Cuan Kloppers PDF

Understanding the
Mining Business Model

Cuan Kloppers, Group Manager: Group
Business Systems, Samancor Chrome
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
“In ancient times, those known as good
warriors prevailed when it was not easy to
prevail. Their victories were not flukes
because they positioned themselves where
they would surely win …”
Sun Tzy - The Art of War
Roadmap
• Positioning Mining with Strategy, People,
Processes & Technology
• The ability to change
• Macro Processes in the Mining Business
• Components
• Business drivers
• Business challenges
• Critical success factors
• Reporting requirements and systems
• Technology as a business process
enabler – the big picture
• The Integrated Solution
• Utilising ERP to enable a business
• Business Intelligence as a strategic tool
Understanding your company's
environment
Environment Economic Regulatory Physical Social Technological
Strategy Corporate Strategy / Vision Operating Strategy Organisation

Strategy
Operating Model Process Technology Physical Setting
Organisation Framework
Organisation Structure Individual Learning/Training/

Knowledge Transfer
Performance Required Resourcing

Management Capabilities
Leadership Communication Culture Performance Support
is key to position yourself in the market today!

Typical Challenges and Business
Drivers
Industry Challenges Business Drivers
Cross-cultural Environment
Multiple Locations Supply & Demand Planning
Changing Market Dynamics Performance Driven

Organisation
Communication Infrastructure
Cash Flow Management
Complex Legislative
Environment Asset Management
Organisational Size Operational Efficiency
Complex Stakeholder
Environment
Transformation
Cost Containment
in the Environment of a typical Mining Company today

Gartner’s Top 10 CEO Business and
Technology Priorities for 2009
Rank Top 10 Business Priorities Top 10 Technology Priorities
1 Business process improvement Business intelligence
2 Reducing enterprise costs Enterprise applications (ERP, CRM and others)
3 Improving enterprise workforce effectiveness Servers and storage technologies
4 Attracting and retaining new customers Legacy application modernization
5 Increasing the use of information/analytics Collaboration technologies
6 Creating new products or services (innovation) Networking, voice and data communications
7 Targeting customers and markets more effectively Technical infrastructure
8 Managing change initiatives Security technologies
9 Expanding current customer relationships Service-oriented applications and architecture
10 Expanding into new markets or geographies Document management
Extracted from Gartner 2009 CIO Survey
Key Components of Business Solution
Integration
People
Strategy
Technology
Process
to understand the Mining Business model
The influence of enabling
Strategy
Process
Technology
People
Your maturity to change
Redefine Re-invent
Industry
Create Best
Practice Reengineer
Match Best
Streamline
Practice
Improve Automate
For efficiency
Functionally
Single Core Value Extended
Managed
Function Process Chain Value
Chain
Scope of Change
influence your strategy…
Typical Mining Business Model
External business drivers and stakeholders
Stakeholders, Customers, Regulators, Natural Forces, Image / Public Perception, Suppliers
Economy, Labour, Competitors, Technology, Political Environment
Minerals
Commodity Strategic Management Process Customers (including ore)
Segmentation:
Precious metals
Core Business Processes Joint
Concentrates
(including ore
Brokers
Ventures (including De
Acquire & Develop Reserves and slimes)
Base metals Other mining Beers)
Specialty companies Manufactured
metals
Extract Ore Utilities Products Commodity
Iron ore Customers Exchanges
By-products (eg,
Industrial Process Ore
minerals Contractors sulphuric acid;
industrial Manufacturers
Coal diamonds) / Fabricators
Gemstones
Sell Product Engineers (including steel
Mine Services mills)
Uranium
Mine Close Royalty (Engineering
Owners [CRA, BHP],
By Operation Governments
Technical Mining
Focus: Support Processes and Maintenance
(including
mints)
Suppliers
[eg, SA mining
Exploration
Health and Information houses])
Fully integrated Safety Supply Trade Utilities (eg,
Management
Mine Services Associations Tolling / Custom Coal)
Single- or Milling
Multi-
Environmental Maintenance Governments Excess capacity Refineries /
Commodity Smelters
Human Treasury Asset Outsourced
Resources Management Custody Suppliers
Processes in the Mining Business
Strategy
Strategic Business Processes
People
Core Business Processes
Acquire
& Develop
Extract Process Sell Mine
Process Reserves Ore Ore Product Close
Technology
Support
Business Processes
Structure
need to be integrated and support the vision and

strategy
Strategy
People
Acquire
& Develop
Technology
Support
Business Processes
Structure
need to be integrated and support the vision and strategy
The Objectives
Strategic Business
Processes
Operational
1. Determine strategic objectives for the company by
commodities, markets, countries and customers
2. Provide a clear strategic direction to the business
3. Identify, source and allocate resources necessary
to execute strategy
4. Promote culture of continuous improvement
Reporting
1. Measure business performance against strategic
objectives
2. Confirming the financial statements and
supplementary disclosures
Key performance indicators
(KPI’s)
Critical Success Factors Key Performance indicators

