One of Aesop’s lesser-known fables, The Soldier and His Horse, can speak to the idea of “value over volume” in the mining industry. As the story goes, a soldier keeps his horse well-groomed and fed during wartime; but after the war, the soldier grows complacent and the horse loses strength. When the call to battle arises once again, the soldier rushes to care for his horse – but time is too short. The horse is unfit, and the soldier has no choice but to continue on foot.
The millennium mining boom, driven in large part by Chinese demand, was a period of frenetic activity and high-volume production. In a manner of speaking, it was peacetime. Business was booming and shareholders were happy.
To that end, we can think of the “bust” cycle as wartime. Demand fell and stockpiles rose. The industry rushed to adapt its processes, eliminate waste, improve the bottom line – but mining for volume had its own inertia. When things were humming along, the industry hadn’t done enough to groom the horse – that is, challenge its processes and prepare for the downturn that would eventually come. This commentary is nothing new; it was widely recognised as operators took painful but necessary steps to shift their thinking and be more efficient.
A Quest for Optimisation
The industry may well experience another boom like the one we had in the first decade of the 21st century – but to forget the lessons of that particular cycle would be an amazing (not to mention unfortunate) feat. Markets can be frivolous. Demand and prices can shift on short notice. Today’s investment in outsized production can become tomorrow’s write-off. That’s why so many leaders in the industry are convinced that value, not volume, is the way forward.
But how is this accomplished, exactly? How is an accounting principle like all-in sustaining costs (AISC) optimised for the mining industry? The answer to this question can be different for every site, especially with so much variation in the grade and accessibility of orebodies today.
Without a doubt, new technologies are part of the solution. Decreasing the input necessary to achieve a given unit of output is the bread and butter of optimisation. In the case of something like automation, however, the effect on people and communities needs to be figured in, along with any direct cost savings.
Renewable energy sources are another matter. If mining sites can reduce its dependence on diesel through the construction of solar, it lowers the carbon footprint and raises the bottom line – it’s hard to find a downside to this, if it can be implemented effectively.
Talent management has emerged as another key in the quest for optimisation. The costs of high turnover, or of problematic work cultures, can’t be separated out from the more technical aspects of an operation.
Our own specialisation in digital blasting gives us constant reminders of the tangible rewards that follow a commitment to optimisation at every level. As we listen and learn from a wide array of mining operations, a clearer picture of the future begins to take shape. The value of partnerships also stands out, as each site presents many unique challenges. Each challenge must be met with vision and consistency if the optimal value of a given operation is to be realised. This is hard to do in the absence of partnerships.
The moral of the story?
If the soldier in Aesop’s fable had kept his horse fit during the good times, it wouldn’t have been much of a fable at all. Peaks and valleys have served to teach the mining industry some important lessons in the 2000s and 2010s. Moving forward, a constant and careful positioning for health and value appears to be the moral of the story.
