ACHIEVING BUSINESS EXCELLENCE ONLINE
AMERICAS EDITION Issue No.50
INCLUDING
S&P Capital IQ: goldcorp’s marlin mine: ide technologies: east asia minerals:
The Vancouver based mineral exploration company has located major gold and silver deposits in Indonesia and has cleared the route to develop them
RELIABLE. SUSTAINABLE. ECONOMICAL.
INDUSTRIAL WATER TREATMENT SOLUTIONS IDE is a world leader in advanced water treatment solutions.
sAGd steam Assisted Gravity drainage
The company offers unique horizontal evaporators designed for the SAGD water challenges. IDE’s industrial and produced water treatment solutions, successfully operating for over two decades, provide high reliability, sustainability and cost effectiveness. Produced Water Solutions Built to Last.
www.ide-tech.com
SEE uS AT OIl SAnDS 2013
business excellence Design Matt Johnson Art Director mjohnson@bus-ex.com Louise Culling Production Designer lculling@bus-ex.com
business Richard Turner Director of sales rturner@bus-ex.com Vince Kielty Director of Editorial Research vkielty@bus-ex.com Sharon Rooke Administration & Operations srooke@bus-ex.com Matt Day Head of technology mday@bus-ex.com Andy Turner Chief Executive aturner@bus-ex.com
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editorial John O’Hanlon Editor
John has contributed to Business Excellence since its inception: he joined the in-house editorial team in February 2013. johanlon@bus-ex.com
Will Daynes Editor
Will has been a business writer for three years. He joined the Business Excellence team in September 2012. wdaynes@bus-ex.com
CONTRIBUTORS George F. Brown, Jr.
George is the CEO and cofounder of Blue Canyon Partners, Inc., a consulting firm working with leading companies on growth strategy.
Chris Faulkner
Chris Faulkner is the founder, president and CEO of Breitling Oil and Gas, an independent oil and natural gas company based in Irving, Texas.
Thomas R. Cutler
President & CEO of TR Cutler, Inc. Cutler is also the founder of the Manufacturing Media Consortium including more than 4000 members.
amit patni Infinity Business Media Ltd
Amit Patni is Director, Risk Solutions at S&P Capital IQ.
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www.bus-ex.com The content of this magazine is copyright of Infinity Business Media Ltd. Redistribution or reproduction of any content is prohibited. Š Copyright 2013 Infinity Business Media Ltd.
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10 operations
stress testing
With financial institutions vulnerable these days, stress testing is a vital tool in a holistic risk management regime.
22 Strategy
28
Learning from the Fast Learners
Three lessons on how western companies can learn from the success of Chinese Second Mouse firms.
28 energy
china’s energy chess game
As China invests in North America and elsewhere in search of energy security, should the rest of the world be worried?
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contents
36 Food Safety
A LEAN FOOD SUPPLY CHAIN
42
PACA Foods has found a food safety solution that helps improve quality across the whole business.
42 Automation
Listen to the machine
The quest for Total Production Efficiency takes a major step forward.
exponor special preview: 50 Event preview
50
exponor 2013
The International Exhibition of the Mining Industry, Exponor 2013, has taken on extra meaning as the Chilean mining industry faces increasing competition.
56
56 Executive insight
Diego Hernández
The President of Exponor 2013, discusses this year’s event and its importance as it relates to the mining industry in Chile.
60 Esachs
a clean bill of health
General Manager, Javier Fuenzalisa, discusses the vital contributions ESACHS makes towards Chile’s wellrespected health care system.
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78
Mining & Minerals: 68 east asia minerals ACCESS TO INDONESIA
The Vancouver based mineral exploration company has located major gold and silver deposits in Indonesia.
78 Barrick Cortez
INVISIBLE GOLD MADE VISIBLE
94
Barrick’s Cortez is one of the most productive and cost effective gold mines in the world, thanks to constructive investment and a good deal of technical innovation.
94 Goldcorp - Éléonore mine partnership in northern Quebec
Goldcorp’s Éléonore gold mine is paying far more than lip service to the principles of stakeholder consultation, community benefit and local content.
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contents
106 Atico Mining
Copper and gold from Colombia Single-mindedly preparing to rejuvenate the senescent El Roble mine.
106
114 OSSA
Tunnel vision
Technical director, Íñigo Núñez Blanco discusses how international expansion and the adopting of innovative technologies have been key to OSSA’s growth.
120 bfl canada
Encouraging investment
120
Managing Vice President and Global Business Leader Penny Dyte discusses BFL’s passion for bringing growth and investment to Canada.
special focus:
goldcorp - marlin mine
128
an in-depth look into goldcorp’s marlin mine from its operations to its sustainable developmet
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184
Oil & gas: 172 Petroperu
Embracing the modern way
The Talara Refinery Modernization Project is Petroperu’s largest undertaking, the results of which will contribute greatly to the sustainable economic development of Peru.
184 PZS Stabilization -SNCA Products Initiating a revolution
How SGA-1 is set to revolutionize the oil and gas industry’s hydraulic fracturing process.
192 Chantier Davie
More than shipbuilding
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More than just Canada’s largest shipbuilder – more than any kind of shipbuilder: its ability to provide end-to-end turnkey solutions and its strategic location makes Davie an ideal partner for a range of industries.
contents
manufacturing: 202 University of Kentucky - Lean Systems Program
Adopting the lean approach
Why more companies than ever before are taking part in The University of Kentucky’s Lean Systems Program.
210 SMTC
The perfect manufacturing partner
202
SMTC is committed to delivering the right solutions to innovative partners around the world.
230
218 Polycorp Ltd
FLEXIBLE FORMULATION
A specialist in polymer products, this company is growing fast and focused on international expansion.
Transport & logistics: 230 Metro de Santiago
Serving Santiago
The expansion programme to improve the infrastructure of South America’s largest subway system.
240 Air Parts International Sales, Inc.
Single source purchasing
240
How the company has become a pioneer in the commercial aviation aftermarket.
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operations
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regulator- and bank-run stress tests using standardized scenarios, while also pushing banks to improve their internal bank-specific programs of stress testing and capital planning. The aim is to fill a gap in bank risk and capital management regarding the exceptional losses that can be generated in severe scenarios (Figure 1). However, the need to support regulatory stress scenarios and upgrade internal stress testing and capital planning has left some large banks running
complex parallel processes. Furthermore, even though banks generally prefer developing internal stress testing programs rather than running their data through ‘one size fits all’ supervisory stress testing models, many banks have been shocked by the effort it takes to gather the risk data for modeling idiosyncratic risks at a more ‘bottom up’, granular level. It’s really only now that many large banks are finding time to take stock, look at the bigger picture, and address some of the broader
Figure 1 Stressed Capital (ICAAP)
Losses Absorbed by Loss Provisions
Tolerance level
Stressed Loss Probability %
T
he recent global financial crisis revealed that financial institutions – and even whole economies – are vulnerable and illprepared for severe systemic shocks. An extensive effort is underway to strengthen the financial sector and make banks and other institutions more resilient in the face of unexpected stress. The hope is that future crises will not lead to governments again being forced to invest billions of taxpayers’ money to save the banking system. A regulatory requirement in the form of mandated stress testing is introduced to help facilitate this overhaul. Stress testing is an important tool in a holistic risk management regime. Regulatory bodies have mandated stress testing as an important part of a risk management regime. Since the first supervisor-run stress tests for very large US banks in 2009, regulators have developed something of a dual strategy on stress testing. They have sought to examine the largest banks’ capital adequacy through
Losses Absorbed by Capital
No Loss Provision or Capital Reserve
Losses $
Expected Losses
Unexpected Losses
Exceptional Losses
operations Table 1
Ten key organizational challenges 1. Dealing with multiple requests for stress testing resources (e.g., multiple regulators) 2. Encouraging board and senior management participation 3. Managing many cross-functional stakeholders across the firm (e.g., Group Risk vs Finance vs Lines of Business) 4. Overcoming silo-based approaches to build a true enterprise-wide stress testing framework 5. Bringing together business and modeling expertise in stress testing teams 6. Choosing the right modeling approach and adapting scenarios for each material risk 7. Collating and aggregating risk data with the requisite amount of granularity 8. Improving approaches in key risk areas coming into focus including liquidity risk, operational risk and PPNR modeling 9. M odeling risk interactions and second-order industry effects (e.g., effect on funding risk of credit crisis) 10. Validating and benchmarking the stress testing approach and individual models
organizational and cross-risk challenges (Table 1) as well as the key methodological challenge – making sure stress testing is granular and robust enough to reflect the bank’s true, idiosyncratic risk profile, particularly in its credit portfolios. For the slightly smaller US banks – those with $10-50 billion dollar assets plus, in effect, those hoping to attain that size in the next few years – the annual stress test race has just started. By Fall 2013, these banks must be prepared to run stress scenarios defined by the regulator using a series
of macroeconomic variables, including any additional variables necessary to estimate losses and revenues in the bank’s unique set of portfolios. Regulators will examine the results of the Dodd-Frank tests, but they will also use the program as a way of probing the quality of each bank’s comprehensive internal stress testing and capital planning program. Firms will be keen to apply relevant lessons from the big bank experience of developing stress test programs, but they will need to make special efforts to tailor their stress
testing programs to their own unique risk profile – smaller banks tend to react to macroeconomic stresses in a particularly heterogeneous way. Table 2 sets out some of the capabilities required for credit stress testing across the bank’s balance sheet. We think that the fall of 2013 will therefore prove to be a pivotal moment in terms of both improving and designing stress testing programs. It’s time to get prepared. Strategic choices The first step is to make sure the bank has a
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Table 2
Capabilities to Address your firm’s entire balance sheet and portfolios BANK BALANCE SHEET EXPOSURE
S&P CAPITAL IQ TOOLKIT
OUTPUTS
Credit Risk
SME Assets (Specific Small Industries, Agriculture)
DATA
Consumer Assets (Mortgage, Home Equity, Auto, Credit Cards, etc.)
Commercial Real Estate (CRE, Home Builder Land Developers, Construction)
Public Sponsored Entities (Federal Housing Authority, Small Business Administration, Government National Mortgage Association) Sovereign Debt (Local, Regional, Government, School Districts) Financial Institutions (Banks, Broker/Dealers, Non-Banking Financial Institutions)
ANALYTICS
Commercial Loans (Corporate & Industrial Loans, Project Finance, Asset Finance)
• Default Data • Loss Data • Company financials • Macro-economic data
• PD models • LGD/EAD models • Downturn LGD • EAD models • Credit migration/ transition matrices • Industry correlation matrices • Concentration effects models
• Macroeconomic stress scenarios • Aggregated stressed default ratings and/or PDs • Aggregated recovery rates • Aggregated losses • Aggregated stressed capital
Market Risk Market Risk (Counterparty Credit Risk, Interest Rate Risk) compr e he n sive st r e s s testing framework in place – a task that’s easy to forget as banks rush to stress test specific portfolios. The framework and governance should cover such topics as the firm’s key goals when stress testing, how stress
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Stress VaR Models
tests support and inform the bank’s risk appetite, the risk coverage and focus (e.g., in terms of types of risk and key portfolios), and key controls and reporting lines. Figure 2 illustrates our perspective on stress testing
Mark-to-Market Losses
showing how the mechanics of stress testing should flow from a clearly articulated stress testing framework. As they improve their approach to stress testing, banks have to make informed trade-offs between three key factors:
operations •K ey Goals: For example, what balance is the bank aiming for between achieving a minimum level of compliance with regulatory rules and leveraging the effort to improve bank decision making? Which risks deserve the most attention? • R esources: We think stress test models must be constructed by teams
that combine modeling expertise with fundamental insights into the risk dynamics of each business and risk area. In addition, the more sophisticated the bank’s program, the more risk data the bank is likely to require. • A pproach: The bank will need to review each portfolio and risk type to put in place the right mix
of approaches for each material risk, in terms of the level of sophistication of the modeling methodology and the wider governance and validation framework. The choices in each of these areas have big implications for how the bank implements stress testing, especially in terms of scenario selection, modeling methodology, and validation.
Figure 2
our perspective on stress testing Stress Testing Framework and Governance Business Goals and Risk Appetite
Stress Scenarios
Stressed Micro-Economic Variables
Revenue and Loss Modeling Revenue (PPNR) Forecast
Scenario P&L
Market Risk, Liquidity Risk, Operational Risk MTM Losses, Stress VaR
Funding/ Contingent Losses
Credit Risk PD, LGD, EAD Models and Benchmarks
Stressed PDs and LGDs/EADs
Stressed Transition Matrices
Operational Losses
Equity Capital
Regulatory Capital
Economic Capital
Capital Adequacy/Management
Stressed Macro-Economic Variables
(Revenue Growth, Cost Containment, Target Rating)
Data Governance and Model Validation
(Event Driven, Determined by Management, Specific MacroEconomic Factors, Supervisory)
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“the bank needs to work out which are the most relevant relationships between the macroeconomic variable and the underlying risk factors” Selecting and adapting scenarios So far, banks have often taken their cue from the regulator in terms of the degree of economic adversity and range of macroeconomic indicators used to build a scenario. However, there is an increasing trend for banks to adapt scenarios to capture how risk exposure is shaped by geographic concentrations, product focus, and exposure to specific risk factors. For example, a bank with a large portfolio of autoloans in the Mid-West region might take the regulator’s most adverse scenario for larger banks (e.g., a rise in the national unemployment rate from 8% to 14%), and try to translate this first into implications for, say, Mid-West unemployment rates and other local macroeconomic factors. If the bank has significant auto loan portfolios it might look at how this ‘local’ scenario
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would affect new auto sales, and therefore auto loan origination; this would help the bank see how the scenario drives PPNR modeling. Then it may look at how the increase in unemployment is likely to translate into rises in unemployment in relevant localities and into slowdowns in regional industries, and how this will increase default and loss given default – the two key risk factors – after taking into account recovery rates, recovery costs, legal costs etc. One tactical question here concerns the degree of idiosyncrasy the bank should factor in, e.g., should our example bank take account of the fact that its auto-loans are largely secured against Japanese, German and luxury imported cars, which tend to exhibit high recovery rates even during economic downturns? This may need some preliminary discussion
with regulators, and the bank will need to be sure it has in place the data and analysis necessary to justify such a bank-specific assumption. We’ve focused on retail portfolio credit risk in one portfolio here. However, banks increasingly need to develop firm-specific scenarios for other risks (e.g., income volatility, liquidity risk) across their enterprise. With some modification, however, many of the ideas discussed here are equally applicable to other portfolios in banks. Moving from macro to micro Regulators increasingly favor granular bottom up riskfactor driven approaches, compared to broader brush ‘top down’ approaches. Bottom up approaches capture the risk nuances of a portfolio because they track how macroeconomic factors affect the micro risk factors
operations that, in turn, drive loss rates in the bank’s risk models. However, forging a robust link between a shift in a macroeconomic factor and an increase in bank losses is a significant modeling challenge on a number of counts, three of which are particularly tricky. First, the bank needs to work out which are the most relevant relationships between the macroeconomic variable and the underlying
risk factors. For example, in a credit card portfolio, should the bank model the relationship between unemployment and default, or unemployment and delinquency? Or look at an intermediate variable such as the Bankruptcy Predictor. Second, the bank needs to look at the observable relationship between the selected risk factors and macroeconomic risk factors across a long time series to
pick up the effect of stresses, while also using judgment to factor in any structural changes in the industry – the analysis must be forward looking if it is to be useful. Third, the bank needs to explore the relationships between the risk factors during an adverse scenario. These relationships may well not be simple linear extensions of the relationships seen in normal markets. It’s now well understood that
Figure 3
Default Default Rates Rates
Model 3.5% projected conditional default rates 3.0% 3.5% 2.5% 3.0% 2.0% 2.5% 1.5% 2.0% 1.0% 1.5% 0.5% 1.0% 0.0% 0.5%
20 20 10 10 20 20 11 11 20 20 12 12 20 20 13 13 20 20 14 14 20 20 15 15 20 20 16 16 20 20 17 17 20 20 18 18 20 20 19 19 20 20 20 20 20 20 21 21 20 20 22 22 20 20 23 23 20 20 24 24 20 20 25 25
0.0%
Model projected conditional prepayment rates 12% 14% 10% 12% 8% 10% 6% 8% 4% 6% 2% 4% 0% 2%
HPA = 0%, Unemployment = 0 pct points for the next 3 yrs HPA = -30%, Unemployment = 6 pct points for the next 3 yrs HPA = -45%, Unemployment = 15 pct points for the next 3 yrs
0%
20 20 10 10 20 20 11 11 20 20 12 12 20 20 13 13 20 20 14 14 20 20 15 15 20 20 16 16 20 20 17 17 20 20 18 18 20 20 19 19 20 20 20 20 20 20 21 21 20 20 22 22 20 20 23 23 20 20 24 24 20 20 25 25
Prepayment Prepayment ratesrates
14%
HPA = 15%, Unemployment = -3 pct points for the next 3 yrs
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PD and LGD correlations can drive up losses in a stressed environment, but establishing the extent of this correlation in particular portfolios remains work in progress. Furthermore, there are many other risk factor relationships to build in and things can easily go wrong unless business knowledge is built into the project. For example, Figure 3 shows an illustrative modeling of the performance of US residential mortgage-backed securities under various scenarios defined in terms of macroeconomic variables. The model was built using data from millions of first and second lien mortgages tracked over a complete housing cycle, including boom and bust – allowing us to link economic scenarios to default and prepayment projections. We can see that the default rate varies hugely from the
most favorable case of strong price appreciation and low unemployment, to the most adverse case of a 45% drop in the house price index and 15% unemployment. However, there is some danger that the analyst will simply apply the PD rates to a base case projection of prepayment rates, whereas the lower figure illustrates the fall off in prepayment under a strongly adverse scenario. It is this kind of correlated movement in risk factors that raises portfolio losses to exceptional levels in the real world. Again, the challenge here is to explore the effect of adverse scenarios across the bank’s full set of business lines and portfolios, taking account of risk factor correlations. Firms should focus on ‘holistic’ stress testing that takes account of the various interplays between risk factors and macroeconomic factors.
