commodity slump requires cost cutting

There are signs of distress across the mining industry: Continued deterioration in commodity prices is undermining cash flows and putting pressure on the serviceability of existing commitments. Some are of the opinion that the drop in commodity prices we are currently experiencing is not a pendulum swing but a seismic shift and that companies who don’t respond appropriately risk their profitability as well as their long-term survival.

“There’s no doubt the mining industry is experiencing tremendous pressure on costs. But cost constraints often lead to innovation. Mining has grown bigger over the past 200 years – bigger plants, bigger trucks, bigger blasts. But the industry itself hasn’t evolved much. Now is the time to make fundamental and dramatic changes.”

Glenn Ives, North American Mining Leader and Chair for Deloitte Canada

The dangers of reactive cost cutting

In a 2014 report Deloitte warns that it would be a short-sighted of mining companies to respond to the commodity slump by retraining their focus on capital prudence, cost discipline, portfolio simplification and non-core asset divestment in an effort to improve ROI. From a long-term perspective we can see that reactive cost cutting is rarely sufficient or sustainable:

  • Shrinking the talent pool while commodities are down means that companies will be scrambling to recruit new teams when the market recovers.
  • Cost cutting measures such as reducing travel or tightening cash management tend to creep back into the costs over time.
  • Reducing funding approvals for projects related to maintenance and safety puts the wellbeing of employees and the future profitability and efficiency of operations at risk: “Reactive maintenance is five times more expensive than preventive maintenance and 10 times more costly than predictive asset management” Lima, Zöhner, Oladzadeh on transforming mining maintenance and advanced service solutions for mining and mineral processing.

Asset monitoring for long-term cost cutting

The best solution for sustainable and efficient cost cutting is to build a culture of cost management by re-evaluate operating models to ensure the necessary management and reporting systems are in place. Deloitte advises various strategies for implementing sustainable cost management program to become the lowest-quartile-cost producers. Three of these strategies can be implemented by means of an efficient asset monitoring system:

Pursue operational excellence

By implementing an efficient asset monitoring system cost reduction diagnostics can be put to use to help mining companies identify key cost levers they can pull to improve productivity and optimize return on capital. “To ensure the changes “stick,” they must track and monitor costs by adopting appropriate operating models and reporting systems and potentially changing their internal cultures in order to drive continuous improvement.”

Improve efficiencies through technology

With real-time information on the location and production of mining machinery available management is able to identify inefficiencies, track productivity levels, streamline processes and re-plan based on actual performance and conditions.

Use analytics to uncover true cost drivers

“It is impossible to reduce the costs of safety, maintenance and other cost-intensive programs on a sustainable basis simply by examining component costs.” Instead, the analytics made available through real-time asset monitoring technology allows companies to assess the costs of entire processes and to improve decision making and asset performance by measuring both financial and non-financial indicators that affect overall profitability. “By combining analytics with the right performance indicators, companies can identify and realize enormous savings.”

Real-Time asset monitoring for cutting costs and improving performance

  • Do you know where your material cars are?
  • Has your requested material arrived at the work place?
  • Is each of your material cars and vehicles being used optimally and efficiently?

real-time asset monitoring

Asset Location Monitoring (ALM) solutions enables the monitoring of all vehicles, loco’s, material cars and any other assets throughout the mining operation. When monitoring and managing these assets you will not only increase productivity; the system will also enable you to create a safer working environment for your people.

Vehicle Management Solution (VMS) solutions makes use of an integrated suite of software and hardware components. It allows for real-time monitoring and management of primary production equipment and related product flow.  Once the vehicle unit (VU) is installed on a vehicle, the unit will constantly monitor and log data in real time from a variety of sources on the vehicle. This includes data from the strategically placed location tags for determining the position of the vehicle.

Modular systems allows integration of monitoring applications with messaging application to deliver notifications when a material car reaches its selected place of work, or when an explosive car has not been returned to surface after a certain number of days. Such a Messaging Module can also generate an alarm, in case of an unauthorized entry in a particular area.

Asset monitoring infrastructure

asset monitoring infrastructure

The Software manages the information upload from each vehicle unit to a centrally located Master Controller. When the vehicle travels through an area without network coverage the vehicle unit acts as a data logger – by storing data locally. Once the vehicle returns to a coverage area, data is then uploaded to the master controller for display/reports on the Visualization application.

In a nutshell:

The implementation of real-time asset monitoring systems is a long-term cost cutting strategy that can assist mine managers with keeping operations afloat in the economic climate currently faced by the mining industry.

Ps. Would you like to know more about Asset Monitoring technology that can help you cut costs and improve productivity in your mine? Contact us now for a FREE consultation!

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