marshall-mining-engineering-solutions

The Cracks are Opening Up

Mon, 28 Feb 2022 13:22:48 GMT

Mining Professional Unemployment Skyrockets whilst Exports Boom. Data released today in the AusIMM's annual Mining Professional Employment Survey shows that 1 in 6 Australian mining industry professionals is out of work. The current 16.2% unemployment rate is in stark contrast to the height of the boom in 2012 when only 1.7% was reported as unemployed. In comparison, Australia's national unemployment rate sits at a respectable 6.1%. Where will we be in 12 months time??

The mining employment downturn is appearing in contrast to record levels of production occurring across the mining industry. Notably, iron ore and coal exports have continued to smash records whilst nickel, gold, and copper production have been continuing to rise off recent lows.

The AusIMM points out that whilst geoscientists have been the first hit in the rush to cut costs and preserve short-term shareholder value, the significant growth in unemployment over the last 12 months has been frontline mining and geotechnical engineers, and metallurgists. Those left behind, whilst thankful, are met with increased responsibilities and heightened pressure to deliver more, with less.

My observation of this alarming trend in workforce reduction is manifesting itself in many ways:

Loss of corporate memory, leading to the future repeating of mistakes made in the past;
Loss of the talent pool as professionals move into other industries in search of secure employment;
Conditions at camp or in the office, along with training and development opportunities have evaporated;
Development of culture of fear as the mining industry casualties its workforce, reinforced by the knowledge that there are increasing numbers of talented people knocking on the door for a/your job; and
Burn-out and demotivation as those left behind are pushed to work harder to cover the lost output of their former workmates.

Unfortunately, it doesn't end there. Minerals exploration expenditure has contracted by more than 60% in the past three years to levels not seen since 2006. These exploration projects support not only the frontline geologists and drilling companies, but their output flows through to the backroom engineering professionals that convert resources to projects ready for the (unnecessarily) arduous approvals journey for one day producing jobs for regional Australia and the tax dollars our governments are so keen to spend.

The mining industry is digging itself into a hole - figuratively, not literally - by wasting the talents it has fostered in the past decade; by putting exploration and development of the next generation of mines on the backburner for fairer economic times; and burning out the talent that they have left to hold the fort as prices decline, but volumes grow.

So, what's the solution? Those that have been in mining for 15 years or more know it, poor old Gen Y is going to hate it, and it's going to be painful for everyone involved. It is coming. You can feel it, almost taste it.

Putting the "Check" in Plan-Do-Check-Act

Mon, 28 Feb 2022 13:16:19 GMT

The seminal deming cycle (Plan – Do – Check – Act) is one of the most frequently used models to describe what and how things should be done in regards to managing health and safety. Its beauty is in how succinctly it sums up the range of actions that are to be undertaken to effectively manage a range of activities across all types of industry. The question often overlooked is how effectively is it being applied?

Some examples of your requirements across a range of jurisdictions include:

The NSW Work Health & Safety (Mines) Regulations 2014 (s15) requires that the safety and health management system (SHMS) must include a system for auditing the effectiveness of the SHMS. s71 obliges the mine operator to ensure the effectiveness of ventilation system and ventilation control plan is audited at least every 12 months.
Queensland’s Coal Mining Safety & Health Act 2001 (s41(1)(f)) obliges the coal mine operator to audit and review the effectiveness of the SHMS and retain the records for 7 years (s68).
New Zealand’s Safety and Health in Employment (Mining Operations and Quarrying Operations) Regulation 2013 requires audits of SHMS effectiveness (s57 and s59). It further goes on to require independent external auditing of Principal Hazard Management Plans (PHMP) within 3 years of implementation (s70).

You can see that there is a common theme amongst these requirements and a strong correlation exists with the requirements in many other jurisdictions across the world. Why are effectiveness audits required? I won’t give you a history lesson, but reflections on the Moura and Pike River disasters highlighted failings in auditing (and actions to address) the effectiveness of the SHMS.