This can help identify additional explanatory variables. For example, in addition to the unemployment rate, consumer price indices (CPI) may help to explain the historical behavior of loans used to fund incomeproducing real estate. A drop in price is often related to a significant fall in consumer and commercial spending and can act as a financial panic indicator in stressed times. Understanding the inter-relationships between macro-economic variables in various scenarios and how these drive loan-level risk factors (e.g., PD and recovery rates) is crucial for successfully modeling stress scenarios. Modeling methodology: Benchmarking and backtesting rating transition approaches So far, we’ve been discussing quite granular, bottom up approaches. However, for some
“the challenge here is to explore the effect of adverse scenarios across the bank’s full set of business lines and portfolios” 18 | Be americas
operations Figure 4
Quarter_t PD Rating
Quarter t+1 PD Rating Migration, 13 is default
1 2 3 4 5 6 7 8 9 10 11 12 13
1
2
3
4
5
6
7
8
9
10
11
12
13
91.28% 0.76% 0.06% 0.00% 0.01% 0.00% 0.00% 0.00% 0.01% 0.01% 0.00% 0.00% 0.00%
4.24% 84.83% 0.62% 0.12% 0.04% 0.02% 0.01% 0.02% 0.01% 0.01% 0.03% 0.00% 0.00%
1.51% 13.51% 82.52% 2.19% 0.63% 0.25% 0.12% 0.10% 0.04% 0.01% 0.01% 0.02% 0.09%
1.50% 0.90% 8.31% 81.64% 4.05% 1.75% 0.78% 0.50% 0.31% 0.13% 0.10% 0.00% 0.17%
1.48% 0.00% 8.15% 14.33% 80.50% 3.49% 1.54% 0.97% 0.60% 0.33% 0.11% 0.04% 0.31%
0.00% 0.00% 0.28% 0.98% 13.20% 79.74% 4.46% 2.45% 1.52% 1.00% 0.50% 0.24% 0.38%
0.00% 0.00% 0.00% 0.60% 0.75% 10.19% 78.24% 4.93% 3.53% 2.03% 1.27% 1.02% 0.74%
0.00% 0.00% 0.04% 0.11% 0.34% 3.76% 13.10% 73.56% 3.90% 2.11% 1.52% 0.63% 0.75%
0.00% 0.00% 0.03% 0.01% 0.23% 0.57% 1.18% 16.00% 68.70% 4.85% 3.03% 1.54% 0.69%
0.00% 0.00% 0.00% 0.00% 0.18% 0.14% 0.17% 0.86% 19.50% 66.38% 3.86% 1.84% 0.52%
0.00% 0.00% 0.00% 0.00% 0.02% 0.04% 0.31% 0.05% 1.23% 21.12% 65.15% 2.27% 0.34%
0.00% 0.00% 0.00% 0.00% 0.02% 0.02% 0.07% 0.45% 0.38% 1.61% 20.66% 61.18% 2.53%
0.00% 0.00% 0.00% 0.00% 0.02% 0.02% 0.04% 0.11% 0.28% 0.42% 3.76% 31.22% 93.49%
‘low default’ portfolios, e.g., C&I loans, regulators might be happy for banks to apply rating or Probability of Default (PD) transition approaches that have a broader brush, top down flavor. For example, the bank might choose to look at how ratings and PDs have behaved in the past, including times when macroeconomic conditions have changed, and extrapolate from this to predict the behavior of ratings over a given period. Figure 4 shows a generic, illustrative credit transition matrix based on percentage PD rates. But there is a fundamental
challenge. How can the bank build a rating transition matrix that can be shown to accurately capture the stress risk in its unique portfolio of exposures? The first thing the bank can do is to use internal risk models and risk and loss data from its historical records to begin capturing how internal ratings (or PDs) behave during a stressful period. But there are likely to be gaps in the bank’s internal data that need to be augmented, and the bank will need to benchmark any internal analysis using a transition matrix built up from a suitable, richer set of external data.
This is not as easy as it sounds because we can’t simply assume that the bank’s portfolio behaves like the wider universe of pubic ratings during a period of stress. Instead, the bank really needs to build a benchmark matrix that is based on obligors of a similar character to its own, e.g., energy industry obligors, or CRE obligors in the same lending sector and geographical region. Ideally, the bank should also compare the output of its rating models using stressed inputs to the output of appropriate external models or scorecards.
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Figure 5 Components of the Validation Process
Quantitative Validation
Backtesting
Discriminatory Power
Benchmarking
Stability
With this kind of robust benchmark to hand, the bank can check for differences between its own matrix and the external benchmark. At a minimum, the bank should be able to provide a good reason for any differences based on the characteristics of the portfolio, e.g., that the bank focuses on a particularly creditworthy kind of counterparty. Banks can use similar approaches to improve their stress scenario estimates for other risk factors, for example, they can use carefully selected external data to augment gaps in their
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Calibration
Qualitative Validation
Model/Design Methodologies
Conceptual Soundness
Internal Use/ Application
Documentation
Loss Given Default data when calculating LGD for stressed periods (and to provide relevant benchmarks). Validating your approach and making it transparent The validation of risk models is often taken to be a regulatory-driven exercise, but inspiring confidence in the models is also vital if stress test results are going to be used to drive important bank business decisions. As Figure 5 shows, validating the bank’s approach to stress testing really falls into two main parts:
qualitative validation and quantitative validation. Qualitative validation is extremely important for stress testing and it includes key factors such as making sure the bank has a best-practice stress testing framework and that proper governance is in place. For example, is the board involved in both questioning and applying stress test results and how has the bank managed the challenge of building interdisciplinary teams? Qualitative validation should also look at the conceptual soundness of a stress test model – is it
operations
“while stress testing is as much an art as a science, quantitative validation can be extremely valuable” the right approach given the nature and materiality of the risk – as well as the bank’s tactics for model design, data collection, risk factor selection and so on. The bank will have to explain why it has chosen a given route, for example, why it has approached one risk using a broad, topdown approach and another using a particular kind of bottom-up risk analysis. Finally, while stress testing is as much an art as a science, quantitative validation can be extremely valuable. For example, the bank can use carefully chosen external data to benchmark and justify its choice of recovery rate for a particular portfolio during a stressed period, or to explain its assumptions concerning the downturn correlations and inter-relationships between risk factors that it has applied in the stress
testing projections. Likewise, while it can be difficult to back test the output of stress testing models directly (e.g., comparing projections for an adverse scenario against the realization of the scenario), the bank can test how well the model performs in projecting baseline or mildly adverse scenarios (e.g., how well it has projected trends in loss rates, revenue). An overriding issue here is transparency. In order to validate its approach to stress testing to regulators and to internal voices, the bank will need to have documented its approach, laid out all the most important assumptions, and backed these up with
benchmarks and external opinions. Conclusion Stress testing has become the new frontier of bank risk management. Banks are expected to run comprehensive, holistic, and coherent enterprisewide stress tests based on transparent and robust methodologies. This is a major challenge, but it can be met if banks set out their goals and stress testing frameworks clearly, and make sure that they approach the task with the right mix of business and modeling expertise – supported by independent benchmarking models and relevant data.
For more information about S&P Capital IQ: Email us: risk_marketing@spcapitaliq.com www.spcapitaliq.com
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Learning fro the Fast Learn Three lessons on how western companies can learn from the success of Chinese Second Mouse firms
written by: George F. Brown, Jr. & David G. Hartman
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strategy
om ners
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I
n previous articles, we’ve written about the emerging competitors from China, firms that are beginning to expand their reach from that country’s broad middle market to even the well-established markets of North America and Europe. We have characterized these companies as Second Mouse firms, drawing upon the saying “The early bird gets the worm, but the Second Mouse gets the cheese” in recognition of their strong fast follower and fast learner competencies. In fact, it has been the ability of these firms to learn best-in-class manufacturing skills from western firms and to parrot key elements of western technology and design that have enabled them to succeed by bringing to market an “almost as good product at a great price point”. Such firms as Huawei, Haier, Sany, Mindray, and Geely are now significant forces in the global economy, with more and more Chinese firms in manufacturing, construction, engineering, ser v ices, and other segments of the economy occupying positions on the Fortune Global 500.
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A key ingredient in the success of the Second Mouse firms has been their application of fast learner skills to the goal of creating “almost as good products at a great price point”. More often than not, western firms focus innovation and product development on raising the bar in terms of key performance metrics, improved design, or additional features. The Second Mouse firms, on the other hand, focus their efforts on achieving significant cost saving without compromising the factors that matter most to their targeted customers. We have used the familiar story of Southwest Airlines as an analogy, reflecting a successful western firm that stripped away some costly features found in other airlines to offer an acceptable service at a very attractive price. So a first element of learning that can be gained from the Second Mouse firms is that there are multiple flavors of innovation, and that innovations that achieve highly attractive price points with still-acceptable products can create a business success story that yields sales to middle market customers that
“The early the worm, bu Mouse gets
y bird gets ut the Second the cheese”
strategy translate into strong rewards for the firm’s shareholders. Just as these Chinese firms have learned from western market leaders, it is possible for western firms to benefit from implementing other aspects of their approach to learning. In this article, we’ll describe three additional philosophies that are second nature to the Second Mouse firms, ones that have helped them to achieve success through fast learning. They are ones that some western firms can accurately say they practice, but by and large, the Second Mouse firms have taken these ideas to a higher level. Even those western firms that can correctly say they already implement these ideas should be asking how they can similarly take their current practices to a higher level. 1. Question, question, question Several decades ago, our firm hosted delegations of Chinese interns who hoped to learn about western practices with respect to data resource management. As our team welcomed these individuals, we first began to hear comments like “I’m exhausted answering all of
their questions”. But over time, the comments shifted to observations like “They asked me a really provocative question today” and “I had to admit I had no answer to a question, and it’s gotten me thinking …”. Reflecting this experience, the first learning principle we see in the Second Mouse firms is “Question everything”. This is a practice that had paid off for many western firms, particularly when they’ve listened carefully to messages from the market as to what does and what doesn’t create value for their customers. It’s easy to do things “because we’ve always done them that way” that in truth are costly and that contribute little to value creation. 2. the 80-20 rule A second lesson involves the familiar concept of the 80-20 rule, with a particular twist to its application by Second Mouse firms. Their concept is that the final increments to performance, design, and features come at a very high cost, and the Second Mouse firms use the 80-20 rule as the route through which they can offer “almost as
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good products at a great price point”. Over and over, they’ve found that their customers, not just in the middle markets of China, but around the world, are willing to sacrifice those final increments when doing so makes the product much more affordable. One western firm with which we worked learned this lesson well. Through a careful market research project, they learned that their targeted market segment in China attributed very little importance to five product features that were of major importance to their ability to differentiate their
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product in western markets. By excluding these features and taking the associated costs out of their product, they were able to achieve a competitive position in China, gaining share, unlike other western firms that attempted to market their western products into China with an unchanged feature set and price point. 3. Taking the time out The third learning lesson is one that all western firms will recognize: “Time is money”. The Second Mouse firms are religious in terms of thinking about how to
shorten the critical path. Anyone with experience in China’s markets can probably provide examples about how a Chinese firm built a working prototype of a product in the same time that western firms used to gain approval to begin working on the same project. We have used the phrase “China speed” to characterize their obsession with quickly getting to market through creative approaches that “take time out”. Not all of the concepts that they employ to do that will translate neatly into western markets. For example, many Chinese firms are seen as doing “beta
strategy
“What enabled the Second Mouse firms to be the ones that “first thought of it” was their constant focus on fast learning” testing in people’s homes”, or, stated more positively, substituting service resources for expensive and timeconsuming processes. While not all of their practices are appropriate to other markets, the focus on “taking time out” is one that frequently pays off not only in terms of cost savings, but also in terms of first-mover advantages.
For many western firms, competition from Chinese Second Mouse firms that are new to global markets will be the most significant challenge of the coming decade. These new competitors will draw upon their fast learning skills to achieve success in new markets, and will frequently surprise their western targets with products, processes, and innovations that “look obvious once you think of it”. What enabled the Second Mouse firms to be the ones that “first thought of it” was their constant focus on fast learning, looking at innovation
from a new perspective, questioning everything, applying the 80-20 rule to cost reduction, and focusing on ways through which they can “take time out”. Those western firms that learn these same principles will be the ones that will have the best chances of winning in the future, not only against new competitors from China and other emerging economies, but against their traditional roster of “usual suspect” competitors. Learning from the fast learners will be a critical success factor in the coming years, and now is the time to start on that journey.
George F. Brown, Jr. is the CEO and cofounder of Blue Canyon Partners, Inc., a management consulting firm working with leading business suppliers on growth strategy. Along with Atlee Valentine Pope, he is also the author of CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs. www.bluecanyonpartners.com
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China’s energ
As China invests in North Am of energy security, should the
written by: Ch
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Energy
gy chess game
merica and elsewhere in search rest of the world be worried?
hris Faulkner
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T
he Canadian g ove r n me nt ’s recent approval of China National Offshore Oil Corporation’s (CNOOC) bid to buy Nexen, Inc. set oil and gas insiders abuzz: is it another smart strategic move in China’s massive chess game to ensure adequate and stable energy supplies for its ever-growing needs, or a calculated effort to gain entry to the North American, and more worrisome, the US energy patch? North America has seen more than $17 billion in gas deals with Chinese companies since 2010, making it a top target for Chinese investment, but North America is by no means alone in enjoying attention from China. China’s needs outpace domestic supply China is now the world’s largest consumer of energy. Though China is the world’s fifth largest oil producer, the country has been a net oil importer since 1993. The International Energy Agency estimates that China could become the world’s largest consumer of oil, and
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its need for natural gas has been growing quickly as the country seeks to lower carbon emissions and aims for natural gas to reach 18 percent of the population by 2015. Wary of unreliable supplies from the volatile Middle East and of Russia’s manipulative nature, Chinese companies have been busy using their state-backed
$17
Billion North American gas deals with China since 2010 might to strike partnership deals and make investments in nearby regions. These agreements have enabled China to set up networks that provide access to oil and gas supplies and pipelines, as well as technology and know-how to access their own reserves. Eschewing Russian and Iranian export corridors, for example, China now has pipeline access via Turkmenistan, Uzbekistan, and Kazakhstan.
