April 2017

Staying in the game – the importance of engineering-based decisions

  • By Peter J Fairfield FAusIMM(CP), Principal Consultant (Project Evaluations), SRK Consulting (Australasia) Pty Ltd

Mine managers should not overlook the importance of technical specialists in pursuing successful project outcomes

There was a good reason at the time … I just can’t see it now!

As I moved around in my career, I hoped that the skeletons left behind didn’t have a negative impact and as I visit projects in my current role, I often wonder why certain decisions have been made. Reflecting on my experiences, including mistakes, the importance of knowledge-based decisions is evident, but if the decisions were not made at the time, the project may not have survived. There is wisdom in staying in the game in order to win the game, but the challenge for mine management is to make these decisions to stay in the game but also deliver lasting value and win the game.

My experience has reinforced that in order to get the most out of our projects, we need to understand and continually review the technical aspects that drive value. It is true that we need to focus on systems, processes and people, but we must ensure we retain the technical skills in our industry to support those tasked with making the ‘best’ decision. The decision may not be optimal, but unless we have the resources and skills to enable the projects to be fully understood, our projects will continue to struggle with short-term focus. This leads to further reductions in value, fewer returns to shareholders and investors leaving the industry, and overall negative sentiment towards the industry.

Background

Over my 29 years in the mining industry, the role and responsibilities of mine management and the operations themselves have changed. This is particularly true of the team supporting mine management.

As an enthusiastic young planning engineer with a few years of experience, I took what I thought was my great innovative idea to the mine superintendent. He looked at me, smiled and said, ‘The last three times we tried that, this is what happened. Go away and come back when you have a better idea.’ I left with my tail between my legs and returned slightly battered to fight another day. I had learnt a valuable lesson. I was surrounded by an immense amount of experience and knowledge: senior planning engineers with more than 12 years’ experience and a mine superintendent with over 30 years’ mining and people management experience. That knowledge and experience was also there to support the mine managers and, when I first started, the assistant mine managers.

Current-day mine managers, often surrounded by less experienced mine superintendents and technical staff, face a growing list of tasks that distract them from preparing and critically assessing the basis of the production plan and then delivering on the promise.

The challenge today is to run operations that are leaner and smarter. With the cyclical boom-and-bust nature of our industry, we need to react and implement change, but are we sufficiently informed to make good decisions in these times? We do employ fewer people on site, but is this lack of support (particularly technical) costing operations on the bottom line through ill-informed, ‘lazy’ decisions?

The changing face of operations

The nature of organisations has changed over the years. Gone are the days of the large-scale ‘breeding grounds’ such as Mt Isa, Broken Hill, the west coast of Tasmania and the Kalgoorlie/Kambalda regions with their structured development of technical and operational staff. Each region had its own parochial nature and a unique set of systems and processes, but employees were trained in these systems and processes, and progressed methodically (often slowly) through the organisation. Each employee had a role and technical knowledge was valued. A number of today’s current leading technical experts cut their teeth in one of these breeding grounds.

These training grounds provided a level of technical and experiential support for the budding technical specialist. The level of work, detail and understanding of the operation from a technical and operational basis was significant. These long-life operations had been through and survived many mining cycles through the application of the collective knowledge. What was taken for granted at the time was the depth of support provided to the mine manager and decision makers by those with sound technical knowledge and extensive practical experience.

Importantly, the value of the technical staff who wanted to be technical engineers, geologists or metallurgists, rather than shift bosses, operators or managers, was valued; there was a clear career path for all concerned.

In today’s climate of lean structures, centralised services and FIFO operations, I see the mine manager, or their alternate, having to make key decisions in the absence of a highly trained, experienced and stable support network. However, the expectation from above is that the manager will get it right, first time.

I consider the challenge to the industry is to re-establish or, where it already exists, maintain the recognition of the value added by technical specialists and experienced workers in an organisation. It may be prudent to better engage them and, in some cases, retain them to support mine management. At one operation I visited over a number of years, five different mine managers were cycled through, none of whom could deliver effectively. It wasn’t until the fifth one engaged with the technical specialists to help solve the underlying technical issues that the operation began to deliver to promise. No amount of polish could be applied to make it shine without getting to grips with and solving the technical issues.

