In response, many mining companies have implemented productivity programs. Partnering between mining companies and equipment and technology providers should also increase, so innovation in mining can succeed more broadly. 5 <68-1 gold mining sector, competitiveness, productivity, industry cost curve, labour availability, labour utilization. Most transformations fail. This has represented a difficult challenge for mines since 2008: none of the mines in the sample studied have succeeded in moving into this quadrant. The pronounced decline in productivity is evident across different commodities, including copper, iron ore, coal, and platinum group metals (Exhibit 3). The surge in demand for metals and minerals in the early 2000s quickly translated into much higher prices and, with it, much increased miners’ profitability. Happy, engaged, and productive employees stay with their organisations longer and reduce costs. We’ve assembled a collection of sample Key Performance Indicators for you to use as a starting point when building scorecards. Will digitali solutions help change the industry future? Over the longer-term, MFP impacts of resource depletion have been offset by technological advances and improved management practices. The mining industry has contributed significantly to Australia’s recent prosperity – with favourable terms of trade over the period 2003-04 to 2006-07 contributing to increased incomes – but productivity in the sector has fallen markedly. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. 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Australian national data cover iron ore, metallurgical coal, thermal coal, gold, copper, nickel, diamonds, and soft-rock minerals. Many mining companies still consider operational productivity improvement to be the domain of a “continuous improvement” department or a handful of Lean experts or Six Sigma black belts, but do not yet regard it as a core competence. Will digitali solutions help change the industry future? Mining industry productivity in Australia FY 2012-2016 Published by L. Granwal , Nov 11, 2020 It is also in evidence across most mining players and all the major mining geographies (Exhibit 4). During the height of the mining boom, record-breaking commodity prices notionally supported the development of marginal high-cost, low-productivity mineral deposits. Productivity in Australian mining 19 3.1 What is involved in mining? We’ve assembled a collection of sample Key Performance Indicators for you to use as a starting point when building scorecards. But for a range of reasons, at an industry … Manufacturing industry Lean Manager Certification – Spring 2021 – Columbus, OH Week 1: March 8-12 / Week 2: April 5-9 / Week 3: May 3-7 / Week 4: June 7-10 Nevertheless, the decline may be less surprising when we take into account the fact that the industry has just ridden a demand supercycle and has succeeded in expanding production of certain major commodities by 50 percent or more over the past decade. We pay our respects to their Cultures, Country and Elders past and present. Growth in capital spending slowed dramatically, from 49 percent a year in 2008–10 to 6 percent a year in 2010–13. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Rules of Origin: can the noodle bowl of trade agreements be untangled? as well as mine level. And, in many cases, new capital projects are executed without integrating new technologies into the mine design. Somewhat more encouraging signs start to emerge, however, when the MPI trend is separated into the two distinct phases of the mining industry’s recent history—before and after 2009—as is also shown in Exhibit 2. The results from McKinsey’s new MineLens Productivity Index (MPI), which adjusts for declining ore grades and mine cost inflation, show that the pronounced decline in productivity is evident across different commodities and is seen in most mining players and geographies. Mining KPIs. The three elements are then linked with a measure of physical mine output, which is not affected by changes in the ore grade and stripping ratio. Mining productivity growth reflects: Solid growth in GVA (4.9%), supported by continued strength in oil and gas extraction and increased demand in iron ore. Please email us at: Introducing the MineLens Productivity Index, Case study of Australia’s productivity trend. Mining commodity prices are volatile, and investors are currently unenthusiastic about the industry’s prospects. The principal contributors to the decline were higher capital expenditures and operating costs, which grew at 49 percent and 11 percent a year, respectively, during the period. During this phase, all mining companies were solely focused on increasing their production, without worrying much about their productivity and costs. This decline stands after adjusting for external factors such as deteriorating ore grades and mine cost inflation, including escalations in the prices of mine inputs such as fuel and explosives. A strategy of continuous improvement that maximises productivity without large capital investments ‘Pr oductivity’ and ‘continuous improvement’ have had a raised profile in mining recently. Since the opportunity for productivity improvement will lie in the areas that operational management can control, we have constructed our index to reflect these areas. Mining typically accounts for around 5 per cent of Australia's nominal market sector gross domestic product. Mining MFP rose 3.7% in 2019–20, recording the seventh consecutive rise in MFP. Despite the impact of the fall in mining MFP, the sector has made a significant contribution to the strong overall growth in national income so far this decade through a substantial improvement in Australia's' terms of trade. Productivity and Safety Gains from Technological Innovation The drivers of this shift towards integrating innovation in mining are many and well known. Automation’s impact at FLSmidth Over the past decade, mining productivity as measured by MPI has declined 3.5 percent per year, meaning that mining companies are 28 percent less efficient in digging and moving a ton of total material today than they were ten years ago (Exhibit 2). Our productivity measure is composed of four elements: physical mining output, employment at the mine site, the value of assets at the site, and nonlabor costs. As a result, the labor metric doesn’t offer guidance on a mine’s total productivity performance. People create and sustain change. As commodity prices dropped, companies responded by […] It will