Strategic Decision Making in Mining – Optimisation · Strategic Decision Making in Mining ... Strategic Decision Making In Mining – Optimisation . 3 . ... every step possible

Strategic Decision Making in Mining – Optimisation Daniel Kahler and Brian Hall

9 March 2016

Project Evaluation 2016

Optimisation – one word, many meanings! &

Daniel Kahler and Brian Hall

Business optimisation – modelling options

www.amcconsultants.com

Optimising – everyone wants it! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Sam Walsh, Rio Tinto, 11/8/15 We’re seeing a strong focus on improving that business in terms of its cost, in terms of its throughput. [Rio Tinto are moving key people to site to ensure that ]... every step possible to optimise that business. http://www.theaustralian.com.au/business/mining-energy/rio-tintos-iron-ore-expansions-put-ioc-at-risk-of-closure/news-story/d374d7486c690e7a78411e9b644aa4fb

Andrew Mackenzie, BHP Billiton, 26/8/15

….we will continue to monitor market conditions to optimise value http://www.smh.com.au/business/mining-and-resources/bhp-billiton-ramps-up-cost-reductions-at-us-shale-business-20150825-gj7eop.html

Spokesperson, South32, 14/1/16

Our primary focus is on optimising the performance of our existing operations and maximising the value of those assets, http://www.afr.com/business/mining/south32-may-bid-for-anglos-us1b-niobium-brazil-business-20160113-gm5e1t

Nev Power , Fortescue Metals Group 15/10/15

Our team is continuing to deliver sustainable cost reductions through an unwavering focus on optimising every aspect of Fortescue’s operations https://au.news.yahoo.com/thewest/wa/a/29817593/fmg-slashes-costs-again/

Spokesperson, Rio Tinto, 11/2/16,

offset the bear market in metals by optimizing their portfolio, cost reductions, and improvements in productivity http://aluminiuminsider.com/aluminium-business-buoys-rio-tinto-on-fy2015-earnings-statement/

http://www.theaustralian.com.au/business/mining-energy/rio-tintos-iron-ore-expansions-put-ioc-at-risk-of-closure/news-story/d374d7486c690e7a78411e9b644aa4fb

http://www.smh.com.au/business/mining-and-resources/bhp-billiton-ramps-up-cost-reductions-at-us-shale-business-20150825-gj7eop.html

http://www.afr.com/business/mining/south32-may-bid-for-anglos-us1b-niobium-brazil-business-20160113-gm5e1t

https://au.news.yahoo.com/thewest/wa/a/29817593/fmg-slashes-costs-again/

http://aluminiuminsider.com/aluminium-business-buoys-rio-tinto-on-fy2015-earnings-statement/


















In common usage:

IMPROVEMENT =

OPTIMISATION Probably a lost cause to argue against this

Optimisation – one word, many meanings! Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Activity or Item Approach

Software Real options

(management flexibility)

Heuristics

Evolutionary algorithms

Mixed integer linear programming (MILP)

CPlex

Dynamic programming

Constraint programming

Blasor

Comet

Prober

River Logic Enterprise Optimizer

DumpSolver

XPAC

XACT

Flowsim

MSO

Whittle

SOT

Express

MineMax

NPV Scheduler

FlexSim Stope Optimizer

Simio

BlendOpt

Lobos

HoV Pit shell

Asset optimisation

Schedule optimisation

Truck haulage Stope design

Decline design

Fragmentation optimisation

Pit-to-port optimisation

Mill recovery optimisation

Implementation optimisation

Supply chain optimisation

Mine-to-mill optimisation

Financial optimisation

Enterprise optimisation Business optimisation



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Activity or Item Approach

Software Real options

(management flexibility)

Heuristics

Evolutionary algorithms

Mixed integer linear programming (MILP)

CPlex

Dynamic programming

Constraint programming

Blasor

Comet

Prober

River Logic Enterprise Optimizer

DumpSolver

XPAC

XACT

Flowsim

MSO

Whittle

SOT

Express

MineMax

NPV Scheduler

FlexSim Stope Optimizer

Simio

BlendOpt

Lobos

HoV Pit shell

Asset optimisation


Truck haulage Stope design

Decline design











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Activity or Item


Truck haulage Pit shell Stope design

Decline design Asset optimisation









Image courtesy: http://b2b-marketingblog.activeconversion.com/2011/01/market-the-value-not-the-features/


Scope!

Component Optimisation

Business Optimisation


8 Image courtesy: http://b2b-marketingblog.activeconversion.com/2011/01/market-the-value-not-the-features/


Where does my “optimisation” fit? Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Outcome in $ (or NPV) ≠ Business Optimisation Component A Optim + Component B Optim ≠ The Optimum




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1. Design 2. Schedule 3. Asset 4. Implementation 5. Financial and risk


Scope!


Business Optimisation


11 Image courtesy: http://b2b-marketingblog.activeconversion.com/2011/01/market-the-value-not-the-features/


Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Strategy selection The traditional approach

Strategy optimisation The flexible approach

Image courtesy: http://sanatiostuff.blog.fc2.com/blog-entry-73.html Image courtesy: http://revitdowntothedetails.blogspot.com.au/2012/08/rubiks-cube-part-1.html



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Modelling techniques

Fully-flexible models

Mathematical programming

or

Image courtesy: http://sanatiostuff.blog.fc2.com/blog-entry-73.html



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Mathematical programming will be likely to identify superior solutions to well defined problems…

BUT…



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Caution needs to be used in assuming away all the variability for the purpose of finding an “optimum result” that can be calculated by a mathematical solver (Rieck, 2015)

…off-the-shelf software solutions might not meet the needs of the business and customised models might be required (De Kock, 2007)

…there are perhaps fewer problems in mining that are suited to solution by these techniques than some would like to believe (Poniewierski, 2003)


Business optimisation - the challenge Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Image courtesy: www.slideshare.net/rob.goodspeed



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A Wicked Problem To solve:

The orientation of a solution concept

The solution is likely to change as you approach it. So…

Image courtesy: http://blog.careerfutura.com/wp-content/uploads/2013/12/problem-solving.jpg

Agreement??


What should be the outcome? Business optimisation Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Information to make decisions

Improved understanding of the project

Image courtesy: http://blog.careerfutura.com/wp-content/uploads/2013/12/problem-solving.jpg



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Mathematical programming

or




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• Interactive for single cases

• Not constrained by mathematical fomulations



Case Studies Project Evaluation 2016 – Strategic Decision Making In Mining – Optimisation

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Thank you Component optimisation

Design optimisation


Asset optimisation


Financial and risk optimisation

Business optimisation

Strategy Optimisation

Strategy Selection Traditional approach

Wicked Problem Consultation &

Bod

y of

K

now

ledg

e Fully-flexible models Mathematical programming

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Strategic Decision Making in Mining – Optimisation · Strategic Decision Making in Mining ... Strategic Decision Making In Mining – Optimisation . 3 . ... every step possible