OZM Business Improvement Case Study 2012

239INTERNATIONAL MINE MANAGEMENT CONFERENCE / MELBOURNE, VIC, 20 - 21 NOVEMBER 2012

INTRODUCTION

OZ Minerals – the companyOZ Minerals is an Australian-based mining company with a focus on copper. The company owns and operates the high quality Prominent Hill copper-gold mine in South Australia and is maximising value from the Prominent Hill operation and from exploration in the highly prospective region. OZ Minerals also owns the Carrapateena copper-gold advanced exploration project situated in South Australia.

OZ Minerals’ strategy is underpinned by the company’s principle of Zero Harm and includes: • a focus on copper • maximising potential of the company’s key asset Prominent Hill • investing in exploration and building a project pipeline through organic development and

acquiring development stage projects or advanced exploration projects • maximising total shareholder returns through capital management initiatives • maintaining high standards of corporate governance across the business.The Prominent Hill copper-gold deposit was discovered in 2001 and is a stand-out Greenfield

discovery in Australia. Prominent Hill commenced first production in February 2009 and had a relatively successful ramp-up period.

1. Group Manager Commercial Operations, OZ Minerals, Ground Floor, 170 Greenhill Road, Parkside SA 5063. Email: [email protected]

2. Commercial Analysis and Improvement Superintendent, OZ Minerals, Ground Floor, 170 Greenhill Road, Parkside SA 5063. Email: [email protected]

3. Managing Director, Momentum Partners, PO Box 7989, Perth Cloisters Square, Perth WA 6832. Email: [email protected]

How to Create a Perfect StormJ de Ross1, A Chadwick2 and C Adams3

ABSTRACTImagine a ‘shiny’ new mine, $1 B in the bank and record commodity prices. So how does a company and its management team create enough tension to maximise profit and to establish a culture that can weather the good and bad times?

That was exactly the situation the team at OZ Minerals’ world class Prominent Hill mine in South Australia faced in 2009.

Three years later, the harder times have come – lower though still healthy commodity prices, rising industry costs, fierce competition for talent, geological and technical issues (common to developing mines). However, the company was able to maximise profit during the good times and equip the culture to deal with the tougher times with minimal turnover.

Through the combination of simple systems and processes, people development, application of commercial technical acumen and a combination of yin and yang leadership, OZ Minerals has achieved something quite rare – sustainable continuous improvement.

The journey started with a vision. The EGM Operations created the ‘spark’. The dream was to create a ‘franchise mine’ that could be rolled out to new mines and acquisitions as the company grew. However, the real leadership came from his lieutenants who provided the important yin and yang. The GM commercial provided the tools, processes, systems and the bottom line focus. The GM operations focused on culture, leadership, training and sustainability. This powerful combination (along with some good old persistence) was able to create the critical mass required to make continuous improvement go ‘viral’.

This paper explores this unique case to uncover the essential ingredients that were created and mixed together. It will touch on the key human, technical and system elements that helped achieve significant improvements in plant recoveries, mine throughput and operational efficiencies, while overcoming human capacity, geotechnical and contractual challenges.

INTERNATIONAL MINE MANAGEMENT CONFERENCE / MELBOURNE, VIC, 20 - 21 NOVEMBER 2012

J DE ROSS, A CHADWICK AND C ADAMS

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The operation is located 650 km north-west of Adelaide and 130 km south-east of the town of Coober Pedy in South Australia. Situated in one of the world’s most mining-friendly jurisdictions in South Australia, Prominent Hill displays highly competitive fundamentals. It is a large copper-gold resource, it is high grade, the ore is processed using conventional methods and there is significant exploration potential (Tables 1, 2 and 3).

OZ Minerals’ Prominent Hill copper-gold mine is now into its third successful year of operation. In 2012 OZ Minerals expanded the Prominent Hill operation to include underground mining. First ore from stoping was produced at Prominent Hill’s Ankata underground mine in the first quarter of 2012. The underground operation will ramp-up over 2012 and is anticipated to reach its full 1.2 Mt/a mining rate by the end of the third quarter of 2012.

The operation is comprised of an open pit and underground mine, a grinding and flotation processing plant, a permanent village and a haulage road, power line and bore field. Prominent Hill is a fly-in, fly-out operation employing approximately 1200 employees and contractors.

