Jon Wylie, President, Global Natural Resources presenting a large capital project at the Future of Mining conference today in Denver.
43% of development projects come in over budget. Jon's talking about how to boost the 57% that meet budget.
You can read more about the project here.
One of the largest mining projects in the world.
Oyu Tolgoi (OT) was discovered in 2001, a joint venture between Turquoise Hill Resources and the Government of Mongolia. It is in an area known as Oyu Tolgoi (Mongolian for Turquoise Hill), where in the time of Genghis Khan outcropping rocks were smelted for copper. The place was suspected to have mineralization by Mongolian geologists since 1950s.
In 2016, OT Board approved an 9-year underground project budgeted at $5.3Bn, making Oyu Tolgoi the "largest mining development project in the world”, targeting to deliver 560kt of copper concentrate in 2025, makes OT the world's third-largest copper operation and biggest new copper mine to come on stream in several years.
Delays cost $2million per day
Based on production volumes and reasonable copper prices the NPV impact of project delays is estimated at $2M per day of schedule slippage. The total underground project spend from January 1, 2016 to March 31, 2018 is approximately $1.4 billion, with $270.5 million spent on underground expansion during Q1’18.
In the 2017 Global survey of projects reports that 50% of projects fail to meet cost and schedule commitments. PMI’s annual survey of 3,234 professionals globally across diverse industries finds that due to poor project performance organizations waste an average of $97 million for every $1 billion invested. There were may reasons cited for this from scope creep, management engagement, Contractor performance and alignment to EPCM capability and integration.
Complexity
In terms of complexity OT is one of the most challenging and complex underground development projects delivered over 10 years, in terms of the number of moving parts, size and scope of investment and people involved.
Due to the complex nature of the underground project plan, with Construction, development and production occurring simultaneously and sharing the same infrastructure with the added complexity of these disparate operations sharing the same time and space. The Oyu Tolgoi leadership realised the existing project management systems were not suitable for safely governing the interactions of the multitude of functions and processes across the shared resources of time, space and equipment necessary for the underground work. They decided to innovate - develop a new strategy and methodology to keep the project on track.
World class project managment and ramp-up
In 2016, after a global review of potential partners, IT platforms and technology solutions, Proudfoot was awarded the project through a request for proposal (RFP) process by presenting a comprehensive, culture and management system delivered through an approach focused on people; training behaviours as opposed to technology.
Project design principles
As part of the project, Proudfoot along with the Rio team, agreed design principals
- Planned work was safe work as well as productive and cost effective - no unplanned work would be done,
- Increase the detail and complexity of planning functions to reduce operational complexity,
- Operational silos would be subordinated by assigning priorities using an “best for project” philosophy.
These design principals drove the development and implementation of a bespoke management control system (MCS) to managing the overall project and planning work across all silos in an integrated way. The control system was supported by a management operating system (MOS) to schedule and safely execute work. These systems work in conjunction with a project-wide integrated planning process (IPP). Together, these tools, communication and commitment meetings, and behaviours are used to manage constraints across various planning horizons and enable people and processes to deliver results.
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