408-2012-major mine equipment acquisition lecture
TRANSCRIPT
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
1/43
Major Mine Equipment
Asset Acquisition Strategy
Or
“How not to buy a lemon or a dog or apup”
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
2/43
Spending millions of your employer’s
money on DOGS and LEMONS might
be funBUT
It could seriously damage your career
prospects……
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
3/43
THIS is the sort of
equipment that we are
talking about!
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
4/43
Asset Acquisition Process
• Introduction
– An attempt to generalise the process
– Each company has different procedures
– Multinationals often have global purchasing
agreements with major suppliers
– Surprisingly some companies very lax
– Consultants can be utilised at any stage and oftenare
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
5/43
Asset Acquisition Process
Define Requirement
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
6/43
Asset Acquisition Process
• Establish the need for the asset (piece ofequipment) in broad terms
• Apply for outline capital approval (process unique
to each organisation) – depends on $’s • Departments involved:
– Mine planning
– Maintenance
– Financial
– Production
– Purchasing
Define Requirement
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
7/43
Reasons for a New Requirement
• New mine
• Expansion
•
Replacement of old equipment• Whim
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
8/43
Asset Acquisition Process
Outline Specification
Define Requirement
Outline approval
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
9/43
Asset Acquisition Process
• Define in more detail what is required – Size, throughput, production required etc
• Produce a draft specification
• Will normally be generic and defined within industry
standard classes – eg a 400t class reardump or a 500t classhydraulic shovel
• Departments involved: – Maintenance
– Production
– Purchasing• Often done by committee – involve all stakeholders
• Try to identify what is REALLY important
Outline Specification
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
10/43
Asset Acquisition Process
Outline Specification
Research Suppliers
Define Requirement
Outline approval
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
11/43
Asset Acquisition Process
• How might we find suitable suppliers of the
equipment we need?
– Internet
– Trade directories/journals – advertising and
articles
– Networking
Research Suppliers
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
12/43
Asset Acquisition Process
• Meanwhile, the method of acquisition needsto be considered because it might beimportant in choosing a supplier
– Purchase – Rent
– Hire with option
– Lease
• Is ownership of the asset important?
• Sub contract may be considered later
Method of
acquisition?
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
13/43
Asset Acquisition Process
Outline Specification
Research Suppliers
Approach Suppliers
Define Requirement
Outline approval
Method of
acquisition?
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
14/43
Asset Acquisition Process
• Decide method of enquiry
• Prepare documents – as detailed as necessary
but not too restrictive• Tender, RFQ/RFP,
• Single source or multiple suppliers
• Use a common basis to review the replies• Draw up shortlist – sometimes it is VERY short
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
15/43
Asset Acquisition Process
Outline Specification
Research Suppliers
Approach Suppliers
Refine Acquisition Parameters
Define Requirement
Outline approval
Method of
acquisition?
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
16/43
Asset Acquisition Process
• In the light of the responses from suppliers it
might be necessary/prudent to revise the
specification for re-submission to those
shorlisted – ie learning “on the hoof”
• Not always necessary
• This step is often included in the final pre-
purchase negotiations
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
17/43
Asset Acquisition Process
Outline Specification
Research Suppliers
Approach Suppliers
Refine Acquisition Parameters
Negotiate & Purchase
Define Requirement
Outline approval
Method of
acquisition?
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
18/43
Asset Acquisition Process
• It is not uncommon to negotiate with more thanone potential supplier at once
• “Dutch Auctions” should be avoided
• High level of integrity and professionalismrequired
• Everybody should win a bit
•
Often very complex• Analysis of bids may lead to a “don’t buy”
decision
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
19/43
What are some of the factors that
influence the choice of product - 1?
• Performance
• Technical excellence
• Fuel consumption
• Reliability (availability)
• Capital cost
• Dealer support
• Spare part availability
• On site acceptance
• Suitability for the mine
• Personal preference
• Buyback
• Guarantees/warranty
• Cost cap
• Trade in
• Associated “gains”
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
20/43
What are some of the factors that
influence the choice of product - 2?
• Price – ie cost – but WHAT cost
– Capital cost
– Whole life cost
– Operating cost
– Unit cost
• What factors need to be considered?
– MANY!
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
21/43
“But (ex) Boss- the machine I bought was
$100,000 cheaper than it’s competition – why
have you sacked me???”
• Upfront capital price is only one part of the
total COST of the machine to the mine. Other
factors effecting it include:
– Availability
– Cost of spare parts
– Fuel consumption
– performance
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
22/43
Lets just look at availability
Mine scheduled to work 6000 hours/year
yr1 yr2 yr3 yr4 yr5 yr6 yr7 yr8 yr9 yr10
m/c 1 98 97 96 94 93 92 90 90 90 90
Worked hours 5880 5820 5760 5640 5580 5520 5400 5400 5400 5400
0
m/c 2 98 95 94 89 85 85 85 85 85 85
Worked hours 5880 5700 5640 5340 5100 5100 5100 5100 5100 5100
difference (hrs) 0 120 120 300 480 420 300 300 300 300 2640 hrs total difference
Assume is a coal mine with a strip ratio of 10cum/1t coal
assume excavator production is 2500 cum/hr
loss of production over m/c life is 2500 x 2640 = 6,600,000 cum overburden
total coal lost over machine life 660,000
tonnes
@ 70 $/t = $46,200,000
40 $/t = $26,400,000
93% AVERAGE
89% AVERAGE
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
23/43
“Guaranteed” Availability
• Involves a contractual guarantee tied to
assured maintenance procedures. Contract
can be complex
• Normally only available with a RAMP or where
dealer has a technician monitoring
maintenance and booking of hours
• Penalties are usually token
• Needs good admin practices to keep records
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
24/43
Fuel consumption
• The hydraulic excavators in the previous
example use about 360 l/hr when digging
• Assume 90% time spent digging
• A 5 l/hr difference (1.4%) gives
– 5 x .9 x 6000 = 27,000 l/yr @ 0.85/l = $23,000/yr
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
25/43
Other Factors to consider – the product
support
• Reputation of local dealer, experience in this typeof product
• Availability of service labour
• Availability of parts• Promises made by dealer/manufacturer
• Support options offered
–
R&M (RAMP, MARC), Parts Cap, Service contracts – Consignment parts
• Availability of finance, deferred payments etc
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
26/43
In the end…
• IF the numbers stack up and most other
factors are equal, the choice is often made
because of “gut feel” or confidence
• Sometimes decisions are unfairly and
misguidedly influenced by personal opinion –
Cow Harbour
• Often, the decision is made for you (financeavailability – single source)
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
27/43
TRANSITION
• NEXT PRESO COMING…..