China has been ramping up its partnerships and investments in other regions for a long time, with its first oil loan to Angola in 2004 for energy, infrastructure, and other projects. It has made loans to companies in Bolivia, Brazil, Ecuador, Kazakhstan, Turkmenistan and Venezuela to secure long-term oil and gas supplies, and joined into partnerships with companies in Australia, Africa, Russia, Uzbekistan, Turkmenistan, Canada and the US. In all, China has established 60 bilateral agreements with various countries, and cooperated with 40 countries in oil exploration and development projects. “Playing nice,” so far The CNOOC-Nexen deal is not China’s first foray into North America. In 2005, CNOOC bought 16 percent of MEG Energy, Ltd. to help develop an oil sands project in northern Alberta; Sinopec, China Investment Corp. and PetroChina have also made deals with Canadian companies; CNOOC provided development funding for some of Statoil ASA’s Gulf of
Energy
Mexico leases and invested in Oklahoma’s Chesapeake Energy for stakes in several US fields. So far, China has “played nice” as it has expanded its investments into other countries. The Chesapeake deal, for example, was structured so that CNOOC did not get an ownership stake and had
no control over production. Whereas most deals include secondment (temporary assignment of the partner’s employees), the US deals have specifically excluded this to avoid potential political backlash. Adopting a more collaborative approach, China has forged alliances to gain advantageous opportunities but has not exerted its considerable political powers.
And the US has been a supportive ally, helping Ch i na rei n force its sovereignty by expanding its domestic gas production and increasing pipeline capacity. In exchange for access to the deep pockets of China’s stateowned energy companies, US companies have shared new technologies and methods for extracting unconventional resources. Houston-based Baker Hughes, Inc., for example, drilled China’s first horizontal shale oil well last year.
Energy
“China has forged alliances to gain advantageous opportunities but has not exerted its considerable political powers” Inaccessible resources Industry experts believe China holds the world’s largest shale gas reserves, with total recoverable shale gas resources estimated at 1,275 trillion cubic feet—more than all of the recoverable resources in the US and Canada combined— but those reserves are mostly
beyond reach due to difficult geology, poor infrastructure, and water shortages. China’s geology poses technological problems unique to the shale gas industry, with most reserves fully twice as deep as those in the US and further hampered by hilly terrain. While the government is seeking foreign investors with the technical knowhow to exploit its reserves, China’s unique geology means that shale drilling technologies from other countries cannot be copied directly. Chinese companies are seeking to learn from their foreign partners, but deals that give them access to foreign supplies are critical. China is also hobbled by a lack of proper infrastructure. Its fragmented pipeline
network, processing and storage facilities are not currently capable of handling the potential volume promised by its reserves. As much of China’s natural gas reserves lie far below mountainous terrain, developing technology for
1,275
trillion Estimated cubic feet of shale gas resources in China the deep reserves isn’t the only obstacle. Typically, oil companies must construct new roads, bridges, and other infrastructure for large-scale drilling operations. Water is another obstacle for China. In February of this year, China issued a warning
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about its worsening water problems. The government has issued strict water consumption restrictions and has heavily invested in water conservation systems, but these measures have done little to curb growing demand for water in the world’s secondlargest economy. China’s water shortage issues could impact its ability to reach shale reserves using the fracturing methods that require large quantities of water. This, again, is where China’s partnerships and investments in foreign energy companies could eventually pay off in the form of development of alternative fracking components, like carbon dioxide and nitrogen. Despite the challenges, China has designated shale gas as an independent resource, clearing the way for smaller companies, domestic and possibly foreign, to
develop it. In December of 2012, the Deputy Director of the National Energy Administration reiterated that China is actively e nc ou r a g i ng f or e ig n companies to invest in exploration and development of China’s energy resources, a nd i nv ites energ y companies to set up research and development centers in China. Is Chinese investment a real worry? News of the CNOOCNexen deal has generated some concern over China’s potent ia l undisc losed motives for gaining further inroads to the North American market. Though China has been playing nice thus far, some worry that this is just another move in China’s end-game of securing world dominance via control of not only economic but also energy
markets. Part of the problem is the fact that Chinese oil companies are not privately owned; they operate with the backing of the Chinese state. The CNOOC-Nexen deal raises issues of American energy security, as it gives unprecedented influence over American reserves
“China’s partnerships and investments in foreign companies could eventually pay off in the form of development of alternative fracking components” 34 | Be americas
Energy
to a foreign government. China and other countries with state-owned oil and gas companies have in the past used their oil and gas resources for political leverage, so the worry is not unwarranted. A s ide f r om t he aforementioned trade-offs for China, another deterrent to Chinese interference in the American oil and gas market should arise from the US’s six-decade commitment to protecting China’s imports in the South China Sea, using the US Navy to ensure safe
passage. China’s confidence in that commitment, however, has appeared to waver in recent years as Washington has rebuked China’s conflicts with Taiwan and North Korea. Regardless of uncertainty over China’s ultimate
motives, it doesn’t appear that China will be slowing its foreign deal-making any time soon. Deal by deal and investment by investment, the world will watch as China’s energy chess game—and end game— plays out.
Chris Faulkner is the founder, president and CEO of Breitling Oil and Gas, an independent oil and natural gas company based in Irving, Texas. Founded in 2004, Breitling Oil and Gas employs state-of-the-art petroleum and natural gas exploration and extraction technologies for the development of onshore oil and gas projects. www.breitlingoilandgas.com
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written by: Thomas R. Cutler
A LEAN SUPPLY
Food safety requires complian Florida-based PACA Foods ha improve quality acros
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Food Safety
EAN FOOD Y CHAIN
nce with stringent regulations. as found a solution that helps ss the whole business
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P
reston W. Blevins is the author of the just-released book Food Safety Regulatory Compliance, Catalyst for Lean and Sustainable Food Supply Chain. Blevins aids comprehension of the salient issues by concluding each chapter with an extensive quiz. Normally, large companies have the resources to fund the implementation of best practices, small companies less so. Blevins’ text is a roadmap for the small food manufacturer and shares how any organization can achieve world-class excellence in operations and supply-chain management. There are many examples of small food companies that have taken a path from few quality and safety controls to world-class excellence. PACA Foods is a foodproduct manufacturer that focuses on dry-blended
food products including spices, nutrients, flour, and sugar based products. All products have private labels and are produced on a custom and proprietary basis. The Tampa, Florida based food company manufactures products for retail, food service, and industrial (other food processors) customers, including all aspects of a product’s dry portions. Producing quality product, delivered efficiently, at the lowest possible cost is a challenge. Michael Shepardson, CEO and President of PACA Foods, shared how the firm went from no computerized inventory control system for the first fifteen years of its existence to evaluating programs that had the capability of integrating with QuickBooks. Jay McLennan is the Manager Supply Chain and Planning at PACA Foods.
“One of the key initiatives of the new ownership group was to attain an SQF level II certification” 38 | Be americas
Food Safety McLennan was charged with gaining better control over quality and safety processes, noting, “One of the key initiatives of the new ownership group (when they took over two years ago) was to attain an SQF (safe quality food) level II certification; some key components of which are documentation and inventory/lot code tracking.” The company implemented MISys (www.misysinc.com) and was able to manage many historical HACCP (hazard analysis critical control points) issues in a proactive fashion by verifying and recording every lot code as inventory comes through the door and trace it as it moves through the different processes within the facility. “We can now even track it at the FIFO layer which greatly adds with our inventory rotation; a critical component for our inventory control here, since many of our products have short and varied shelf lives. We have passed every mock recall and SQF critical control point for purchasing and inventory control since we launched the MISys solution,” reported McLennan.
Safety considerations PACA has some items that are allergens and have to be specially handled and specially located in the company warehouse. McLennan noted the company even runs peanut products now which require a very high level of attention to safety, since a mistake could be potentially fatal. The requirements for special handling, clothing, testing, equipment and production are now all maintained in the same software solution that has improved quality control procedures. “The chances for a mistake are down to almost nothing and we have enjoyed an increase in both this kind of business and in the speed in which we produce it. We are now so confident in our abilities that we are actively pursuing business that requires even more stringent controls, like working with meat products that require full FDA and USDA compliance. “We recently had an entire truckload of a potentially hazardous item come in. It ran acceptable at first, but then started setting off our
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metal detectors. We didn’t have a service failure to our customer, and were able to tell exactly when the problem started. We were able to identify which of three lot codes on that one receipt was the one that caused it. The manufacturer was extremely grateful not to have the entire shipment rejected; we were able to replace the bad lot in time, never stopped running and were able to make our delivery on time, complete, accurate and most importantly safely,” enthused McLennan.
Transparency drives both quality and safety Food manufacturers globally have reported the advantages of the transparency of the MISys system. The ability for all users to see live real time information results in greater efficiency and fewer errors. Previously, whenever there was a question regarding inventory levels, lot codes, or expiration dates, staff had to physically stop, leave the production floor and come to the office to ask the inventory control manager. Now all they need to do is consult the closest computer or ask
the nearest supervisor on the floor who has access. The result is far less downtime and production interruptions on the floor. It has also resulted in the purchasing and inventory personnel focusing on more value added tasks. Previously there was a line to the door of the purchasing manager’s office and now PACA can go days at a time without a production question being asked. PACA has actually enjoyed a cost of sales reduction during a mildly inflationary period, while some key blended food items and ingredients (like
Inventory reduction + reduced carrying costs - MISys Investment = $169,980 $210k
Reduced Carrying Costs
$185,000
Inventory Value: $500,000
$170,000
$170k
Typical System Configuration:
$155,000 $140,000 $125,000
$50k
y Re Inve ntor
$90k
duc ti
on
$130k
Cashflow $114,660
Cashflow $142,320
Cashflow $169,980
Purchase Cost: $9,170
$10k $9,170
Cashflow $128,490
Cashflow $156,150
• Basic Manufacturing • Advanced Purchasing • Material Requirements Planning • 1 User License • SureStart Implementation • Unlimited Technical Support
$10,340
12mo
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$11,510
$12,680
$13,850
$15,020
MISys Investmment 24mo
36mo
48mo
60mo
Annual Maintenance: $1,170
Food Safety
“We are now so confident in our abilities that we are actively pursuing business that requires even more stringent controls” anything containing corn) have gone up dramatically. Being able to accurately forecast and order in a just-intime environment, being able to consolidate items under preferred vendors, and move to less frequent deliveries reduced material and labor costs as PACA has established real economic order quantities and enjoys the cost savings derived as a result. Scalability Like many other small and mid-sized food products manufacturers, PACA had QuickBooks as the backbone of the accounting operation, yet needed more without abandoning the system.
Shepardson commented: “We analyzed the available programs that had the capability of integrating with Quick Books. MISys was the front-runner from the start…it had all the modules, inventory control, purchasing, MRP, bar-coding, lot control, scheduling that we knew we needed for our daily needs and to begin our plan for continuous improvement.” No more confusion over which product uses which ingredients or packaging, having accurate costs in FIFO layers provided the ability to quickly analyze inventory and send purchase orders directly from the system. Real cost savings were realized
Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc. Cutler is the founder of the Manufacturing Media Consortium including more than 4000 journalists, editors, and economists writing about trends in manufacturing, industry, material
by loading the qualified suppliers for every item and being able to quote and compare suppliers’ prices, quality, and lead times. Blevins’ text recognizes how food companies, like PACA Foods, have had to reconcile the global sourcing of ingredients and how that has created a complex supply chain, significant management challenges, and additional regulatory compliance requirements. The tremendous pressure on food manufacturers can be balanced by leveraging existing investments in food safety regulatory compliance into superior inventory management.
handling, and process improvement. Cutler is a member of the Society of Professional Journalists, Online News Association, American Society of Business Publication Editors, and Committee of Concerned Journalists. trcutler@trcutlerinc.com
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Listen to the machine The quest for Total Production Efficiency takes a major step forward through the combination of the MTConnect Standard with Big Data, and the new vimana software platform from System Insights
written by: Thomas R. Cutler
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Automation
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Automation
T
he MTConnect s t a n d a r d facilitates data collection vital for meaningful analysis of machine tool behavior. In 2007, a group at the Association for Manufacturing Technology (AMT) led by Paul Warndorf realized the need for a comprehensive standard to address the inability to collect data from manufacturing equipment. That was six years ago and various machine tool builders and controller manufacturers functioned as islands of automation, requir ing propr ietar y methods to access their data. AMT enlisted the help of the University of California, Berkeley, to develop an open standard making data easily available; this development spurred a new generation of innovation in the manufacturing industry using the latest technologies, including ‘big data’. William Sobel, presently CEO at System Insights, was a visiting lecturer and researcher at the RADLAB back in 2007 and was asked to develop the standard. Sobel enlisted the assistance of
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Athulan Vijayaraghavan, who was working on his doctorate in mechanical engineering. Sobel architected and wrote the MTConnect standard with the goal of reducing the complexity and cost of shopfloor data collection and providing a common language for all manufacturing equipment. Moving beyond OEE For the past five years ma nu fac t u r i ng pla nt managers and supervisors have adopted lea n manufacturing principles, eliminated waste, and still seen total production efficiency elude them. Monitoring and overall equipment effectiveness (OEE) solutions in the shop extracted little value because most ‘OEE monitoring’ technology uses tools that generate data, but none that help them make sense of it. OEE is an effective metric to given an overall sense of how effectively manufacturing equipment is performing; it is not particularly useful in improving shopfloor productivity. OEE is a composite metric, combining machine
availability, part quality, and schedule adherence. At best, OEE conflates each of these individual aspects of productivity, and at worst, OEE incorrectly inflates a device’s productivity by one of the three metrics, overwhelming the others. OEE-based monitoring tools have also emphasized data collection and reporting, aggregating OEE and its constituent metrics from a variety of shopfloor devices
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and presenting it to users in the form of dashboard and reports. While these applications present valuable shopfloor statistics, they do not offer more than a rearview mirror-view into the shop’s performance. OEE-based monitoring solutions are reactive; they do not help operations managers understand why devices have low productivity and what opportunities a plant has to increase productivity.
Moving beyond OEE, data is needed that can allow a better understanding of what opportunities are available to increase device productivity. MTConnect and big data An innovative combination of MTConnect and Big Data technology led to the first significant manufacturing analytic software; it debuted in 2008 at the International Manufacturing Technology Show (IMTS). Sobel and
Automation
“vimana allows manufacturers to make decisions by understanding why machines are doing what they are doing” Vijayaraghavan saw the need for applications that went beyond current stateof-the-art capabilities in OEE-based monitoring, and founded System Insights in Berkeley, California. The
result was the development of the revolutionary vimana platform for manufacturing intelligence and Big Data analytics. Sobel had been working with researchers applying machine learning and Big Data analytics in order to make data centers more efficient. The vimana platform is a synthesis of the technologies that are used to enhance the efficiency of financial systems, data centers, and social media. Dr Vijayaraghavan brought his knowledge of decision tools for designing manufacturing processes and systems, developed during his doctoral work under Professor David Dornfeld at the Laboratory for Manufacturing and Sustainability at UC Berkeley. vimana vimana is a next generation software platform with realtime pattern matching and
historical machine learning capabilities which makes sense of data from multiple shopfloor sources using the MTConnect standard. Manufacturers apply these data in helping users understand the opportunities to improve productivity. This information is presented in the form of dashboards, real-time metrics, alerts, and contextual reports. Sobel is passionate noting that, “vimana delivers real, measurable value within weeks of deployment by allowing manufacturers to make decisions and understand why machines are doing what they are doing, and not merely what they are doing.” Traditional OEE-based applications act as data historians collecting data from the machine tools and providing reports. The reports do not add context to what the machines are
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“This capability goes well beyond OEE monitoring, and allows the user to take targeted actions to improve productivity based on the downtime reasons” doing, they merely report the machines’ activities.
