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| Capital Optimisation – Brownfield expansion of underground Nickel and Copper mine |
Context / Scope of project
A rapid fall in metal prices and significantly reduced availability of capital caused a major nickel miner to halt a brownfield expansion half-way through construction at an operating nickel and copper mine. With new, lower price expectations and a track record of slow development rates on the expansion, the project had a negative projected NPV. A project team was assigned to ‘look at all options’ in order to develop a plan that would allow the expansion to meet the company’s internal target rate of return. The project team had a tight timeline to deliver a recommendation and the magnitude of their attempt to evaluate all potential options threatened to endanger delivery.
Client achieved:
In 3 weeks-
- Improved the project’s NPV from below zero to over $250 million
- Increased the expected output from the mine by 46% in the nickel zone and 37% in the copper zone through tangible, benchmarked operating improvement ideas
- Reduced total pre-production capex by 17% and annual opex projections by 19% through operating efficiency ideas, improvements in purchasing and streamlined overheads
- Reduced duration of the pre-production phase by 43% through operational redesign and efficiency improvement ideas
- Identified means to drive down required overheads by 32% while achieving higher production output
- Eliminated low value analyses and activities from the project team’s workstream and improved focus on key value levers in order to ensure on-time, high quality deliverable
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What we did:
- Created value driver trees to identify and quantify key operational bottlenecks and scope for improvements
- Conducted structured workshops with the entire project team to enhance prioritization of team activities – identified improvement ideas in key areas and formed consensus on which low value activities and analyses could be put on the back burner
- Analyzed historical performance data and mapped results against value driver trees to quantify improvement opportunities and ‘pressure test’ new assumptions at a realistic and detailed level
- Quantified risks and sensitivities to various operational and cost projections to provide a more robust picture of the project’s financials
- Benchmarked key operating and cost assumptions against internal and external standards
- Developed a detailed framework of outstanding issues and key analyses that the project team needed to complete to ensure timely completion of their deliverable
- Created a project timeline and suggested review structure to ensure that the team’s efforts remained on track and focused on the key value levers
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