value creation in mining the productivity imperative...themenworkshop kanada berlin kvs 10dec14...
TRANSCRIPT
Value Creation in Mining – The Productivity Imperative
Dr. Konrad von Szczepanski
10th December 2014
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 1
The 'squeeze' is here
75
168 168192 209
228
0
100
200
300
400
20%
2012
313
33%
2011
329
45%
2010
273
$/unit production
Indexed to 2002 price
Cost (Indexed)
39%
2009
230
27%
2002
EBITDA %
2013
288
100
25%
Source: Based on 13 prioritized commodities and 19 companies, CG Value Science; financial reports
Price (indexed)
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 2
The mining industry is no longer creating value
1. TSR weighted by market capitalization. Sample cut-off: 2012 MV >$7B or 2002 MV >$1B Sources: Thomson Reuters Datastream; Thomson Reuters Worldscope; Bloomberg; annual reports; BCG analysis.
-80 -60 -40 -20 0 20 40 60
TSR rank
Average annual TSR (annual %)
First quartile
Second quartile
Third quartile
Fourth quartile
16% Weighted average TSR for industry sample1 0% -20%
2013 2009-2012 2002-2012
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 3
Percentage points of
TSR, 2007-141
Revenue growth 7 11 8 (2)
EBITDA margin change (3) (1) 1 (2)
Profit growth 4 10 9 (4)
EV / EBITDA multiple
change (11) (14) (13) (5)
FCF contribution (1) (4) 1 (5)
TSR (% pa) (8) (7) (2) (14)
Its not easy to 'turn the ship'
1. TSR is calculated in the reporting currency and is from November 30, 2007 through November 30, 2014; Financials are last-12-month data available as of the analysis date (December 3, 2014) 2. LSE listing 3. ASX listing Note: Figures show contribution of each factor in percentage points of average annual TSR; apparent discrepancies with TSR total due to rounding Source: Standard & Poor's Capital IQ; BCG analysis
2 3
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 4
0
250
500
750
1,000
1,250
0
200
400
600
800
1,000
2014 2011 2008 2005 2002 1999 1996
Canadian mining output per FTE ($000s per FTE) Euromoney global mining index
Mining industry at (another) pivot point
Source: Bloomberg, Statistics Canada & Mining Association of Canada, BCG Analysis
Geology our friend China Miracle Productivity imperative?
Canadian mining labour productivity
Euromoney Global Mining Index
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 5
Productivity is well understood …
Assets
Cost
10–15% cost out
Technology
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 6
Myth
Productivity is well understood … or is it?
Reality
Assets
Cost
10–15% cost out
Technology
Mgt systems,
Assets, People
NPV
30%+ NPV
Operating Model
Transformation
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 7
Best practice productivity programs cover three fronts
Effective Management
Systems
People Excellence
Efficient Physical Assets
Organization, Roles & Accountabilities
Strategic Workforce Planning
Training & Development
Culture & Employee Engagement
Integrated Planning
Governance, Compliance & Risk
Performance Management
Data, Analytics & Decision Making
Understanding the resource potential
Method, Configuration, Equipment Selection
Process Design & Continuous Improvement
Technology Platform
Employ, develop and engage the right people"
Plan, steer and control the deployment of resources within and
across company boundaries"
Understand the resource body; design, operate, maintain and improve
physical assets from "face to ship"
3
3.1
3.2
3.3
3.4
2
2.1
2.2
2.3
2.4
1
1.1
1.2
1.3
1.4
“ “ “
Source: BCG experience
HSEC Cost Volume Sustaining capital
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 8
Don't sell yourself short
NPV improvements of over 30% should be your goal
1. Unit cost reductions from increased throughput are in addition to this. Source: BCG experience
Performance
KPI Example levers Impact
• Enhanced mine planning
• Restructuring mine-system and flow sheet
• Classic OEE
• Real-time end-to-end supply chain management
10–15%
• Re-organise and re-structure
• Procurement and logistics
• De-capitalise, e.g., leaner fleet
• Classic OEE Unit cost at constant volumes1
5–10%
• New operating model (technology)
• Re-organise and re-structure
• Incentives
• Training
10–20%
Throughput Mtpa
Unit cost $/t
Productivity t/FTE
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 9
Mining next to a see technology-driven productivity uplift
Source: BCG experience, Technology Advantage Practice
Multi-channel, 24x7, single view of customer Branch, office hours,
account based
Consumer
banking
2000's
Just-in time, automation, global platforms Manual assembly lines Auto
industry
Multiple-brands with common supply chain Manual stocking,
point-to-point logistics
Grocery and
Consumer
Goods
1990's
Customer oriented, hub-and-spoke model Scale game, point-to-point logistics Logistics
Standardised, integrated Local, siloed Industrial
products
2010's
Mining Next Generation Mining Manual, not Integrated,
simple processing
1980's
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 10
A bold vision for a new mining operating model
Entire operations optimised from central Integrated Operations Centre
No on-site operators, only basic support teams
Remotely
managed and
coordinated
operations
Smart sensors provide real-time data about ops and assets
Reduced operating variability through predictive analytics
Data-driven
decision-making
Standardised, 'no frills' mining model
Culture that drives low cost, lean operations across value chain
Absolute lowest
cost
Mind shift: supply chain as a big manufacturing plant
Demand 'pull' approach, just-in-time, fully integrated
Manufacturing
supply chain
philosophy
Mobile vehicles, plants and rail fully automated
Core processes self-adjusting without human intervention Full automation
Themenworkshop Kanada Berlin KvS 10Dec14 V1.pptx 11
In closing: Get the MOST out of your mines
Source: BCG experience
• Targeted interventions not one-size-fits all
• Value, value, value!
Maturity-based
• Effective management systems
• Efficient physical assets
• People excellence
Optimized
• Skills and training
• Cultural
Sustainable
Transformational
• Operating model shift
• 30%+ NPV step change
3 1 2
Thank you
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