will it affect our value?”). This visual-based helps people understand the complexity of and the relationships between different key business activities. It also can prioritise the many things we have to do and drive accountability for achieving desired outcomes. Selected key points from our approach are outlined below: Defining Valued Outcomes • Identify the main overarching value of the organisation (eg. “we provide... or our goal is to be...), or highest level economic outcome (ROI). • Next, determine the key business functional areas (economic drivers) that deliver that overall value. • Finally, determine the business activity drivers and their measures that make up the key business functions. • Consider different perspectives of Value - cost vs profit, customer vs business unit, etc. This process is illustrated in the diagram on next slide..
HDR | Salva has found that our clients often have trouble ensuring that the key measures (KPI's) they have set for their people will actually drive business success. This is usually because those accountable for KPI's don't have a tool to allow them to see this link. Our experience highlights the importance of the overall approach, not just to defining the valued outcomes but also to ensure these are realised.
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Productivity Improvement Tools
Value Driver Trees
Cost Optimisation Process
Strategic Thinking
Process Mapping
As Is – To Be
Ranging Analysis
Process Optimisation
Benchmarking
Prioritisation Matrix
Risk Analysis with Monte Carlo
Simulation
Throughput Rate
648 99.1%
ROM Tonnes
416,971 95.2% Availability
Coking 91.3% 101.4%
351,885 97.2%
Coal Produced Utilisation
361,866 98.8% 95.2% 95.2%
tonnes 0 C C Yield
84% 102%
Energy
9,981 219% Energy Yield
2% 230%
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Driver Tree using graphics
Plant Availability
50%
60%
70%
80%
90%
100%
Jul-04 Oct-04 Jan-05 Apr-05
Actual Target
Plant Intensity
(tph)
400
500
600
700
800
900
Jul-04 Oct-04 Jan-05 Apr-05
Actual Target
Monthly Feed Tonnes
200000
300000
400000
500000
600000
Jul-04 Oct-04 Jan-05 Apr-05
Actual Target
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Case Study: VDT Application
Load & Haul Performance Analysis
33
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Cost Data Analysis:
Visual Tools
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LOGIC TREE EXAMPLE:
HOW DID ROBERT MAXWELL DIE?
How did Robert
Maxwell die?
He was murdered
He may not be dead
He died of natural causes
He committed suicide
Poison
He’s living under his old identity,
but undetected
Other health problems
Other means
Gunshot wound
He has taken a new identity,
having lost a lot of weight
Pulmonary edema
Self-inflicted gunshot wound
Heart attack
Knife wound
Threw himself overboard
Considers
all options
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Typical Assignment
Key Tasks
Identification of key drivers for load and haul
Gathering base line /current performance measures
Benchmark measures against ‘leading practices’
Adjust measures for future plans
Develop potential cost of operations
Develop KPI’s for contract management (from operations perspective)
Potential Time / Cost
• Information Gathering - 5 days (3 days at site)
• Development of Driver tree framework – 5 days
• Syndication and user engagement – 4 days (2 days at site)
• Benchmark data and bottom up cost based on activities – 5 days
• Final handover – 4 days (2 days at site)
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How HDR | Salva bring benefits
HDR | Salva works closely with our
clients in assisting in optimising the
value through efficient mining process.
Our team of analysts specialises in
identifying process across the entire
mine to port value chain.
We bring a systematic approach to the
review and optimisation of the mining
operation and the ability to build robust,
ongoing management processes that
maximise the return on equity to our
clients.
Services • Strategic management
• Mine to Port Optimisation
• KPIs and KPDs
• Implementation Plan
• Internal Peer Review
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Linking business activities to the
bottom line
HDR | Salva has found that our
clients often have trouble ensuring
that the key measures (KPI's) they
have set for their people will actually
drive business success. This is
usually because those accountable
for KPI's don't have a tool to allow
them to see this link.
Our experience highlights the
importance of the overall approach,
not just to defining the valued
outcomes but also to ensure these
are realised.
We have found Value Driver Trees (VDTs) are a useful mechanism to determine the affect of business activities on the overall value (eg. “if I improve X, will it affect our value?”). This visual-based helps people understand the complexity of and the relationships between different key business activities. It also can prioritise the many things we have to do and drive accountability for achieving desired outcomes. Selected key points from our approach are outlined below:
Defining Valued Outcomes
Identify the main overarching value of the organisation (eg. “we provide... or our goal is to be...), or highest level economic outcome (ROI).
Next, determine the key business functional areas (economic drivers) that deliver that overall value.
Finally, determine the business activity drivers and their measures that make up the key business functions.
Consider different perspectives of Value - cost vs profit, customer vs business unit, etc.
This process is illustrated in the diagram on next slide..
38
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HDR | Salva Advantage
A well constructed and managed VDT
will give your business managers a
simple but powerful tool to keep their
staff focussed on the key economic
drivers to deliver business value.
The VDT makes clear role accountability,
provides a trigger for business variance
identification and directs people to where
improvement projects should be
focussed. Key benefit measures can be
communicated quickly and clearly up to
Board and out to all employees.
Automation of data collection keeps
focus on managing improvements – not
on “checking the numbers”.
