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making the difference
Owner's Team Challenges for the next mining investment cycleJulio Iturriaga
November 2018
Turner & Townsend
Who we are
Owner's Team Challenges 2
Turner & Townsend is an independent professional services company
specializing in program management, project management, cost and
commercial management and consulting across the real estate,
infrastructure and natural resources sectors.
With 108 offices in 45 countries, we draw on our extensive global and
industry experience to manage risk while maximizing value and
performance during the construction and operation of our clients’ assets.
November 2018
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Context: overruns and delays on previous cycle
November 2018
Owner's Team Challenges 4
An exception: Cerro Verde in Perú
The US$4.5 billion expansion finished on Budget and on schedule
“You win and lose projects with front-endengineering and planning” Richard Adkersonsaid in Mining for Value
At the end of 2014:
140 large mining projects in the world
Investment of: US$334 billions
Project in general average 40% overrun
Megaproject average +60% above budget
Overrun
69%Delays
50%
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Examples – Copper in Chile
Owner's Team Challenges 5
Caserones:
Challenging physical and geological conditions
Cost estimate from US$ 2 billion (2010) to US$4.2 billion (2014)
By 2017 still had not metdesign capacity
Antucoya:
Project was suspended to control escalating costs
Commissioning and ramp up issues
Came online a year behind schedule
Pascua-Lama:
Initial Capex ~US$1 billion
Investment to date: US$5.5 billion
Has produced an ounceyet
Sierra Gorda:
Struggled with commissioning and overruns
Molybdenum low prices
November 2018
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Key Lessons from previous cycle
Governance
Boards and executive committees require knowledge of project execution
Maintain capital discipline and risk management in the approval of projects (toll-gate processes)
Owner’s team
Strong owner team with proper project controls governance, systems
Avoid over-optimistic cost estimations (capex and opex) – challenge the project
Project
Plan thoroughly from the beginning for a solid budget and schedule (don’t move to aggressive mode to take advantage / avoid a given cycle)
Don’t rush design phases
Market
Be aware of intense rivalry for project development capabilities, equipment, supplies and inputs
Be aware of the requirements of your execution commercial model - EPCM vs EPC vs self performed, other
Owner's Team Challenges 6
November 2018
making the difference
Owner's Team Challenges for new mining investment cycle
Colombia Gold Symposium
7
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Improvement Delivery of Mining Investments
Owner's Team Challenges 8
Project Lifecycle
1
Project Objectives
Business Case
Functional Requirements
Risk Profile
Owner’s
Team
2
Project
Results
3
Mining/
Asset
Operation
Deliver
Results
Economic/ Environmental/ Social
Owner’s Team is “instrumental”
Custodian of Business Case and Project Requirements
Manage and Integrate Interfaces/ Stakeholders
Accountable for Project Results
November 2018
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Tensions shaping the Owner’s Team
9
Project
Owner’sOrg
Market
Owner´sTeam
SelectionStrategyBusiness NeedsRisk ProfilePortfolio/ Programme MgmtPMO
DeliveryProject resultsAchieving Objectives/Requirements
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Owner’s Organization and Project Definitions
Governance
Portfolio/ Programme management
Selection of components/ Risk management
Organization maturity for project development
Project type
Greenfield vs Brownfield
Underground vs Open Pit
SIB – Stay In Business
Site location/ conditions
Altitude/ Extreme weather
Communities
Complexity
Size
Interfaces
CIFTER
10
Project
Owner’sOrg
Market
Owner´sTeam
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Owner's Team Challenges
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Owner’s Team Key Roles and Functions
Owner's Team Challenges 11
ProjectObjectives
Procurement/ Contract Services
ProjectManagement
Project Controls
Design/ Engineering
Construction/ Commissioning
Project Services Purchase/ Logistics Expediting Contract administration Dispute mgmt
Engineering Design Mgmt Eng Disciplines Document Control
Construction Manager/Area – Discipline Coordination Constructability Construction supervision Construction logistics Commissioning Handover
Project Control Manager/Project Service Manager/Commercial Manager RISK CONTROL Change Mgmt Cost Control Planning Estimating Reporting ASSURANCE Quality Processes and procedures
