Asset management and today’s mining industry
The current economic climate of low commodity prices and increasing costs means that only smart mining companies will see their operations survive through this current downturn.
While history tells us that the cycle will turn around and prices will go back up again, how many mining companies will be left to take advantage of the next upturn?
By “smart” mining companies, I am referring to those companies that have spent the time and money to optimize the performance of their current assets so that their plant and equipment will reliably deliver the business plan consistently for the life of the operations.
Those companies that look past tomorrow, and start to consider the whole of life of their asset’s performance, and the total cost of ownership will be the companies that will weather the storm and provide more consistent returns to their shareholders over the longer term.
Traditionally, the maintenance department has always been the “bridesmaid” and never the “bride” within the mining industry. Maintenance has always needed to respond to the needs of the mining operations and generally speaking, production has taken first priority, regardless of cost.
This operating philosophy works when things are good, but is found wanting when the economic climate is as it is today. What it also does is create an asset condition which deteriorates as time goes on, thus leaving those companies who have been poor asset owners at the mercy of a downturn, and to disappear into obscurity.
Part of the answer lies in the unassuming term “asset management.” This is, according to the UK-based Institute of Asset Management (IAM): “the systematic and coordinated activities and practices through which an organization optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their life cycles for the purpose of achieving its organizational strategic plan.”
How important is asset management in today’s mining companies? IAM goes on to say: “This definition of asset management represents a significantly greater scope than just the maintenance or care of physical assets, and is closer to the central purpose of an organization. Good asset management considers and optimizes the conflicting priorities of asset utilization and asset care, of short-term performance opportunities and long-term sustainability, and between capital investments and subsequent operating costs, risks and performance.
“Life cycle” asset management is also more than simply the consideration of capital costs and operating costs over pre-determined asset “life” assumptions. Truly optimized, whole life asset management includes risk exposures and performance attributes, and considers the asset’s economic life as the result of an optimization process (depending upon the design, utilization, maintenance, obsolescence and other factors).”
Given the usual relationship of Operations and Asset Management in mining, it may be radical to suggest that the asset management plan should be one of the main drivers for the mining operation.
Here’s why. If proper asset management systems and processes have been implemented to deliver the business plan and reliable plant and equipment, then in conjunction with mine planning forecasts, there is no reason why the planned maintenance activities cannot be followed religiously. Yes, there will be times when changes are required. This is part of reality.
But the implementation of a good asset management plan includes continual improvement and updating. What it will do, however, is start to highlight shortfalls in other parts of the business. And these need to be addressed in the same way.
When is the best time to do this? When times are bad and the pressure is on? Of course not … or so you might think to be logical. But when do most companies start to do something? When there is a downturn.
The “smart” companies optimize their operations when times are good; when they can afford to make the changes required, and thus reap the benefits of increased revenue and profit when commodity prices are up. They are then positioned to be operating at their optimum when the cycle turns down.
Some years ago, the IAM facilitated the development of a “standard” on asset management, called PAS55. This standard is soon to be replaced by the incoming ISO 55000. PAS55 has made some inroads into the mining industry; but not to the degree that is required for long-term sustainability of mining companies. There are a number of companies who are endorsed trainers and auditors by the IAM to the PAS55 “standard.” Along with PAS55, there are a number of tools available for use to assist with the implementation of asset managements systems; one such program being a fully integrated enterprise grade asset management software tool called Rylson8.
If good asset management systems and processes have been implemented, then managers can readily have answers to the following questions to help better manage their businesses:
- What are my most critical assets? And why?
- What is the work I need to do on my assets to deliver the business plan reliably and safely?
- How can I ensure that the work I need to do will be done at the right time?
- How many people do I need to do the required work? And what skill types are required?
- What parts and materials do I need for primary and secondary maintenance activities?
- What do my maintenance budgets look like; both operating and capital replacement?
- What is the critical path of my shutdowns and what other activities can be done during the shut without impacting on plant availability?
- What is the cost of my shuts?
- What does my whole-of-life cost profile look like?
- Have I minimized the total cost of ownership for the plant and equipment?
- Am I carrying the right critical spares as determined by a risk assessment?
- How do I record and report plant and equipment downtime?
- Have I got an effective defect elimination program in place? And do I have the right resources in position to ensure the plant is undergoing continual improvement?
- Do I have a good information management system in place to store the information generated and to give quick and easy access as required?
Only when you can answer “yes” to all of the above, can you honestly say that your company is doing the best that it can.
People will then ask, how much does all this cost? If the asset management improvement plan being put into place is cost effective (benefit gained outweighs the cost); you will find that in most cases, the improvements identified will fund the costs incurred for implementation. You already have a budget approved; if a significant saving on that budget can be identified and realized, no additional monies will be required. The improvements will be self-funding.
In some, in this current economic climate; the question is not…”how can we afford to do that?” The question is…”how can we NOT afford to do that?”