Identify / Do
Baseline / Plan
Use vimana’s pattern matching to identify opportunities to improve productivity
lin se
ify
Ba
nt
e Id
e
Apply vimana’s historical reports to baseline device’s current performance
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id Va l
oy
pl
De Deploy
Leverage vimana’s MTConnect support to deploy across facility
at e
Continuous improvement with vimana
Validate
Apply vimana’s realtime analytics to validate improvements
Understanding downtime A key capability of vimana is the auto-classification of downtime in machine tools and manufacturing devices. vimana maps the patterns in the MTConnect data sources in the device including the reason the device is down. vimana can study real-time data from the device leading up to a downtime; it will reveal that the device is down because of a broken tool, or that the device is down for the operator to edit the program to change an offset. Dr Vijayaraghavan noted, “These downtimes can then be linked in turn to further activities in the device. The operator’s offset change can be associated with poor part quality or excessive vibration or tool chatter during machining. This capability
Automation goes well beyond OEE monitoring, and allows the user to take targeted actions to improve productivity based on the downtime reasons.” vimana is a powerful data mining engine on the backend which finds hidden trends in the data, like the actual part handling time, the actual cycle times to make a part, the variation in the overrides during producing, differences between planned and actual process parameters. These capabilities help build more insight into the production process and make sustainable changes for the future. In this way vimana makes Total Production Efficiency a reality for the manufacturing shopfloor. Total Production Efficiency The capabilities of vimana are delivered to the manufacturing customer using a customer value
framework (CVF) model. Based on extensive user feedback, System Insights developed an engagement model unique for the manufacturing industry en su r i ng t hat eac h manufacturer is extracting maximum value from v i ma na’s capabi l it ies. vimana is first applied in defining a baseline of the plant’s productivity and device utilization. Following this initial process, vimana is used in identifying opportunities for improvement, and as the improvements are implemented, effectiveness is measured using vimana. E xec ut ion of t h is framework has proven to deliver significant economic benefits to manufacturers regardless of the current state of their business cycle. For expanding businesses, the increased capacity derived by deploying vimana
Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc. Cutler is the founder of the Manufacturing Media Consortium including more than 4000 journalists, editors, and economists writing about trends in manufacturing, industry, material
in a CVF engagement model is applied toward growth targets, avoiding new capital expenditures that would otherwise be required to meet expansion goals. Companies applying this new capacity against backlog realize increased profits. Businesses simply looking to reduce cost can eliminate equipment and labor expenses. By combining MTConnect and Big Data technology, Sobel and Vijayaraghavan pioneered an innovative and indust r y-f irst software solution and engagement model for Total Production Efficiency. Aptly named System Insights, these pioneers overcame the limitations of OEE by delivering sig n i f ic a nt e c onom ic benefits to the discrete manufacturing industry in all phases of a companies’ business cycle.
handling, and process improvement. Cutler is a member of the Society of Professional Journalists, Online News Association, American Society of Business Publication Editors, and Committee of Concerned Journalists. trcutler@trcutlerinc.com
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EVENTS
Exponor
The International Exhibition of the Mining Industry, Exp extra meaning as the Chilean mining industry faces inc Exponor 2013 17-21 June 2013 Antofagasta, Chile Organized by the Antofagasta Industrial Association (AIA), The International Exhibition of the Mining Industry, Exponor 2013, will take place between June 17 and 21, 2013 in Antofagasta. The biggest technological and innovative mining exhibition to occur in Chile this year, Exponor 2013 will bring together around
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1,000 exhibitors from 30 countries during its five day run. One of the main attributes of the show is its proximity to the sites of the world’s principal mining companies, which makes this exhibition unique in its kind and allows the promotion of activities such as technical visits and technological tours. “The fact that we are a few miles from the main mining sites allows the suppliers to have a direct relationship with the mining company,
Special preview
2013
ponor 2013, has taken on creasing competition
SEMINAR program: Improving leadership and competitiveness in the mining industry Tuesday June 18th 2013, Exponor Event Ground 09:15 - 09:30 Accreditation 09:30 - 09:35 Greetings from Mr. Marko Razmilic, President of the Antofagasta Association of Industry 09:35 - 09:50 Presentation from Mr. Hernán Cheyre, Vicepresidente of CORFO
Diego Hernández, President of Exponor
which in turn favours the development of two key activities of Exponor, which are technical visits and technological tours, “explains the General Manager of Exponor, Fernando Cortez. The exhibition itself includes technical tours to mining facilities, business roundtables with mining executives, seminars regarding investments in mining projects and technical talks, as well as visits by delegations of executives from mining companies and suppliers, international workshops with foreign mining executives
09:50 - 10:00 Strategic alliance formed between Antofagasta Industrial Association, AIA and CIDERE: Vendor Qualification System Implementation Agreement for the Coquimbo Region. 10:00 - 10:30 Presentation from Mr. Diego Hernández, Executive President of Antofagasta Minerals. 10:30 - 11:00 Presentation from Mr. Thomas Keller, Executive President of Codelco. 11:00 - 11:30 Presentation from Mr. Edgar Basto, President of Minera Escondida 11:30 - 11:45 Refreshments
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Health Management Centers
Patient Rescue Service
Patient Transfer Service
Rescue Centre
Events Coverage
We are Empresa de Servicios Externos de la Asociaci贸n Chilena de Seguridad (ESACHS S.A.), leader in delivery of health services nationwide. With over seven years experience, our services are known for their quality and compliance with all provisions imposed by the health authority. Our expertise in the administration of health centers, ranging from the implementation of First Aid rooms to complex health units with multiple health benefits in different national organizations, being widely recognized by major productive sectors, such as mining. For delivery Rescue Services throughout Chile, ESACHS has a fleet of over 400 vehicles among Emergency Ambulance Basic and Advanced, Mini Buses and cars, plus a Rescue Centre with a single national number, 1404, attending efficiently workers emergencies in our country.
Phone: +56 (2) 251.55.021 esasgp@achs.cl | www.esachs.cl
EVENTS
Special preview
“Exponor places the Region of Antofagasta and Chile on the world stage and drives the growth of our regional and national companies” and business networking for exhibitors from international and national pavilions. Held every two years, Exponor 2013 has taken on an even greater meaning this year, what with mining industry today, especially the copper industry, is faced by an important challenge to maintain its position in the international arena in order to reduce production costs. The event is being seen as representing the concrete response to the challenge of increased competition for Chilean mining. More than 40,000 visitors are expected during the five days of the event, made up principally of the professionals in charge of the most important areas of mining. This includes Managers, Heads of Procurement, Operations and Maintenance, Senior Executives and Technicians, all of whom transform Exponor into the ideal showcase to display products and services to the professionals and technicians of mining companies and other suppliers. The event organisers are expecting that over $750 million of business will be generated during, and as a result of, Exponor 2013. “Exponor places the Region of Antofagasta
and Chile on the world stage and drives the growth of our regional and national companies to achieve competitiveness and technological development, and the continuous improvement needed to become world-class companies,” states Marko Razmilic, President of AIA. “In total, 40 of the stalls have been reserved by foreign traders, demonstrating that there is a growing interest amongst international companies to be present at Exponor.” Furthermore, whilst the event is being
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EVENTS
carried out, Exponor becomes the engine of the regional economy, as it allows different productive sectors such as tourism, hospitality, transportation and general services to be linked directly or indirectly to the event. Exponor 2013 Activity Program Business Roundtable: Bilateral meetings between exhibitors and mining executives in areas such as supply, mine, plant, engineering, maintenance, project, HSEC of mining companies in the northern area of Chile.
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Technical Visits: Exponor is located a few kilometres from sites of the world’s major mining companies, thus facilitating visits from executives, professionals, technicians and operators to the exhibition to learn new technologies and products being offered by the exhibitors. Technological Tours: In order to introduce participants to the challenges that the mining industry will face in the coming years, Exponor offers a program to visit mine sites. This activity allows the exhibitor
Special preview “Exponor becomes the engine of the regional economy, as it allows different productive sectors to be linked directly or indirectly to the event� to understand production processes and company needs. International Workshop: An activity to understand the purchase and supply needs of Latin-American mining projects. Business Evenings: An opportunity for foreign and national exhibitors, and mining executives to develop relations between their respective countries.
Technical Talks: At Exponor the exhibitor has the opportunity to give a technical talk to their potential clients. Seminar: How to improve leadership and competitiveness within the mining industry. An opportunity for participants to explore business opportunities and to get to know the main operational challenges, investment projects and supply needs of the mining industry in Chile. The event will feature presentations by Thomas Keller, CEO of Codelco; Diego HernĂĄndez, CEO of Antofagasta Minerals; and Edgar Basto, President of Minera Escondida. Zoom Innovation: Opportunity for the exhibitor to promote a product, service, software, tool or innovative process that improves the productive process. Exponor 2013 is the first time this initiative will take place.
For more information about Exponor 2013 visit: www.exponor.cl
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executive insi ht
Diego Hernández President of Exponor 2013, discusses this year’s event and its importance as it relates to the mining industry in Chile
To be President of this event must be an honour and recognition of your work throughout the industry. How do you see your role as President of this event and what are you going to contribute to the role? Of course it’s an honour to be President of Exponor 2013, which is today one of the main exhibitions within the mining industry on a worldwide level and the only one which takes place in the Antofagasta region, the main copper producing region in the world. At the same time, to be President of this exhibition is a challenge in terms of relieving the most important challenges facing our industry today, especially in Chile, in order to cope with the loss of innovation with new ideas and innovative solutions by service companies which congregate here.
You have been President at many mining companies and are therefore in a unique position to comment on the industry in Chile. Why do you think that Chile is one of the best mining nations in the world? Do you see the Chilean mining operations as a solid investment option? Chile has established itself as a country with a world class, mature mining industry with a high level of development, which continues to grow, and for which it has a lot of experience in addressing technical, environmental, social and institutional challenges, etc. The mining activity contribution is fundamental for the development of the country. Equally, in 2011 Chile represented 32 percent of the world’s copper production and 28 percent of the world’s reserves for
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the mineral, whilst the Antofagasta region on its own represented 16 percent of the world’s production. Furthermore, the current situation has been projected into the future, Antofagasta having 37 percent of the projected investments within Chile’s mining sector during the coming years.
What is your vision for Exponor this year? How important is this event with regards to the mining industry in the Antofagasta region and Chile as a whole? Carrying out Exponor in our country and particularly in Antofagasta represents the only exhibition in a mining region of this importance and which has, as a main attraction, a network of contacts, representing the best possibilities for integrating with
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mining professionals and the option of visiting different sites. Exponor matches problems to solutions and vice versa, promoting innovation and directly contributing to the competitiveness of our sites, which is the main challenge of our industry.
As CEO of Antofagasta Minerals, without doubt you have a great knowledge of the work of the Industrial Association of Antofagasta. How do you see the role of the Association with regards to the development of the region? Without doubt the AIA is an exemplary organisation at a national and international level, and is a key player in promoting the development of the area. In fact for many years it has represented the main meeting
executive insi ht “The advantage is in the network of contacts that is being created between all of the national and international exhibitors”
place between the mining industry and the local suppliers.
What does it mean for the industry to have delegates, visitors and exhibitors from so many countries, in Chile? The scale of Exponor today, which this year is predicted to receive around 1,000 exhibitors from 30 countries, will allow the world’s main mining companies and their suppliers to set their sights on Antofagasta, increasing the work carried out in the region and the country, and propelling furthermore its potential as one of the most important mining developments in the world.
What do you think are the major advantages of having so many industry professionals in Antofagasta? The advantage is in the network of contacts that is being created between all of the national and international exhibitors that participate in the exhibition and the visitors. The exhibition includes a series of activities such as technical talks, workshops and business meetings which promote the discussion of visions and challenges in the industry, as well as offers and needs.
What can the visitors expect? The visitors will find themselves in the biggest mining exhibition within mining territory, with the possibility of direct contact with those who have faced the same challenges and who can provide them with new or better solutions.
Important relationships are established and strengthened at such events. I am sure that you will meet with old friends. Do you have any final words for the attendees of the event? I invite them to come together so that we can again develop an exhibition of international quality, which finds solutions to the competitive challenges of the mining industry. We have in our hands a great mining potential, which we still need to strengthen and develop. Antofagasta has proven to be a great place for this activity, with increasingly good facilities and services.
For more information about Exponor 2013 visit: www.exponor.cl
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Vi s exp tan sit on d aour o r t:
ESACHS
A clean bill
of health General Manager, Javier Fuenzalisa, discusses the vital contributions ESACHS makes towards Chile’s wellrespected health care system
written by: Will Daynes research by: Louisa Adcock
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A
quick glance over Chile’s basic health indicators makes one thing clear. With infant and maternal mortality levels amongst the lowest in Latin America, and the average life expecting coming in at close to 76 years, a figure that is up from just over 60 years in the early 1970s, it is plain to see that much of the country’s population is benefiting from what is an advanced health care system. It was eight years ago that ACHS, Chile’s most comprehensive private network of occupational health and injury prevention centres, further contributed to the evolution of the country’s health care system by establishing the ESACHS. “Our main line of business,” states ESACHS General Manager, Javier Fuenzalisa, “is to manage health centres, polyclinics and First Aid rooms within the business premises of various sectors of the economy.” As well as operating primary care facilities that deal with complex workplace injuries and occupational health issues, ACHS provides comprehensive occupational risk prevention and training courses, and up-to-date information on workplace and in-transit accident prevention. Using innovative management systems, in line with the needs of an evolving workforce, ACHS routinely conducts new risk research in order to implement specific programmes for individual industry sectors. It also strives to promote healthy habits and behaviour in order to improve the quality of life of its affiliates, most notably through a range of special programs and education campaigns. ACHS’ operations are based on a culture of
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ESACHS
Patient rescue service
quality, in which on-going staff training, state-of-the-art technology, and definition of processes and standards figure highly. Since its creation ESACHS has developed a reputation for delivering high quality service that conforms to the provisions and regulations imposed by the Chilean Health Authority. In order to deliver rescue and patient transfer services throughout the country, the company operates a fleet of more than 300 vehicles, including emergency ambulances, mini buses, trucks and cars. In order to meet the needs and interests of companies across all manner of industry sectors ESACHS has developed specific health units. These include First Aid and Nursing Rooms in which trained professionals can deliver emergency care, Procedure Rooms and Polyclinics. These Polyclinics are kitted out with all the necessary equipment and facilities to deliver complete care, and come with additional sampling and x-ray rooms. It is at this level that the company shares a hugely important link with the major national and international mining companies operating in various sectors throughout Chile. From an administrative standpoint the company specialises in providing all manner of services to health centres, ranging from the implementation of First Aid rooms to complex
health units, with its work recognised by a number of vital industries such as the country’s mining sector. Today ESACHS employs approximately 1,500 employees, while its coverage across Chile spans from the Tarapacá region to the Los Lagos region encompassing a total of 21 agencies found in the most important cities within each region. “In the years since ESACHS first came into being,” Fuenzalisa continues,
“ESACHS has developed a reputation for delivering high quality service that conforms to the provisions and regulations” 64 | be americas
ESACHS
Esachs fleet of vehicles
“we have accumulated a significant level of specialised knowledge within our field of work, much of which is based on the more than five decades worth of experience in the health sector possessed by our parent company.” With the evolution of mining in Chile in recent times making it an ever more critical component of the country’s economic growth it comes as little surprise to find that ESACHS has made every effort to accompany this growth, in the process delivering its polyclinic and First Aid room management services to some of the most important companies in the sector. Such companies include BHP, CODELCO, the Doña Inés de Collahuasi Mining Company, Lumina Copper, Goldcorp, KGHM International, Antofagasta Minerals, Xstrata Copper, CAP Mining, Yamana Gold and ESO ALMA.
