AGES OF EQUIPMENT Carl Kirstein Exxaro Resources Ltd - - PowerPoint PPT Presentation

OPTIMUM REPLACEMENT AGES OF EQUIPMENT

Carl Kirstein Exxaro Resources Ltd carl.kirstein@exxaro.com

• Decisions for Equipment Replacement
• ABC LCCs
• Putting it all Together
• Questions
• Key Points to Take Home

What I’ll Cover

• Mining Companies such as Exxaro Resources Ltd

spend up to half of its initial capital costs and more than half of its sustaining capital- and operating costs

• n Heavy Mobile Equipment, which amounts to

millions of Rands each year.

• Saving just a fraction on these costs amounts to

substantial decreases in total costs.

• This presentation will show how the replacement age
• f equipment could be determined to optimise the

total cost of ownership.

Introduction & Overview

Question

• Current replacement strategy for 40t ADTs is 40,000h,

should it be reduced to 35,000h to decrease costs? Answer:

• No. The performance will increase, but so will the cost…
• … rather replace it much earlier, so that you save costs

and increase performance

– 29% reduction in overall costs – 60% reduction in required maintenance manpower (convenient if you have numerous vacancies) – Increase of 14.3% availability… the fleet can be reduced in size

Decisions for Equipment Replacement

• Choosing the best replacement age in most cases is a

balancing act of costs versus performance within constraints

Decisions for Equipment Replacement

Performance Costs Constraints Don’t drop the ball

• Costs

– Direct Costs – History (SAP PM) and Forecasts (SAP PM + MCB) – Indirect Costs – not taken into consideration yet

• Performance

– Uptime – how many hours it will be operating (reliability also modelled) – Throughput Rate – tons per hour

Decisions for Equipment Replacement

• Constraints

– statutory requirements – laws and policies – available manpower, tools, and facilities – agreements and relationships with suppliers – operating conditions and fit-for-purpose – required employment duration for the technology

Decisions for Equipment Replacement

• ABC LCCs - Activity Based Costing Life Cycle Costs
• ABC means to derive costs based on the activities

that will be performed by and upon the Asset

• These Activities include the following categories

– Acquisition – Components and Maintenance Actions – Operation – Support Equipment and Infrastructure – Software and Technical Data – Training – Retirement and/or disposal

ABC LCCs

Acquisition Costs

• Research and Design – pre-feasibility and feasibility

studies; pilot/test; design modifications etc

• Construction – premiums on expediting; discounts;

site specific construction

• Transport – logistics, customs etc
• Assembly – on site assembly of components
• Commissioning – hot and cold commissioning,

Quality assurance certification; inspections; tests etc

ABC LCCs

Component and Maintenance Action Costs

• Drive train (major and minor) – motors,

turbochargers, transmissions, bearings, couplings, differentials, fuel systems, brakes, pumps, rotary joints, v-belts, chains, axles, shafts etc

• Work Equipment – pins, bushes, shrouds etc. G.E.T. is

not included

• Electrical – control systems, reels, transformers,

alternators, power supplies etc

• Hydraulic – valves, hoses, pipes, pumps, cylinders,

motors, filters etc

ABC LCCs

• Pneumatic – valves, hoses, pipes, pumps, cylinders,

motors, filters etc

• Cooling and Lubrication – fans, motors, pumps,

valves, oil coolers, inter coolers, top-ups, oil changes, filters, radiator etc

• Chassis – idlers, rollers, track pads or tracks, side

frames, sprockets, shafts, minor repairs etc

• Services – 250h-, 500h-, 1000h services etc. Only

costs not included elsewhere

• Miscellaneous – safety, cabin, consumables, air

conditioner etc

ABC LCCs

Operational Costs

• Man Power – operations-, engineering-, SHEQ-, HR-,

FI-, BI-, SCM-, IT-, IM-, first line management, middle management- and senior management personnel required

• Facilities – running costs of wash bays, offices,

workshops, warehouses, stores, fuel stations, load bays, laboratories, server, network, etc

• Utilities – ground engaging tools (GET), liners,

buckets, tyres, track pads etc

• Energy – fuel and electricity supply and costs

ABC LCCs

Support Equipment and Infrastructure Costs

• Preparing – Capex for roads, ramps, stockpiles, panto-

lines, electricity supply, water supply, air supply, storm water channels etc

• Sustaining – Opex for water (roads), dust suppression,

waste disposal

• Cleaning and Maintaining – equipment for road

condition, pit floor condition, equipment move, etc. Capital costs of wash bays, offices, workshops, warehouses, stores, fuel stations, load bays, laboratories, servers, network, etc

• Emergency – equipment to deal with breakdowns

ABC LCCs

Software and Technical Data Costs

• Equipment Manuals and Drawings – hardcopies and

electronically provided

• Equipment Specific Software – international satellite

tracking, GPS, licensing, strength & fatigue simulation, performance simulation, cost simulation etc