1. Proper understanding of 1. Return on equity; Share
price comparisons; Analyst
mining sector rating comparisons
2. Proper understanding of 2. Actual vs. budget
company’s competitive comparison
strategy
3. Focused strategic plan 3. Return on assets
4. Actual vs budget
4. Successful comparison
implementation &
monitoring of strategic 5. Share price comparison
plan 6. Shareholder / analyst
5. Adapt to changing perception
environment
Some common Financial Best
Practice Measurements
Measure Calculation
1. Average selling price per unit 1. Total sales / ton sold
2. Foreign exchange rate 2. Foreign exchange rate achieved /
spot foreign exchange rate
effectiveness
3. Total salary and fringe expense /
3. Payroll to sales net sales
4. Sales price effectiveness 4. Average sales price achieved /
5. Market capitalisation per ounce average spot price
6. Purchasing effectiveness 5. Market capitalisation / number of
ounces available
7. Mining operations cost per ton
6. Purchasing costs current year /
mined purchasing costs prior year
8. Total operating cost per ton (comparison to local country
milled inflation rates)
9. Total cash cost per ounces 7. Mining operating cost / ton mined
poured 8. Total operating cost / ton milled
9. Total cash cost / ounces poured
Some common Operational Best Practice
Measurements
Measure Calculation
1. Production effectiveness 1. Actual production / budget production
2. Exploration expenditure ratio 2. Total exploration expenditure / total
3. Hedging ratio sales
4. Ore mining cost (Bank comparison 3. Future production hedged / future
- World Averages) production
5. Safety 4. Mining costs / number of units mined
6. Product development cycle time 5. Number of lost time injuries
7. Capital expenditure cycle time 6. Time from spending capital to start of
8. Crushing & Milling effectiveness capital project
9. Mining grade (grams per tonne) 7. Throughput rate per hour
10. Mining strip ratio 8. Average daily ore milled / design
throughput rate
11. Milling grade (grams per tonne)
9. Unavailable machine time / total
12. Milling recovery (%) available machine time
10. Industry standard
Strategy
People
Acquire
& Develop
Technology
Support
Business Processes
Structure
The Mining Value Chain...
Acquire
& Develop
Reserves Ore Ore Product Close
Core business processes are the

processes that develop, produce, sell,
and distribute an entity’s products and
services.
These processes do not follow traditional
organisational or functional lines, but
reflect the grouping of related business
activities
...the heart of the business
Components of the Core Business
Processes...
Acquire
& Develop
Targeting Mining Stockpile Salvage

Selling
Acquisition Access Metallurgical Rehabilitation

Reserves Extraction /
Exploration & Enrichment / Transportation
Transportation Upgrading Monitoring
Evaluation
Planning
Permitting
Construction /
Commissioning
Access
Reserves
...is the lifeblood of the business
Typical Key performance
indicators (KPI’s)
Acquire
& Develop
Number of failed mining

Targeting
developments
Geological
Ratio of successful acquisitions / modeling, Mine
Acquisition
targets Technical
Exploration & Number of titles lapsing systems
Evaluation unintentionally
Systems
KPI’s
Budget vs actual production

Planning
statistics
Time and cost to obtain permit
Permitting
Delays to project (days Budgeting
systems, models,
Construction / Actual vs budget cost; days late etc – ERP
Commissioning commissioned
Access Frequency and cost of health, safety

Reserves and environmental fines / claims
indicators (KPI’s
Acquire
& Develop
Tonnes of ore mined per

