TCO is the Way to Go

With much of the mining sector in the midst of a prolonged economic drought that has seen falling commodity prices, reduced investment and a lack of new viable discoveries, it is gasping for good news. Yet with targeted ore bodies scarcer, typically of lower grade and increasingly challenging to extract, there is little to suggest an imminent return to the heady days of yesteryear, when cost control was for pedants and large profits were almost a given.

Cost then, has become everything. Yet, rather than looking at the Total Cost of Ownership (TCO) and mitigating the impact of Opex as the best way of wringing the most from existing assets, the drive to cut Capex, come what may, remains the chief influence on purchasing decisions, with even modest savings on initial capital outlay considered good business. The consequence of such a singular assessment of value has been a race to the bottom, with the introduction of kit ill-suited for the purpose at hand, having increased bottlenecks and downtime, whilst reducing the capacity to maintain the optimal productivity of plant sites. An industry that is feeling the pinch, where maintenance can constitute up to 50% of operating costs, must learn fast that focusing on upfront cost is a false economy. “Buy now, pay later” never sounded so bleak.

 

Focusing on upfront cost is a false economy.

 

For suppliers of plants, systems and services, such an approach may seem at first glance like the gift that keeps on giving, as sales of spares increase and the cash keeps rolling in. Reputationally, however, it is risky business, for in promoting cheap, off-the-shelf solutions, they are, in fact, promoting inefficiency. Moreover, the cumulative effect of accelerated operational inefficiencies over a period of time, risks seeing projects suspended, mothballed or permanently shut down, which benefits neither side.

This state of affairs, meanwhile, is exacerbated by mining’s inherent conservatism and silo mentality, where data and information on best practice is not shared and innovation is viewed with suspicion, not just between competing suppliers, but within the mining set-up itself. Suppliers will denigrate the competition in an effort to secure sales and cement relationships, while plant operators can be more concerned with passing the buck, than enhancing productivity. So, each stage of the plant is seemingly focused on its own niche remit, role and mandate, rather than recognising its status as part of an interconnected system. Consequently, equipment is more likely to fail before problems are picked up, meaning downtime is increased and productivity takes a hit.

How then, to incentivise collaboration and breed a culture of cooperation, where each function and operational area understands the wider strategic objectives and that systems work better when viewed as a whole?

 

Bringing data to bear will become easier as its availability increases.

 

One measure could involve enhanced mandatory training that encourages the cross-fertilisation of ideas, thereby giving rise to a culture where each cog in the system has a better big picture understanding. To really drive this step-change, however, may require results-driven financial incentivisation that encompasses the whole staff spectrum from top to bottom, so that everyone involved has a vested interest in optimising productivity, in keeping with their pay grade.

Meanwhile, there is, at present, a distinct paucity of quantifiable data on the merits of viewing cost in terms of TCO and that which is available either does not flow freely, or is not well understood. This means it can be difficult to determine how best to reconcile cost efficiencies with increased output.

Bringing such data to bear will become easier as its availability increases, while there is no doubt it is set to become hugely important for informing and supporting strategy and in ensuring that disparate KPIs are linked to and reflect that strategy. It has the capacity to do no less than prove the route to optimisation, in so doing, eliminating hearsay and conjecture and allowing for enhanced real-time management, analytics and intelligence to be applied.

 

 

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