Mine Construction: On Time, On Budget
- 12 October 2022
By John Ferguson (Chief Executive Officer) and Eduardo Spina (Vice President of International Operations)
Mine construction projects have long lifecycles, and enormous amounts of capital are at stake. Unfortunately, bringing them in on time and on budget is the exception, not the rule. Most mine construction projects (4 out of 5) are completed late and run a whopping 43% over budget. And because mine construction booms when commodity prices climb, this can postpone billions of dollars in anticipated revenues, and companies can miss profit opportunities altogether if the commodity markets turn.
It doesn’t have to be this way. Mining companies can use lean management methodologies to improve yields, increase responsiveness and build more resilient organizations. These revolutionary management practices can have a significant financial impact on mine construction projects and help avoid project delays and cost overruns, enabling companies to increase excavation and extraction rates and capture billions of dollars in revenue.
For example, lean management methodologies have not only delivered cost savings but helped get a mine construction project in South America back on track, finish on time, realize the return on investment, and go from running nine months behind schedule to being completed on time.
$1 Billion Reasons
Mine construction companies have extensive project management expertise and can generate up-to-the-minute status reports and detailed project plans. Despite these capabilities, construction of a new mine often falls significantly behind schedule. In the case of this project, the work was spread between multiple contractors, construction work was poorly coordinated between them, and crews were executing just three blasts per day.
After conducting several site visits, TBM identified several significant issues, including: contract deadlines nine months behind schedule; hefty fines for non-compliance with contract terms; inefficient drilling processes; disorganized movement of equipment between fronts; and many workers waiting around with nothing to do.
The company's first step in using lean management methodologies was implementing a daily plan-of-day (POD) meeting and monthly and weekly "obeya" meetings. For the POD meetings, managers from different areas met to review performance and discuss pending issues. They would then brainstorm solutions as a group and assign responsibility for implementing those solutions. In obeya meetings, senior leaders met to address bigger picture challenges. Their focus included removing obstacles, discussing equipment purchases, and addressing mid- or longer-term resource needs.
The multidisciplinary approach optimized the use of resources and improved compliance with construction milestones. As a result, productivity increased to six blasts per day. However, they were still not achieving the target of seven blasts per shift (14 per day) and were still experiencing significant delays.
Clearing Out the Waste
Root causes of the delays were identified, which included a lack of standardized processes, minimal employee training, weak problem-solving capabilities, poor equipment availability, and daily operational headaches. To address these issues, we launched a series of kaizen events. The kaizen events targeted different areas of the construction process, from fortification, drilling, and blasting to the removal of rock. Ultimately, without making any new equipment investments, output was boosted to 6.2 kilotons per day, exceeding their target.
“Pull” vs. “Push”
Typically, a designated scheduler generates plans from the start date, consulting with team leaders and stakeholders to arrive at a detailed sequence of activities. Pull planning, a lean management practice, starts with the completion date and works backward. With backward planning, the power comes from transferring control of the schedule from the central scheduler to all key stakeholders. They then work together to identify predecessor activities and streamline the workflow between departments and organizations. The collaborative effort breaks down departmental and organizational divisions, which the traditional approach tends to reinforce.
TBM helped the client’s teams leverage pull-planning to identify restrictions that could cause delays. They then took preventive measures and redesigned work sequences to ensure effective collaboration. For example, the client needed to assemble a 12 km-long conveyor quickly to meet deadlines. Starting with the key milestones, they identified potential areas of interference as well as slack time. As a result, the assembly and construction work were not only completed on schedule, but the total time was reduced by 20%.
From Nine Months Behind to On-Time
Working with the mine construction company to implement lean management practices for this project rapidly fostered the company’s continuous improvement capabilities. More consistent management and construction processes helped them achieve the targeted improvements, and the site leaders and supervisors became more confident about implementing change. Over time the management behavior and culture have become much more proactive and less reactive, driving increased daily productivity and an increase in yield per blasting of 20%. Prior to the improvements, the mine experienced hefty, delay-related financial penalties. They ultimately captured $460 million in cost savings and captured $1 billion in revenue by opening on time.
