New profitability indicators for the mining industry

New profitability indicators for the mining industry
12 Jul 2013Archived News Brian Innes Climate Change Matters

The decline in commodity prices is shifting the focus from throughput to efficiency and productivity for Australian miners. However, efficiency is not generally taken into account in standard estimates of mining productivity. It is generally overlooked as it is not always linked to production output and yield.  Energetics considers the value in integrating information from across your financial, operations and environmental data to develop indicators of true profitability performance.

Efficiency Indices

Energy use is a critical component within the resources industry. Whilst a relatively small operating cost, energy provides a useful indicator of business performance.  The cost and availability of energy are major factors in determining mine efficiency and profitability.

The type of energy use depends largely on the nature of operations as well as their location. Mining activities are typically the major user of diesel and electricity is significantly used in ore processing activities.

Efficiency in mining and processing operations is generally monitored using efficiency indices. Some useful efficiency indices are below:

Activities Efficiency Indices

Mining

  • Blasting
  • Material handling

Blast energy
Powder factor
Size reduction (particle size)
Trucks and shovel productivity

Crushing and grinding

Throughput
Bond work index
Operating work index
% minus 75 micron material
Particle size P80 (product size vs target size)

Flotation

Ore floatability
Bubble surface area flux
Froth recovery


Key performance indicators (KPIs) for energy in the mining industry have always been around determining the relationship between energy use and production. Carefully selected key performance indicators identify precisely where to take action to imrpove performance. Some of the commonly used KPIs are shown below.

kL/t

Kilolitre per tonne of material/ore mined

kWh/t

Kilowatt-hour of electricity per tonne of ore milled

tCO2-e/t

Tonnes of CO2-e per tonne of ore processed

GJ/t

Gigajoule of energy per tonne of product

t/h

Tonnes  of ore processed per hour


These KPIs are generally developed to help business managers identify and explain increases or decreases in energy use and to develop performance targets for energy management programs.

These energy KPIs generally follow the same trend where energy intensity i.e. kWh/t or kL/t reduces as production rates increase.

As ore grades continue to decrease with energy prices soaring, mine operators should investigate in more detail those indicators which inform profitability performance.

Energetics believes there is a strong need to develop a new indicator to link energy and process efficiency with profitability.

Rather than using only economic values to estimate mining profitability, we should investigate the linkage between process efficiency, energy spent and revenue.


Energy benchmarking

Another useful approach is to look at energy consumed and performance by benchmarking. This helps operators to understand how they are performing relative to similar operations as well as against industry best practice. It will assist operators to determine typical ranges of performance and focus on target areas for improvement, even down to equipment performance and/or process level.

Benchmarking enables:

  • Comparison between operations / core processes.

  • Individual mines to assess their performance relative to peers.

  • Drive improvement to operations, productivity and cost savings.



What it means to operators and investors

Increased profitability results when a company achieves more output with the same cost level. We know that higher efficiency leads to higher productivity and productivity gains have historically led to gains in real income, lower inflation and increased corporate profitability. A company that is increasing output with the same number of energy used will likely be more profitable.

At Energetics we are able to work with you to develop indicators of true profitability performance.

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