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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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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!


Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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


Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Key Components of Business Solution
Integration

People

Strategy

Technology
Process
to understand the Mining Business model
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
The influence of enabling
Strategy

Process

Technology

People

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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…
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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


Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
strategy
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
The Objectives
Strategic Business
Strategic Business Processes
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Key performance indicators
(KPI’s)
Strategic Business Processes
Strategic Business Processes

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
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Some common Financial Best
Practice Measurements
Strategic Business Processes
Strategic Business Processes

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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Some common Operational Best Practice
Measurements

Strategic Business Processes

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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
The Mining Value Chain...
Core Business Processes
Acquire
& Develop
Extract Process Sell Mine
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
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Components of the Core Business
Processes...
Core Business Processes
Acquire
& Develop
Extract Process Sell Mine
Reserves Ore Ore Product Close

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
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Typical Key performance
indicators (KPI’s)
Core Business Processes
Acquire
& Develop
Extract Process Sell Mine
Reserves Ore Ore Product Close

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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Typical Key performance
indicators (KPI’s
Core Business Processes
Acquire
& Develop
Extract Process Sell Mine
Reserves Ore Ore Product Close

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.
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Typical Key performance
indicators (KPI’s
Core Business Processes
Acquire
& Develop
Extract Process Sell Mine
Reserves Ore Ore Product Close
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
ALL Data

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
In the world of the Operations
Integration is important?
Manager
Strategy

People

Process

Technology

Structure

Technology needs to enable the core business processes


Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
Mining companies are changing
their technology mindset

to get their systems and data organized …


Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
How do we do IT at
Samancor Chrome?

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
The Samancor Chrome pillars
VISION

SHAREHOLDER VALUE OUR


VALUES

Dictate the way we do Business


Business Processes
Organisation Learning &

Customer

Growth
Development
SHEQ

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
The big picture: Implementing
technology
Strategic Management Processes
Business Intelligence &
Customer Relationship
Strategic Enterprise
Management
Management

Core Business Processes


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


Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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
Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
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

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa
THANK YOU

Mine-Tech International Conference and Expo, 2-4 November 2009, Johannesburg, South Africa