Developing Cost Effective Projects

Transcription

1 Developing Cost Effective Projects EPCM Contracting in Lower Commodity Cycles Presenter : Darren Naylor

2 Contents Ø SENET Introduction Ø The Mining Industry In Context of Commodity Cycles Ø The EPCM Contractors Role A Value Approach Ø Generating Cost Efficiencies Practical Example (True Gold Karma Project) Ø Conclusion

3 South African multi-disciplinary design, engineering and project management company in Industrial, Mining and Metallurgical Industries; Mid Tier Project house with a track record in excess of 25 years, including core competencies in Copper and Gold; Extensive project execution experience in remote locations, with a strong presence in Africa.

4 African Project Experience First African project Ayanfuri, Ghana 1993 Over 400 studies & projects undertaken in Africa

5 In Context Commodity Cycles Mining Industry Specialist Consultants Investors Successful Projects Logistics Banks EPCM/EPC Construction Contractors Contractors Equipment Suppliers Mining Companies Governments Exploration Companies

6 Commodity Cycles Lower prices cause less production to come to market 4 1 Low production leads to an undersupplied market and prices increase Higher production leads to oversupply and prices begin to fall 3 2 Rising prices causes greater production to come to market

7 Commodity Cycle (Copper) World Demand (Mtpa) World Supply (Mtpa) Surplus/Shortage Source ICSG & Consensus Economics

8 Commodity Cycles (Super-cycles) Total non-oil commodity prices Period current Peak Year % rise in prices during upswing 50.2% 72% 38.9% 81.3% % fall in prices during downswing -54.6% -43.3% -52.5%? Length of cycle (years) ? Upswing Downswing ? Source UN DESA

9 Source Consensus Economics Feb 2016 Commodity Cycles - Where to?

10 Mining in Commodity Cycle Downswing Common Trends and Challenges in Mining during Periods of Low Commodity Cycles 1) Cut costs & boost productivity (Operationally Driven) 2) Limit capital expenditure Conservative approach to new capital investments 3) Ability to raise financing becomes far more challenging and new capital projects are difficult to get off the ground. (Equity and Debt sources are far more conservative and risk averse)

11 What is the role of the EPCM Contractor A team effort and Interdependence of role players Economically Robust Project: Built on time and within budget

12 History of African Project Developments Source McKinsey & Company Creating Global Mining Winners in Africa

13 KARMA HEAP LEACH GOLD PROJECT BURKINA FASO

14 True Gold s Karma Gold Project

15 True Gold s Karma Gold Project Milestones Date Achieve DFS December January 2014 Detailed Engineering October 2013 June 2014 Barrage Construction Dec 2013 June 2014 Project Execution July 2014 March 2016

16 Cost-Effective Process Technology Heap Leach Technology Low Cost & Simple mining Method Lower Energy and Water Requirements Simple Design and Equipment Shortened Construction Phase No Mill, Tailings Fewer Environmental Concerns Source MINING.com August 2015, article, Mining's Breakthrough Technology

17 Cost Effective Process Technology SENET- A leader in Heap Leach Technology Projects Successfully executed 10 heap leach projects & 25 studies Gold 8 projects Uranium 1 Project Copper 1 Project Since 1993 developed a range of proprietary heap leach equipment Mobile stacking equipment (grasshoppers, stackers, transverse, stacker feed conveyors) Agglomeration drums

18 Practical Engineering Solutions Engineering Excellence & Cost Savings Approach 3D Design Implementation

19 Practical Engineering Solutions Packaged / Modular Design Approach Standardised designs and equipment selection in key areas leads to reduced engineering costs. ADR Building Soft Rock Crushing Engineering packaged within vendor equipment supply for key areas: Reduces overall engineering costs; No separation of responsibility between design and fabrication. Faster construction time (Trial assembled in Workshop)

20 Practical Engineering Solutions Practical Infrastructure Buildings Multiple options utilised, as appropriate (cost effective approach) Containerised buildings and offices; Prefabricated buildings; Structural steel cladded buildings; Blockwork structures; Self-bunded fuel storage tanks.

21 Procurement Maximised sourcing out of Burkina Faso (Approximately 15% local content achieved). Local Fabrication where possible E.g. All columns & tanks were fabricated in Burkina Faso; SMPP Installation handled by local Burkina Faso contractor. Approximately a further 15% of equipment was sourced within region Sourcing of all project piping; E&I Installation contractor. Extensive savings on project logistics and incountry transportation contractors were used.

22 Logistics Project Logistics were managed through SENET in-house logistics team in partnership with SDV Bollore and Uti/ Stellar Deliveries through ports: Tema & Takoradi in Ghana : ± 1100km from Ouagadougou Lome in Togo: ± 988 km from Ouagadougou Average of 20 days from port to site including customs clearance. Volume of Containers Containers Breakbulk Cargo 1200m³

23 Construction Methodology Hybrid Responsibility for Construction Execution (Self Perform & Sub Contractors) EPCM Contractor Bulk Materials SoW EPCM & Client Direct Civil SoW EPCM & Client Direct SMPP SoW Local Contractor E&I SoW Regional Contractor

24 Contracting Approach A Flexible Contracting and Commercial Approach EPCM EPC Hybrid

25 Conclusion Commodity Cycle is dynamic, yet indicators are that there is still some time to go before a normalisation (a new normal) is established. The entire industry is being revolutionised based on survival. Teamwork and partnerships within the value chain are a necessity. EPCM contractors need to focus on fundamentals: Engineering Excellence; Enhanced focus on low cost processes and technologies (proven); Construction adaptability; Practical approach to project development; Long term partnerships; Logistics Understand Jurisdictions; Flexibility. Does Your EPCM Contractor Measure Up?

26 Thank You Long Run is a misleading guide to current Affairs in the long run we are all dead. Markets will stay irrational longer than we can all stay solvent. (John Keynes)