Mining Construction Mega Projects

Hello All,

I thought it would be worthwhile to have a post that speaks to Mining Construction Mega Projects.  The top 20 mining companies are postured to spend $60B/year on greenfield projects as well as brownfield expansions.  I wasn't able to find any other posts on the topic, therefore would like to ask the community; why do you think 4 out of 5 Mining Construction Mega Projects come in late and over budget by 50%?

Thanks,

Jason

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Comments

  • Funny... well, not really... I was UG in a gold mine a few months back... looking at a stalled mega project. Why stalled? Safety. Contractor broke the last straw and was done - that day. Project had to be brought back to life and completed by a 100% new group. I am guess that is an exception, but I have now seen it for myself. Clearly delivered late... over budget too.

    As for other thoughts, engineering, even with a lot of "field verification" can be wrong/inadequate. Let that occur with a critical work element and it can reverberate thru the entire project. I have seen inadequate engineering on a very large concrete silo yield an failed installation… the cost to fix? A lot.
    New technologies may work well in a lab and on paper, but once implemented (built), can present issues not considered… I am talking about show stopper issues where ore will not feed – at all.

    Finally, often the teams that are involved in early development are NOT the teams to execute once capital is approved. Too many pre-approval teams shoot for some budget to keep executives and board members happy… why??? That is nothing but a bad joke. Get real with the budget development… scrutinize everything. Stop rushing to make some board date, or have the team needed to put the effort in to make that quarter’s BoD.

    If my name is on a project, it is not going over – time or budget. If that means we put off BoD approval for a few quarters if that is what I will do. If that is not possible, I will personally factor every line item for uncertainty as heavily as I find appropriate, and ensure every single person is aware of the reasoning.
    If I had to pick one… I would say poor early stage planning, scope dev and estimating.

    The solution is NOT to just throw money at scopes... it is to get into the work, get the right people involved - very involved and scrutinize every step of the way. It is possible.

  • I don't have any particular examples from personal experience, but I'd guess for similar reasons as other projects of a civil nature. Tunneling is a very good example. Planning on a tight budget to win approval or get a contract certainly doesn't help, too little leeway and running into the danger of cheap quality. And if you run into something unexpected, as is bound to happen when dealing with a natural material such as rock, things can go astray really quickly. Then you have all the legal hoops to jump through, environmental groups to convince, changing governments with different priorities for long term projects, all this while still trying to meet the expectations of your shareholders.

    Oyu Tolgoi is a good example that's been in the news for budget overruns for some time now, and if BHP decides to go ahead with their multi-billion dollar Jansen project in Saskatchewan, it'll be interesting to see how far they will get.

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