McKinsey: embrace the value chain and boost EBITDA by 10-15%
Understanding the mining value chain as a single integrated process and embracing mine-to-market optimisation can generate a 10 to 15 percent increase in EBITDA, according to a McKinsey report entitled The mine to market value chain: a hidden gem.
While fragmented responsibilities often cause companies to lose sight of the big picture, the report notes companies that manage their value chain well can establish a significant source of competitive advantage and value creation.
It acknowledges the industry faces pressure on all sides, be it shifts in commodity markets, the COVID-19 pandemic, environmental concerns or regulatory policies. But those that "dissolve silos" and focus on organisational enablement and data/tech architecture will see commercial benefits.
Companies should boost transparency along the value chain by building a 'value-driver tree' encompassing operations, logistics and sales. Simulation and optimisation are most effective when applied together, which can ensure individually optimized operations with KPIs. Amid uncertain times, an integrated mine-to-market perspective can help create further resilience and maximise shipped throughput in the face of disruption.
"As digital technologies help remove the barriers to entry and tip the scales of competitive advantage, mining executives will need to ensure their organizations rely on a sustainable business model by proactively envisioning and shaping that model’s role in an integrated end-to-end ecosystem," the report concludes.
"The journey toward an integrated end-to-end mining value chain is complex, but it is also an essential shift to unlocking an untapped source of value. Mining companies must develop a comprehensive mine-to-market perspective to survive down cycles in the short term and strengthen and expand market position in the longer term."
Coal India Secures First-Of-Its-Kind Digital Deal
Coal India Limited (CIL) has appointed Accenture Solutions to digitally transform seven of its open-cast mines as the company strives to improve performance and increase coal production. Accenture is due to lay down digitalisation groundwork until March 2022.
The deal aims to increase coal production by 100 million tonnes (MT) by the end of FY’23. Once the minimum quantity has been surpassed, an agreed sum will be paid to the consultant for every additional sum of coal produced. This success fee will only be paid on the procurement of the minimum assured quantity.
The move will see heavy earth moving machinery (HEMM) fitted with digital sensors to monitor performance efficiency at all levels. Additionally, modern data analytic techniques aim to increase mine productivity and project monitoring through functional system management and effective observation.
An Exciting Venture For Global Mining
CIL, which aims to provide energy security in an environmentally and socially sustainable manner, hopes the move will help transform the entire business of mining operations and ensure higher volumes of coal are acquired at a lower cost.
“This is a first of its kind initiative by the company utilising digitalisation to ramp up coal output,” CIL has said.
A Digital Step Towards Enhanced Performance
Digitalisation is expected to take place at open-cast mines in Kusmunda, Gevra, Dipka of Southern Eastern Coalfields (SECL), Migahi, Jayant, Dudhichua, and Khadia of Northern Coalfields (NCL). Nearly 32% (188 MT) of CIL’s 596 MT output in FY’21 was accounted for by the seven selected mines. However, this new deal is set to see a large increase following the subsequent digital changes due to be made.
“Learning from the outcome and success of this model, we may replicate it in our other large mines,” says CIL, optimistic about the future following the modernisation of their mining.
It is expected that the move will help address roadblocks and guarantee corrective measures are put into place, ensuring the company is able to move forward with its aim of increasing output whilst remaining sustainable and eco-friendly.