In addition, Australian Standard “AS/NZS 4804 Occupational health and safety management systems – General guidelines on principle, systems and supporting techniques clause 4.5 ‘Review and Improvement’” states the following: “Management review is a cornerstone of the management system, providing an opportunity for senior management to regularly review the operation of the system and its continuing suitability in the face of change to make adjustments to build upon and improve its effectiveness.”

Make management review the cornerstone of your organisation by engaging specialist advice (external and internal) to undertake rigorous testing of the effectiveness of the implementation of your SHMS. You may be surprised at what small measures can be identified to make significant improvements to health and safety. Many organisations (including Marshall Mining & Engineering Solutions) have the experience and competence required to undertake your effectiveness audit and assist with ongoing implementation and improvement actions to ensure sustainable.

Pink Balls

Mon, 28 Feb 2022 13:12:30 GMT

What can the mining industry learn from the Day/Night Test Match?

Oooh, cricket!! Urgh, cricket. Whatever your take on cricket is, there's something interesting to be gained out of the recent Day/Night Test Match played between Australia and New Zealand. The match was won in a tense battle inside 3 days with many factors influencing the potential outcomes. Whether it was durability of the ball, the visibility under lights, the pitch designed to protect the ball, conditions changing and the batsmen struggling to handle a swinging, moving ball - there were many talking points. Cricket's administrators were ecstatic about a turnaround in attendance and television viewership. In the end, it's all about the money. So, what parallels can the mining industry draw from this? For me, it's not a matter of where to begin, but where to stop?? Change management, innovation, performance monitoring, adapting to conditions, marketing, and profits.

With slumping commodity prices, flagging morale, and prioritising all efforts to minimising unit costs, now is the time for measuring performance, innovation and making change. The naysayers out there tend to be the ones most set in their ways and resistant to change. "Test matches with a pink ball? It's just not cricket" they'd chorus. The same can be said of miners who didn't need fleet management systems 20 years ago, but now selection of the right solution is more important than the decision to have a solution. Just as cricket looked at where it was successful (these days in One Day and T20) and found cricket lover's attended and watched cricket in prime-time viewing slots, the mining industry should be looking to where its success arises. Priorities should include:

putting maximum tonnes in every bucket and every tray;
optimise strip ratio and minimising overburden stripping in advance;
good roads equal more loads;
focus on loss, dilution, and reconciliation;
maintenance strategy optimisation;
pivoting marketing for maximised profit (smaller number of higher quality tonnes vs higher number of lower quality tonnes);

The list continues. Contact us at Marshall Mining & Engineering Solutions for more...

Once you've identified the key areas influencing your operations success - Measure it. Then test it to see if changes have an influence. This test can be on a spreadsheet, then in application in the field. Just as cricket didn't just paint pink a red or white ball, they spent months and years developing the technology and trialling before culminating in last week's Test Match. Miners shouldn't be changing their marketing strategy without testing that a market exists, or the addition of their new product into the market won't spoil the intended outcome with increased supply causing a fall in price you've assumed would be gained.

Before implementing your intended changes, risk assess it. Manage the change so that it has be best chance of success and sustainability. Do you think everyone would be hailing the Day/Night Test a success if the pitch was a dry, dusty wicket that tore the ball apart as occurred in Brisbane and Perth in the previous two Test Matches? Of course not. So does implementing change require modification to other things that you do? Changing to cheaper heat resistant tyres requires more attention on road maintenance - do you have the equipment, personnel, and skills to achieve this? Best make sure before making the change!

As I have written previously, monitoring and confirming that changes are effective is the critical final step in ensuring the success of your innovations. This should be done, not just in the 'honeymoon phase' whilst implementing a change, but on an ongoing basis. Change without sustainable improvement is just shuffling the deck chairs on the Titanic. Don't go implementing a change if you're not going to back it all the way as the way we do things NOW. All too often, change ends up slipping away and the old way of doing things returns.

Never forget that the reason for change is that the old way wasn't working...

