Engineering & Mining Journal

JAN 2018

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Page 49 of 67

48 E&MJ • JANUARY 2018 OPERATING STRATEGIES A large U.S. insurance company closes its current TV commer- cials with the slogan, "We know a thing or two, because we've seen a thing or two." As a catchphrase, it could just as easily be applied to ongoing efforts among the world's largest min- ers to increase productivity. These companies have seen a few things, and they know what needs to change in order to meet their goals. High on the list are improvements in loading, haul- age, and equipment maintenance and replacement practices that offer the prospect of boosting productivity with little or no investment in additional primary production equipment. At Rio Tinto, the driving force behind these improvements is a desire to generate higher free cash fl ow to maintain and improve shareholder returns. This was made clear by Jean-Sébastien Jacques, Rio Tinto's CEO, at the company's 2017 Investor Semi- nar held in early December in Sydney, Australia, who opened the event by stating, "Looking ahead, [our] $5 billion productivity program will help drive value over the next fi ve years. Our group target of $1.5 billion of annual additional free cash fl ow from 2021 will ensure we can continue to lead the pack in delivering superior cash returns to our shareholders." Other Rio Tinto executives fi lled in the details: Chris Lynch, CFO, added, "In addition to generating value through the completion of our growth projects, we are also focused on the productivity of our existing assets. Increasing the value of our $50 billion installed asset base provides low risk, high returns for our shareholders." Lynch noted that "In each of 2017 and 2018, we should generate around $300 million dollars of additional free cash from our productivity program. We are taking a hard line on mea- suring productivity. There will no be easy runs here." "We will not be adjusting for grade declines," Lynch said. "We see this as a fundamental, ongoing challenge for our indus- try, and we need to overcome declining grades before we can count value added. This differs from most of our peers. It raises the bar for our productivity agenda. There will also be savings in capital expenditure, which we can avoid, for example. The replacement rate for trucks will be slower as we get better utili- zation and longer lives. We are not counting that cash avoided in our $5 billion cumulative target." Stephen McIntosh, Rio Tinto's group executive–growth and in- novation, listed some of the foundational elements supporting the company's push for productivity, including the startup of its driver- less truck fl eet 10 years ago, the opening of its remote operations center in Perth, Australia, in 2010, and a decade-long effort to transform Rio Tinto from "what was historically a very conservative company into a more curious, agile and inventive organization" by utilizing its available specialized technical expertise along with rapidly evolving IT systems and tools — including creation of its proprietary Mine Automation System (known as MAS) and the re- lated visualization capability (RTVis) that allows users to combine myriad streams of data to deliver operational insights in real time. McIntosh said Rio Tinto has identifi ed fi ve priority areas across the value chain that will deliver the most value with little or no extra capital required, including improving equipment and fl eet utiliza- tion by doing more with the same equipment or doing the same with less equipment. Other areas involve optimized mine planning, processing recovery gains; improved effi ciency of energy systems, rail networks and ports; and capacity optimization, in which the company leverages its capability to switch off or run assets part time or even shut down excess pits and sites to maximize value. Rob Atkinson, Rio Tinto's head of productivity and technical support, provided several examples of improved fl eet utilization, starting with payload maximization — an initiative that he said costs "virtually nothing." Explaining that on a typical day its trucks will perform nearly 25,000 hauls carrying between 200 metric tons (mt) and 300 mt of ore and waste depending on the truck size, Atkinson said that Rio Tinto had been working closely with its truck, loading equip- ment and tire suppliers to safely increase the load carried on each trip while conducting extensive fi eld trials to improve loading ac- curacy. As a result, during 2017, it increased the average load by 6% on a like-for-like indexed basis and has plans to increase this an additional 10% as loading accuracy improves. With the current Here's How Rio Tinto, BHP Plan to Save Millions in Haulage, Maintenance Costs Rio Tinto says it increased its average payload by 6% in 2017, and plans to improve that by an additional 10% in the near future.

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