Coal Age

MAR 2018

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Page 40 of 51

March 2018 39 operating ideas Here's How Rio Tinto, BHP Plan to Save Millions in Haulage, Maintenance Costs A large U.S. insurance company closes its current TV commercials with the slogan, "We know a thing or two, because we've seen a thing or two." As a catchphrase, it could just as easily be applied to ongoing efforts among the world's largest miners to increase productivity. These companies have seen a few things, and they know what needs to change in order to meet their goals. High on the list are improve- ments in loading, haulage, and equipment maintenance and replacement practices that offer the prospect of boosting produc- tivity with little or no investment in addi- tional primary production equipment. At Rio Tinto, the driving force behind these improvements is a desire to gener- ate higher free cash flow to maintain and improve shareholder returns. This was made clear by Jean-Sébastien Jacques, Rio Tinto's CEO, at the company's 2017 In- vestor Seminar held in early December in Sydney, Australia, who opened the event by stating, "Looking ahead, [our] $5 billion productivity program will help drive value over the next five years. Our group target of $1.5 billion of annual additional free cash flow from 2021 will ensure we can continue to lead the pack in delivering su- perior cash returns to our shareholders." Other Rio Tinto executives filled in the details: Chris Lynch, CFO, added, "In addi- tion to generating value through the com- pletion of our growth projects, we are also focused on the productivity of our existing assets. Increasing the value of our $50 bil- lion installed asset base provides low risk, high returns for our shareholders." Lynch noted that "In each of 2017 and 2018, we should generate around $300 million dollars of additional free cash from our productivity program. We are taking a hard line on measuring productivity. There will be no easy runs here." "We will not be adjusting for grade de- clines," Lynch said. "We see this as a fun- damental, ongoing challenge for our in- dustry, and we need to overcome declining grades before we can count value added. This differs from most of our peers. It raises the bar for our productivity agenda. There will also be savings in capital expenditure, which we can avoid, for example. The re- placement rate for trucks will be slower as we get better utilization and longer lives. We are not counting that cash avoided in our $5 billion cumulative target." Stephen McIntosh, Rio Tinto's group executive–growth and innovation, listed some of the foundational elements sup- porting the company's push for produc- tivity, including the startup of its driverless truck fleet 10 years ago, the opening of its re- mote operations center in Perth, Australia, in 2010, and a decade-long effort to trans- form Rio Tinto from "what was historically a very conservative company into a more curious, agile and inventive organization" by utilizing its available specialized tech- nical expertise along with rapidly evolving IT systems and tools — including creation of its proprietary Mine Automation System (known as MAS) and the related visualiza- tion capability (RTVis) that allows users to combine myriad streams of data to deliver operational insights in real time. McIntosh said Rio Tinto has identified five priority areas across the value chain that will deliver the most value with little or no extra capital required, including improv- ing equipment and fleet utilization by doing more with the same equipment or doing the same with less equipment. Other areas in- volve optimized mine planning, processing recovery gains; improved efficiency of ener- gy systems, rail networks and ports; and ca- pacity optimization, in which the company leverages its capability to switch off or run assets part time or even shut down excess pits and sites to maximize value. Rob Atkinson, Rio Tinto's head of productivity and technical support, pro- vided several examples of improved fleet utilization, starting with payload maxi- mization — an initiative that he said costs "virtually nothing." Explaining that on a typical day its trucks will perform nearly 25,000 hauls carrying between 200 metric tons (mt) and 300 mt of ore and waste depending on the truck size, Atkinson said that Rio Tinto had been working closely with its truck, load- ing equipment and tire suppliers to safely increase the load carried on each trip while conducting extensive field trials to improve loading accuracy. As a result, during 2017, it increased the average load by 6% on a like-for-like indexed basis and has plans to increase this an additional 10% as loading accuracy improves. With the current fleet, this offers the opportunity to mine more than 150 million mt more annually or mine the same tons with less equipment. Atkinson also said, "It's no longer ac- ceptable for our trucks to be performing useful work for only 65% or the equivalent of 8 months of the year. We would not be happy to do this with a processing or man- ufacturing plant so why have we accepted this in the mining industry? "All things being equal, the more the trucks are working efficiently, the more waste and ore we can move, and in turn, we can work our downstream fixed plant harder. To drive this metric, we have been working the whole of the mining cycle from planning to changeovers to maintenance. "Our mine at Oyu Tolgoi is current- ly sustainably achieving annual effective Rio Tinto says it increased its average payload by 6% in 2017, and plans to improve that by an additional 10% in the near future.

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