Paris will see the end of coal

Pink ball cricket has been hailed a success. Change is afoot, and the proof of its success will be seen in 5- and 10-years time when it is part of the new normal. The mining industry has a history littered with failed change. Now, more than ever, successful change will see the industry adapt, survive and thrive so it can continue making a difference to people's lives and the global economy in the decades to come.

Coal's New Normal

Mon, 28 Feb 2022 13:08:04 GMT

Coal's new normal - just like the old normal...

As the old saying goes - Lies, damned lies, and statistics.

Our ever-concerned "green" friends keep telling us that new coal projects are uneconomic and investors shouldn't lose their money developing them. Coal is in decline - someone in Paris said so. Intellectual giant Senator Larissa Waters tells us that coal prices have fallen 70% since 2009. Green-investment fund manager and ABC-favourite "expert" used ironically, trust me. Tim Buckley tells us that we've hit peak coal. How about we look into some facts.

Coal is NOT in decline

Despite a small contraction in consumption in fiscal 2014/15, global thermal coal consumption is slated to increase year-on-year into the foreseeable future. As new power stations come online (some older ones go offline) and expanding power requirements in southern Africa, India, and China continue we will continue to see coal-based energy as a cornerstone of low-cost energy for many years to come. At least 40MW of capacity is commissioning in 2016, with much more under construction or in approvals or planning phases.

Coal Prices have fallen - back where they used to be

Well, duh! Thanks for that Larissa. Thanks to a surge in crude oil and coking coal prices on the back of successive flood seasons and cyclones interrupting port and rail supply at key contract negotiation times Thermal Coal prices were at record highs in 2009. In fact, it was compounded by post-GFC investment stimulus in China which added additional demand to an already heated production environment. When you look at thermal coal pricing over the longer term, and exclude the convenient highs (they're called outliers, Larissa) you see a much more stable picture.

I agree that it still looks pretty sad. But let's take exchange rate into account...

Pretty clearly, you can see a long term floor in the AUD coal price of about $55/t. Sure margins have diminished since the last time prices were in the $60/t range as excessive growth in wages, royalties, mining taxes have taken their toll. We will continue to see reductions in wage rates as unions counter the casualization of the workforce. It's going to be bumpy, but interesting, as the industry transitions in the next year or two back to the "old normal".

Peak Coal? I don't think so, Tim

Peak-anything, by its definition, suggests that the ability of supply to meet demand becomes unsustainably unbalanced. As director of the failed Arkx Clean Energy Fund, Tim Buckley spruiks a good story about the end of fossil fuels and an investment in his fund is the way of the future. Being an economist and Director of the fossil-fuels hating IEEFA (can't be bothered typing it out, its name is a fallacy) you'd think if anyone understood supply and demand it would be Tim. Sadly, he's already called Peak Coal. If peak coal was the case, the price would be climbing inexorably and making the switch to a 100% renewable energy economy as simple as the green lobby wants us to believe.

As is typical of an anti-fossil fuels type, Tim only tells half the story. Supply, demand and price are intrinsically linked. When supply and demand move out of equilibrium, there is a shift in price which either stimulates or softens supply. We are seeing a return to equilibrium. Thermal coal production has increased by 54% between 2008 and 2015. The supply/demand equation has been out of equilibrium and is returning to normal.

Let me make one thing clear - future growth in energy is likely to come predominantly from renewable sources but the elimination of coal from the mix is not going to happen.

Paris will see the end of coal

Paris will see the end of dirty coal. Australian thermal coal is the cleanest in the world. A shift to super-critical and ultra-super-critical coal fired power stations requiring higher quality coal than has previously been used (especially in China and India) will result in reduced carbon emissions. The commercialisation of proven Carbon Capture and Storage (CCS) technologies will ensure that existing power infrastructure remains in place for decades to come.

Coal is again the cheapest form of base load electricity. Developing nations will continue to have thermal coal power supply in the mix as they grow their economies whilst developed nations shift the technology intensive and more costly nuclear, solar, and wind-based supply networks.