Prominent Hill produces some of the world’s highest grade copper concentrates. These concentrates travel directly to international customers via rail to the Port of Adelaide and then via ship to Asia and Europe.

Why business improvement when you don’t need it?OZ Minerals commenced a business improvement (BI) program in July 2010 at the Prominent Hill mine. The mine was not facing a cash crisis nor was it a mature operation in need of a ‘shake-up’.

The plant had just been commissioned and the business wanted to maintain the start-up culture and improvement trajectory. The business also wanted to develop capability to deal with inevitable cyclical downturn. In many ways it was the best time to start BI.

The program approach was designed and agreed by the management team and covered the following items:

Classification Tonnes (Mt) Cu (%) Cu (kt) Au (g/t) Au (koz) Ag (g/t) Ag (koz)

Proved 36.7 1.05 384 0.65 769 3.08 3630

Probable 35.6 1.22 435 0.62 711 2.97 3402

Total 72.3 1.13 818 0.64 1480 3.03 7032

TABLE 1Prominent Hill Ore Reserves – June 2011.

Category Tonnes (Mt) Cu (%) Au (g/t) Ag (g/t) Cu (kt) Au (Moz) Ag (Moz)

Measured 25 1.63 0.5 3.9 402 0.4 3.1

Indicated 78.5 1.39 0.6 3.2 1093 1.4 8.1

Inferred 111.7 1.02 0.5 2.3 1144 1.7 8.4

Total 214.9 1.23 0.5 2.8 2638 3.5 19.5

TABLE 2Prominent Hill Copper Mineral Resource – June 2011.

Category Tonnes (Mt) Cu (%) Au (g/t) Ag (g/t) Cu (kt) Au (Moz) Ag (Moz)

Measured 11.0 0.10 1.1 1.9 11 0.4 0.7

Indicated 18.9 0.07 1.6 1.1 13 1.0 0.6

Inferred 27.8 0.06 1.6 0.7 16 1.4 0.7

Total 57.8 0.07 1.5 1.1 40 2.8 2.0

TABLE 3Prominent Hill Gold Mineral Resource – June 2011.


HOW TO CREATE A PERFECT STORM

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• tailored to suit OZ Minerals’ culture, capabilities, priorities and workload • primary focus on implementation of initiatives and delivery of financial value • engagement of management team and the workforce to create sustainability and ownership.The first key financial target was to achieve a one to two per cent sustainable increase in earnings

before interest, tax, depreciation and amortisation (EBITDA) each year.

BUSINESS IMPROVEMENT PROGRAM DESIGN

Key components of the business improvement programThe program was designed around six simple reinforcing steps. The symbolism of the hexagon or circle (Figure 1) is to emphasise that the business will rotate through these steps on numerous occasions and the process would become ‘free spinning’ or continuous. The other concept is the ability to ‘crank’ or turn the basic process to suit the relevant business environment or objectives (ie a cost versus production focus).

A high-level description of the six steps is as follows:1. Baseline and target setting (diagnostic) – a process of working with management on defining the

objectives of the program and a view of the ‘current state’.2. Idea generation and harvesting – initially the business believed there were 100 ideas ready to go

but after closer scrutiny and analysis, it was clear that there were only a handful of ideas. Even where ideas existed, there was no standard methodology for evaluating and measuring. The diagnostic allowed the business to run a series of idea generation sessions focused in the right areas.

3. Training and coaching – it is important that people from within the business are involved from start to finish. During the program a range of formal and informal training sessions were held. The aim was to create a lift in organisational capability and plant ‘super users’ or BI champions within each department.

4. Prioritisation – as the operations were ramping up, vacancies were still being filled. It was clear that the business would only be able to handle a certain number of improvements at any one time. Therefore a simple prioritisation framework was critical to ensure the business focussed on doing a smaller number of high value, high ease ideas (to pick the ‘low hanging fruit’).

5. Idea implementation – the hardest step due to lack of capacity and project management skills. Simple project management training, coaching and supporting key performance indicators (KPIs) were used to help the business complete the ‘heavy lifting’ phase.

6. Sustaining principles – making BI part of the everyday processes and language including celebration of successes, structured and simple meetings and aligned KPIs.

FIG 1 - Key components of the business improvement program.