As part of the company’s drive to become even further integrated into Chile’s mining sector it will be attending the EXPONOR 2013 exhibition, which will take place between 17 and 21 June in Antofagasta. Organised by the Antofagasta Industrial Association, the event will bring together more than 1,000 exhibitors from around 30 countries. “This year marks the very first time that ESACHS has attended EXPONOR,” Fuenzalisa says. “Being a participant at this year’s event is a great honour for all of us here and we are very excited to have the opportunity to interact face-to-face with not only many of our current customers, but hopefully some future clients as well.” In addition to working with the above mining companies ESACHS also provides
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its services to a number of other important sectors and areas of economic activity, such as the education and banking sectors, the forestry and fishing communities and the metalworking, communications and consumer products industries. Furthermore, the company has a strong track record of providing services to Chile’s prisons and its collection of observatories. “The greatest asset we have as a business,” Fuenzalisa explains, “is our dedicated staff, all of whom are fully qualified to deliver
pre-hospital care. Simply put, the reasons behind the quality and efficiency of our services can all be traced back to the work of our employees and it is for this reason that we continue to invest heavily in our people.” Obviously the services ESACHS provides are very staff intensive in their nature and it is because of this that it also works hard to contract out its external activities, such as transportation, accommodation and deliveries of food and supplies, to its premises to other local businesses. In doing
“Our operational excellence is arguably best demonstrated by our ever-present willingness to develop and improve ourselves”
Ambulance service
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ESACHS
Javier Fuenzalisa, General Manager
so the company is also doing its bit for the wider Chilean economy by helped to generate further employment opportunities that local and region businesses can capitalise on. As it continues to grow as a company ESACHS is constantly in the process of reviewing and expanding the range of services it provides, while always ensuring that at the end of the day its customers have the peace of mind of knowing that they can rely on the company to deliver quality health care. “Our operational excellence is arguably best demonstrated by our ever-present willingness to develop and improve ourselves,” Fuenzalisa highlights. “To this end we are constantly looking to incorporate the latest technology and technological advances into every facet of our operations, from the emergency vehicles we use to the way in which we equip health centres.”
The evidence that this philosophy of selfimprovement is paying off can be seen in the fact that ESACHS’ customer base has increased steadily over the last eight years, and continues to do so now. “Literally every month we are being invited by companies from different economic sectors to participate in proposals related to the management of various health centres,” Fuenzalisa concludes. “It is with great pride and satisfaction that we can stand here today and say that we are proving beyond doubt that we are the leaders when it comes to the delivery of such vital services.” For more information about ESACHS visit: www.esachs.cl
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East Asia Minerals
ACCESS TO
INDONESIA East Asia Minerals has come through the rapids and is now headed into smoother waters: the Vancouver based mineral exploration company has located major gold and silver deposits in Indonesia and has cleared the route to develop them
written by: John O’Hanlon research by: Jeff Abbott
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A scenic view from the mountain on the Island of Sangihe
East Asia Minerals
O
ne year can make a big difference: when Ed Rochette, accepted his current role as chairman of East Asia Minerals (EAS) his burden seemed heavy. Today it is a lot lighter. Let us recap. When Rochette came in as the chairman of the company in 2010 he was alarmed by the heavy burn rate of capital. When he saw that $2.5 million a month was being spent and the share price had fallen dramatically he decided to take on the role of CEO and set about the task of making sense out of this fundamentally sound mining company, with its potentially world class gold deposits in Indonesia as well as some uranium and phosphate assets in Mongolia. He stopped all drilling activities and cut staff levels by 60 percent. With the management team’s efforts thereafter focused on resolving the permitting impasse the Indonesian operations had reached, the shareholders and the market were expected to respond positively. Once he was able to reduce the monthly burn rate down to $400,000 by the end of 2011, he was able to raise $13 million in a private placement. By the time the third quarter of 2012 had arrived things were looking up and the situation then was captured in the Business Excellence article that we published in October. Basically EAS was by then focused strongly on Indonesia, where Rochette was spending most of his time. The two main projects the company has there are located far apart from one another. One is on the small island of Sangihe at the north-eastern tip of the Indonesian archipelago in Sulawesi
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province, while the larger Miwah project is in the province of Aceh in westernmost Sumatra, the largest of Indonesia’s 17,000-odd islands. However both projects promise to yield richly, with Sangihe currently estimated to contain nearly a million ounces of gold plus eleven million of silver and Miwah thought to have more than three million ounces of gold and almost nine million of silver. These are truly potential world class deposits even without taking their considerable development upside potential into consideration. Through the efforts of the strengthened management team that Rochette has brought on, work at Sangihe has been progressing smoothly, with a 4,600 metre drilling programme that started in late 2012, bang on Rochette’s predicted schedule and directed towards increasing the inferred reserve. “Look out for the preliminary results from that drilling programme,” he advises. “We will be announcing those during the last week in February.” The work is being carried out under the eye of Frank Rocca, appointed VP of Exploration in September 2012 and a key member of the strong team now being built. That team will be further cemented shortly with the appointment of a new COO to replace Dave Anthony, whose move to the Board of Directors was announced at Christmas.
Miwah presented more problems, as we noted last year. While Sangihe has been permitted under Indonesia’s pre-2009 Contract of Work (CoW) system with a 27year licence, the work at Miwah is governed by an eight-year exploration IUP, the local licensing format that was adopted by the government more recently. The IUPs at Miwah were due to expire at the end of 2012. Had it not been possible
“Had it not been possible to renew the licence, all of the data and IP that had been accrued would be forfeit” 72 | be americas
East Asia Minerals
Local ship transporting relief supplies to earthquake victims across Sangihe Harbour
to renew them there would when it comes to securing be a danger not only that operating licences and the concession would revert negotiating terms. Even so, to the government but that had he not had the invaluable support of his management all of the data and IP that Current drilling team coupled with the local had been accrued would programme at Sangihe partner, the strategic advisors be forfeit. Closer spaced drilling is needed to confirm and the officials in Aceh, the the findings and upgrade the resource from result might have been different. ‘inferred’ to ‘indicated’. Additionally, Miwah There was cause for celebration when on is what is called an ‘open’ resource which 8 January 2013 EAS was able to announce means that drilling outside the area already that it had obtained agreements, signed by the explored could add significantly to the ore elected Bupati, or Regent of Pidie confirming body that has already been defined. his verbal assent to renewing the licences for It was a delicate situation, and retaining the an additional two years until 30 November, good will of the authorities at all levels was 2014. “This signed extension was the result crucial. Fortunately Ed Rochette is a lawyer of a sustained effort by the Company over with one of the best records in the industry the past year,” said Rochette. “The tenure
4,600m
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“I am a great believer in making the local people ambassadors for the company right from the start” issues at Miwah are now behind us. We can immediately re-start our exploration programme for the project and our team can move forward to seek removal of the surface use restrictions imposed by the Ministry of Forestry.” The deforestation of Indonesia, which since 1900 has lost millions of hectares of some of the world’s most diverse rain forest in the world, is a matter of global importance.
A collection of recent core smaples
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However the main threat has been the paper and pulp industry, plantation agriculture and logging. The strict regulations that have been rightly introduced are aimed at saving the remaining trees and wildlife habitat for posterity. But mining has a light footprint compared with other industries: drilling requires very few trees to be removed and any mining project comes with a robust rehabilitation plan. Compared to the palm oil
East Asia Minerals
EAS management team at ceremony for donation of supplies for earthquake victims. (Left to right) Mike McAllister-Manager IR, Dave Anthony-Chief Operating Officer, Edward Rochette-Chairman & CEO
plantations that change the landscape for all time, mining is environmentally sustainable. Nevertheless permission for any surface disturbance activity in the areas classified as “protected forest” has to be obtained from the Ministry of Forestry, and this process can easily take two years. Ed Rochette is sympathetic with the principles behind the regulations, however it is as much in the Indonesian government’s interest to facilitate the development of a major gold mine as of any of EAS’s other stakeholders involved with the project. “We believe we may have been able to identify a way forward, working with the government officials, that will bring the
time-scale well below six months,” he says diplomatically. “The new drilling programme, which has already started in areas without surface restrictions, will confirm the viability of this project, and it should also demonstrate significant extension to the resource.” As well as contributing positively to Indonesia’s GDP, EAS’s activities will benefit local communities. “I am a great believer in making the local people ambassadors for the company right from the start,” he says. “If you get them on your side before something happens or someone organises a protest it is a lot better than having to make amends after the event.” This is an extension of the
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Core sample detail from 120m
East Asia Minerals person-to-person principle that was crucial in resolving the tenure problems and is well illustrated at Sangihe where at Christmas 300 children and their parents were given a dinner hosted by EAS, the first time any overseas company has done this on that island. Now a clean water scheme has been initiated for villagers living near the operation, and 42 local jobs have been created. Already 500 bags of cement have been given to villagers to help them repair houses damaged in a recent earthquake. Equipment has been purchased for the local medical clinic; sports equipment has been obtained for the local team; fertiliser has been purchased and distributed for local farmers; and other community engagement projects are currently being implemented which are geared towards local content objectives. Miwah will benefit in a similar way as the project matures. East Asia Minerals is no longer a turnaround case, but a lean company, well organised and financed, with an aggressive exploration, acquisition and growth strategy. Monthly expenditure has been maintained at around $400,000, and the company had $10 million in the bank at the end of last year. Above all, it has achieved 90 percent of the goals that Ed Rochette set out for himself and East Asia Minerals just a year ago. The next challenge is “to grow the company�, a goal that the management team, along with its strategic advisors, are currently working on. For more information about East Asia Minerals visit: www.eaminerals.com
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Barrick Cortez
INVISIBLE GOLD MADE VISIBLE Barrick’s Cortez mine is one of the most productive and cost effective gold mines in the world, thanks to constructive investment and a good deal of technical innovation
written by: John O’Hanlon research by: Jeff Abbott
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Barrick Cortez Aerial view of the Cortez Hills site
O
ver recent years, Cortez Hills has yielded well over a million ounces of gold annually, in the first quarter of last year at a cash cost of $308 an ounce, well below industry averages of between $400 and $500. The key to the success of this operation lies in the nature of the deposit, says George Fennemore, Barrick’s Manager of Corporate Social Responsibility and regional permitting specialist for the company. Like most Nevada mines, Cortez contains large deposits of ‘invisible’ gold, where the ore holds microscopic particles rather than veins or nuggets of gold. But to understand the present day deposit it is necessary to look at its history. Mining in the Cortez district began in 1862, says Fennemore. “The mining authorization for some of the claims out there was originally signed by Abraham Lincoln’s administration: in fact the first development was encouraged by the US government to help fund the Union effort during the Civil War.” There has been almost continuous mining in this district for 150 years, however the metal Lincoln had his eye on was silver, and silver mining continued there right up until the outbreak of World War II. Gold mining activities started after the war, but it was not until 1962, when the United States Geological Service inaugurated a two-year pilot project at Cortez and Newmont’s nearby Carlin property to refine the application of heap leaching to these low carbon, low sulfide oxidized deposits, that the ‘invisible’ gold became commercially ‘visible’. “The process is simplified when
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BARRICK Barrick CORTEZ Cortez you Barrick don’t Cortez have tofeature deal with text in culpa qui officia deserunt those to go refractory here...Lorem elements ipsum mollit anim id est laborum. Lorem ipsum dolor sit amet, which sitinterfere dolor amet, consectetur with gold production,” says consectetur adipisicing elit, adipisicing elit,Fennemore. sed do In his opinion these studies sed do eiusmod tempor eiusmod tempor incididunt helped to grow the industry incididunt ut labore et dolore ut labore et dolore magna significantly through the magna aliqua. Ut enim ad aliqua. Ut enim ad minim minim veniam, quis nostrud final two decades of the veniam, quis nostrud exercitation ullamco laboris exercitation ullamco laboris last century, particularly nisi ut aliquip ex eagoldfields. commodo nisi ut aliquip ex ea commodo in the Nevada A double jumbo drill is drilling the face for the next shot aute (explosives) consequat. Duis some aute irure consequat. Duis irure “We developed very dolor in reprehenderit in This is a caption this is a caption dolor in reprehenderit in innovative processes to turn this ore gold. The cyanide heap in removing microscopic voluptate velitinto esse cillum voluptategold veliteven essefrom cillum low leachingeuprocess use pariatur. was developed here dolore grade ore especially deposits that dolore fugiat we nulla Excepteur eu deposits, fugiat nulla pariatur. Excepteur wereoccaecat oxidizedcupidatat – ores that do proident, not have sunt a lot at Cortez and was found non to beproident, very effective sint occaecat cupidatat sunt sint non
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be americas BE WEEKLY| |832
9 million oz Established deposit amount
Inside the processing plant
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of sulfides or carbon in them.” The Cortez deposits tend to be low in sulfide and carbon deposits and very conducive to heap leaching. Not all the gold in the Cortez district is held in these oxidized deposits, but a significant proportion of it is, and there is much more of it than was ever suspected when the nearby Pipeline deposit was being mined in the 1990s using truck and shovel methods. “We have continued to look for these large scale oxidized deposits,” he explains. “They are well suited for the mining fleet and for the processing that was already available on site. By going back into productive districts and drilling a bit deeper we were able to locate the Pediment deposit back in 1999. Further drilling revealed the adjacent and larger Cortez Hills deposit. That was when we finally understood that there was a large gold deposit at depth.” A minority of the gold at Cortez Hills is indeed found in refractory rock. This is transported 75 miles to the company’s specialized mills at its Goldstrike property to the north of Elko – this might seem an expensive option, but it makes sense when one considers that construction of a new refractory mill would cost upward of a billion dollars. Barrick took six years to complete its drilling program and establish a deposit
Barrick Cortez
Overview of the mine from the mountain side
in the region of 9 million ounces coming in at a very satisfactory grade, with some areas exceeding one once per ton of ore. The permitting process began in 2005 with applications to both federal and state agencies, and the operating permit was finally received in November 2008. The entire process was complicated by the fact that the area became the focal point
for a Native American rights organization’s struggle over land that is now managed by the US federal government. Besides gold, the area was also rich in historical and cultural resources. While Cortez Hills contained no Native American settlements as such, it was located on traditional migration routes. Artifacts were found in their thousands, dating back thousands of years. “We
“We executed one of the largest archaeological programs that had ever been done in the State of Nevada” be americas | 85
STRIVING TO BE THE BEST. CHOOSING TO BE THE SAFEST. Cementation is proud to be part of the Barrick Cortez Hills Project team providing design, construction management and mine contracting services. Cementation U S A 10150 Centennial Parkway, Ste 110, Sandy UT 84070 801.937.4120 • www.cementation.us
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Barrick Cortez executed one of the largest archaeological programs We are an underground mine contracting and engineering that had ever been done in company, providing mine development and production the State of Nevada aiming services for Clients throughout the US and Mexico. We to characterize, document are focused on safety and committed to our ultimate goal and preserve the archaeology of zero harm within our operations. We understand that and history through that mine owners are looking for safe work, engineering that adds value, and a contractor willing to work with them, and area.” Over eight months together meet budget and schedule challenges head on. the site was populated by Complete with our best for project philosophy, Cementation archaeologists armed with is and has always been that contractor. trowels and going inch by www.cementation.us inch across the area of the proposed mine. In all, nearly 400,000 artifacts were recovered, many from historic mining in the area. Cataloguing these items was a massive task for the Nevada State Museum which continues to stabilize, curate, and preserve them for posterity. There’s never a mining development where there are not some objections from community, environmental and commercial interests, and Cortez Hills was no exception. Barrick’s legal success over objections gave no particular cause for satisfaction and George Fennemore in fact sees the dialogue as a prime way to engage legitimate concerns and hopefully allay them. “Because we utilize public land for our mining, this gives the opportunity for any interested party
CEMENTATION USA INC.