How much is Administration costing you?

Mon, 28 Feb 2022 12:52:32 GMT

Administration: noun the act of making productive people unproductive.

Here we go - another end of month. Reconciliations, audits, statistics, accruals, justifications, commiserations, late nights, early mornings, and fitting your normal duties around compiling a report to meet head office's deadlines. Perish the thought that someone may actually read, understand, and perhaps get some value out the 10 to 100+ pages of text, graphs, statistics, spreadsheets collated across the range of departments in your business.

Have you ever considered the cost of the administrative burden of compiling this information? How many departments do you have? Five, six, ten?? Safety, production, maintenance, engineering, commercial, marketing, human resources, exploration, business development. You may have more, less or a different mix. It doesn't matter.

I'm not here to tell you that all Administration is bad. It's not! Administration is necessary - there are people in organisations whose soul purpose is to administrate: Accountants, Document Controllers, Secretaries and so on. But when you take productive, frontline personnel away from their main purpose and get them to administrate AND you don't get a return on that investment, is where businesses need to focus.

Are you getting your Administrative "Bang for your Buck"?

When you consider that you may have to deploy up to a quarter of your office-based staff towards running reports, compiling statistics, updating graphs, writing justifications for under or over performance and generally pulling together a summary of departmental activities over the past month to generate a departmental report. You end up devoting significant hours of what could have been productive time to compilation of page upon page of paperwork, that is not too dissimilar from last month's report. It is not uncommon to find that the exercise rapidly descends into a cut-and-paste exercise where quality suffers.

If your department consists of 20 people, and 5 of them end up devoting an average of 8 hours each to compiling your departmental report. Consider then, that at say $100/hr, your department has devoted $4,000 towards production of the monthly report.

Now, I want to suggest something a little radical... Take a step back and look at that departmental report. Would you pay a consultant $4,000 to produce that report for you? Probably not, and neither would I. You end up with a series of 6 departmental reports - at a cost of $24,000 each month ($288,000 annually).

What next? Then, you get your 6 department heads, the business unit heads, plus a few other hangers-on together and discuss the reports for a few hours. Say 10 people at an average hourly cost of $200/hr for 4 hours leads to a further $8,000 invested. Could your administrative time and expense be better devoted towards making your organisation operate more effectively? To be continued...

** I trust you enjoyed my article. Please Follow, Like, Share, and add your Comments. And most of all, stay tuned for the next instalment!

James Marshall is a passionate resources industry consultant with experience across technical, operational, commercial, and management functions in Australia, Indonesia, and New Zealand. James can be reached through LinkedIn, Facebook, and at www.marshallmining.com

What's the point?

Mon, 28 Feb 2022 12:48:20 GMT

What's the point? This is a question often asked in exasperation at the tribulations of your latest challenge. Where this question is rarely used, but perhaps should get greater attention, is challenging the purpose of the administrative tasks that you are doing each day, week, and month. As was highlighted in Part 1, there are significant investments across all businesses being diverted into non-productive activities. And for what?

What's your purpose?

There are a multitude of reasons for administrative reporting. They are not all captured, but here's a few of the common cases:

Monitoring performance (production, productivity, cost, revenue, profit)
Confirming changes are having the desired effect (validation)
Provide information for rewarding or penalising performance

Of course, we all want to know how many widgets were produced, the rate is widgets per hour, and the cost is $ per widget. The critical aspect of procuring this information is not merely its presence, but what decisions you make with it. Herein lies the value proposition: is the cost of your diverted administrative effort justified by the decisions the business is taking on the back of it?

The generation of reports and data each month may have satisfied a purpose when it was initiated often many years earlier, but the currency of that purpose needs to be challenged and adapted to the conditions, costs, and technologies of today. Are you taking action based on the information generated to create a positive return? To be continued...

** I trust you enjoyed my article. Please Follow, Like, Share, and add your Comments. And most of all, stay tuned for the next instalment!