Examples of recent engagements:
Rio Tinto
Development of fact book for accessing improvement value
and dependence on one unified model across Rio Coal
operations
Change management of major cross business transformation
project including use of VDT's to link front line process
changes with overall improvement KPI's
BHP Billiton
Development of logistics contractor contract based on VDT’s
Design and implementation of VDT's for process plants
OceanaGold (NZ)
Design and implementation of VDT's across mine and
processing operations
Nickel West
Design and implementation of VDT's for smelting operations
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Case Studies
Just Broad Overview is shared in this forum to respect client’s
privacy and IP!
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Ore & Waste Fragmentation
Gain share with Orica Mining Services – tapping into best explosive
expertise
Improved fragmentation of waste blocks results in improved digging
efficiency, increased excavator loading productivity and reduced
wear on excavator components
Improved fragmentation of ore blocks bolster improvements to mill
throughput and ROM loader efficiency
Both ideas have a combined annualised value of $3 Million.
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Mine Design
Redesign of Pit 2, Pit 3 North and FRIM pits to bring ore mining
forward to present time and replace Medium Grade stockpiles
which would otherwise be mined presently or shortly in the
future
Pit 2: Brought 2,140 oz forward
Pits 3 North: Displacing Medium Grade stockpiles to the tune of 5,414
oz,
FRIM: Displaced Medium Grade stockpiles, 598 oz
All redesign projects completed.
Total value from Aggressive Re-design: $6.47 Million
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Berm Robbing
Aim is to mine extra ore from Pit3 which was left behind for wall support purposes
As the pit is filled up with waste, there exists opportunity to mine berms that were inaccessible to mining before
Project has been completed. $2.1M of benefits in the bank.
Pit
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Mining Cycle Efficiency
Load Haul Dump Optimisation
On board system (Minestar) used to capture an accurate/ detailed
picture of the Load and Haul cycle
– Drilling & Blasting cycle
– Load and Haul fleet availability
– Delays
– Pit Dewatering
– Haul Path variability
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Improve Haul Path Variability
Co-operative with Caterpillar and Local Service Agent
Main Goal is to improve trucking (haulage) productivity and reduce
wear and tear on haulage fleet components (cost savings in
maintenance and ancillary gear usage)
Scope is to reduce haul path variability to within ± 200 mm and better pit
floor condition control
CAT CAES system being procured and installed in D10R dozers on site
Potential annualised value of idea: $3,200k
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Truck Utilization & Pay Load
Training
Right Tools & Info
Tracking & Reporting
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Tyres
Main Goal is to reduce wear and tear on haulage fleet components
(cost savings in maintenance and ancillary gear usage)
Scope is to reduce haul path variability to within ± 200 mm and better pit
floor condition control
Tyre Bay at Mine Crib:
– Obvious benefit is the reduction of truck travel time to get tyre changes – trucks
currently have to travel to the Main workshop
– This ‘lost’ time can be better utilised for extra production or machine variable
operating cost reduction
– Safety implications are also improved because there will be fewer people &
machines sharing a small amount of space at the Main workshop
Annualised value of idea: $3,200k
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Reduction of Mining Fleet
Consumables Usage
Includes fuel, GET, lubrication, tyres etc.
Tracking and monitoring systems being improved
Currently accounts for 20% of total mining operating costs
Combine efforts of alliance partners
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Improving Mining Utilisation
Hot Seat Changeover
– Combination of Hot Seating and Shift Change Optimisation activities
– Crews to start their shifts from Mine Crib Room rather than from the Main
Office
– Reduction of production time lost due to shift changes and lunch breaks
– Gain of extra 40 minutes production a day
Refuelling Bay
Some Routine Preventive Maintenance at Mine Crib
Tyre Bay at Crib Hut
Ore Mining at Night
Training Simulator for Load & Haul Operators
Pit Dewatering
Operator Awareness for targets!
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Mill Throughput Increase
Goal was to increase Mill throughput to a consistent 640 tph
The design flaw in the discharge end of the mill was responsible for
reduced throughput as the slurry was not effectively exiting the mill due
to the grates being too stiff and continually pegging
Modifications were made to increase the flexibility and aperture of the
grates.
The idea has a value of $11,000,000 per annum.
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Some Engagements
A well constructed and managed Business Optimisation Program will give your business managers a simple but powerful tool to keep their staff focussed on the key economic drivers to deliver business value. This makes clear role accountability, provides a trigger for business variance identification and directs people to where improvement projects should be focussed. Key benefit measures can be communicated quickly and clearly up to Board and out to all employees. Automation of data collection keeps focus on managing improvements – not on “checking the numbers”.
Consultant’s Experience: Rio Tinto • Development of fact book for accessing improvement value and dependence on one unified model across Rio Coal operations •Change management of major cross business transformation project including use of VDT's to link front line process changes with overall improvement KPI's BHP Billiton • Development of logistics contractor contract based on VDT’s • Design and implementation of VDT's for process plants OceanaGold (NZ) •Design and implementation of VDT's across mine and processing operations BHP Billiton Nickel West * Design and implementation of VDT's for smelting operations
Manish Garg [email protected]
+61 407 771 528