How to Avoid Project Delays Like Hindustan Copper Ltd's Latest
Hindustan Copper Limited (HCL), a public sector enterprise of the Government of India and a Mini Ratna-I CPSE, signed a Memorandum of Understanding (MoU) with the Ministry of Mines, Government of India, in New Delhi on March 25th of this year. The MoU outlines the business plan for the financial year 2014-15. The company stated a goal of 35,000 MT of metal production from their mines.
Mandatory Approvals Cause Delay
As it stands their current goal states an increase in their production capacity to 12.41-million tons per year. This represents an increase of almost four times their current output. However, it appears that Hindustan Copper Limited is probably going to fall short of the deadline for this significant increase set for 2017/2018. Delays in securing mandatory approvals have been identified as the deadline killer for this vertically integrated copper producing company.
HCL’s plans for the large increase in production involved the impressive investment of approximately $580 million. A significant contingency of the plan was dependent on the expansion of Malanjkhand, the company’s largest copper-producing facility, in the central Indian province of Madhya Pradesh. The Malanjkhand mines comprise over 70 percent of India’s overall copper reserves, representing a wholly necessary component of the mining company’s plans to increase its production.
Malanjkhand is situated very near to the Kanha National Park, and herein lies the problem. The National Wildlife Board (NWB) never provided their approval for expansion of the Malanjkhand mines, leaving the appeal stagnant for over two years.
Approvals and Comprehensive Due Diligence
HCL is a majority government owned and managed miner, and therefore its investments were approved by the Cabinet Committee for Economic Affairs, and the company had also approached the Project Monitoring Group which is supposed to address stalled projects. While HCL did execute due diligence in some areas, it did move forward when it shouldn’t have in other areas, such as awarding contracts to various venders without the required approvals in place. Comprehensive due diligence across the board, improved communication, and improved policy based project management may have helped HCL stay on target with their increased production plans.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”