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.
• Related content: [INFOGRAPHIC] Mining CEOs: Who Makes What?
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
Copper production from top ten companies to increase by 3.8%
Copper production from the world’s top companies is set to increase by up to 3.8% this year, following a fall of 0.2% in 2020, GlobalData analysis reveals. Last year’s marginal slump saw production drop to 11.76 million tonnes (Mt).
The initial impact of the COVID-19 pandemic on mining operations was immense, however, six of the ten largest copper producers succeeded in increasing output last year. In 2021, copper production from the top ten copper companies is expected to bounce back, rising by up to 3.8%, to reach 12.2Mt, according to GlobalData, a leading data and analytics company.
The highest increase in copper production was by Canada’s First Quantum, which, despite all the challenges, reported 10.4% growth in 2020. The company’s Sentinel mine in Zambia and Cobre Panama were key contributors to this growth. While the latter remained under care and maintenance between April and August 2020, it delivered record production levels during the subsequent months.
Codelco, the world’s largest producer of the red metal used in electric vehicles, also bucked the trend.
Vinneth Bajaj, Associate Project Manager at GlobalData, commented: “Despite Codelco reporting over 3,400 active cases during July 2020, the company achieved 1.2% growth in its production in 2020. The company implemented a four-phase plan, as part of the COVID-19 measures, to ensure the health and safety of its employees, while also avoiding any significant impact to its copper output.”
Although the overall impact was minimal, declines in production were observed from Glencore (8.2%), Antofagasta (4.7%), BHP (3.9%) and Freeport McMoRan (1.3%). Reduced operational workforces due to COVID-19 measures, lower ore grades and production halts due to maintenance were the key disruptors to output during 2020.
The move towards electric vehicles and clean energy from renewables sources such as solar panels and wind turbines has driven the copper price to all-time highs. Copper has been among the best performers over the last month where metals ranging from aluminum to iron ore have surged to their highest prices in years. The rally is being fueled by stimulus measures, near-zero interest rates and signs that economies are recovering from the global pandemic.