Creating a Mine Value Agenda A high performance approach to planning

2 | Creating a Mine Value Agenda: A high-performance approach to planning

In short, planning is no small challenge for mining companies. To a great extent, that is because planners lack clear visibility into the full range of business activities. This lack of visibility makes it difficult to factor in the numerous variables that affect plans and limits the ability to consider a variety of planning options. For example, the systems and processes of functional areas are often siloed, meaning that information from geologists, production, the supply chain, marketing and finance needs to be brought together manually. As a result, companies do not have the timely horizontal view of the business needed to make effective trade-offs that optimize overall enterprise economic performance.

At the same time, companies struggle to develop the vertical view needed to easily connect long-term strategies with short-term daily, weekly and monthly activities. That makes it difficult to develop operational plans in one view that are focused on supporting company strategy. When problems or changes occur on the ground, they may not be apparent to upper-level management for weeks or months, complicating efforts to keep operations aligned with the company’s overall goals.

As a result, mining companies typically have had to base planning on a mix of data, experience and gut-level assessments. That approach may have been effective in the past, but it is no longer enough. The mining industry today is increasingly global, complex and dynamic, and companies have to meet high levels of demand, manage portfolios of operations, find new sources of raw material, boost efficiency and develop agility. The industry is rapidly becoming a place where accurate, flexible planning is imperative to survival.

In this environment, mining companies need mature analytical planning and management solutions—for both brownfield operations and greenfield opportunities. With that in mind, we offer the Accenture Mine Value Solution, which helps companies to take a more rigorous—and more effective—approach to planning. Through the Mine Value Solution, we help executives create a mining value agenda, which provides an integrated view of the value chain and insight into what drives value in their organizations. And we work with these executives to develop practical plans that increase operations and help achieve high performance.

Mining companies spend a great deal of time and energy on planning—determining how to get the commodity out of the ground, process it efficiently and sell it on the market at the best price. But planning in the industry can be complicated, and pulling together the operational information needed to make fact-based decisions about future direction is often difficult. What is more, things change—and anything from fluctuating demand and price volatility, to politics or increased labor costs, to unexpected operational obstacles, can quickly reshape the business landscape, leaving companies scrambling to adjust their plans.

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4 | Creating a Mine Value Agenda: A high-performance approach to planning

Taking planning to the next levelWith the Accenture Mine Value Solution, we can draw on sophisticated technology and analytical techniques to help mining companies develop a comprehensive view of the business. To do so, we use the Qerent Mine Performance Management and Planning Technology Suite, a powerful planning, modeling and optimization solution from Cyest Corporation, based in South Africa. With this solution, we create models that capture the variables involved in the company’s business—from assets and resources to current costs and commodity prices. We then collaborate with executives to explore various scenarios and perform value analysis by determining the financial impact each will have on the business.

Drawing on our experience with mining companies around the world, Accenture offers a structured approach to value planning. We apply a common framework to the different towers of the Accenture Mine Value Solution. The process generally begins with defining the value chain model, followed by identifying opportunities and bottlenecks. Planning, budgeting and forecasting are integrated across the value chain to achieve a roadmap of initiatives.

The Mine Value Solution ultimately lets companies test and validate the most viable actions to improve the business before they are implemented. For greenfield opportunities, the Mine Value Solution is applied during the early stages of a capital project to help evaluate the economics of a proposed investment. In the case of brownfield operations, front-end diagnostic work is performed to help analyze opportunities for improvement.

The Accenture Mine Value Solution planning process goes far beyond traditional fore-casting, which simply extrapolates trends. It can encompass the interrelationships of some 50,000 business variables. These can include not only economic factors, but also a wide range of detailed operational variables that affect those economic factors, such as the mine layout, ventilation capacity and even the type of steel used in drills. When one variable is modified, planners can see the effect it has on the whole model, which can depict anything from a single mine shaft to an entire portfolio of operations. Planners can then test out different scenarios to identify the optimal approach. As a result, decision makers can answer complex questions, such as:

• How would a change in currency exchange rates affect the costs of each mine plant and each product?

• How will improvements in efficiency affect our cost per ton and cash flow?

• How would reducing the prices of our top products affect our relative margin and the absolute profit of each of our geographies?

• How will our market share be affected over the next five years if we simultaneously increase production capacity and switch to a three-shift production cycle, and inflation rates increase three percent?

Through this process, we help mining companies understand where and how to create better value. Combining these insights with the relevant planners and operators, we can create operational plans for achieving value in both the short and medium term, identifying and prioritizing specific improvement initiatives. And we can help implement those plans—for example, with programs that transform the workforce, strengthen the supply chain, drive operational excellence, reduce costs, support ongoing value analysis and performance reporting, and outsource IT and business processes.