9 miles Process General Supervisor Darrin Powers with about 5,500 ounces of gold dore
The longest conveyor in Nevada serves Cortez Hills
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“We opted to build the longest conveyor in Nevada rather than truck ore from the pit�
A section of the conveyor belt
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Barrick Cortez to comment. Anyway the dialogue is not just about our mining operation but in general how the government handles resources.” This is a particularly big issue in Nevada where 90 percent of the land is Federal Government owned. Cortez is the largest mining operation on federal land in the USA and the main permitting process handled through the US Bureau of Land Management is bound to attract considerable public comment. That may not always be comfortable but it does provide a forum. In the Maintenance worker end, local interests should receive primary consideration in view of the at our existing facilities which are about nine undeniable economic boost the project and miles away from the pit itself, so we opted to all its associated activity generates. build the longest conveyor in Nevada rather By midsummer of 2009 construction was in than truck ore from the pit.” full swing, using a 78-cubic-yard P&H 4100, The conveyor designed and supplied by multiple 57 cubic-yard P&H 2800 shovels and ThyssenKrupp Robins can transfer 1,000 a fleet of 27 400 tonne Liebherr haul trucks. tons per hour from the Cortez Hills to the Though it took till the end existing heap leach facility – of that year before the ore it includes a belt feeder and body was uncovered and gold five conveyors. A 90 foot long recovery could commence. variable speed belt feeder This was a fast track project. transfers primary crushed It took just under a year to ore to the first of the 5 get from virgin ground to the conveyors. The most complex ore body, says Fennemore. conveyor of the system is the Proven and probable “We process the ore from seven mile long regenerative gold resources at both the open pit and the overland conveyor that runs Cortez, end 2011 underground mine below it at 900 feet per minute with a
14.5 million oz
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4280 EAST IDAHO STREET | 1-866-766-ROPE | www.elkowirerope.net
Elko Wire Rope & Mining Supply would like to thank the Nevada Mining, Drilling & Contractors who have made us successful in this area since 1996. We look forward to your continued support.
LOCAL QUALITY SERVICE SINCE 1996
BARRICK Cortez CORTEZ Barrick Barrick feature text tempor incididunt ut labore 2 mile longCortez downhill section to goa descent here....Lorem ipsum et dolore magna aliqua. Ut with of 900 feet. A enim ad minim veniam, quis dolor sitcontrol amet, system consectetur unique was nostrud exercitation ullamco adipisicing toelit, sed the do developed achieve laboris nisi ut aliquip ex eiusmod temporbetween incididunt right belt tension the ea commodo consequat. ut labore dolorecan magna drives. The et conveyor now Duis aute irure dolor in aliqua. Utore enim minim transport fromadboth the reprehenderit in voluptate veniam, nostrud open pit and quis the underground exercitation ullamco laboris velit esse cillum dolore mine which was constructed nisi utthe aliquip ex ea commodo eu fugiat nulla pariatur. over same period. The consequat. Duis irure sintworld’s occaecat underground oreaute body is A mechanicExcepteur is dwarfed by the largest proident, dolor inviareprehenderit rubber cupidatat tire dozer innon the Cortez Hills sunt shop reached twin declines in at This is a caption this is a caption in culpa qui officia deserunt voluptate esse and cillum six degreesvelit gradient, the mollit est laborum. Lorem ipsum dolor dolore eu fugiat pariatur. Excepteur underground minenulla has been designed so that on theanim site id it was also important to ensure sit amet, elit,live sed do sinthighest occaecat cupidatat non proident, sunt that its levels will eventually coincide with the consectetur Shoshone adipisicing people who in in culpa quiofofficia deserunt eiusmod incididunt laborethe et dolore the bottom the open pit. mollit anim id the areatempor would benefit utfrom work estHaving laborum. Lorem ipsum sit amet, magnadone. aliqua.The Ut enim minim veniam, quis established that alldolor possible work being areaadwas covered with a consectetur adipisicing elit, the sedarchaeology do eiusmod young nostrudsecond exercitation ullamco nisi ut had been done to preserve growth forest,laboris Fennemore
ELKO WIRE ROPE & MINING SUPPLY It is the goal of Elko Wire Rope to provide manufactured rigging products and hardware which are competitively priced and delivered on time with zero defects at quality and service levels that are consisitent with the expectations of our customers. We fully understand that to do so is good business. The succes of Elko Wire Rope depends on our commitment to associate involvement, continual improvement and improved buisness performance goals. E. elkowirerope@frontiernet.net www.elkowirerope.net
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Barrick Cortez The Cortez Hills pit and underground mine entrance
90% Amount of land in Nevada which is Federal Government owned says, and when the time came for these trees to be removed the Shoshone people were consulted and the timber made available to indigenous communities for firewood and other uses. It is important to get interventions of this sort right, George Fennemore believes. “It is easy for a big corporation to overwhelm a small community so we work very diligently to pay attention to the land users, other water users, and employers – for example when we harvest trees we are careful to work with local woodcutters and not wipe out their business by dumping a load of firewood onto the market.” A global corporation such as Barrick has to be particularly diligent, he says, to be sensitive to the needs of local communities and local businesses and operate in ways that will not disrupt their livelihood. Many local vendors and suppliers are supported by the presence of a large operation, and many local businesses have benefited from Barrick’s policy of sourcing the maximum possible in materials and services from them. For more information about Barrick Cortez visit: www.barrick.com
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no
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Goldcorp - Éléonore Mine
partnership in orthern Quebec Goldcorp’s Éléonore gold mine is paying far more than lip service to the principles of stakeholder consultation, community benefit and local content
written by: John O’Hanlon research by: james boyle
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Goldcorp - Éléonore Mine
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ames Bay, a tongue of water licking out between Ontario and Quebec, is by any standards remote. The Cree nation that lives on its shores have staked their claim, not always without difficulty, to such economic development as has taken place in the region, but today the greatest impact on their way of life is undoubtedly mining. Nobody coming into this area should doubt the need to involve the Cree, as traditional owners of the land, in their plans. Perhaps the highest profile local business to have been developed is Air Creebec, founded in 1982 and today carrying more than 60,000 passengers a year – it’s a wholly-owned Cree enterprise, and its largest customer is Goldcorp, one of the world’s fastest growing senior gold producers, with operations and development projects located throughout the Americas. Goldcorp plans to fly more than a third of that number to its Éléonore project during 2013. A Canadian company headquartered in Vancouver, British Columbia, Goldcorp employs more than 16,000 people worldwide however one of its most significant current projects is its fast developing Éléonore project located some 200 kilometres inland from the Cree centre of Wemindji on the east cost of James Bay. When it comes into operation in 2014, according to figures from a pre-feasibility study published in 2011, it should be processing 3,500 tonnes of gold bearing ore a day, extracted from an underground resource that is known to have a lot more potential than so far confirmed. By 2017 this rate will double,
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making the Éléonore mine one of Canada’s most significant gold producers, but as the deposit is ‘open at depth and along strike’ (there is more to be discovered below and beyond the areas already drilled) the ultimate limit is not yet known. It is a brand new, greenfield site, says Guy Belleau, site manager at the Éléonore project and it has been moved forward in an exemplary way. “In February 2011 we announced that after a successful negotiation with our Cree partners we had reached a collaboration agreement with our First Nation partners, the Cree Nation of Wemindji, the Grand Council of the Crees (Eeyou Istchee) and the Cree Regional Authority.” The agreement will ensure that the Crees receive a fair share in the project’s financial
Goldcorp - Éléonore Mine
Concentrator under construction
benefits. It protects the environment while supporting the Crees’ social and cultural practices in a spirit of continued collaboration, and establishes shared responsibilities in critical issues of environmental stewardship, community development, local employment, and small business development. It reflects an approach to working with indigenous communities that Goldcorp hopes will provide a benchmark for its own and others to use in
future projects, he says. Construction started in November 2011, and has progressed excellently. “We are on schedule,” says Belleau. “We have dug an exploration decline, or ramp, that is now three kilometres long and down to 400 metres in depth, enabling us to initiate our diamond drilling definition so we can get better knowledge of the detail of the ore body and definition drilling also takes place from
“We are in a win situation here with these world class infrastructures: there is no excuse now – we are going to deliver!” be americas | 99
our 725 metre exploration shaft. We have also made a start on the production shaft. It is already 200 metres deep, but is projected to end up at 1,500 metres so still has a long way to go.” A 63 kilometre road was built from the La Sarcelle Hydro-Quebec power plant which is located 60 kilometres from James Bay Highway, a 60 kilometre power line brought to the site, an airstrip constructed complete with
communications tower. All in all Goldcorp has invested $130 million in infrastructure at Éléonore. “We are in a win situation here with these world class infrastructures: there is no excuse now – we are going to deliver!” Above ground there’s a great deal of building work in progress. The steelwork for the processing plant is substantially completed, and cladding has started. From May the ball mill that crushes the ore will
“Today 30 percent of our workforce are from the Cree communities - that is a great achievement just a year into the construction phase”
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Goldcorp - Éléonore Mine
be installed, an important milestone towards getting the processing plant ready to receive its first batch of rock from the mine. At the moment Éléonore is a fly-in-fly-out operation served by Air Creebec, however a 400 person permanent camp is under construction. “The accommodation is just about complete, and we are starting to build a new kitchen facility, the recreational areas and a gymnasium – all that will be completed by the end of this year.” There will also be a world class tailings management facility, an administration building and a water treatment facility with a daily capacity of 26,000 cubic metres. Contributing to this hive of activity, 850 workers are currently at the site, which means that the mine is providing direct employment to around 1,300 people.
The permitting go-ahead from the Québec department of environment could have come at a better time than November 2011. Many companies would have put off construction till the spring, but Goldcorp thought it could perhaps save time by working the foundations for the concentrator and the production shaft through Canada’s unforgiving winter. “You know that every time we have obstacles or challenges our people respond,” says Guy Belleau with irrepressible enthusiasm. “They always think outside the box and find solutions so we did pretty well to speed work up and build during the worst time of the year while keeping up the schedule.” The solution was to build a shed over the foundations. It was, he claims, just like working in the summer! Additionally the
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“Firms like this will be training others in the community to create a sustainable industry” concrete elements for the foundation were cast in a factory off-site. “They arrived ready made so it was just like putting together Lego – that also helped us to speed up a lot.” First and last, Guy Belleau believes in the mantra that people are the key to a successful project. “Our main challenge is to find the right people, and so far we have been very successful in attracting the best-in-class simply because of Goldcorp’s reputation in
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promoting people, safety and partnership.” Staffing a project like this ought to be difficult, but it has not been hard. Good people really want to work for Goldcorp and gravitate to the company, as evidenced by the large number of résumés he gets on his desk. Safety is an important pillar in attracting the best people, he continues. The results of the continuous improvement efforts were recognised by the Quebec Mining Association
Goldcorp - Éléonore Mine
Aerial view of the operations
when it awarded the FJ O’Connell trophy to Éléonore in 2011 to acknowledge an 85 percent improvement in safety at the site in the past three years. However training is also key where the First Nations are concerned. A committee comprising 50 percent Cree and 50 percent Goldcorp employees meets regularly with the objective of maximising Cree employment, training and retention. “Today 30 percent of our workforce are from the Cree communities - that is a great achievement just a year into the construction phase and we are very proud of it.” These are not just any jobs, he emphasises. “When someone joins us as a janitor or washing up in the kitchen, and a year later I see them working as technologists with the geology or explorations teams, or doing skilled jobs
like roof bolting underground, operating sophisticated equipment or shaft sinking it makes my job really worthwhile!” Some operators who joined without qualifications or experience are now operating 50 tonne trucks underground, thanks to the ore extraction training program, and that really warms his heart. Now Belleau’s team along with Cree partners are developing a similar programme in mineral processing. “We think this is the first time, in Quebec anyway, that the Cree have had the opportunity to learn mineral processing. They will end up with a high school diploma in the subject.” The first cohort of 16 students is already in session, he says. That is important. The mine life is estimated at 15 years. It will probably be there decades
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Goldcorp - Éléonore Mine after that, but at some point it will stop but then there will be a core of experienced Cree able to take their skills anywhere in the world. Outside of direct employment, he wants to leave a legacy of sustainable investment. A laundry is being established by the Cree in Wemindji and Goldcorp participated in the purchase of some of the equipments. The new business has a three-year contract to wash all the overalls, all bed liners, sheets and cleaning cloths generated by the mine. “Firms like this will be training others in the community to create a sustainable industry,” enthuses Guy Belleau. “We promote Cree contractors on site too. Today 80 percent of the material brought to the site is transported by a Cree company. And Air Creebec has added to its fleet thanks tour contract with them.” But the First Nations are not only concerned with making money. One of Goldcorp’s proudest innovations has been the way it manages its tailings at Éléonore. “In consultation the Cree made it very clear they didn’t want traditional tailings management involving a large body of water under which we would do the tailings deposition. Water is very important to them. So we decided to filter 85 percent of the water and transport the thickened tailings truck by truck to the tailings facility.” The area is rehabilitated progressively, he adds, so that be the end of the project the tailings will have been already 95 percent revegetated. For more information about Goldcorp - Éléonore Mine visit: www.goldcorp.com
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Atico Mining
and Copper
gold from Colombia Atico Mining is single-mindedly preparing to rejuvenate the senescent El Roble mine and make it perform better than ever it did in its prime
written by: John o’hanlon research by: abi abagun
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El Roble, Surface drill program
Atico Mining
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ased in Vancouver, Atico Mining (VMS) deposit, the only one currently being Corporation focuses on finding worked in Colombia but similar to very and developing mid-size high- productive sites of a similar nature in Canada grade copper-gold deposits in and elsewhere in the world. “VMS deposits Latin America. The company often come in packs, or clusters,” he explains. was floated on the Toronto Stock Exchange “The fact that we are in an area of 100 square just over a year ago by a team that has long kilometres, where five or six other VMSs are and successful experience in the region and being explored in a 100 kilometre radius includes several members of the Ganoza indicates there is potential for this area to be family which is very much involved in Fortuna like those in Canada, Peru and other VMS Silver which has operations in Mexico as well districts. But here the percentage of sulphide as their home nation Peru. in this mineralisation could be very high, as Atico, however is currently taken up with high as 70 or 80 percent. What you find in just one project, El Roble located near to the the El Roble is more chalcopyrite, carrying town of El Carmen de Atrato 30 percent copper, hence the in the Chocó department of high copper grades.” Colombia. There is already Mor e i m me d i ate ly, though, Atico has concluded a functioning mine there, that another level containing privately run by local at least as much ore as has company Minera El Roble already been extracted over which over the last couple Ore already extracted the lifetime of El Roble of decades has mined 1.5 from El Roble is lying up to 300 metres million tonnes of ore with below the existing mine. an average head grade of 2.5 percent copper and 2.5 grams per tonne “There are two things that excite us about of gold. Atico has an option to purchase a El Roble,” Ganoza continues. “One is the 90 percent interest in this operation, and is existing mine, which we will continue to hoping to exercise that option during the work, along with the fact we have found course of this year, taking over the current these very high grade resources below the mining operation plus the surrounding mine. That creates the perfect opportunity 6,600 hectares in mining claims. to combine an ongoing operation with The current owner is happy to relinquish newly-found resources that we can take its interest since the levels now being mined advantage of. At the same time we are are nearly exhausted, and to allow Atico to excited about the prospect of finding explore the future possibilities of the mine additional VMSs in the surrounding land and its surrounding areas. And these are package. These can then be developed and considerable, says CEO Fernando Ganoza. fed to the mill and processing facility that El Roble is a volcanogenic massive sulphide is already operating.”
