Loss Mitigation in the Mining Down Turn Speaker:

Transcription

1 Loss Mitigation in the Mining Down Turn Speaker: Murray Rowley, Manager LMI Mining Division, LMI Group Pty Ltd

2 RIMS 2016 Business Interruption Paper - SYNOPSIS Lower commodity prices drive need for optimising control of costs As distinct from a buoyant market a new unexpected loss event during a downturn can be the death knell of the business Two case studies on loss mitigation saving the day: one old & one more recent

3 Case Study No.1 MARION 8900 DRAGLINE BOOM COLLAPSE Collapse occurred at the Moura Open Cut Mine in Central Queensland Australia on 4 February 1971 Owned and operated by Thiess Peabody Mitsui Machine weighing 6,600 tons & with a 130 cubic yard bucket was at the time second largest dragline in the world Key issue was that there was no replacement steel available within Australia.

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5 Fast Tracking of the Boom rebuild Urgent trip from Brisbane to Marion in Ohio USA to meet with manufacturer Chartering of 8 jet aircraft to carry special steel to Brisbane road freight to Moura Round the clock crewing working at night with arc lights. Job completed in just 12 weeks but only after solving last minute hiccup! No matter how many noughts, if you spend less than the revenue saved it is a deal.

6 Post Script - Boom Dropped a Second Time!! 8 years later on 2 November 1979 Flew to scene with engineer After inspecting damaged boom requested to inspect spare boom Surprise! Surprise!

7 Case Study No.2 ENERGY COAL MINE IN HUNTER VALLEY NSW MAJOR EQUIPMENT FIRE WHEN TIME IS MONEY AND EVERY DAY IS COUNTING!

8 Ref: RT doc MAJOR EQUIPMENT FIRE THURSDAY 22 JULY AM No injuries resulted from an incident which occurred today at 8.30am Leibherr 208 Excavator caught on fire, the fire took over two hours to control and as a result 208 received major equipment damage. Initial investigation shows a possible blown hydraulic hose as the cause. A full safety inspection of 207 has been untaken to ensure this unit is safe to operate.

9 Initial Adjuster Visit Scene of fire only 320nm south of Brisbane 1 hour 45 minutes flying time to Scone airport On arrival linked up with broker Use of light aircraft facilitates rapid response

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13 Liebherr 996 Excavator Weight 577 tonnes Powered by 2 Cummins 3,000 hp diesel engines 34 M3 Bucket Excavator Configuration Diesel Fuel Capacity 13,000 litres Hydraulic Fluid Capacity 8,200 litres Function to remove overburden to expose coal

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16 BI Loss Exposure from Overburden & Mining Schedule 9.1 M bcm out of total volume of 60 M bcm (annual) 15% ROM coal to be 5.5 bcm 12.3 M tonnes Estimated repair period 8 months Estimated loss of saleable coal sold 1.09 M tonnes Total exposure to lost coal shipped and sold US$54.5 m Estimated Variable Costs US$20/t US$21.8 m Net BI Loss Exposure before deductible US$32.7 m

17 BI Loss Relative Cost Over Time Total estimated loss for 8 months: US$32.7 m Cost per calendar month: US$ 4.1 m Cost per week: US$ 943 k Cost per day US$134,753 Cost per hour: US$ Cost per minute: US$ Cost per second: US$ 1.56

18 Initial Reported Loss Reserve As per our first report of 27 July 2004: Material Damage (est repair cost) US$ 4.3 m Business Interruption US$ 32.7 m Gross Loss Reserve US$ 37.0 m Less Business Unit Deductible US$ 10.0 m Total Net Loss Reserve US$ 27.0 m

19 Loss Mitigation Options Fast Track repairs overtime/airfreight Replace with new equipment Changing the mining plan sequence truck haul distances and cycle times Hire of alternative equipment Use of outside contractors Re-commission existing plant Buying in coal from other mines

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21 Old P&H 2800 shovel 23 rd July discussion re 30 year old electric rope shovel decommissioned in 2003 Feasibility of returning to service Bypassing usual corporate protocols Lowest price may also be the slowest price!

22 Worthwhile Pay-off Shovel commenced digging by last week of August 2004 By end of December 2004Unit had dug 1789k BCM which converts to 328k ROM tonnes Recovery of nearly 26% of original coal shortfall

23 Concern over Repair Progress Report from Engineer on 27 August 2004 Key parts ordered with waiver re MAC rights. No delivery dates ex-liebherr Factory in France Need for urgent action left Brisbane by air on 30 August 2004

24 Visit to Liebherr Factory infrance Met with factory executives in Colmar AM 1 September 2004 Existing programme unlikely excavator would be ready before March 2005 Initial need to establish credibility

25 Explanation of Insurance Funding for: 1. Overtime & Extra shifts worked in Liebherr factory 2. Incentive payments to outside sub-contractors particularly hydraulic tank and operator s cabin 3. Supplying complete power unit modules from Colmar (faster than repairs) 4. Air Freight (A) Expediting delivery to MAC s mine in Australia airfreight in lieu of shipping (B) Air freight of other customer s components taken for MAC s machine

26 What a difference a day makes! Reasonable extra expense for incentive payments and factory overtime and extra shifts Assignment of special factory co-ordinator for MAC machine components Reduction of several weeks in completion time for hydraulic tank and operator s cabin Agreement to use Antonov 124 heavy lift aircraft main time saving of over six weeks in delivery

27 Liebherr Performance! Main components completed ahead of schedule We negotiated with Antonov company and Schenker Antonov load master visited Colmar factory to identify load packing and dimension requirements Loaded trucks left factory for 1.5 hour drive to Basel-Mulhouse airport Antonov 124 departed on time pm Wednesday 27 October

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36 The Eagle has landed!

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40 Liebherr Gannt Chart Actual Completion Date 17 th December 2004 Original Expected Outage 243 days Elapsed time since fire 149 days Time Saving Achieved 94 days

41 Estimated BI Saving Impact of Loss Mitigation Measures Gross Saving in BI Gross Profit US$24 m Extra Costs incurred $1.7 m Net Saving US$22.3m

42 Final Loss Adjustment Material Damage US$5.4m Business Interruption (inc ICW) US$8.8m US$14.2m Less Deductible US$10.0m Total Net Loss Estimate US$4.3m

43 Gaining Best Outcome for All Parties Insurer (Captive or External) is a major stakeholder Cutting across corporate culture but not safety Thinking outside the square Subrogation process still follows

44 You can make a difference in these challenging times! Disruption from a loss event can be more critical in the bad times than in the good. The proper management & mitigation of a loss could be vital to the survival of your company. Among the jobs that you save might be your own!

45 Murray Rowley of the LMI Group