• Support Software – SCADA, Dispatch, SAP, Pivot,

DMS, etc

ABC LCCs

Training Costs

• Simulators – Capex and Opex
• Training courses
• Trainers
• Training Material

ABC LCCs

Retirement and Disposal Costs

• Deactivation
• Phase-out
• Deconstruction
• Transport
• Storage
• Sell
• Recycle

ABC LCCs

• Acquisition
• Components and Maintenance Actions
• Operation
• Support Equipment and Infrastructure
• Software and Technical Data
• Training
• Retirement and/or disposal

ABC LCCs

Varies with age

Putting it all together – Acquire and Retire

Discount Rate 9.0% pa Keys Replacement Cost R 3 800 000 user input Study Period 150 000 h calculated Information OEM financial Range from 10 000 h parameters Range To 35 000 h labour Team hrs pm 120 h availability Team efficiency 100% Site Team efficiency 100% Team Rates R 710 ph Commission downtime 0 h Commission Team hrs 0 h Reliability Factor 35.0% Reliability period 45 000 h Reliability Labour N Reliability Cost est. N Reliability Cost FTE. N Reliability Cost Severity 1 h Escalation/ Discount 0% Estimated Machine hrs pa 3 760h

Equipment: Annual Hours 8766 hpa Number of holidays 13 pa Scheduled Production 24 h/day production Monday 24 h Tuesday 24 h Wednesday 24 h Thursday 24 h Friday 24 h Saturday 24 h Sunday 24 h Total Hours 8448 hpa Operation 7 days per week 40t ADT

Production Hours

Putting it all together - Acquire and Retire

40t ADT Utilized per annum simulated hours 3 323 h Active per annum machine hours 3 760 h tactical 2.82 h non-tactical 7.17 h Shift Change 1.00 hpd Personal 0.83 hpd Fuel / cable move 0.60 hpd Manoeuvre & Blasting 0.60 hpd Face prep 0.00 hpd Lost downtime Waiting 1.00 hpd Maintenance Availability >85% 58.5% Operational Availability >70% 78.5% Equipment Availability >60% 45.9% Use of Availability >96% 91.0% Equipment Utilization >57% 41.8% Maintenance downtime Operational downtime

Equipment

0% 10% 20% 30% 40% 50% 60% Resale Value Machine hours Calculated User Inputs

Putting it all together – Utilize and Support

Maintenance Action

• r Component Replacement

Start @ Frequency Cost Downtime manhours required Lubricants 1 001 h 1 000 h 2 000 R 2.0 h 4.0 h Services 1 001 h 1 000 h 28 000 R 4.0 h 8.0 h Aircon 1 001 h 1 000 h 7 000 R 4.0 h 8.0 h Bonnet 25 001 h 25 000 h 12 000 R 24.0 h 48.0 h Cab Group 25 001 h 25 000 h 15 000 R 24.0 h 48.0 h Gauges 5 001 h 5 000 h 12 000 R 4.0 h 8.0 h Hooter Reverse 5 001 h 5 000 h 1 400 R 2.0 h 4.0 h Motor Wiper 5 001 h 5 000 h 800 R 3.0 h 6.0 h Paint 25 001 h 25 000 h 12 000 R 24.0 h 48.0 h Windows 5 001 h 5 000 h 12 000 R 24.0 h 48.0 h Windscreen 5 001 h 5 000 h 12 000 R 24.0 h 48.0 h Cooler Eng Oil 15 001 h 15 000 h 3 000 R 12.0 h 24.0 h Cooler Inter Turbo 25 001 h 25 000 h 15 500 R 12.0 h 24.0 h Cylinder Head 40 001 h 40 000 h 85 000 R 36.0 h 72.0 h

R - R 500 000 R 1 000 000 R 1 500 000 R 2 000 000 R 2 500 000 R 3 000 000 R 3 500 000 R 4 000 000 R 4 500 000 R 5 000 000 Labour Cost Maintenance Cost

Putting it all together – Utilize and Support

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% Availability 0.0 h 200.0 h 400.0 h 600.0 h 800.0 h 1 000.0 h 1 200.0 h Manhours

Putting it all together

Putting it all together – 40,000h evaluation

Putting it all together – 35,000h evaluation

Putting it all together – 15,000h evaluation

Putting it all together – 25,000h evaluation

• Use the information you have: Maintenance plans,

tenders, actuals

• You should optimize the replacement interval: more

money you pay is more money your suppliers earn, they are not incentivized to help you unless you run a MARC/rental contract.

• Add Risk for an even clearer picture: Indirect costs

could be added to this calculation without too much extra complication (refer to my risk colloquium presentation)

Key Points to Take Home