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Key conceptsThere are a range of factors and concepts that were captured during the process. Some were obvious and some were a surprise. • The BI journey took 18 months before it started to become ‘business as usual’ in a similar way to

safety meetings or month-end reporting. • Gaining alignment from top to bottom and from start to finish was harder than thought and took

some restructuring to ensure interface issues were smoothed over. The key learning is to never assume the initial team and structure will get you there. Be prepared to make tough decisions and make the changes but at the right time.

• The approach of introducing hard targets once capabilities and processes were established worked well.

• Dedicated and centralised resourcing with a project management office and some external coaching at the beginning was critical to help get the process moving in an organised way.

• Not every department or area is at the same stage of maturity. Be prepared to adapt and be flexible while keeping the long-term goals in mind – there is more than one way to ‘skin a cat’.

OVERVIEW OF BUSINESS IMPROVEMENT PROCESSThe overall program took place over an 18 month period, and the tools, processes and concepts are now standard practice (Figure 2).

A range of tools, templates and processes were designed, adapted and introduced into the business. The tool kit enables teams and individuals to develop, evaluate and manage improvement ideas in a methodical and standard way. This allows ideas to be properly evaluated and compared to ensure sufficient rigour and prioritisation.

The concept of an opportunity pipeline with a certain flow and bandwidth is a powerful one. It gives a sense of what was happening and how quickly. The concept is that value is delivered in a continuous process and at any given time the business needs a portfolio or mix of ideas at different stages (planning, implementing, delivering, sustaining). The other key concept is the width of the idea pipeline. At any given time the business can only handle a certain number of ideas based on capabilities, capacity and competing initiatives.

An important part of the program is to get the correct flow and ‘open up’ the pipeline though training and development to up-skill the business. Standardised training programs and inductions covering BI were established from the beginning and evolved as ‘critical mass’ started to take effect.

FIG 2 - Overview of business improvement process.



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SIMPLE CASE STUDIESMost ideas are simple and common sense. The innovation was the ability to analyse, develop and implement ideas in a prioritised, simple and timely manner. The other shift was the ability to get the key mining contractors aligned with BI and therefore enable the successful implementation of projects.

Reagent optimisationOptimal selection of reagents can have a significant impact on flotation kinetics and resultant concentrate grade and or recovery, adding significant value to the business bottom line with low associated operating costs.

Bench scale laboratory trials were completed on an assortment of reagents to determine whether the current reagents regime could be altered to improve metallurgical performance. Interfroth’s CMS 2500 mineral collector was selected for trial because it was identified that it could provide an increased copper recovery without reducing concentrate quality.

Field trials and statistical analysis confirmed that the CMS 2500 reagent provided a significant benefit in copper recovery with 99 per cent confidence over a three month period. As a result the CMS 2500 reagent was added permanently to the Prominent Hill concentrator reagent sweet, generating a copper recovery increase of one per cent or 1000 t/a of copper metal, with low cost impact at an addition rate of 3 g/t.

Semi-autogenous grinding mill shell lifter bolts and linersFailure of the semi-autogenous grinding (SAG) mill shell lifter bolts and liners were a significant contributor to plant unplanned downtime with numerous subsequent total plant shutdowns to replace and reline problem sections of the Prominent Hill SAG mill required on an ad-hoc basis. In 2010, this contributed to 27 per cent of total unplanned downtime.

An investigation into the SAG Mill shell lifter bolt and liner failures indicated that the high incidence of failure was related to liner installation techniques. Existing procedures and task supervision protocols for these activities were neither comprehensive nor detailed and allowed for considerable variation in installation techniques.

Improved and standardised shell lifter bolt and liner installation procedures were developed for use during SAG mill relines along with set installation check regimes. Input from installation equipment manufacturers, mill reline vendors, mill liner manufacturers, and also experience obtained from other operating sites, was used when developing the new procedures and check systems. This small change resulted in elimination of the failures and additional plant capacity of 100 000 t of ore or the equivalent of one per cent mill availability per annum.

Wet weather roadsIn 2009, all load and haul mining operations were stopped each time there was a wet weather event. The reason for stopping was that wet conditions of the haul roads could cause trucks to slide and present life threatening risks (eg slippery ramps). Mining operations would have to stop immediately when the rain started and would not commence until haul roads were assessed to be safe again to operate.

