THE ENTERPRISE OPTIMISATION APPROACH

Many mining businesses are partially optimised. Enterprise Optimisation goes beyond what can be achieved using conventional methods and available software.

How do we do it?

Money Mining means running your mining and mineral processing business to maximise economic value. This may mean overcoming typical organisational silo-based objectives like maximising reserves, minimising costs, maximising recovery, maximising equipment utilisation, having steady production, minimising capital expenditure and maximising mine life - all of which can be demonstrated to reduce the value of the business in many circumstances.

Whittle Consulting's approach called Enterprise Optimisation is a comprehensive integrated study which identifies where the value-increasing opportunities exist. Enterprise Optimisation can be your first step by "finding the money", hidden from mining company management by the complexity of the operation, long standing industry paradigms and typical organisational barriers.

Enterprise Optimisation, involves a combination of:

Philosophy:

• "It's a Money Mine!"

  Mining and mineral processing businesses are highly technical, and staffed by lots of technical people. However, the focus on tonnes, pounds, ounces, truck hours, material movement etc can distract us from the fact that this is a commercial enterprise. We are not here to make copper/gold/nickel etc, we are here to make money. Mines don't fail because they don't make metal, they fail because they don't make money. Generating cash is the fundamental objective of a mining operation, without it you will not have the opportunity to exist, expand, or pursue other social and political objectives. If you are not making money then you should not be messing up the environment, asking employees to risk their safety and the livelihoods of their families, and asking investors to trust you with their capital.

• "Money has a time value - we want the money now!"

  A million dollars is worth more today than in several years time. The timing of cash spent and generated is critical to the evaluation of a mining business, and the assessment of its value. That is why we use Net Present Value (NPV) as a basic measure of value. It is a simple arithmetic tool that reflects the time value of money (opportunity cost and risk). NPV is not perfect, in particular how it accounts for risk and uncertainty (a deep subject which can be incorporated with more sophisticated techniques) , but it is a great starting point.

• "It is the bottlenecks that stop us getting all the money now!"

  If there were no bottlenecks/constraints, then we could mine and process the ore body in one year to get all the cash immediately and the NPV would be fantastic. It is not just the amount of cash in the ore body that is important, it is the rate at which the cash can be realised that counts, and that is determined by the bottlenecks. The bottlenecks are what make a mining operation 10, 20 or 30 years. We need to understand and manage the economic bottlenecks to maximise the value of the business.

Methodology:

We combine a comprehensive and unique combination of advanced business modelling and optimisation techniques, including Lerchs-Grossman*, Ken Lane* Cut-off Grade, Activity Based Costing, and Theory of Constraints, through a process that involves Cross Functional Communication, and a heavy dose of lateral thinking. For example, detailed recognition of the cost, throughput and recovery characteristics of material (Geo-metallurgy) can and should have a material impact on the mine design and operating production plan. Recognition of the bottlenecks in the system affects all parts of the plan and will lead to changes in operating strategies at different stages of the life-of-operation.

Enterprise Optimisation involves the combination of 10 distinct mechanisms, which are ultimately performed simultaneously to produce life of mine business plans with Net Present Value increased by of 5% - 35% or considerably more, even when conventional optimisation techniques and software have already been applied (including Gemcom Whittle). This value is derived from overcoming organisation silo-based barriers, dynamically harmonising the flexibility in all parts of the business value chain. This involves combining a range of analytical and optimisation techniques, including Lerchs-Grossman*, Ken Lane*, Theory of Constraints (Goldratt*), Activity Based Costing, and other business modelling methods.

The result is a business plan with significantly better cash flow profile.

(*) References:
Lerchs, H & Grossman, I F, 1965. Optimum Design of Open Pit Mines. CIM Bulletin, Canadian Institute of Mining & Metallurgy, Vol 58, January.
Lane, K F, 1998, 1997. The Economic Definition of Ore : Cut-off Grades in Theory & Practice. Mining Journal Books, London
Goldratt, E. & Cox, J. (1992). The Goal: A process of ongoing improvement.

Software:

We use whatever software suits the purpose best. In general this includes Gemcom Whittle software and Whittle Consulting's proprietary "Prober" software - the most powerful all-encompassing mining business optimisation software in existence.

To discuss how Enterprise Optimisation and the Money Mining concepts might apply to your business contact Managing Director Gerald Whittle