Behaviours

After the exploration team and geologists depart the industry in the face of an economic downturn, and technical construction and support staff leave due to cost pressures resulting from an extended construction and ramp-up phase, the technical specialists start to get nervous as they anticipate being next in the cost-reduction process.

Most military people will state that a battle plan does not survive first contact with the enemy. Drawing on this analogy, how many designs and schedules remain unchanged after first contact with construction and the orebody?

With the increased pressure to continuously improve and/or turn an operation around, is the focus on the right metrics? Do we have the best people and sufficient time to address the volatility in performance, assess the metrics’ relative importance to success and do we understand the operation well enough to be able to identify the right metrics? In my experience, there is no single answer; it varies across operations and over time at each operation. To every question, there is a simple answer that is invariably wrong. Insufficient time and corporate support to allow the identification, assessment and management of the drivers will limit the ability to identify what success can look like and how to achieve sustained success.

Often, the value that is not being realised, where the focus needs to be, is unknown, and evaluating the effectiveness of the plan is therefore not adequately understood. We are unable to define the time, effort and cost that should be applied to identifying and implementing the solution.

The feasibility study anchor

I have often been confronted with trying to answer the question, ‘…but the feasibility study said … are you telling me it is wrong?’ After a few battle scars, I’ve learnt to say that the feasibility study was right at the time, but things have changed, more has been learnt and something does need to change.

If you do survive first contact and successfully walk out of the office after answering the question, the next challenge is to determine what needs to be done and look around and see who is there to do the work. If things have not been going well, there is typically no-one on site with the time or expertise to do the work and the status quo remains. The manager must continue to optimise and rationalise simply to stay in the game, rather than assess the problems and make technical changes to address the fundamental issues.

The manager is then faced with the dilemma of what to change, and then whether to ask for help and potentially appear incapable. If the manager does seek help, should a consultant be engaged or should the centralised technical services team be used? The decision at times is the lesser of two evils, rather than embracing the value that either party can bring. The next challenge is how the relationship with the selected support staff is managed and maintained and how the technical/operational changes (if required) are implemented.

At first impression, reducing staffing levels is effective for the cost side, but it comes at the expense of project implementation, efficiency and the technical development of professionals in the industry. Failing to invest in the technical staff on site has a negative impact on performance at site level and, more broadly, on the industry as a whole.

At times, the reduction of staff and restructuring exercise can be followed (or triggered) by the appearance of management consultants tasked with looking at ways to fix the project. Management changes generally create a challenging culture on site that needs to be managed. While it is important to acknowledge that both management and technical challenges need to be addressed, less attention is being paid to the underlying issues driving the poor performance that results in decisions that lead to ineffective operational management structures.

The centralised versus decentralised model

As the size and strategy of organisations and sites change over time due to cost pressures and management trends, so too does the need to retain full-time, site-based technical teams to assess new opportunities, progress projects through the approval process and provide life support to often under-resourced operations. This resulted in the model of technical teams providing technical support to a number of operations from a centralised hub. These services may come at a lower cost to the business, may not necessarily be more cost-effective and the model may enjoy varying degrees of success based on the culture of the site and centralised teams. Often, as the centralised teams are beginning to bed down, develop relationships and impart value, the services are then decentralised and taken back to site, due in part to changing economic conditions and/or a new corporate structure.

The contractor/consultant model

The industry has created the contractor/consultant market by cutting staff in the tough times, only to bring them back on a part-time or casual basis. These contractors/consultants either set themselves up as sole traders/teams or join larger consulting firms. More often than not, the reality is that while the technical work must still be done, the corporate culture does not recognise the value of a full-time role.

In the absence of the technical skills within the organisation, the operation becomes increasingly reliant on the contractor/consultant to provide the ongoing support and, indeed, the corporate knowledge of why things are failing, what has been tried, what has succeeded, what needs improving and why (and increasingly where) the information is stored. This is even more evident in FIFO operations.