Wet weather events contributed to 20 per cent of total excavator downtime. On average each excavator lost 370 operating hours per annum due to wet weather which was equivalent to 480 000 BCMs per excavator. Historical averages showed that the mine can get as much as four times the rain had in the last four years. This could cause each excavator to lose 920 hours of production in a year.

Friction evaluation tests were conducted on the existing haul roads and competent road sheeting material displayed exceptional surface friction competence under water application which enabled quicker resumption of heavy vehicle activity after wet weather stoppages. Dedicated equipment and teams for road maintenance were allocated to ensure the road works were completed and maintained successfully. Whilst still in implementation, this simple solution has resulted in approximately 500 000 BCM in additional production from January to August 2012.



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Equipment utilisationDuring the first quarter of 2012 (Q1), the annual equivalent of 303 hours per excavator and 264 hours per truck were calculated as downtime for crew change which impacted on equipment utilisation and the ability to meet production targets.

The crew change delay is the changing of crews every 12 hours (shift change) and involves all that happens at the start and end of shift. The average downtime during Q1 was 40 minutes (time is measured per excavator from the last truck loaded in the previous to the first in the next shift).

It is possible to reduce the downtime further (as evidenced by hot seating at crib) simply with a focus on three major areas: lengthy prestart delays, trucks out of circuit for too long and improving the dispatch system. These are solutions to the root cause ‘system inefficiency and location’. The complexity arises when addressing the five other root causes associated with large groups of people (planning, communication, supervision, knowledge and skill).

A total of 43 initiatives have been identified in this area. Most initiatives have been implemented concurrently with the development of a new procedure and the construction of a hot seat bay during early June 2012 (Figure 3). Value has been delivered by achieving and maintaining the project target of 33 minutes (saving an average of seven minutes per excavator) for the three month period from June to August 2012. This equates to a delivered saving of 94 excavator hours or 124 000 extra BCMs mined.

THE HUMAN INGREDIENTSFor OZ Minerals, there are four critical human ingredients that enabled the operations to achieve a step change in performance in a sustainable way.

VisionA clear vision was established early by the key stakeholders. The aim was to create a simple, consistent and value-adding process that could be rolled out to other mines – ‘developing the OZ Minerals franchise model’. The real chemistry was to be adaptable on what this meant for each area and how it could align with individual visions.

FIG 3 - Crew change trial – average excavator delay.



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Culture of learningBI is embedded in the culture as an integrated approach. Deviations at one area of the mine operating system would have impacts on other parts of the business. The aim was to have the mine and mill reasonably balanced in terms of throughput capacity; however, this took some time as mining improvement projects were delayed partly due to the existing commercial arrangements with the mining contract which were inflexible and hard to change. Once the contract was updated and renewed, improvements started to flow more readily.

Another key aspect was to think of the program as a natural evolution where skill and capabilities would be developed over a period of time and aligned to the overall program objectives. Interviews and surveys helped guide how the business was progressing and regressing and what where the hot spots for attention – ‘feeling the pulse’.

Training programs are customised and continuous. Training modules were developed and are now being integrated into the annual training program, inductions and on-boarding processes.

Leadership With a stable management team in place and a level of maturity across functional areas of responsibility the focus could shift from operational silos to an integrated view on end-to-end production processes.

Strong leadership from both the general manager and deputy general manager – production enabled the interface of opportunities along the value-chain, which further enhanced performance.

Once capability and processes had been introduced and developed, the business was able to focus on performance management, targets and KPIs. Regular target setting and review became standard business practice.

ResourcingA central project management office (PMO) was implemented to help shape the design of the tools and systems to ensure a consistent approach and ‘helicopter view’. The PMO could track and report progress ensuring resourcing issues were identified and addressed as required.

For most of the ideas, a single point of accountability was established and internal resources were utilised with external support from time to time. It was important for the business to own the change even if it took a bit longer.

BI champions were trained and developed within each area so they could facilitate the program within and across departments. Their role was also to be advocates for change and improvement.

TECHNICAL INGREDIENTSThe truth is that it takes many different skills, some technical and some not, to implement a successful BI program. Each operation is a bit different in terms of challenges, culture and environment. At OZ Minerals the following skills were important ingredients: • Problem solving – having the ability to think about and structure a problem in a logical and

useful way. • Project management – implementation in operating environments is not always naturally found.