1.5
million tonnes
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Atico Mining The existing mill has MWH Geo-Surveys daily capacity of 400 tonnes. MWH Geo-Surveys specializes in high precision gravity Atico will need to grow this surveys. Using digital ‘feedback’ micro-gravity instruments capacity. “The first expansion combined with millimeter precision GNSS positioning will be relatively small – a and a digital terrain mapping system, our gravity surveys 40 to 50 percent increase to can efficiently and accurately map your density specific maybe 600 tpd. At the same exploration properties. MWH has developed a data logging system that wirelessly time we will be optimizing captures the digital gravity meter output and integrates the the operation in terms real-time GNSS positions to enhance survey productivity of productivity. Right now and accuracy. the throughput is 350, For over thirty years our operations have spanned the globe and we want to take it up to including some of the world’s most challenging environments. 600 tonnes.” With knowledge, experience and technology we can provide So t he c u r r e nt gravity surveys in a safe and cost effective manner. www.mwhgeo.com infrastructure will be retained and improved, but the deeper levels will be accessed with different infrastructure, designed from the outset to support throughput of up to 600 tpd. “We will be trucking ore from inside the mine, which means you have to have another dimension of tunnelling.” This will be a much more sophisticated operation than the existing one, which uses LHD (load-hauldump) equipment. However the new stopes will use mechanised cut-and-fill methods. Modern mining, he hopes, will address one anomaly that has shown up in the mine, which has been producing at a grade lower than the historical resource that Kennecott defined
“VMS deposits often come in packs, or clusters”
El Roble Mine, Flotation Circuit
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back in the 1980s at 4.8 percent copper and 3.2 g/t gold. Actual yields have come in at 2.5 percent and 2.5 g/t respectively, but this is probably explained simply by dilution: too much extraneous rock is getting mixed in with the extracted ore. The new El Roble will be better equipped to deliver the high grades the geologists are finding. However the existing infrastructure at the level currently being mined – called the 2000 level because it is 2,000 metres
above sea level – can be used productively in the new 1800 level. The shafts can be used to bring additional access points into the mine, bring in services like electricity, water and air, and provide alternative safety. “We will add a lot of years to the life of the mine with these new resources, but there needed to be investment to reach these resources and mine them efficiently,” he summarises. “The current owner doesn’t want to make that investment, and lacks
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Atico Mining
El Roble Mine, Colombia
the sophistication it needs, which is why the association with us makes sense.” Atico’s directors are from South America and are here for the long term. Colombia has become a lot more secure in the last decade, though in its 22 years of operation El Roble, on the edge of its most stable province Antioquia, never experienced any problems. However El Carmen de Atrato has become very dependent on El Roble, with 50 percent of its economic activity directly related to the mine. “Our vision for this property is that it will become a much bigger operation - we believe this could be a very important mining centre. But mines have a finite life and we worry that El Carmen de Atrato’s dependence will only increase, so we need to do everything in our power to mitigate that.” The idea is to make El Carmen de Atrato
self-sufficient by the time the mine closes. Atico Mining, he reveals, as already knocking on the doors of government departments, local authorities and NGOs to start schemes to develop local agricultural, engineering and service businesses that can take over as an alternative to El Roble, which already employs 35 local people in connection with its ongoing surveying and drilling work. But for now Fernando Ganoza’s energy is completely taken up with this year’s gamechangers for Atico – purchasing the mine and getting the mill in shape to double its current throughput. For more information about Atico Mining visit: www.aticomining.com
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Tunnel
vision Technical director, Íñigo Núñez Blanco discusses how international expansion and the adopting of innovative technologies have been key to OSSA’s growth
written by: Will Daynes research by: Gary Smith
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OSSA
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Hydro Power Plant tunnel
OSSA
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ounded as a family owned mining established connections, and also booming company in Spain in 1952, economies such as Asia, where underground OSSA is today active across the infrastructure continues to develop rapidly.” globe and recognised as being a The company’s most important goal is to leading figure in the underground transform OSSA into a globally recognised construction sector specialising in three core tunnelling brand. Meanwhile, as Blanco business segments, those being construction, goes on to highlight, another crucial aim for energy and mining. OSSA is to become what he refers to as a Over the last six decades the company global reference in the market for its high has been responsible for the excavation of quality standards and reliable solutions. “Our more than 700 kilometres of underground commitment to investing in research and tunnels, 75 kilometres of shafts and more development has allowed us to remain at the than 500,000 cubic metres of caverns cutting edge of new technologies and this in on behalf of clients such as Rio Tinto, Southern turn has resulted in increased productivity.” Perú Copper Co, CODELCO, While global expansion is Narcea Goldmines, Somincor, vital to the company’s longPizarras Expiz, Iberpotash, term strategy, it does continue to value its mining operations Hullera Vasco-Leonesa and Hunosa. in Spain, where it currently Today the mining segment holds two contacts, one with The year that OSSA accounts for around ten León’s Santa Lucia coal mine was established and the other with Huelva’s percent of OSSA’s total Aguablanca nickel mine. activit y, with further Further afield, OSSA has recently been growth expected as investment in the industry continues in line with the rising awarded a contract from Anglo American price of metals such as copper and gold. in Brazil. “This particular contract, which Considering this, you might well say that involves digging a tunnel around 250 metres the OSSA of 2013 is starting to return to in length, while not the biggest we have ever its mining roots. It is doing so by carrying received, represents our first foray into Brazil,” out projects in Chile, Peru and Brazil, while Blanco enthuses. “This provides us with a also tendering for new opportunities in great opportunity to further establish OSSA other Latin American countries. as an important global mining company.” “The international expansion of our Elsewhere, OSSA is to participate in a large operations has certainly been one of the main joint venture project on behalf of CODELCO drivers of our growth in recent times,” explains in the Andina sector of Chile’s mining sector. technical director, Íñigo Núñez Blanco. “In Work on this particular project is expected that sense our focus is very much on Latin to commence in the first quarter of 2014 and America, due to our cultural influence and OSSA is very keen to contribute its experience
1952
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700 KM Total tunnel length OSSA has excavated over its 60 years
Construction at the Hydro Power Plant, Cortes de Pallás
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to what may well turn out to be one of the region’s more significant undertakings in the years to come. The last 12-to-18 months have also seen the company make a number of important internal moves, namely the preparation of its first Communication of Progress statement, something that will result in the company adopting a more comprehensive social responsibility governance framework when it is completed around July of this year. In addition to this, 2012 also saw OSSA develop an Ethics Code of Conduct, which encompasses critical issues such as safety, labour and the environment, and will be published on its website in the weeks to come. Looking ahead to what the future holds for the business, Blanco is aware that while the high price of minerals is currently the driving force behind the mining boom in many countries, such a situation is not sustainable in the long-term, meaning a downward trend in mineral prices is all but inevitable. When such a situation does arise it will result in new project investment falling and will create a scenario where new developments in the sector will be analysed according to a more demanding set of criteria. “With this in mind,” Blanco concludes, “it is
OSSA
Bifurcation at the Carrasconte Mine for Minero Siderúrgica
“The company needs to continue its legacy of betting on innovation and investment in research and development” clear to all of us within OSSA that the company needs to continue its legacy of betting on innovation and investment in research and development, which we see as the best way of creating a sustainable company that has the ability to succeed in the long-run. One of the ways we will look to do this is by adopting new technologies, including those from other industries, particularly those related to the monitoring and automation of processes, to
increasing productivity and of course further guaranteeing worker safety. In turn we hope this improves the overall efficiency of our mining operations and our contribution to a more sustainable sector in general.” For more information about OSSA visit: www.ossaint.com
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Encouraging investme As BFL CANADA (BFL) enters its 26th year of operations, Managing Vice President and Global Business Leader Penny Dyte discusses how it remains just as passionate about bringing growth and investment to Canada as it has always been
written by: Will Daynes research by: Marcus Lewis
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BFL CANADA
ment
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Canada ranks first for the production of Uranium
BFL CANADA
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rom the first aboriginal inhabitants to use various minerals to produce tools to the now 363,000 plus people who earn a living from the more than 800 mines that exist across the country, Canada’s history has always been intrinsically linked to mining. Mining activities are an integral part of Canada’s history with the country still ranking first in the world for the production of potash and uranium, and among the top five for the production of nickel and diamonds. Today the industry is responsible for contributing almost five percent of the country’s Gross Domestic Product, with companies making new mineral deposit discoveries on a regular basis. Companies involved in the mineral and mineral processing industry in Canada each require effective risk identification and management, along with world-class engineering, as a basis for their insurance programs in order to protect their assets from the various financial threats, risks and exposures that they face, as well as to minimise their total cost of risk. With ten locations across the country BFL, the largest employee-owned and operated commercial insurance broker and consulting services firm in Canada, provides its clients with services that ensure that their risk management and insurance programmes addresses every aspect of operations from initial exploration through construction and operation of a mining facility. Under the leadership of its President, CEO and founder, Barry Lorenzetti, BFL is now entering its 26th year of operation. “The company today,” explains Penny Dyte,
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BFL provides its clients with services that address every aspect of their operations
Managing Vice President and Global Business Leader, “remains very much aligned with how Barry Lorenzetti first conceived it, with the model being one of employee ownership and retention, niche practices and being very much focused on client needs. Our computer systems are client facing, our executives are client first and our organisation is very flat. We are unwavering about these drivers and are very proud to run it that way because it helps breed an entrepreneurial spirit within the company and differentiates us in Canada.” As a country, Canada has several things going for it, not least of all the fact that it is home to a vast area of unpopulated prospective land. For her part as BFL’s Global Business
Leader, Dyte has the incredibly vital role of not only assisting Canadian businesses to take advantage of opportunities here, but also working with the increasing number of foreign companies looking to invest in the country. Among the niche sectors that BFL is connected to are the construction, transportation, energy, professional services and real estate industries. Its newest niche is the mining sector. “Because we already had a very robust construction services offering and experience working with clients in the oil sands sector, it made it a very natural lead in to the mining industry,” Dyte continues. In building its mining team, BFL appointed three people to handle its operations across
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BFL CANADA Canada. BFL’s Eastern Region mining team is headed up by Lisa Gianonne, while the Ontario area is the responsibility of Sean Hurley and the Western Region is overseen by Janet McLean, and complemented by John Donovan as Construction Practice Leader and Rick Adam on Loss Control/Prevention. With these individuals in place, BFL was able to begin to branch out to deal not only with clients that were already operational, but also prospective clients. What BFL Knows, however, is that in order to properly deal with foreign brokers looking to invest in Canada it would require an international offering. “This realisation led us to carefully choose Lockton International, the world’s largest privately held firm, as our partner,” Dyte highlights. “Being particularly tenacious about our Canadian ownership, we weren’t looking to buy outside of Canada, nor were Lockton looking to buy into it, rather their model was to partner with large independent firms within countries that could manage their own people and had their own business model. We each fit perfectly within that vision and our clients benefit from it.” What BFL and seven other partners subsequently did, in April 2012, was form a company called Lockton Global. Today that business has a total of 100 partners based around the world that have bought into providing international services not just to the mining community but in general on a private firm basis. One of the first things foreign investors recognise when approaching work in Canada is the unique nature of its regulatory environment. Canada, for example, has one
Janet McLean
Sean Hurley
Lisa Giannone
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“The company’s model is one of employee ownership and retention, niche practices and being very much focused on client needs” of the most stringent environmental protocols found anywhere. While this can mean that companies initially struggle to cement a strong footprint in the country, once they have proven that they can conform to Canada’s rules and regulations they can expect the full support of the government. After all, as Dyte states, nobody is trying to deter growth, rather they are striving to ensure that said growth is healthy and sustainable.
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“Because of our working knowledge of our regulatory environment,” Dyte says, “we are able to provide more than just a black and white account of what our clients need to do in Canada in order to place business. What we do is actually build business acumen into the clients’ own business goals and challenges. It is this type of service that means that once we are in front of a client they quickly see us being on their side and thus we become
BFL CANADA
BFL builds business acumen into its clients’ own business goals and challenges
part of their team. So I see us as not only as risk advisors but also as business advisors trying to manage that risk that exists in our Canadian environment and that is very different than just trying to place insurance for general risks because, at the end of the day, each client is unique.” Just by looking at the vast number of new mine and expansion permits currently in circulation, it is clear that there is a great deal of growth yet to come in the Canadian mining industry. “Not only will we be there to usher our clients through the regulatory and insurance market environment,” Dyte enthuses, “we will also have the ability to bring to them some boots on the ground, with claims and loss control experience, and relationships, that they can count on.”
At the same time, Canadian companies will themselves see a massive amount of growth particularly as they expand further in foreign markets such as Mexico, South America, South Africa and Australia. “Being able to trend some of the more important facets of our model, while also helping companies with safety, maintenance and understanding the insurance markets is really going to help them gain success more quickly than may otherwise be the case,” Dyte concludes. “This is what I envision we are going to be spending a lot of time doing in the months ahead.” For more information about BFL Canada visit: www.bflcanada.ca
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Marlin Mine:
Sustainable o
Through its Marlin Guatemala, a subsi to ensure the count
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Goldcorp - Marlin Mine
opportunities
n Mine operations, Montana Exploradora de idiary of the Canadian firm Goldcorp, is working try will soon be able to unlock its potential
written by: Will Daynes research by: Candice Nice
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Panoramic view of the processing plant
Goldcorp - Marlin Mine
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ossessing a land mass of almost 109,000 square kilometres, the Central America country of Guatemala shares its borders with Mexico, Belize, Honduras and El Salvador, as well as the Pacific coastline to the Southwest and a part of the Caribbean coastline to the east. Boasting a diverse history, a rich and distinctive culture, and areas of immense natural beauty, Guatemala has, in more recent times, become just as well known for its enormous gold potential. Indeed in 2007 one mine alone processed some 1.7 million tonnes of mineral with an average gold content of 4.55 grams per tonne and 84.31 grams of silver per tonne, further confirming the country as a mining destination of particular interest. Possessing a stable, macroeconomic backdrop, Guatemala is fast earning a reputation as having perhaps the greatest future mining potential of any Central American country. Other factors that are helping to attract the interest of international investors include the free movement of goods and trade, and a local labour force with a reputation for being hard working, fast learners. Spanning the boundaries of the San
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MARLIN MINE GOLDCORP
KAESER COMPRESSORS Tough screw compressors and the right technical support are the true solution in Central Americas Mines. When integral and reliable solutions are required, in compressed air, Kaeser is the best answer. This is the case in Mina Marlin in Guatemala. Mina Marlin operates through Montana Exploradora de Guatemala which is a subsidiary from Goldcorp (Canada) and being in production since 2005, with yearly average of 250,000 ounces of gold and 3.5 million ounces of silver, with reserves of 2.5 million ounces of gold and 36 million ounces of silver. The mine is located in the department of San Marcos, 271 km from Guatemala City, but it takes 5 to 6 hours to get there by car from the city due to the last 20 km of dirt road. Mina Marlin has today basically two mining stages: Underground mining: with a ramp 4.6 m wide and 4.9 m high for 20 tons dump trucks, and tunnels with pipes for compressed air, water, ventilation ducts and electric cables. Process: until sodium cyanide leaching to separate the gold and silver minerals from the rocks, with cyanide destruction facilities to prevent and guarantee environmental and human hazards. Although this is not the normal industrial environment, Kaeser compressors generate the compressed air, in Mina Marlin, for the blast process and for the ventilation tunnel drilling. We can find, for example, a Kaeser DSD175 compressor, installed at a depth of 350 meters, at 40 °C ambient temperature with lots of mine dust in the air.
