Operational review

Cost and revenue optimisation initiatives through Business Process Re-engineering (BPR)

The BPR process, which commenced during the second half of 2010, continues to review all operational production processes and associated cost structures from the stope to the mill. New business blueprints and appropriate organisational structures were implemented to support sustainable gold output at an NCE margin of 20 per cent in the short to medium term and 25 per cent in the long-term from our existing operations.

South Africa region

BPR initiatives are planned to deliver savings of approximately R500 million over the next two years. BPR savings realised during the September quarter were largely distorted by the fire at KDC West’s Ya Rona shaft and the illegal industrial action.

Initiatives for improving quality mining and increasing productivity are ongoing and include safety initiatives to improve compliance and behaviour, together with a focus on face length optimisation and labour planning to provide the correct skills mix. It also includes a focus on quality blasts to improve blasting frequency i.e. full panel blasting, full face advance and a product size which is optimal in achieving a good milling result. Initiatives also include leadership training to ensure people skills are developed and optimised, and a drive for compliance to procedures and processes.

At KDC, the September quarter was a challenging one due to the severe impact of the Ya Rona fire and the strikes at KDC East and more significantly at KDC West. As a result, KDC could not continue the positive momentum achieved in the previous quarter. The closure of Ya Rona for the entire quarter due to the fire impacted the availability of workplaces and the corresponding face-length mined decreased by 1 per cent compared with the June quarter.

Notwithstanding these setbacks, underlying trends remain strong and the positive momentum created by the Shaft Full Potential (SFP) programme during the first half of 2012 is clearly visible. In particular, safety performance continued to improve across the mine and KDC East performed well on production, matching the September 2011 quarter despite the impact of the fire and strike. Crew productivity, one of the key focus areas for SFP, only decreased by 2 per cent compared with the same quarter last year, despite the strikes at KDC East and West.

The mechanisation of development ends at the long-life shafts of KDC and Beatrix (South Deep is already mechanised) is aimed at improving safety and productivity, reducing development costs and increasing ore reserve flexibility through higher monthly development advance rates. Having achieved 98 per cent of flat-end development metres advanced at long-life shafts, this project is largely completed. The drill rigs operating on the long-life shafts at Beatrix and KDC achieved an average rate of 34 metres per rig per month in the September quarter. This is lower than the 39 metres achieved in the June quarter due to the fire at Ya Rona shaft and the illegal industrial action.

Progress against the Mine Health and Safety Council (MHSC) milestone, that no machine or piece of equipment, such as pneumatic development rock drills, pneumatic stope rock drills, hydropower rock drills and drill rigs, fans and winches, may generate a sound pressure level in excess of 110dB (A) after December 2013, is ongoing. The number of measurements expressed as a percentage of noise measurements of machinery and equipment emitting noise in excess of 110dB (A) increased from zero in the June quarter to 0.9 per cent of readings for the September quarter. Silencing of equipment is ongoing, with continued focus on replacing blocked and/or damaged silencers on machines. A further measure to identify sound pressures above 85dB (A) has been introduced and currently the percentage of employees exposed above this level is 64.6 per cent. This measurement is without ear protection. Studies indicate that with the proper use of currently available ear protection devices no employee will be subject to a sound pressure level in excess of 85dB (A). A project to measure exposure whilst using hearing protective devices to provide further verification was started in September. Not enough readings have been taken to reach a definite conclusion.

The Group continues to pursue best practice in the area of dust control in accordance with the MHSC. In order to improve upon dust exposure targets, the Group is targeting the following core initiatives:

  • Building health rooms at the training centres to coach employees on potential exposures and wearing of respiratory personal protective equipment – 80 per cent completed;
  • Using foggers, a water mist spray system, to trap dust particles liberated in haulages and tipping points to prevent dust from entering the main air stream;
  • Installing dual stage tip filter units, where the filters are equipped with an additional layer of filtration material to improve the efficiency of old technology filter bags in order to increase dust filtration;
  • Managing the opening and closing of ore transfer chutes between levels so that they remain closed when not in use to reduce airborne dust entering the work place;
  • Treating footwalls in haulages with binding chemicals sprayed from a specially designed car pulled by a loco to prevent dust from being liberated into intake airways; and
  • Analysing individual filters to assist in determining exposure levels.

West Africa region

Tarkwa

BPR initiatives are ongoing. The major BPR projects for 2012 include:

  • Commissioning and integration of the secondary crusher at the CIL plant. This is expected to achieve a 5 per cent improvement in the milling rate from 950,000 tonnes per month to 1 million tonnes per month. The secondary crusher was commissioned in the March quarter. The planned ramp-up of the secondary crusher was slightly above plan at 77 per cent of nameplate capacity for the September quarter. It is expected that the crusher will operate at full capacity from the December quarter;
  • Waste strip acceleration is planned by way of the implementation of a larger sized load and haul fleet, which will make up around 20 per cent of the total fleet once commissioned. The resultant flexibility is designed to ensure a continuous ore supply to the plant, which could increase the annual mining volume by as much as 10 per cent. Commissioning of the larger sized load and haul fleet is scheduled for the December quarter; and
  • The construction and commissioning of an in-pit satellite fuel depot. The benefits include shorter haul distances for re-fueling, fuel consumption cost savings and improved productivity. Commissioning will be completed during the December quarter. This initiative is expected to deliver approximately US$30 million in cost savings over the life of mine.