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
28/43
Mobile Surface Plant
Maintenance Options
• Although based on mobile surface plant
(shovels, trucks etc) the principles apply to all
plant fixed and mobile
• An overview of some of the options available,
and their pro’s and con’s but not exhaustive –
would take a book!
• Every mine is different
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
29/43
What are the options?
• There are many options when it comes tochoosing how to maintain a fleet of miningequipment
• We will consider a fleet of, say,10 x 220tdumptrucks, two matching 29cum hydraulicshovels and a pair of 450kW ‘dozers all from thesame manufacturer
• “Single sourcing” is worth considering – allows: – a rationalisation of parts holding and the ability to
consider comprehensive maintenance packages
– Consideration of “consequential” downtime claims
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
30/43
Maintenance Strategy Options
• 1. Do it yourself
•
2. Do it yourself with some help
• 3. R&M, RAMP MARC
• 4. Parts Cap
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
31/43
In House Maintenance• Very popular in large organisations
• Customer has total control of maintenance and repair• Customer supplies facilities (workshops, field vehicles,
cranes, parts storage, welfare areas)
• Customer supplies labour – supplemented by hired in
specialist when necessary (line boring etc)• Customer holds some stock and relies on dealer for back up
and large items
• Customer budgets for maintenance expenditure andassumes the risk
• WARRANTY on new machines and parts is important• Organisation is essential - record keeping, stock control etc
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
32/43
In House Maintenance
•
Advantages – More control over maintenance
– Can be cheaper than RAMP
–
Cash flow better than a level payment RAMP – Ability to take risks that dealer won’t take (NOT of
course unsafe ones…)
– Ability to use 3rd party parts and “will fits” once
out of warranty period
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
33/43
In House Maintenance
• Disadvantages
– Costs not fixed – lots of potential for“ass biting”!
– More own labour, organisation control, skill gaps
– Training issues
– Needs slick systems
– Pressure often to delay maintenance from own
people – No one to blame! Always grey areas in warranty
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
34/43
Service & Inspection Contracts
•
Dealer carries out routine servicing andregular inspections
• Customer responsible for repairs
•A “halfway house” to R&M
• Helps keep up with condition of machines and
plan repairs
• Some of the risk shared with the dealer
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
35/43
R&M, R.A.M.P or M.A.R.C
• The dealer takes full responsibility for themaintenance and repair of the machines
• Dealer supplies all parts and labour and employsan “exchange before failure” principle
• Customer is charged per hour worked – NB worked hours or SMR – different- why?
• Hourly rate is inflated annually by an agreedmechanism
• Dealer usually has a “back to back” contractwith the manufacturer
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
36/43
R&M, R.A.M.P or M.A.R.C - 2
• Advantages
– Guaranteed cost per hour for life of contract
– Enables customer to consider a guaranteed
availability clause – penalties?
– Warranty not an issue
– Often, infrastructure is funded by the dealer
– Dealer responsible for labour – no training issues
– Can exclude some items if desired
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
37/43
R&M, R.A.M.P or M.A.R.C - 3
• Disadvantages
– Customer still responsible for misuse and abuseand some exclusions
–
Bad cash flow in early years – “stepped R&M” – Might be more expensive than own maintenance
– Need trust in dealer/manufacturer
– Tendency for own staff to “disown” the machines
– Might pay for parts not fitted
– Needs a really good contract
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
38/43
Parts Cap Contract
• Like an R&M without the labour
• Guarantees the MAXIMUM cost per hour of spareparts
• Can exclude some parts if desired• Annual reconciliations of actual vs guaranteed
• Customer supplies labour
•
Warranty is calculated into the contract• Usually supported by the manufacturer
• Can include G.A.S.P or service level guarantee
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
39/43
Parts Cap Contract - 2
• Advantages
– Parts budget is fixed, only have to cover labour
– Only “upside” on parts costs
– Can opt to exclude some parts
– Allows mine staff to “own” the machine
– No warranty issues
– Usually have a regular inspection contract withdealer
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
40/43
Parts Cap Contract - 3
• Disadvantages
– Labour problems remain with customer
– Potential conflict if parts fitted badly
– Guaranteed availability not available
– All parts must be bought from dealer. No cheaper
suppliers allowed
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
41/43
Summary of Maintenance Options
• All mines are different
• Availability of resources will form a key part of
the decision of how to maintain
• Hybrid schemes are possible
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
42/43
Komatsu Mining Germany
-
8/21/2019 408-2012-Major Mine Equipment Acquisition Lecture
43/43
THANK YOU!