Mining and metals report: Opportunities to improve capital productivity
The productivity of invested capital is a key issue for CEOs across the global mining sector. This focus reflects the significance and challenge of achieving predictable return on investment when delivering complex multibillion dollar asset developments.
New data captured through a recent global study by Ernst & Young has revealed that overruns to the sanctioned budget and schedule commitments are the norm with our global megaproject sample group, showing an average budget overrun of a staggering 62 percent.
With projects of this scale, every overrun impacts:
• Total shareholder return
• Capital productivity
• Corporate performance
• Strategic outcomes
Overrun risks are driving an unprecedented level of scrutiny on the project, program and portfolio disciplines of cost and schedule control.
Based on their study results, EY has developed a root cause model to analyze the drivers of overruns and capital productivity impacts. Some of the findings are surprising.
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Overruns occur despite large investments by mining and metals companies to enhance up-front engineering practices and increase delivery maturity.
EY believe that there are overlooked opportunities to significantly enhance delivery control and have identified three critical enablers for preventing cost and schedule overruns that are often de-prioritized and underinvested:
• Flagging of emerging risks
Implementing governance, and reporting frameworks with lead indicators that reliably flag emerging risks while they can still be efficiently mitigated
• Adequate cost and time contingency
Allocating cost and time contingency across the projects’ life cycle to avoid risk-driven budget and schedule variances
• Scenario planning
Enhancing the value of contingency planning through enhanced delivery scenario planning
Complemented by a broad uplift in delivery-discipline maturity, these enablers have real potential to significantly improve capital productivity realization.
In this paper, EY will:
• Explore the surprising findings of their study
• Propose a root cause model
• Examine key considerations in applying these critical enabling techniques
Download the full report on the EY website: Opportunities to enhance capital productivity - mining and metals megaprojects
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.