Selecting Vendors To Optimize Your Mining Business
Two decades ago, there was not a lot of conversation about optimizing production processes, nor were there suppliers that designed equipment and supplies for that purpose. Things are different today.
Today there is an increased focus on optimizing production and/or value stream performance. If optimization is a corporate goal and if capital has been spent on new equipment and systems to achieve that goal, finding suppliers who invest in R&D to "optimize their customers' businesses" should be part of the procurement RFQ/RFP criteria.
Unfortunately, there is often a “disconnect” between your "optimization mission" and procurement processes that select vendors by price, which excludes vendors that bring a “profit advantage” to the table. Some suppliers are “in business” to optimize “your business” and sometimes invest millions in R&D to produce products that exceed your production/maintenance requirements.
These products may cost a little more, but last longer, increase quality and/or reduce future costs. These savings are greater than the higher incremental price, which helps you make more money. If a company decides to focus on optimization but continues to use price as the main criteria for vendor selection, inputs will be purchased for use in the production process that may actually "steal" from the production potential and cost potential that could be achieved.
To solve this problem, a new set of vendor selection criteria is required. It would give “extra points” for R&D and technology advancements that are designed to contribute more value than the lowest cost part or supply. Cost/benefit criteria would replace a “cost-only” quote. Vendor product information would include technical evidence and/or case studies that substantiate the value stated by the vendor. Some of the risk would be absorbed by the vendor.
Making these changes to your procurement process “aligns” one of your most important support groups with the goals of your production value stream. Procurement must work with departments involved in optimization planning meetings (engineering, operations, maintenance, etc.). You cannot lose by creating stronger internal and external partnerships to achieve optimization... in fact, those partnerships are REQUIRED to maximize your opportunity.
About the author: Kay Sever is an industry leader in performance optimization and change acceleration. She helps companies experience “break-through change” by removing the barriers that hold them back. To assist with this work, Kay created a management training program that removes barriers to align the culture and management system with optimization goals. See MiningOpportunity.com for details on her services, contact information and products.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.