Contract mining

Our engagements cover all aspects of effective contract mining management.

We help our clients to manage their contracts and contractors better, to improve their performance and, when a change to either insourcing or outsourcing is being considered, to make an informed decision, and to plan for the transition and to execute it successfully.

Improving contractor performance

Sometimes we are asked (by either mining companies or contract mining companies) to improve contract mining performance. Here we assist contractors to:Reduce costs:

  • Sourcing better
  • Using less
  • Reducing wastage

Improve output:

  • Debottlenecking
  • Increasing utilisation
  • Increasing key machine availability.

Example: Large coking mine

PIP helped our client and their contract miner to achieve a 33% increase in production. This was based on designing and coaching a sustainable routine of daily reviews that provided actionable feedback, and embedding these reviews in daily behaviours and routines. In addition, we enabled the client to reduce unit cost by 6% – reversing a history where higher production hours (with higher costs) were used to make up for shortfalls on inputs such as fleet dig rate.

Improving contracts and contractor management

Contract management

Contracts are often negotiated by the procurement department and key details, which might be used to manage the contract more effectively, are not communicated to the operations. The consequence is often lower quality of service, higher costs, or both.

Contractor management

Over-spend or under delivery by contractors can often be traced to how the contractor is managed. Lack of (or poorly skilled) client resources to manage the contractor, ineffective or misaligned KPIs, and inadequate reporting and reviews can all lead to a situation where control of the contractor is poor, impacting negatively on costs and quality.We assist our clients to improve their contractor management through various tailored approaches, such as:

  • Establishing clarity around specific roles of both parties
  • Establishing KPIs
  • Manager training and coaching
  • Incentive alignment
  • Structured Results-Action-Review meetings.

Example: Multi-mine opencast coal operation

The mine had an incumbent MARC (Maintenance and Repair Contract) supplier. Analysis of spend with that supplier identified that the various service offerings were unnecessarily broken into separate contracts and that erroneous ‘common knowledge’ about what was permissible under these contracts was leading to significant over-spend. Consolidation of the service offerings into a single contract and education of key managers about its content led to a 25% saving in earth moving equipment maintenance costs in the first year.

Strategy and sourcing

Strategy

We help our clients review the cost/benefits/risks of using contract miners in their operations. This covers the range of decisions from outsourcing, transitioning between suppliers and insourcing as well as the strategic and tactical planning on how to make this happen.

Sourcing

We also help our clients negotiate transitions and contracts with contract mining companies. Here we focus not only on the economics, but also on ensuring role clarity between the parties is clear but also that the right KPIs, reporting and reviews are set up.

Example: Smooth contractor change out

Our client, a large underground mine was having problems with an existing contractor and eventually needed to change out, without causing major disruptions to the operation of the site. PIP’s involvement was to try to salvage the existing contract, but also plan for a change if needed, then oversee the contract replacement. Quickly determining that the existing contract could not be salvaged, an alternative contractor was found, terms were negotiated and a detailed 30-day transition plan was devised and executed to effectively manage the associated risks and tradeoffs of the change out. By overseeing the smooth transition, all equipment was ready on day one for the new contractor and under the new, more favourable contract terms, weekly underground development improved by 50%.

Insourcing and outsourcing

Sometimes the situation is such that outsourcing (a move to use contractors to perform a key part of the operation) or insourcing (a move away from an existing contractor to owner-operate) is considered to be the most attractive path. In such cases, we will assist our clients with:

  • Assessing alternatives, determining the preferred one and building a business case.
  • Planning for the transition – ensuring that not only are the basic ‘building blocks’ of the plan (the physical assets, human assets, and systems and processes) considered in detail, but that the ‘cement’, the new Wiring and coaching necessary for a successful transition are also given due attention.
  • Executing the transition – without compromising safety, production or cost.
  • Post-transition support – bedding down and coaching managers on the new Wiring.

Example: Insourcing the complete underground and surface operations of an underground platinum miner

Our client was considering a move away from its incumbent mining contractor, which was providing a complete underground mining and engineering service, as well all aspects of surface support, such as payroll, procurement, technical services and IT, employing around 5,000 people.We helped our client to understand the benefit and risks of moving to an owner-operate scenario and to determine that this was significantly value adding for the company. We then helped our client to plan for the transition and to execute it, resulting in a production tonnage increase of 15% and ounces by 27% in the 3 months following ‘go live’. This was achieved without any negative impact on safety and at a cost 13% below that budgeted.

I would like to express my thanks for your involvement prior to and during the contractor changeover. This was not a light decision, nor a challenge to be underestimated. It was really heartening to see the level of energy and dedication that you put into this change process. The fact that this was undertaken with minimal disruption was testament to the level of preplanning and attention to detail. Your insight into the many issues was great as was your shepherding through all the detailed follow-up.SIMON, GENERAL MANAGER, CONTRACT MINING INDUSTRY

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