Mine Expansion Avoids $50M in Wasted Capital
A recently acquired nickel mine was in the midst of an expansion when the project team was told that they needed to reduce the remaining capital by over $100M in the next two months to remain viable in the new organization. The scope included a new mine area and additions to the mill.
The expansion was already more than 50% constructed.
Any opportunities for reducing capital were seemingly already passed, or even at best case, rapidly disappearing. People were working over weekends and well past dinner to try to find what more they could squeeze, worried that their multi-year project (and positions) may come to an end.
The team partnered with Stroud to complete 2-week Zero-Based Analysis (ZBA) on the remaining scope and determine whether a $100M reduction was even possible.
This process reviewed the factors driving every last dollar of remaining spend and asked, “What would this look like in a perfect world?” When this perfect world scenario was compared back to the current plan, over 200 unique potential opportunities for cost reduction were identified with a total value of over $250M!
The team uncovered five times more opportunity than had been compiled.
Most importantly this meant that instead of looking where else to squeeze, the team could now focus on validating that roughly 40% of this theoretical opportunity was real and could still be implemented.
One opportunity, in particular, stood out from the rest: the mill expansion. This was designed to boost mill capacity by about 15% to handle the new mine. While the overall project was more than half constructed, the mill scope itself was in earlier stages with less than 20% of the total cost sunk and over $50M in remaining spend still in play. The Zero-Based Analysis challenged a project premise that was in place since day one: can the existing mill assets reliably handle the needed capacity increase? One problem: the engineering team was adamant the mill expansion was an out-of-scope operational issue.
The single largest savings opportunity was at risk of being dismissed before it could even be evaluated.
Unfazed, the project manager appealed to an escalation process that was in place but had never been used. When leaders in the new organization understood the value that could be at stake, they commissioned an integrated team with project and operations personnel to rapidly re-evaluate all of the assumptions that drove the size of the mill expansion.
The team applied Variable Analysis, Stroud’s most rigorous problem-solving tool, to quickly determine exactly what was limiting the existing mill throughput. The team initially believed that the mill couldn’t achieve the required sprint capacity, and beyond that there were components limited to an average steady-state throughput that was too low.
Going through the problem-solving process together with operations at the table, the team was able to uncover two key facts.
First, operations confirmed the mill had actually already safely surpassed the required sprint rate by nearly 2% for a full week earlier that year.
And second, the team determined the average throughput limit was actually sufficient if mill availability could be raised from 92% to 95%.
So now the problem-solving focus could zero-in on mill availability, which on fact-finding was primarily being driven by filter press cleaning cycles. With this level of focus and knowing what’s at stake, the maintenance manager opened up,
“Yeah, there probably are quicker ways to clean the filters, we’ve just always done it this way because it works and we’ve never had a need to do anything different.”
“If we had known that the filter cleaning cycles had a domino effect of costing us well over $50M in Capital, we would have solved this years ago. The power of this integrated team approach with the rigor of Stroud’s tools just averted a massive spend that isn’t necessary!”
Within weeks, the required filter press cleaning improvement was locked-in and the leadership team made a confident decision to eliminate the mill expansion, saving over $50M in capital, while still achieving the mine expansion and target production.
During that time, the newly invigorated team was able to secure another $50M in savings from 24 of the highest impact, lowest complexity items from the pool of 200+ other theoretical opportunities remaining, highlighted by several newly identified safe execution improvements.
As the project manager remarked:
“We never thought there’d still be so much opportunity this late in construction, but the team showed that there is always big upside out there and you should never stop looking.”
The project was approved to proceed and is now complete and successfully operating.
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