Mining worker / per day
Labour scheduling
Access Cost per unit output
Tri p sheets
Reserves LTIFR (Lost Time
Systems
Incidence Frequency Mine scheduling
Transportation KPI’s Rate) Maintenance
planning
Trips per day or volume
of unit per time unit; Production & cost
Amount of time/volume reporting
capacity used vs
Amount of time/volume
capacity available
This core business process describes the key elements of the actual extraction of ore from the
mine and transportation of this to the processing facility. This includes sampling, breaking and
removal of the broken ore, grading and transportation.
indicators (KPI’s
Acquire
& Develop
Mine scheduling
Stockpile turnover ratio Stockpile Maintenance
planning
Grade of ore recovered
Metallurgical Mining technical
Fines / tones of ore
Extraction / systems
recovered
Systems
Enrichment / Process Control
Recovery rate; mine call factor Upgrading
Metallurgical
Percentage capacity utilisation accounting
Units-of-production per time Quality
unit management/
Cost per unit output grade control
Maintenance cost per machine Production & cost

hour reporting
Strategy
People
Acquire
& Develop
Technology
Support
Business Processes
Structure
Support Components
Support
Business Processes
Support Processes
Health and Safety Information Supply / Procurement

Management
Environmental Maintenance
Treasury
Management
Quality
Management /
Asset Human
Grade Control
Custody Resources
Life before a ERP System
High cost, low trust, manual, low adoption, gut decisions
Manual Flow
Casual Users
Executives Salespeople, CSRs,
CFO, COO, VP Sales Warehouse Mgrs.
Divisional Mgmt
External Users
Suppliers, Partners,
Customers
Power Users
Finance, Sales, Supply Chain
Analysts
Custom BI
Programmers Platforms/Tools
BI Teams
Other Systems BI Tool 2 BI Tool 3BI Tool 4

Data Warehouse
IT/DW Data Marts
Data Integration/Data Quality
Team
EDW
SQL SQL SQL
Data Mgmt Teams

Oracle Microsoft
ALL Data
Enterprise BI Strategy & a Integrated Platform
Trusted, centralized, high adoption, fact-based, lower cost
Power Users
Finance, Sales, Supply Chain Casual Users
Executives Salespeople, CSRs,
CFO, COO, VP Sales Analysts
Warehouse Mgrs.
Divisional Mgmt
External Users
Suppliers, Partners,
Customers
Information
management BI Platform BI
BW Platforms/Tools
Teams
BI Teams
BI Team
BI Tool 2 BI Tool 3BI Tool 4
Operational Systems
SAP SAP MES

ERP HR Data Integration/Data Quality
SQL Microsoft
In the world of the Operations
Integration is important?
Manager
Strategy
People
Process
Technology
Structure
Technology needs to enable the core business processes

Why is Integration so important?
To make decisions on ONE version of the truth
Different information requirements for different
levels in the organization
Disconnection between the business systems
and the business processes
Lack of alignment between the applications of
the business systems make it difficult to manage
the business
Roles & responsibilities of the key components
of business system applications is not always
aligned
Lack of growth due to a lack of knowledge
sharing
Mining companies are changing
their technology mindset
to get their systems and data organized …

How do we do IT at
Samancor Chrome?
The Samancor Chrome pillars
VISION
SHAREHOLDER VALUE OUR

VALUES
Dictate the way we do Business

Business Processes
Organisation Learning &
Customer
Growth
Development
SHEQ
The Samancor Chrome pillars
VISION
Areas of Focus to VISION
achieve “Zero harm”
SHAREHOLDER VALUE OUR

Enablers: VALUES
• Leadership
Dictate the way we do Business

Business Processes
•Positive
Attitude
• Enabling
Organisation Learning &
Environment
Customer
Growth
Development
•Simple
Integrated
SHEQ
Systems
Integrated mining Solution at
Integrated Mining
Samancor Solution
Chrome
SAP Client
Integration - People
People Integration
Mine BI
Value
Proposition MES
Atos
Technical
GEMCOM &
KPMG
Consulting
Process Control
Systems
The big picture: Implementing
technology
Strategic Management Processes
Business Intelligence &
Customer Relationship
Strategic Enterprise
Management
Management

Supply Chain Management - APO
Resource to Product to
Product Customer
Product Life-Cycle Management
Support Business Processes

Procurement & Human Capital Financial Asset Life Cycle Information
SHEQ
Supply Management Management Management Management
Shared Services
to manage according to the Mining Business Model