There are so many distractions and competing interests. Having some tools and sense of discipline were areas where capability needed to be developed.

• Customer focused – whether it is the quality of the copper cathodes, the quality of the ore or the supporting services for the core operational process, everyone has a customer. This becomes particularly important when we consider that the mine is an integrated system.

• Influencing skills – given the integrated nature of the operations and the high use of contractors, a critical skill is the ability to influence and understand the various stakeholders around a given idea.

• Facilitation – to generate ideas, to get things done, to get the most out of the talent within the business. The sum of the whole is more than the sum of the individual parts.

• Root-cause analysis – this skill is sometimes lacking and without it there can be a focus on the symptoms resulting in wasted effort.



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• Communications – great ideas cannot be implemented if they cannot be understood. Presentation skills, visual management and effective written communications can be the difference between success and failure.

SYSTEMS INGREDIENTSDeveloping a set of standard methodologies process and tools has been a key ingredient to establishing BI at Prominent Hill and ensuring its sustainability.

The business needed simple, user friendly tools that could be embedded into day-to-day activities. They needed to be grasped by multiple workforce levels, from the ground-up, and be applied across both production and support departments to ensure a uniform approach.

The implementation of ‘master project lists’ in each department, coupled with a prioritisation method using a standard set of evaluation criteria, provided visibility of both the number and type of BI opportunities across the operation.

Each idea selected for implementation required a ‘project book’; a simple excel workbook used to manage the initiative throughout its lifecycle. To ensure adequate management and rigor was applied, the project book supports a gated approach with formal sign-off required at the completion of each phase of project deliverables including:1. Evaluation and planning • scope definition • stakeholder input and approval • KPIs and financial valuation • risk assessment • detailed implementation plan

2. implementation • physical and financial KPIs tracked and at target levels • achievement of key milestones • demonstrated risk management

3. value delivery • maximum potential improvement being delivered • continued physical and financial KPI tracking • standard operating procedures modified • training delivered

4. sustaining • initiative fully embedded in daily operations per scope • improvement considered business as usual • key learnings documented for future reference • post-implementation financial valuation completed • budget and forecast assumptions updated.Monthly tracking and reporting is coordinated by the BI PMO and treated the same way as any

normal finance month-end process.The reporting cycle commences with a mid-month snap shot to assist project owners in managing

the administrative component of their initiatives. This premonth-end report provides a ‘heads up’ on what will be ‘red-flagged’ by the end of the month therefore prompting project owners to seek formal sign-off of their project deliverables in accordance with the above-named phases.

On business day one draft reporting and preliminary comments are issued with the final report distributed on business day four to all BI champions, project owners and senior management. The accuracy and completeness of the monthly report relies on project owners ensuring all data in their respective project books is updated including: • implementation plans (per cent complete) • physical KPIs • financial KPIs.



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BI is also a standing agenda item on the monthly management meeting where the focus is on exception reporting. However, it also provides an opportunity to discuss issues or cascade key messages to both production and support departments.

To increase the rigour and delivery of BI value another key tool developed was the results and progress meeting (RPM). The RPM is a routine meeting aimed at reviewing and agreeing progress, priorities, actions and results.

During 2011, RPMs were rolled out at Prominent Hill with meetings being held monthly by the general manager with each department manager.

Effective from April 2012, RPMs were cascaded further throughout the Prominent Hill operation and are now required to be held at all of the following levels: • general manager with deputy general manager – production and support department managers • deputy general manager with production department managers • department managers with direct reports (supervisors/superintendents) • projects sponsors with project owners (for all priority BI projects).The RPM process has been well supported and compliance is reported on a monthly basis and

also quarterly in the 2012 Prominent Hill balanced score card. The full year target of 80 per cent has already been surpassed with a year-to-date average of 90 per cent (Figure 4).

SO WHAT ARE THE OUTCOMES?BI at Prominent Hill started with the end in mind: sustainable value delivery. However, the results have taken care of themselves. The real outcomes have been successfully achieving and monitoring progress against the three key deliverables (Figure 2):1. Prominent Hill now has a standardised approach to BI with methodologies, processes and

tools that are embedded into the ‘way we do business’. The centralised PMO is fully functional and supports the ongoing development and sustainability of key processes. All BI projects implemented at Prominent Hill use the standard process and tools. Projects are reported on a monthly basis using the monthly BI Report, which is reviewed at the monthly management meeting by senior management. Regular reviews, surveys and health-checks provide a feedback loop to enable continuous improvement of internal processes.