Project Director/ Project Manager/ (Macro) Area Manager (s) INTEGRATION Stakeholders Mgmt Requirements Mgmt Interface Mgmt
Project
Owner’sOrg
Market
Owner´sTeam
SupportGeosciences/
Operations
“License to operate” Legal/ Environmental/ Permitting Safety Communities Human Resources Labour Relations/ Site security
Mining Development/ Operations Geology Mining Metallurgical & Processing Geotechnical Operational Readiness
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In Source
Managing Capabilities
Owner's Team Challenges 14
Self Deliver
Augmented
Managed Services – Certain Functions
Managed Services Function
Managed Services –Portfolio
Managing Inputs Managing the Outputs (Performance)
Build capability Buy Capability
Owner’s Performance Outsourced Performance Accountability Accountability
Out Source
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Market – Professionals
High demand on key project roles
Gender gap
Generations (Gen X vs Millenials)
Construction
Work force productivity
Skills shortage (workforce age profile UK 2017 Q4)
Owner's Team Challenges 15
Project
Owner’sOrg
Market
Owner´sTeam
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Market heating up in South America
Commodity price cycles are a constant challenge for mining (since 2015):
■ Gold: 11%; Copper: 20%; Silver: -1%
There are several million dollar investments planned for the next 7 years in the region
■ 36 projects in the region announced on PFS, FS, social evaluation, under construction
Mega projects in the region (over US$1 billion):
■ Chile: 6 projects for a total of US$22.5 billion
■ Peru: 6 projects for a total of US$10,5 billion
■ Colombia: 1 Project
■ Argentina: 1 Project US$3 billion
Owner's Team Challenges 17
Forecast of mining investment2018-2024 - Chile
Forecast of mining investment2018-2022 - Peru
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Is your team prepared?
Owner's Team Challenges 18
Is your organization ready?
Have you reviewed and updated your governance to align with the different projects?
Is your risk profile adequate to your organization maturity for project development?
Do you have an owner’s team with the correct structure, roles and skills?
Is your project ready?
Do you have the proper capabilities in place?
Do you have the right tools and systems?
Do you know the magic number for your project’s owner team?
Title
SubtitleUse the increase/ decrease indent iconsto move between levels
■ Bullet
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References and sources
Five factors influencing the size of mine management teams
In response to current industry challenges, mining companies are looking at alternative delivery models to drive down costs and manage their risks.
http://www.turnerandtownsend.com/en/insights/five-factors-influencing-the-size-of-mine-management-teams/
Smartprojects: Risk and Innovation – International Conference
https://www.alessandri.legal/PC2018/
Mining for value (Cesco book)
https://www.spencerstuart.com/-/media/2018/october/miningforvalue_web.pdf
Inversión en la minería chilena - Cartera de proyectos 2018 -2027 (Cochilco)
Ministerio de Minería y Energía de Perú WWW.bnamericas.com
EPCM Guide 2015 - 2016
Building on a very successful and compelling webinar discussion on how the EPCM mining space is evolving, we are pleased to present the EPCM mining guide 2015-2016, which shares insight into, and best practice on how the EPCM contract is evolving. -2015-2016/
International construction market survey 2018
The 2018 international construction market survey brings together data and experience from 46 markets around the world, to provide an insight into the current state and direction of travel of the global construction industry. This year it also brings optimism.
http://www.turnerandtownsend.com/en/insights/international-construction-market-survey-2018/
Contracting in Latin America: a quick guide for foreign companies dealing with construction contracts
http://www.turnerandtownsend.com/en/insights/contracting-in-latin-america-quick-guide-for-foreign-companies-dealing-with-construction-contracts/
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Owner's Team Challenges 20
Turner & Townsend LimitadaAv. Apoquindo 2827Oficina 202BLas CondesSantiago de Chile7550268
t: +(56) 2 32454100e: [email protected]
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© Turner & Townsend Limitada. This content is for general information purposes only and does not purport to constitute professional advice. We do not make any representation or give any warranty, express or implied, and shall not be liable for any losses or damages whatsoever, arising from reliance on information contained in this document.
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