Business System of Nordgold (BSN) Description In 2012, Nordgold took - - PowerPoint PPT Presentation

April 2015

Nordgold: Business System of Nordgold

Oleg Maksimov, Head of BSN

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Business System of Nordgold (BSN) Description

• In 2012, Nordgold took an active decision to make operational efficiency a top priority for the company:
• Management has started a bottom-up approach to develop the BSN programme
• Efficiency designated as one of the core values of the company
• Key target of BSN is transform the workforce and improve operational processes
• We created BSN as an “umbrella” brand for all efficiency improvement initiatives in the company
• BSN is being implemented by a dedicated group of internal consultants (referred to as Navigators)

BSN AIMS TO ESTABLISH BEST-IN-CLASS SUSTAINABLE PROCESSES AT THE COMPANY’S OPERATING ASSETS, ENSURING THEY ARE AS EFFICIENT, LOW COST, SUSTAINABLE AND, ABOVE ALL, AS SAFE AS POSSIBLE

1998 2009 2011 2000 Total production

• ptimisation

Continuous improvement Business Systems Production consulting

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MODULES WORKFORCE TRAINING COSTS REDUCTION OPERATIONAL IMPROVEMENT HSE SUPPORT KEY PROJECTS RESULTS

 Lean Academy and

training

 Idea of the month  5S concept

implementation

 Kaizen teams,

Visualisation

 Standardisation  Communication

(dialogues)

 Turnaround

programmes

 Overall effectiveness

• f equipment (OEE)

programme

 Benchmarking  Debottleneck

modeling (volume)

 GTS centers  Management of

Investment projects

 Consumption rates

in mining and milling areas

 SG&A reduction  Headcount reduction  TOP-20 materials  Price reduction  Outsourcing vs.

insourcing analysis

 HSE dialogs  HSE models,

reports, audits

 White boards and

SOPs development

 Exchange of best

practices ♦ Change in people’s mindset, cultural transformation ♦ 2% structural effect

• n EBITDA

♦ Best operational practices/processes ♦ Budget effect on EBITDA ♦ Zero fatalities ♦ Best industry LTI ♦ Best practice sharing ♦ Target TCC & FCF ♦ Budget effect on EBITDA

BSN Consists of 5 Components

SAP IMPLEMENTATION

 Implementation of

three waves of SAP project

 Post implementation

control and improvement ♦ Process support by SAP system ♦ Consolidation and standardisation of information

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BSN Contribution to Nordgold’s EBITDA

• In 2012-2014, Nordgold realised more than US$124 million of EBITDA gains via:
• Costs reduction (c. 60%)
• Productivity improvements through implementation of debottlenecking projects (c. 40%)
• Nordgold is targeting a further US$55 million EBITDA gains in 2015 but the focus has now shifted from

costs reductions to increasing productivity

• 3 mines in West Africa estimated to contribute the largest share, accounting for c.70% of the total

19 39 43 25 19 6 8 10 7 7 2014A

64

2 5

17

2012A 2015E

55

2013A

52

West Africa Undeground Russian Open Pits

Productivity improvement Cost reduction

57% 43%

BSN Effect on 2015 EBITDA by Source BSN Effect on EBITDA, 2012-2015, US$ million

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• Generation of efficiency projects is

part of BP / SBP process

• Each Department Head is

provided with an efficiency plan

• Projects generated by joint teams

(BSN + production)

• Reward based on performance

against KPIs on an annual and quarterly basis for Department Heads, linked to gold production, OCF and BSN efficiency target (10-15%)

Efficiency Projects Motivation & KPI

• Project office and Navigators on-

site at each mine

• Line managers responsible for

implementation

Dedicated Team

 BSN achieved US$64 million of EBITDA gains in 2014  Targeting more than US$55 million in 2015

Setting Targets Communication Operational Efficiency and Growth

• Weekly status update at each mine

sites

• Monthly dialogue with Dep COOs
• Quarterly review by CEO

Sustainability of BSN is Built on 5 Key Elements

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Jan13

Dec14

Case Study – Lefa Turnaround

Cost dynamics and dore production, 2013-2014

Monthly cost, USD 000’ Monthly production, oz

AVERAGE 2013 - US$19.1 mln AVERAGE 2014 - US$15.5 mln

Monthly Spending:

AVERAGE 2013 - 13,900 oz AVERAGE 2014 - 16,899 oz

Monthly Production: Lefa – Turnaround case

When we started Lefa turnaround programme, the

mine generated negative FCF and had AISC well above US$1,000/oz

During 2 years management team with BSN support

were working under efficiency improvement

With the increased level of monthly production total

cash cost spends decreased by US$3.5-4 million across the whole value chain (mining, processing, SG&A)

Key success factors of the turnaround program: Headcount reduction from 2,300 to 1,500

employees, as well as overtimes reduction

Lower reagent consumption by improvement

• f control and processes automatisation

Mine planning, grade control improvement

and mining from new pits – Firifirini, Kankarta North

Control over SG&A, including travelling costs Sustainability lower costs of logistics Training of operators Accurate planning to reduce overstock Improvement of overall efficiency of

equipment (OEE)

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Case Study – Tires Costs Decrease

Total spending on tires was decreased by almost 50% YoY in 2014 Volumes of tire consumed were reduced by 44% YoY The significant improvement was achieved due to the implementation of tire GTS

program (started in early-2013)

Key elements of the program includes: Launch of repair workshops to extend the life of damaged tires Regular pressure check, development of tire rotation procedure Road management with regular grading and sheeting, especially during the

rain season. Use of crushed material to maintain the roads

Root cause analysis for each tire damage Development of tire management software for reporting and data capturing

TIRE MANAGEMENT PROGRAM

Mine Act 2013 Act 2014 Diff. Mine Act 2013 Act 2014 Diff. Aprelkovo 462,000 369,009

• 20%

Aprelkovo 160 115

• 28%

Berezitovy 827,000 374,969

• 55%

Berezitovy 128 108

• 16%

Neryungri 767,000 508,662

• 34%

Neryungri 99 42

• 58%

Lefa 5,362,000 2,034,636

• 62%

Lefa 269 121

• 55%

Bissa 663,000 1,279,310 93% Bissa 36 71 97% Taparko 1,682,000 694,599

• 59%

Taparko 229 94

• 59%

Total 9,763,000 5,261,185

• 46%

Total 921 551

• 40%

Dump Trucks, thsd. USD Dump Trucks, Tires Consumption, piece

Nordgold – reduction of tires consumption

n e w n e w 3 % 3 %

n e w n e w

3 % 3 %

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Case Study– Fuel Economy

Savings on Fuel / HFO / Oils with Total

• Lefa has longstanding relationships with its Fuel/HFO/Oils suppliers with the largest

supplier accounting for c.US$71 million of annual spending

• Last year BSN together with Lefa team tested the quality of supplied products and

identified the following issues:

• HFO shortfall in calorific density of HFO
• LFO low grade of color and lub oils contamination
• Decline of quality of oil supplies
• The procurement team conducted a further market review comparing the prices

among other potential alternative suppliers, which revealed scope for material price reduction from the largest supplier

Results:

• Total annualized savings of US$6.4 million
• Annualised savings on HFO of US$2.0 million driven by:
• Change in pricing mechanism to be based on Platts FOB MED HFO Cargoes 3.5%
• Improvement in transportation costs
• Annualised savings on LFO of US$0.3 million due to additional discount of 100 GNF/l
• Annualised savings on Lubs of US$4.1 million

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Case Study – Overall Equipment Efficiency (Ongoing)

Nordgold OEE project

Downtime analysis

* - first three years

Mining is an important part of our production

chain

We are constantly seeking for mining

efficiency improvement

Detailed productivity analysis for comparable

• pen pit operations and mining equipment

Recommended opportunities for

incorporation into a business improvement plan

Estimated potential cost reduction value for

the identified opportunities

UR, act UR, target Payload, act Payload, target Speed, act Speed, target OEE, target % % % 56% 62% 20 / 49 * 20 / 49 * 20,3 21,3 71 13 323 117% Factor KPI Improvement + 11% + 0% + 5%

Travel empty

285 (19%) 331 (23%) 809 (56%)

Loading Travel loaded

154 (11%) 39 (3%)

Utilization time Dump

TAPARKO

Productive time during the day, min Productivity per truck Daily moved, all fleet km/h m3/h** m3 km/h

* Not checked with weight scales

bcm / t bcm / t

** Productive time included only

OEE calculation