2. Simple tools coupled with a stable and capable management team have seen the development of a prioritised pipeline that is rigorously reviewed and managed. As of June 2012, 37 key ideas or projects were closed-out (Figures 5 and 6) which seemed to collate well with other organisations of 1000+ employees where 40 ideas seems to be the natural limit over a one- to two-year period.The final outcome was eight times the initial target set by the management team (Figure 7).The processing plant was more mature in terms of developing a BI culture, which was reflected in

FIG 4 - Results and progress meeting compliance – percentage total Prominent Hill.



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the timing of delivery. However, the mine started to deliver substantial benefits once the mining contract was re-aligned and a deputy general manager-production appointed to drive interface opportunities and benefits (Figure 8). Currently, there are more than 30 ideas in the opportunity pool yet to be implemented (Figure 9).

3. A trained and up-skilled workforce has been integral to driving change and successfully implementing ideas. BI champions, selected from key operational areas, participated in an intensive period of training and coaching in the early stages of the project. In addition, it was necessary to up-skill project owners, superintendents and managers on the processes, methodologies and tools that had been developed. Stemming from the initial five BI champions, more than 30 people have taken on the role of a ‘project owner’ over the last two and half years.

FIG 5 - Number of projects in the pipeline (by department).

FIG 6 - Business improvement actual earnings before interest, tax, depreciation and amortisation impact (cumulative) – by year.

FIG 7 - Business improvement actual earnings before interest, tax, depreciation and amortisation impact (cumulative) – by department.



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This also includes personnel from the key mining contractor, Thiess, who have been included in the OZ Minerals BI organisation chart since January 2012. The next phase will see the evolution of BI site wide. This includes providing all personnel that come to Prominent Hill with BI on-boarding so they are equipped to identify and manage improvement opportunities in the same way they do with safety and hazards. We will seek to support our contractors by providing them with an improvement framework as a first step in achieving consistent standards of performance and continuous improvement across all organisations at Prominent Hill.

In summary, the continued focus on these key deliverables has laid a solid foundation for further business improvement, which will enable the business to capitalise on the good times and be well equipped to deal with the inevitable cyclical downturn.

CONCLUSIONSSustainability of BI in mining operations is difficult given asset decay, tight labour markets, Mother Nature and an escalating cost environment. Throw in the ups and downs of commodity prices and the ‘perfect storm’ for lack of sustainability could be a regular occurrence.

Similarly, a new mine with high grades and copper prices is also a situation where creating a burning platform for BI could be difficult.

There is nothing unique in the ideas and improvements that OZ Minerals has been able to implement over the last few years. What is unique is the ability to create an enduring process that has been able to deliver sustainable improvements. However, the results are simply the outcome of continually driving each of the three key deliverables which have and continue to be the focus of BI at Prominent Hill: standard processes, a rigorously prioritised pipeline and people development.

Perhaps the combination of the human, technical and system ingredients at the Prominent Hill are a specific one-off case. If so, please use this ‘franchise model’ if you find another Prominent Hill simple!

FIG 8 - Number of projects by type.

FIG 9 - Opportunity pool.



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• Have a shared vision • develop a culture of learning • empowering leadership • whole of business process visibility and control • up-skill the business • standardised simple tools • integrate into daily life – ’the way we do business’!

ACKNOWLEDGEMENTS Reagent optimisation: • Mike Thurn – Director Interfroth • Mark Weidenbach and Tien Ly – Prominent Hill Operation.SAG mill shell lifter bolts and liners: • David Denlay – Sales Manager – Growth Steel • Marc Barraclough – Technical Representative – Growth Steel • Brett Cummings – Reline Manager – TME Group • Mark Weidenbach and Josephine Lombardi – Prominent Hill Operation.Wet weather roads: • Leidy Alvarado and Stephen McKnight – Prominent Hill Operation • David Tulloch – Director RoadSafety Training Services Pty Ltd.Equipment utilisation: • Thiess Production – Prominent Hill Operation.

OZM Business Improvement Case Study 2012

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