Mining companies are going through a fundamental operational shift that requires them to concentrate on efficiency over volume.
In the previous decade miners focused on expansion to meet booming demand but as demand has slowed and commodity prices have fallen, costs are now a big issue.
With prices volatile, sales and commodity management are high on miners’ agendas. Prices can change dramatically between a shipment from Sierra Leone setting off and the ship’s arrival in North China.
Managing price risk
Commodity management enables miners to use swaps, forwards and futures to hedge prices. They also need to know how exposed to risk they are on a group-wide basis because they may be long or short in different areas of the business.
SAP helped Nyrstar to transform its sales and commodity risk management.
Relying on manual data had left the company open to error and without an integrated, accurate hedge book. SAP ERP enabled Nyrstar to manage sales, purchases and movements globally using a single IT platform linked directly to its broker, and to integrate them with risk management, hedge management and valuation processes.
This SAPs Commodity Management solution significantly simplified Nyrstar’s IT architecture and allowed the company to retire more than 10 legacy systems.
Optimising physical operations
The shift from expansion to cost control has also increased the importance of optimising use of machines such as excavators and hauling trucks.
SAP helped Peabody to improve dramatically its use of equipment in their open pit mines.
The shift started at 7am and the first bucket was meant to hit the truck at 7:15 but it was often close to 7:45 before this happened. To deal with this, at 7:15 each truck operator was required to key in a status code reporting whether the first bucket had landed and if not, why not. The report was sent to the shift operator or mine manager on their mobile device and constantly updated.
This process brought the average time for the first bucket back from 7:40 to 7:20 and gave Peabody an extra two or three full truckloads (270 ton each) per excavator, which improved productivity by up to 2000 ton per day.
These are just two examples of how processes can be improved dramatically. In a more volatile world, every second and every cent counts.
I’d like to hear how the changed operating environment has changed your priorities and requirements
To learn more about how we can help you with your business challenges please have a look at SAP’s Solution Explorer for the Mining Industry.
Tags: mining, hedging, commodities, cost control, commodity management, risk management