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Strategic Decision Making in Mining – Optimisation Daniel Kahler and Brian Hall
9 March 2016
Project Evaluation 2016
Optimisation – one word, many meanings! &
Daniel Kahler and Brian Hall
Business optimisation – modelling options
www.amcconsultants.com
Optimising – everyone wants it! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
3
Sam Walsh, Rio Tinto, 11/8/15 We’re seeing a strong focus on improving that business in terms of its cost, in terms of its throughput. [Rio Tinto are moving key people to site to ensure that ]... every step possible to optimise that business. http://www.theaustralian.com.au/business/mining-energy/rio-tintos-iron-ore-expansions-put-ioc-at-risk-of-closure/news-story/d374d7486c690e7a78411e9b644aa4fb
Andrew Mackenzie, BHP Billiton, 26/8/15
….we will continue to monitor market conditions to optimise value http://www.smh.com.au/business/mining-and-resources/bhp-billiton-ramps-up-cost-reductions-at-us-shale-business-20150825-gj7eop.html
Spokesperson, South32, 14/1/16
Our primary focus is on optimising the performance of our existing operations and maximising the value of those assets, http://www.afr.com/business/mining/south32-may-bid-for-anglos-us1b-niobium-brazil-business-20160113-gm5e1t
Nev Power , Fortescue Metals Group 15/10/15
Our team is continuing to deliver sustainable cost reductions through an unwavering focus on optimising every aspect of Fortescue’s operations https://au.news.yahoo.com/thewest/wa/a/29817593/fmg-slashes-costs-again/
Spokesperson, Rio Tinto, 11/2/16,
offset the bear market in metals by optimizing their portfolio, cost reductions, and improvements in productivity http://aluminiuminsider.com/aluminium-business-buoys-rio-tinto-on-fy2015-earnings-statement/
www.amcconsultants.com
In common usage:
IMPROVEMENT =
OPTIMISATION Probably a lost cause to argue against this
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
4
www.amcconsultants.com
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
5
Activity or Item Approach
Software Real options
(management flexibility)
Heuristics
Evolutionary algorithms
Mixed integer linear programming (MILP)
CPlex
Dynamic programming
Constraint programming
Blasor
Comet
Prober
River Logic Enterprise Optimizer
DumpSolver
XPAC
XACT
Flowsim
MSO
Whittle
SOT
Express
MineMax
NPV Scheduler
FlexSim Stope Optimizer
Simio
BlendOpt
Lobos
HoV Pit shell
Asset optimisation
Schedule optimisation
Truck haulage Stope design
Decline design
Fragmentation optimisation
Pit-to-port optimisation
Mill recovery optimisation
Implementation optimisation
Supply chain optimisation
Mine-to-mill optimisation
Financial optimisation
Enterprise optimisation Business optimisation
www.amcconsultants.com
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
6
Activity or Item Approach
Software Real options
(management flexibility)
Heuristics
Evolutionary algorithms
Mixed integer linear programming (MILP)
CPlex
Dynamic programming
Constraint programming
Blasor
Comet
Prober
River Logic Enterprise Optimizer
DumpSolver
XPAC
XACT
Flowsim
MSO
Whittle
SOT
Express
MineMax
NPV Scheduler
FlexSim Stope Optimizer
Simio
BlendOpt
Lobos
HoV Pit shell
Asset optimisation
Schedule optimisation
Truck haulage Stope design
Decline design
Fragmentation optimisation
Pit-to-port optimisation
Mill recovery optimisation
Implementation optimisation
Supply chain optimisation
Mine-to-mill optimisation
Financial optimisation
Enterprise optimisation Business optimisation
www.amcconsultants.com
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
7
Activity or Item
Schedule optimisation
Truck haulage Pit shell Stope design
Decline design Asset optimisation
Implementation optimisation
Supply chain optimisation
Fragmentation optimisation
Pit-to-port optimisation
Mill recovery optimisation
Mine-to-mill optimisation
Financial optimisation
Enterprise optimisation Business optimisation
Image courtesy: http://b2b-marketingblog.activeconversion.com/2011/01/market-the-value-not-the-features/
www.amcconsultants.com
Scope!
Component Optimisation
Business Optimisation
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
8 Image courtesy: http://b2b-marketingblog.activeconversion.com/2011/01/market-the-value-not-the-features/
www.amcconsultants.com
Where does my “optimisation” fit? Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
9
Outcome in $ (or NPV) ≠ Business Optimisation Component A Optim + Component B Optim ≠ The Optimum
www.amcconsultants.com
Component Optimisation
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
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1. Design 2. Schedule 3. Asset 4. Implementation 5. Financial and risk
www.amcconsultants.com
Scope!
Component Optimisation
Business Optimisation
Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
11 Image courtesy: http://b2b-marketingblog.activeconversion.com/2011/01/market-the-value-not-the-features/
www.amcconsultants.com
Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
12
Strategy selection The traditional approach
Strategy optimisation The flexible approach
Image courtesy: http://sanatiostuff.blog.fc2.com/blog-entry-73.html Image courtesy: http://revitdowntothedetails.blogspot.com.au/2012/08/rubiks-cube-part-1.html
www.amcconsultants.com
Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
13
Strategy optimisation The flexible approach
Modelling techniques
Fully-flexible models
Mathematical programming
or
Image courtesy: http://sanatiostuff.blog.fc2.com/blog-entry-73.html
www.amcconsultants.com
Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
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Mathematical programming will be likely to identify superior solutions to well defined problems…
BUT…
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Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
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Caution needs to be used in assuming away all the variability for the purpose of finding an “optimum result” that can be calculated by a mathematical solver (Rieck, 2015)
…off-the-shelf software solutions might not meet the needs of the business and customised models might be required (De Kock, 2007)
…there are perhaps fewer problems in mining that are suited to solution by these techniques than some would like to believe (Poniewierski, 2003)
www.amcconsultants.com
Business optimisation - the challenge Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
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Image courtesy: www.slideshare.net/rob.goodspeed
www.amcconsultants.com
Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
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A Wicked Problem To solve:
The orientation of a solution concept
The solution is likely to change as you approach it. So…
Image courtesy: http://blog.careerfutura.com/wp-content/uploads/2013/12/problem-solving.jpg
Agreement??
www.amcconsultants.com
What should be the outcome? Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
18
Information to make decisions
Improved understanding of the project
Image courtesy: http://blog.careerfutura.com/wp-content/uploads/2013/12/problem-solving.jpg
www.amcconsultants.com
Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
19
Strategy optimisation The flexible approach
Modelling techniques
Fully-flexible models
Mathematical programming
or
Image courtesy: http://sanatiostuff.blog.fc2.com/blog-entry-73.html
www.amcconsultants.com
Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
20
Strategy optimisation The flexible approach
Modelling techniques
Fully-flexible models
• Interactive for single cases
• Not constrained by mathematical fomulations
Image courtesy: http://sanatiostuff.blog.fc2.com/blog-entry-73.html
www.amcconsultants.com
Case Studies Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation
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Thank you Component optimisation
Design optimisation
Schedule optimisation
Asset optimisation
Implementation optimisation
Financial and risk optimisation
Business optimisation
Strategy Optimisation
Strategy Selection Traditional approach
Wicked Problem Consultation &
Bod
y of
K
now
ledg
e Fully-flexible models Mathematical programming