Author: C. Twigge-Molecey
Copper 2003 - Cobre 2003, Fifth International Conference - Santiago, Chile, pp. 41-57. 2003
Abstract
Over the last three decades the mining and metals sector, including copper, have not given the financial returns that allow us to effectively compete for capital in world markets. As our products are vital to human well being, we should be in a stronger position.
As a capital-intensive industry, with very long time horizons, to survive we must change many things. One critical need is the development and deployment of knowledge and intellectual capability throughout our industry. This presentation examines how poor utilization of knowledge has resulted in over $US20 billion in non-productive capital investment over the last decade in 43 specific projects and, from analysis of the failures, identifies key issues relating to risk management in capital projects.
Analysis of these 43 projects, that failed to meet industry criteria for success, indicates that over 2/3 of the projects did not have proper phasing, over 2/3 had no continuity in the execution teams from concept to start-up and over 40% had serious “front-end development” issues. In most cases at least two of the above factors were present. When tied to similar results from other major studies it is clear the industry is at best inconsistent in application of basic principles of project risk management.
A related issue is the reduction of intellectual capital in our industry. One clear symptom is the “rush to be second’ with new technologies. This has resulted in dramatic downsizing of the mining and metallurgy sector’s research and development capability. Competing metals such as aluminium, continue to expand their R&D investments. Further, very few vendors have significant development groups left. Our industry’s ability to use existing knowledge and develop new knowledge is waning rapidly. Further, a major knowledge transfer and development initiative is required before the knowledge base further shrinks by retirement and downsizing. Demographic factors make this a potentially urgent issue in the OECD countries.