Figure 1. The Accenture Mine Value Solution helps mining companies identify, quantify and prioritize initiatives to improve their operations portfolio or activities.

Source: Accenture analysis. Mine Value Greenfield Solutions

Mine Value Planning Solutions

Mine Value Analytic Solutions

Mine Value Diagnostic Solutions

Applied during early stages of a capital project to help evaluate the economics of the proposed investment.

Used to re-engineer the end-to-end business planning and budgeting process. Also support workforce planning.

To support ongoing value analysis and performance reporting.

Used to support front-end diagnostic work to help analyze opportunities for improvement.

Accenture Mine Value Solution

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Greenfield prefeasibility A miner looking to operate in the Arctic Circle collaborated with Accenture to develop a supply chain logistics modeling approach for the prefeasibility stage of a zinc, copper and lead mine project. The project weighed the prefeasibility of the long-term plan through supply chain modeling. Several items needed to be addressed, including the definition of potential scenarios, analysis of the scenarios, mitigation of complex constraints and integration with the organization’s logistics network. Accenture collaborated with the miner to perform supply chain modeling using the Mine Value Solution, which enabled the development of a quantitative, robust, flexible and reusable supply chain logistics model to perform analysis. The model identified an optimal vessel fleet, viable market demand destinations for concentrate shipping and estimates of capital and operational expenditure costs within the defined prefeasibility confidence level. Ongoing, the miner continues to use the supply chain model, providing sustained benefit.

Brownfield operations excellence A miner with global operations wanted to increase production. An assessment conducted by Accenture led the company to team with Accenture on the execution of operational improvements to help the mine to produce the required tonnage per year on a sustainable basis. Several areas were targeted for improvement, including shovel spotting protocol, drilling performance and loss of productivity during shift change, in addition to enhancing mine planning and assessing operational value. Accenture used the Mine Value Solution to understand the mine’s operational challenges in detail and constraints inhibiting the company from achieving its objectives. An action plan was then developed along with change management components, driving a transformation in operations.

Still in progress, the operational transformation has already has delivered results. Within three months, drilling productivity increased by up to 57 percent. Extensive steps were taken to support the sustainability of the new tools, approaches and processes. The company now has the ability to keep driving improvements. It also has created a culture of using objective measurements and analytics to drive fact-driven management.

The Accenture Mine Value Solution also can provide a foundation for lasting results. By integrating the Qerent platform—a Cyest solution—with operational systems, we help establish real-time processes for tracking and managing performance across the company and keeping operational plans in step with strategy. Executives can use a dashboard to monitor actual performance versus budget and easily identify the areas that are causing any deviation from plans, making it clear where action needs to be taken. Using the solution’s modeling capabilities, executives can assess numerous “what-if” scenarios to find the most effective approach to solving the problem. Overall, the solution helps decision makers understand what is happening with any organizational process, where there are problems and what can be done about them.

6 | Creating a Mine Value Agenda: A high-performance approach to planning

Planning for high performanceThe Accenture Mine Value Solution can be used by executives—in the war room or for frontline discussions—to gain deeper insight into performance, forecasting, budgeting exercise and improvement portfolio management. It can also be used for better control over the business, the ability to keep plans in step with changing business realities and to help cultural change. These possibilities mean mining companies can use planning as a truly strategic tool for achieving high performance.

With a mine value agenda in place, companies can create programs that drive significant improvements in forecasting, planning and budgeting. For example, experience shows that the Accenture Mine Value Solution has helped support programs that can provide:

• Up to 50 percent reduction in the time needed to develop plans

• Twenty-five percent reductions in contingency budget

• Alignment of budgeted plans and operational plans

Operational excellence

• Profit increase of more than 25 percent

• Throughput increase of more than 25 percent

• Cost per ton decrease of more than 10 percent

Maintenance excellence

• Profit increase of more than 12 percent

• Throughput increase of more than 10 percent

• Cost per ton decrease of more than three percent

By nature, better planning can make actual mining operations more efficient and effective—and experience indicates that the solution can help companies use capital more strategically, increase revenues by up to three percent and decrease costs by up to 10 percent.

In helping companies create a mine value agenda, we draw not only on powerful Cyest technology, but also on Accenture’s mining industry experience and knowledge. We have a solid track record of success in the industry, having worked with more than 50 mining companies over more than 25 years, including all of the large diversified miners and many of the leading commodity niche players from around the world. We also draw on our proven delivery methods, comprehensive quality processes and network of delivery centers to help ensure that projects are completed within schedule and budget while delivering solid results.

For more information on how Accenture and the Mine Value Solution can help your company, please visit www.accenture.com/mining.

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About AccentureAccenture is a global management consulting, technology services and outsourcing company, with approximately 266,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

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