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au


5 elements that will change the mining business model of the
future
The mining sector has primarily relied on the traditional mining business model in order to improve
productivity. With a focus almost exclusively on geology, mining and processing, this model is less
relevant in the 21
st
Century environment.
Trends are now demonstrating that enabling infrastructure is the dominant cost in developing new
mines. As a result, mining companies need to look beyond the traditional mine development
methods and to new strategies to improve productivity and ROI.
Andrew Keith, Leader Mining Infrastructure, Aurecon explores the five elements that should be
taken into consideration when creating a mining business model for the future and how this will
impact on the productivity of the Australian Mining Sector.
1. Cost should not be the sole focus
To work out where to apply ones focus, one must first understand what the goal is. It is not the tru
goal, the raison detre of any mining company to minimise cost. To truly minimise cost would be to
close the mine and let all the staff go.
Cost is, at best, only half the equation. Mining companies need to focus on how to get better value
from the resources they have. Certainly cost is a critical element you dont want to spend more
many than you have to, but its not everything.
What we should be talking about is value. The problem with reactive cost-cutting, particularly in the
industry down-turn, is its the wrong aspect to focus on exclusively and can potentially destroy mine
value.
From a micro point of view, finding out where there is waste in the system and trimming costs is
vitally important. In the recent boom the industry had a focus on time to market which was the
most important thing and consequently cost was what it was. As a result, the industry got a bit fat,
dumb and happy. Now theres a downturn, paying attention to cost is obviously important to return
the industry to a more sustainable footing, although it really should have been there all along.
Many in the industry recognise that the lean and innovative approach to keeping costs down and
value high that had existed through numerous market cycles of price variation had been somewhat
lost through the super boom of the early 21
st
century.
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2. Its time to discard the 20
th
Century approach
Currently we have the issue of the industry using the 20
th
century mine development methodology
that was right for when mines were less remote and less complex, but now out-dated. This mindset
focused almost exclusively on getting your resource geology right, your mine plan right and your
processing right and the rest of it took care of itself. Current Australian Bureau of Statistics data
shows that over 70 per cent of the cost of a mine development is in supporting and enabling
infrastructure. So weve potentially got the cart before the horse by using the 20
th
century approach
to mines. It will have worked well when mines were more accessible and of higher grades and lower
complexity, but with the trends in the industry its no longer as relevant as it should be.
PWC conducted a survey back in 2012 that showed only two and a half per cent of mining projects
were successful. So 97.5% were failures. That compares with mega projects across all industries in
which a still poor but much higher figure of 35% failure rate according to Ed Merrows book
Industrial Mega Projects. The mining industry figure is therefore clearly not good enough and
weve got to change the approach to mine development to deal with current industry realities. There
is no way that the industry can expect improved results by doing the same thing over and over again.
For miners to improve their productivity and return on investment, they need to understand and
look across the whole value chain and try to integrate their decisions across that value chain. This
involves making sure that infrastructure, water supply, power supply and haulage of product to
market, are all integrated into the decisions that are made in the traditional locations of the mine
and process plant, so they get an optimum whole of mine business approach to these things, rather
than last centurys approach.
3. Have a thorough understanding of the whole mining value chain
Like all modern businesses, the mining industry tends to compartmentalise roles and job functions
so that managers can manage things and control things. For example: the mine manager manages
the mine and tries to optimise the performance of the mine to his KPIs and the plant manager
manages the plant and tries to optimise it to his KPIs and the logistics manager does the same thing
and so forth . This essentially occurs in silos and the problem is that not all job functions can be
optimal for the overall business to be operating in an enhanced way. There will always be a bittle
neck that must be improved while other elements support the optimising of that bottleneck.
As a result the KPIs end up working against each other and against the ultimate value outcome of
the business. Businesses that understand this and create integration across that value chain so those
managers are removed from their silos and are thinking and being rewarded for the performance
across the whole business, will make a huge difference to the performance of their mines.
4. Emphasis on infrastructure and sustainability
Weve got to understand the trends in the industry and the fact that there will be a greater emphasis
on infrastructure in the future. This will revolve around increasing depths, increasing deposit
complexity, reducing head grades and an increase of more remote mines in less developed locations.
The industry also needs to consider many of the new mines are now going to be developed in less
developed nations, which means the environment and the community aspects of projects will
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become more important and sustainability will become a far more important issue for mining
companies to embrace.
If you look back 20 years, safety in the mining industry was by and large a lip service. It was
something the industry identified as important, but was often seen as a cost to projects. This has
now changed and now the whole industry has a culture where safety is the number one important
focus and building safety into projects through HAZOPS etc. is a fundamental part of the way mines
are developed and operated.
Sustainability is the new safety and in the future having a culture of sustainability in mining
companies and projects will be fundamental. Projects will be delivered with the best triple bottom
line outcomes. Does that mean there will be no negative community or environmental impact?
Absolutely not. But getting the best triple bottom line balanced to those is where the mining
industry will go.
5. Integrate new technologies
The emergence of driverless vehicles, driverless trains and remote operating centres has created
efficiencies in terms of being able to manage with fewer resources in places where you can better
control the cost of accommodation and salaries. It also provides better access to the best expertise
and allows people to meet face to face rather than over the telephone, improving productivity. Its
integral for companies to understand how these technologies can impact and improve bottom line
efficiencies.
Andrew Keith is presenting at the Mining Productivity and Technology Forum 16 17 July in
Brisbane. The Forum is an invite only event that brings together senior level decision makers to
uncover critical solutions to increasing efficiency and Productivity.
For more information or to request an invitation please visit www.mining-productivity.com.au

The Mining Productivity and Technology Forum cover a large range of current, timely topics in an
industry that is going through serious change. The topics covered at the conference are very relevant
for the future and also there are some extremely relevant topics around dealing with some of the
current challenges of a depressed market.
Andrew Keith, Leader Mining Infrastructure, Aurecon





http://www.mining-productivity.com.au

Andrew Keith is Aurecons global Leader, Mining Infrastructure. Andrew
has a long history of planning and managing design of infrastructure for
mining projects, especially in remote locations having spent 12 years
managing Aurecons Indonesian operations and delivering work for the
Indonesian coal and nickel mining industries. Andrews strategic role is
to coordinate globally the companys expertise to provide the solutions
needed by the mining industry in a market of decreasing ore grades and
increasing complexity, price volatility, increasing remoteness and
geographic challenges and rising global social license and CSR
imperative.