Case study

I have observed a large company’s operation, which had centralised technical support services, struggle to implement the project’s feasibility study goals. For a variety of reasons, the operation’s struggle to meet performance targets resulted in cost blowouts and the inability to deliver the metal production targets against the plan. Cost over-runs and a production shortfall inevitably go hand in hand. The organisation had adopted a centralised support services model and a lean, site-based team. Over time, the site-based team became even leaner through attrition, initially enforced, then natural. This led to less well-considered decisions being made.

The challenges to make the right decisions to stay in the game and keep the operation cash positive were real, but so too was the fact that implementation of the feasibility study plan was not going to be successful and the mine plan needed to be changed. The constant pressure on the site team to deliver and the anchoring of the feasibility study approach led to a lack of focus on the development of technical solutions. The organisational culture led to a less than adequate integration of the internal resources that were available to assist and support the site team to address the technical issues affecting the success of the operation, infrastructure location and mining sequence. After a period of time, the risks that the design basis were developed to mitigate had not transpired, but the feasibility study anchor remained. All the while, production and performance pressures resulted in regular site management changes that continued to have an impact on the functionality of the organisation and the site-based and centralised teams. Fundamental changes to the technical aspects of the project led to the operation’s ability to consistently meet production target and deliver profitable performance.

The site and centralised teams were driven together through corporate change. The same individuals prepared and implemented a revised case that deviated from the feasibility study that has proven to be successful, and the operation performed at production levels above those estimated in the feasibility study. The changes in staffing levels and personnel resulted in cost savings, but it was not until the technical solutions were developed and implemented that the productivity and revenue side of the operation began to improve. During this period, the lost opportunity outweighed the cost savings. The technical changes (revised plans) were based on the experiences and conditions on site and largely went against traditional convention – the anchor chain was cut. Over time, the revised plans were modified and refined by an increasingly larger, more stable and experienced technical team. With the success, confidence grew, as did the support for additional resources to further assess and implement changes to seek and implement continual improvements.

Should we conclude that the feasibility study was wrong? If the intent of the feasibility study was to secure funding to enable a project to be progressed and constructed, then it was successful. What went wrong, or what can be improved upon and learnt from the experience, is the recognition that we must continually assess and learn from technical experiences and not be afraid of change and making bold decisions. In fact, the decision to proceed based on the feasibility study was a bold decision that, at times, did seem a bad one. However, the development, implementation and continual refinement of the design and operational practices has led to a very successful operation in a challenging technical environment. Any investors who had the courage to stick with the company throughout the process would have been financially rewarded.

Conclusion

We are currently experiencing a period of significantly high unemployment, and highly skilled people are leaving our industry. This is at a critical time when we are looking to improve the performance of our operations. I consider that these improvements are best introduced and achieved by holistically understanding the technical issues and developing technical solutions. This will require professionals to embrace the various organisational models and structures that are encountered in organisations.

As an industry, we must challenge ourselves to refocus on the most important asset – our people – and retain and develop technical skills across the industry. This will in turn attract new people to enter the industry.

To navigate through the current operating environment, we must be creative in our thinking and approach. This applies to how we structure our organisations and how we remunerate and value the people working in our industry.

Cutting so-called non-productive technical and professional people is not the answer when we acknowledge that we must get smarter in what we do. By understanding our assets and doing the smart things, we will improve the quality of our output and, ultimately, improve the performance of our assets and the external perception of our industry.

Most importantly, this will attract and retain investment levels, which will lead to greater security and stability within our industry and provide a better environment for fostering and developing our technical, professional and operational staff.

Acknowledgements

The author would like to acknowledge all those that have been very generous with their time and knowledge; mining professionals who have provided learning and guidance over the past 29 years – even when I didn’t realise it – and those I continue to learn from today.

The willingness of people in our industry to give and share the precious resource of their time should not be underestimated. It is one of the many aspects that make our industry such an enjoyable and rewarding one.

References

Hall A and Hall B, 2006. Doing the right things right – identifying and implementing the mine plan that delivers the corporate goals, in Proceedings International Mine Management Conference 2006 (The Australian Institute of Mining and Metallurgy: Melbourne).

Coombes J, 2016. Transcending the mining discipline divide – multidisciplinary, interdisciplinary or transdisciplinary, in Proceedings Project Evaluation Conference 2016, pp 2–10 (The Australian Institute of Mining and Metallurgy: Melbourne).

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