Damang

BPR initiatives are ongoing. The major BPR projects for 2012 include:

  • Continued savings from owner mining and maintenance initiatives implemented in early 2011;
  • The implementation of an additional shift which is providing flexibility to accelerate waste stripping and increase mining volumes to ensure a continuous ore supply to the plant. The new shift has also improved utilisation of mining equipment. Implementation was completed in the March quarter with full productivity benefits achieved from the June quarter onwards; and
  • Optimisation of the plant circuit to achieve the maximum recovery rate under current blend conditions. This includes a pre-leach thickener to improve the control of the circuit’s water balance and increase the efficiency of the cyclones by way of an in-line leach reactor to maximise gravity gold recovery, thereby improving overall recoveries. An additional CIL leach tank is also being added to the circuit to create flexibility and allow current tanks to be fully refurbished. Once all eight tanks are fully operational recoveries are expected to improve due to increased residence time and circuit reliability. These projects are scheduled to be completed in the December quarter.

The introduction of owner mining has resulted in a decrease in mining costs from US$4.35 per tonne, which was the contractor cost per tonne prior to conversion to owner mining (2010), to US$3.43 per tonne before adjusting for the effect of inflation. Added to this, the additional shift has resulted in an increase in tonnes mined from approximately six million tonnes per quarter to eight million tonnes per quarter, reducing costs further from US$3.43 per tonne to US$3.19 per tonne mined (year to date). As a result, based on year to date tonnages, benefits of US$32 million have been achieved, of which US$5 million accrued in the September quarter. This compares to the cost of the owner mining conversion of US$55 million.

Australasia region

St Ives

BPR initiatives are ongoing. The major BPR projects for 2012 include:

 
Implementation of the physicals and mining equipment management system (Pitram) continued through the September quarter. The project deliverables are to improve the management of the mining fleet, integrate production information and simplify production reporting.
 
There are two key elements to this project; Mining Physicals Reporting and Mine Equipment Management. The Mining Physicals Reporting project goal is to replace the current MRM data base reporting system with the Pitram physicals reporting system by the end of the year. Physicals information has already been fed into the live Pitram system from the end of September 2012. A full reconciliation between the two systems will take place prior to the end of the year.
 
Implementation of the Pitram fleet management system for open pits and underground operations also continued through the September quarter. A pilot exercise gathered important data on trucks and loaders in preparation for the go-live date late in November. Primary objectives from this programme include productivity and efficiency improvements in mining fleets through better real time information on equipment location and status, payload management and equipment availability and utilisation.
 
The underground production drilling improvement project continued throughout the September 2012 quarter. The intent is to increase drill rig performance and decrease stope dilution through improved drilling accuracy. The total value of this project from improved efficiencies and reduced dilution is estimated at approximately A$7 million per year.
 
There are a number of active projects in the ore processing area. These include several recovery improvement projects and an investigation into utilising underground fleet to deliver ore direct to the mill thereby eliminating the contractor, as ore is currently stockpiled near the source and a contractor re-handles the ore to the mill.
 
The transition to owner mining in the open pits is creating opportunities to further improve the efficiency of the open pit activities. Value stream mapping and process analysis is being facilitated across all aspects of the open pits to identify improvement opportunities. A number of technical improvement projects have already been identified during the September quarter, primarily in the domain of drill and blast. These are expected to impact positively on mining performance and cost. They will be implemented in the December 2012 quarter.

Agnew

BPR initiatives are ongoing. The major BPR projects for 2012 include:

  • Consolidation of Agnew’s stores which was completed during September. Benefits from the project are estimated at A$350,000 per annum.
  • A project adding a fifth gear to haul trucks to enable faster and more efficient hauling of underground ore directly to the ROM pad is on-going. As a result, re-handling and the related costs have been significantly reduced. Savings of A$514,000 have been achieved in the September quarter and A$941,000 year to date.
  • Equipment damage has been an on-going cost and awareness issue. A new more systematic approach to recording, analysing and eliminating equipment damage has been implemented. Life cycle cost benefits are expected to accrue.
  • The paste fill optimisation project was implemented during the June 2012 quarter. This project optimised mix ratios, delivery systems and scheduling to rectify a number of incidents whereby paste was not able to be delivered correctly to the underground stopes. There have been no major paste incidents or stoppages since then. However, an on-going effort is made to eliminate minor delays and bottlenecks in the process. As a result, storage pods to increase cement storage capacity have been ordered and should be on site before year-end.