also necessitate looking beyond the boundaries of the mining industry to seek inspiration from other industries’ successes. The path to a step change in mining productivity will come through reducing and, where possible, eliminating the variability that has made mining unique. Productivity measure in this paper is limited to labour productivity, in line with limited reporting on productivity. We have deliberately excluded ore grade from the calculation. The company, which has been partnering with mining companies for more than four decades, has the MMM division, a digital technology platform aimed at impacting productivity in the sector. Australia's Productivity Surge and its Determinants, Australia's Restrictions on Trade in Financial Services, Australia's Service Sector: A Study in Diversity, Australian Atlantic Salmon: Effects of Import Competition, Australian Gas Industry and Markets Study, Australian Manufacturing Industry and International Trade Data 1968-69 to 1992-93, Authorisation of the National Electricity Code, Better Indigenous Policies: The Role of Evaluation, Beyond the Firm - An assessment of business linkages and networks in Australia, Building Excellence in Health Care in a Changing Environment, Business Failure and Change: An Australian Perspective. Compared with industries such as automotive, which obsessively focus on productivity gains, the numbers seem astonishing. Increases in capital expenditures and, to a slightly lesser extent, in operating expenditures have been largely to blame (Exhibit 5). Mining companies have spent several years ruthlessly reducing costs. During the height of the mining boom, record-breaking commodity prices notionally supported the development of marginal high-cost, low-productivity mineral deposits. Here’s how to retain valuable staff in the mining industry. Use minimal essential Productivity in Australian mining 19 3.1 What is involved in mining? Existing approaches to measuring mining productivity have limitations. What do the data show? During the early 21 st century, many commodities prices including minerals significantly rose due to the large growth of emerging markets. Embed effective management operating systems at mines. A mine that has improved in all four elements of productivity that underpin MPI—labor, capital expenditure, nonlabor operating costs, and production volumes—will move from its starting position (as shown by the dark-blue bubble) into the green quadrant, and the bubble size will be the same size or smaller than in 2008. Boosting production volumes became the industry’s top priority. Which factors that make up the MPI have had the greatest impact on productivity trends? 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The shortcoming of this measure is that it fails to take into account how output might be affected by geological conditions such as declining ore quality, and by investment in equipment or spending on consumables such as tires or explosives. Prioritize operational excellence and capabilities development. A smaller bubble indicates lower capital spend. Mining companies are facing increasing pressure to improve safety, but it seems connectivity is the answer, with safety greatly improving as the industry enters the digital age. 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Australia's Productivity Growth Slump: Signs of Crisis, Adjustment or Both? This means that the companies able to succeed in the race to achieve higher productivity will be among the biggest winners. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Please try again later. In this whitepaper, we have reimagined mining operations to make it safer, effective and more profitable. The operating systems should also free up people and resources to prioritize productivity and operational excellence, and support effective performance management. These worsen and deepen as a mine is exploited, leading to rising extraction costs and falling output. The global mining industry’s open cut equipment productivity has declined by 20% over the past seven years despite a push for increased output and declining market conditions. Is the Polish biggest mining company a trendsetter or rather just a follower of global copetitors' strategy? With an increased focus on sustainable productivity, deeper insights delivered by automation can actively enable industry players to strengthen their market share. Combined with a commitment to monitor productivity performance, they will be an important factor in that race. A 2017 poll by Ernst and Young of more than 700 industry representatives revealed that the majority of the top mining businesses have already started their digital journey in some capacity – notably through investing in autonomous and IoT-based technologies. * The mining, except oil and gas industry had a productivity decline of 3.8%, as hours worked increased while output declined. It seems as if all the major players are either chasing it or talking about it. Doing this will create greater transparency on operations performance. Presently, the industry is struggling with a range of challenges concerned with productivity. Long lead times between investment in new capacity in mining and the associated output response can lead to short term movements in mining MFP unrelated to underlying efficiency. The evolution of the mine’s asset value since 2008 is represented by the size of the bubble. Given that mining companies typically measure the output of the actual ore being mined, rather than the total material moved, productivity measured in this way tends to be constantly in decline. On the first level, the way forward is clear. We have developed the MineLens Productivity Index (MPI) to measure the underlying productivity of mining companies, employing a methodology that is simple but comprehensive. What is clear is that with the collapse in mining profitability over the past three years, the industry is seeking once more to raise productivity. “The mining industry will continue to find solutions to improve the productivity of its operations. 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Same pace discover how MineLens can provide data and insights to mine about. Using MPI can deliver useful insights fully reflect operational performance and productivity without worrying much their! Their continuing connection to land, waters and community Leo Soames, Dean Parham Harry... December 2008 the greatest impact on productivity Gains, the numbers seem..
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