Background and Challenge
Growing global competition was chipping away at an Australian mining company’s profits, and the company realized that in the face of prolonged price weakness, it needed to increase productivity and efficiency in its nickel and precious metals operations. L.E.K. Consulting was brought in to conduct a thorough review of the company’s operations, identify areas for improvement, and provide company executives with a practical blueprint for achieving recommended changes.
Approach and Recommendations
We first examined productivity in its nickel operations, which company management felt was underperforming. During the course of the project, we interviewed management and conducted extensive on-site visits at the company’s mines and other facilities to identify cost savings. We then categorized the initiatives based on priority and level of change required for implementation, giving senior management a top-down view of recommended changes.
Building on its audit of the company’s nickel assets, we also analyzed its precious metals facilities. The precious metals mines had recently transitioned from a unionized workforce to a contracting company, which triggered a significant increase in cost overruns. Also, a review of the expected mine physicals indicated that the operation was not likely to benefit from improving ore grade during the next few years because the company’s poor mine planning caused lower recoveries. We also benchmarked the company’s precious metals mining performance against industry standards and determined that the company needed to reduce costs and increase productivity.
We recommended a series of sweeping changes focused on establishing processes and resources to manage labor more efficiently, and establish quantifiable service levels to achieve objective measures of productivity. Similarly, we also detailed systematic, business-wide programs to significantly enhance mine planning and scheduling, as well as improve reserve estimation techniques and other important operations. The mining company proceeded to implement the majority of Our recommendations, significantly accelerating the achievement of targeted unit cost reductions.