Information Maturity Quadrants ©
1 2 3 4
Data Integrity Business Rules Process Optimization Business Value
Open Transactions
l Overdue Transactions l Integration
Data Grouping(MD07) Automation
lTrusted Automation Increase Service
On time Transactions
l Real-time l Groups Strategy
Stocking and priorities Lead time
lEnhance reduction
Existing Increase Revenue
transactions
Single Data Source l MRP rules
Master Data Rules Functionality
l Enhanced process Optimize
Increase Service
l Inventory
DataCleansing
l Data and Process l ATP Levels – Internal &
Service lNext Generation
Enhance existing Value
Levels
Accountability
Inside the System lExternal
Lead Time/s Technology
functionality Improved Inventory
Increased
l Turns
Frequent lSupplier
l Communications lException Management Performance
Collaboration
Service Levels Revenue
Exception Monitoring lInventory Accuracy Benchmarking Reduce Operating Costs
Cooperation Exceptions l Reduce Value of
lBusiness Measures Management Dashboard Improved Management
Data Accuracy Master Data Stock
Design Measures Global Standardization Information (Visibility)
Data and Process l Reduce Operating
Purchasing & Financial Supplier & Customer Increase process
Accountability Costs
Integration Collaboration optimization & flexibility
User Confidence l Set new targets
Lead Time Accuracy Lead Time Adherence Lead Time Reduction
HOUSEKEEPING INTEGRATION FUNCTIONALITY BUSINESS VALUE
OWNERSHIP, ACCOUNTABILITY, and GOVERNANCE
Get what was implemented to work Get the system to work

Get the system to work for your
for you, rather than
as intended. Get the processes you working for the
business. Set VALUE targets and achieve
integrated those targets, using your system
system
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, © 2007 Reveal. All rights reserved.
South Africa
copyright
Barrier to Increased Performance
Lack of visibility through entire cycle
Strategy Strategic Alignment
Predictable Performance
Confident Decisions
Risks Opportunities
Execution
Greatest Business Intelligence Value
When deployed to everyone who can have an impact
BI Value:
High performing
companies use Analytics
as a key strategy
Drive Gain element 5 times more
Effectiveness competitive than low performers*
advantage or Companies with the
Strategic
major highest use of BI achieve
innovation above-average
Operating Margin in
their industry
Business Intelligence tools
Provide better
increase productivity by
Tactical/Ad-Hoc information to an average of 25%
the
Salesforce Effectiveness
organization and Financial Management
are the most important
uses of BI
Reduce the
cost of doing Over 80% of companies
use a formal BI
Drive business and
Enterprise Reporting organization to drive value
Efficiency improve IT
capability
Source: Competing on Analytics, Thomas Davenport; ASUG / SAP Benchmarking and Best Practices Survey – Aggregated results are based on 83 total survey submissions
Think about this…
It is often said that what

gets measured gets done.
Perhaps so, but it is more
accurate to say that only
things that are understood
get managed!
Gerhard van Niekerk - SAP Labs
THANK YOU

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Understanding the

Mining Business Model

Sun Tzy - The Art of War

Strategy Corporate Strategy / Vision Operating Strategy Organisation

Organisation Structure Individual Learning/Training/

Performance Required Resourcing

Leadership Communication Culture Performance Support

is key to position yourself in the market today!

Changing Market Dynamics Performance Driven

Organisational Size Operational Efficiency

in the Environment of a typical Mining Company today

Extracted from Gartner 2009 CIO Survey

need to be integrated and support the vision and

Critical Success Factors Key Performance indicators

Strategic Business Processes

Core business processes are the

Targeting Mining Stockpile Salvage

Acquisition Access Metallurgical Rehabilitation

Number of failed mining

Budget vs actual production

Access Frequency and cost of health, safety

Tonnes of ore mined per

Maintenance cost per machine Production & cost

Health and Safety Information Supply / Procurement

Other Systems BI Tool 2 BI Tool 3BI Tool 4

Data Mgmt Teams

SAP SAP MES

Technology needs to enable the core business processes

to get their systems and data organized …

SHAREHOLDER VALUE OUR

Dictate the way we do Business

SHAREHOLDER VALUE OUR

Dictate the way we do Business

Core Business Processes

Product Life-Cycle Management

Support Business Processes

to manage according to the Mining Business Model

HOUSEKEEPING INTEGRATION FUNCTIONALITY BUSINESS VALUE

OWNERSHIP, ACCOUNTABILITY, and GOVERNANCE

Get what was implemented to work Get the system to work

It is often said that what

Gerhard van Niekerk - SAP Labs

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