Nevertheless, it is not only about really heavy duty equipment. “Kaeser made the difference due to their accompaniment, the installation, application and technical support”, as the mine superintendent engineer said. The system users are satisfied with the Kaeser compressors operation, thanks to their reliability, high volume delivery capability running at low rpms, and because they are very compact units that can perform in very harsh environments. The support and technical consulting have been keys to the daily improvements in the compressed air system in the mine. According to the mine manager: “No other company has provided us with such a complete technical consultancy”, exclaiming after the compressed air audit presentation, performed by Kaeser, in the mine. This as a mandatory task in order to really provide an excellent support, added to the close aftersales service and maintenance, supplied from the Kaeser subsidiary in Guatemala. www.kaeser.com.gt
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Goldcorp - Marlin Mine
Mine entrance
Miguel Ixtahuacรกn and Sipacapa, located the Ministry of Energy and Mines of in San Marcos, the Marlin Mine was Guatemala into issuing a licence for the originally discovered in 1998 by two development and operation of the Marlin project, on 27 November Guatemalan geologists. 2003. Follow ing t he Acquired in July 2002 by Canadian Company Glamis successful completion of Gold, it was they who, in the construction phase in conducting an exploration the third quarter of 2005, study, determined that the mine began producing the mine held a projected gold and silver before Gold recovery rate 1.4 million ounces of gold. the turn of the year. from the mine This projection spurred During the three years
98%
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MARLINMine MINE Goldcorp - Marlin between Marlin Mine 2003 feature and 2006 text tempor incididunt ut labore et dolore magna aliqua. Ut ap to pgo r oxhere....Lorem i m at e l y ipsum $300 enim ad minim veniam, quis million dolor sit amet, was consectetur invested nostrud exercitation ullamco iadipisicing nto t he elit, op er sed atordo ’s laboris nisi ut aliquip ex exploration eiusmod tempor activities incididunt and ea commodo consequat. overall ut laborepreparations et dolore magna for Duis aute irure dolor in exploitation. aliqua. Ut enim It ad wasminim then reprehenderit in voluptate in veniam, 2009 that quis Goldcorp nostrud invested an ullamco exercitation additional laboris $69 velit esse cillum dolore million nisi ut aliquip into ex theeaoperation, commodo eu fugiat nulla pariatur. with a similar consequat. Duisfigure aute being irure Excepteur sint occaecat ploughed the business dolor in into reprehenderit in This is a caption this is a caption cupidatat non proident, sunt in 2010. Such Goldcorp’s in culpa qui officia deserunt voluptate velitisesse cillum commitment to nulla the longipsum dolor plant dolore eu fugiat pariatur. Excepteur mollit anim id est laborum. LoremSmelting termoccaecat success of the project sint cupidatat non proident, sunt sit amet, consectetur adipisicing elit, sed do that in culpa it intends qui officia to deserunt invest a mollit further anim $150 id from eiusmod such tempor investment incididuntand ut labore commitment et dolore million est laborum. into Marlin LoremMine ipsum bydolor 2014.sit amet, however. magna aliqua. Indeed Ut enim the ad ripple minim effect veniam, created quis consectetur adipisicing elit, sedisdo eiusmod by nostrud this has exercitation spread throughout ullamco laboris businesses nisi ut It is not just the mine that benefiting
Brenntag brings to the Mining Industry a broad line of chemical products as well as alliances with both local and internationally known suppliers. With over 100 years of business experience, we are well positioned to provide customers with a diverse array of quality products and services at competitive prices. In addition, we have an unparalleled ability
to support our multinational customers with Brenntag’s globally-based organization. With distribution and sales locations throughout the United States, Canada, Europe, South and Central America, Africa, China, Australia and New Zealand, we are capable of meeting the needs of customers… from commodity to niche market products in a broad range of packaging containers and sizes. Our product portfolio includes an extensive line of chemicals for use in different applications throughout the mining operations, including flotation, dust control, solvent extraction and water treatment. www.brenntag.com
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Atlas Copco specialises in providing equipment and solutions to companies involved in mining, rock excavation and construction. We develop, manufacture and sell services related to underground and surface rigs, underground haulage and transport, crushing, anchors, jet grouting, drill steel, exploration and a full range of parts and consumables. Operating within the marketplace for 140 years, Atlas Copco is continuously looking to innovate in order to achieve sustainable productivity in the fields of surface and underground mining, infrastructure projects, deep drilling, geotechnical applications and civil works. El área de negocios Mining and Rock Excavation Technique de Atlas Copco provee equipos y soluciones para construcción y minería. Desarrollamos, fabricamos, comercializamos y ofrecemos servicio técnico para nuestros equipos de perforación subterránea y de superficie, acarreo y transporte, trituración, anclajes, inyección de cemento, aceros de barrenación, exploración así como una gama completa de partes y consumibles. Con 140 años en el mercado, en Atlas Copco innovamos continuamente para lograr una productividad sustentable en la minería subterránea y de superficie, en proyectos de infraestructura, perforación profunda, aplicaciones de geotecnia y obras civiles.
For the attention of Central American and Caribbean countries. Atlas Copco Central America S.A. Panamerica Corporate Center Edificio 9080, Local #3, Boulevar de las Americas, Panamá Pacífico Ciudad de Panamá, Panamá Tel:+507 8306155 / 56 / 57 Fax:+507 8306160 www.atlascopco.com
Goldcorp - Marlin Mine
Local workers
in the local community with Marlin Mine today having more than 1000 suppliers, a figure that is helping to generate contracts worth over $907 million. “One of the first things we recognised about this mine and what makes it so
unique,” explains Marlin Mine General Manager, Christian Roldan, “is just how well the ore itself responds to metallurgical treatments. When it comes to gold we have extremely high recovery rates of about 98 percent recovery and more than
“One of the first things we recognised about this mine and what makes it so unique, is just how well the ore itself responds to metallurgical treatments” special focus | 139
buildings • bridges • warehouses • mezzanines • industrial buildings shopping centers • special structures • civil works • pipes
MARLIN MINE, GOLDCORP 2011
MINERA SAN RAFAEL, TAHOE RESOURCES 2013
MINERA SAN RAFAEL, TAHOE RESOURCES, 2013
Guatemala | El Salvador | Honduras | Nicaragua | Costa Rica | Panama | Belize
Goldcorp - Marlin Mine
Exterior view of the water treatment plant
90 percent for silver. We also benefit from the fact that Marlin is located in a very strong mining district where, to this day, we continue to uncover new resources
around the main Marlin vein.” Average annual production at the mine is today estimated as being 250,000 ounces of gold and around 3.5 million ounces of silver, with current reserves exceeding 2.5 million ounces Aceros Arquitectónicos of gold and 36 million Aceros Arquitectónicos, Grupo Ferroso S.A. is a company ounces of silver. In the five fully dedicated to the Manufacture and Assembly of Steel years between 2005 and Works. With 50 years of experience, we also focus on 2010 it has been calculated Civil Works and turnkey arrangement projects. Clients that some 1.2 million ounces like GOLDCORP, SOLEL BONEH, SAMUEL ENGINEERING, of gold, equivalent to over ENEL, etc. have made our operation renowned worldwide. Structural engineers specially trained in designing metal $1.1 billion, that originated structures have the necessary equipment for structural from the mine was exported analysis and design, using specialized software such along with 18.2 million as STAAD Pro Ver 8, the most widely accepted program tonnes of silver, which in the world. There are a total of 220 employees in the generated $299.3 million in manufacturing area and 25 people in the technical area, export revenues. supervision and administration. The production process www.acerosarq.com of the Marlin Mine is
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Procesadora de Minerales, S.A. –PROMISA- is a Guatemalan based company founded in 1971. We are the main suppliers of nonmetallic minerals to different industries, but also share our experience, technology, services and knowledge with the mining business. Our main objective focuses on supporting our clients, which include Marlin Mine-Montana Exploradora/GoldCorp Guatemala, with high standard products, on site engineering services and training and tools aimed especially for mining processes, thus minimizing ecological and local community liabilities, and ensuring business sustainability. We represent MI-HDD Mining & Waterwell, a MI-SWACO Division, as well as Diamantina Christensen Mining Products, known worldwide for its high efficiency drilling fluids, bits and tools, additives, products and equipment that increase the productivity of operations and reduce environmental footprint and fluid consumption.
Our products:
• Bentonite • Drilling Fluids formulated for both small and large borehole stability and core quality • Polymers • Fluid Loss Control Agents • Shale Stabilizers • Viscosifiers • Filtration Control Additives • Lubricants • Drill Bits and Tools
www.promisa.biz | info@promisa.biz (502) 23366696 | fax (502) 23366705 Guatemala City, Guatemala
Goldcorp - Marlin Mine divided into four phases, these being exploration, As miners go deeper underground to provide the materials construction, operation and on which the world depends, they need safe, reliable production, and technical equipment designed to handle demanding conditions. From closure and reclamation. “At the first cut to the last inch of the seam, we’re committed to present,” Roldan continues, meeting the needs of customer in every mining application “there are three main and environment. Our broad product line includes drills, loaders and trucks for hard rock applications, and underground areas that precision-engineered products. Since the beginning of we are mining. In order to Montana’s operation (Gold Corp Mine in Guatemala), extract the full potential of Gentrac has provided equipment, parts and services as what the mine has to offer support in their mining operation. Gentrac is grateful to we have had to overcome Marlin Mine for the confidence given. a number of challenges. www.gentrac.com.gt T hese have included creating ventilation systems for both on-going and future underground activities and establishing strong water controls around the mine site.” Strong environmental controls have been a feature of the mine site since it first opened. Today these controls include the use of emergency response teams that are on call at all times of day to respond to all manner of events. These include responding to signs of increased sodium or sulphite levels in the surrounding water network or dealing with any issues that may arise during the transportation of hazardous materials. Such is the skill of
GENTRAC
1.4 million Ounces of gold Marlin Mine is estimated to hold Water treatment plant
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We at Ingenia are highly qualified in all areas of electrical engineering, industrial and mining projects.
We are a company known for its core values, such as honesty, long term relationships, honesty and respect for our customers, suppliers, employees and to our country. • Counseling • Design • Electrical Installation • Mechanical Installations • Project Management • Turnkey Projects • Power Quality Studies • Armed electric panels • Electrical Audits We meet the needs of our customers, so if electricity is your thinking we are your best choice, contact us: PBX: (502) 2499-4444 | FAX: (502) 2499-4401 | www.ingenia.com.gt
Goldcorp - Marlin Mine
the mine’s emergency teams that they were even called in to assist in the rescue and recovery efforts that followed the earthquake that struck the San Marcos area in November 2012. In 2012, Montana Exploradora de
Guatemala commissioned the building of a tail filtering plant near to the mine. The concept for the plant came about as a solution to how the operators could reclaim the open pit section of Marlin Mine that is no long in operation. The plant’s core
“Marlin is located in a very strong mining district where, to this day, its operators continue to uncover new resources around the main Marlin vein” special focus | 145
This is a caption this is a caption
Goldcorp - Marlin Mine function today is to dry the tailings from the mine in order for them to be used to fill pipes and cover the decommissioned pit wall in order to avoid further erosion or drainage. The immediate future of Marlin Mine revolves around what Roldan calls an extensive aspiration programme. “We presently have a number of aggressive exploration programmes underway in many areas of the district surrounding the mine and we have been greatly encouraged by the results we have seen. This gives us great hope for extending the Marlin Mine network further into these parts of the region.” In the meantime the operators also remain committed to setting a strong example of what responsible modern mining can bring to the country in the decades ahead, “On average,” national executive director, Mario Marroquin concludes, “mining in countries such as Chile and Peru accounts for as much as 12 percent of their annual GDP, while here in Guatemala that figure is more like two percent. If we were able to bring this up to just six percent, I believe the results of that would be more than enough to convince a great deal more people to begin accepting the industry and help them realise just how many positive benefits a strong, responsible mining sector could bring to the country.” For more information about Goldcorp - Marlin Mine visit: www.goldcorpguatemala.com
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Marlin Mine:
Supporting development The legacy left behind by Marlin Mine in Guatemala is something of huge importance to its operators, Montana Exploradora de Guatemala, and is what drives its work in the field of corporate social responsibility
written by: Will Daynes research by: Candice Nice
148 | special focus
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Area of environmental recovery
Goldcorp - Marlin Mine
L
ong before it commenced operations at its Marlin Mine asset, Goldcorp made a commitment to not only respect the cultural values of the local communities of San Miguel and Sipacapa, but also to support the sustainable development of the area. It remains the company’s aim to seek out and establish strategic alliances throughout the region in order to promote its dedication to improve the lives of the local population and generate sustainable prosperity that lasts beyond the lifetime of the mine. The operators of Marlin Mine, Montana Exploradora de Guatemala, a subsidiary of Goldcorp, are very much pioneers within the country of Guatemala. “We have known since day one,” Marlin Mine General Manager, Christian Roldan says, “that by being situated on indigenous land it has been fundamental to build strong relationships with local communities. By sitting down and listening to their concerns and needs we quickly found that job creation was a big issue for them. Today we are proud to say that approximately 90 percent of our workforce is Guatemalan, with 60 percent of these being people from the local area.” Being a 24 hours a day, 365 days a year type operation, logistics is a hugely vital ingredient in the mines success. Once again the local community has become a major strategic partner in this area of the business. “We take great pride in the fact that over 68 percent of our suppliers are local providers,” enthuses materials manager, Pedro Richmagui.
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Keeping your world up and running
Fluke has the right tool for surface, underground and process on the mine Clamp Meter
Process Calibrator
PBX: 502-23695000
Diagram is not an exact physical representation. Diagram elements are not to scale and are for illustration purposes only. Modification of this document is not permitted without written permission from Fluke, Š 2010 Fluke Corporation. Reproduced with permission.
CNX Wireless
Power Quality and Energy Analyzer
www.conpro.com.gt
Thermography
Vibration
ventas@conpro.com.gt
Goldcorp - Marlin Mine In getting to this position, conpro the mine operators have We are a Guatemalan company with 18 years of experience worked tirelessly to develop serving the industrial power market in Central America, local businesses and to through the representation and distribution of global improve their understanding brands, leaders in each of its segments. We provide of mining and how it solutions in measurement equipments, distribution will become even more equipments for low and medium voltage, transformers built under design, electrical enclosures, cables for special important to Guatemala in application, and lighting fixtures. The wide range of the years to come. “A good options offering with the support and the guarantee of the example of our work in this companies we represent, along with the knowledge of our field,” Richmagui continues, sales force. “is how we have helped We have provided Mina Marlin electrical equipments along develop local transport with technical training for power quality, process calibration companies, bringing them and, certified Level 1 thermography for maintenance and operation in the underground and process areas, to keep up to a level of operational the mine up and running. excellence that means that www.conpro.com.gt when the day comes that the mine is no longer in operation the community is left with a strong enterprise that can then pitch itself to other organisations.” While local communities have already experienced the benefits that mining can bring to the country, the perception of mining amongst the wider population of Guatemala remains somewhat divided. It is for this reason that the operators of Marlin Mine continue to make a concerted effort to bring people, groups and agencies together in order to highlight how a prosperous Locals prepare trees for planting
“Strong environmental controls have been a feature of the mine site since it first opened” special focus | 153
Proud to be Operating for Excellence with Goldcorp at Marlin Mine. With over 20 active projects across two continents, Dumas brings ingenuity and expertise to some of the world’s most challenging underground mines.
www.dumasmining.com Toronto | Timmins | Val-d’Or | Guatemala | Chihuahua | Lima
Goldcorp - Marlin Mine mining industry can benefit Guatemala in the long term. A trusted partner of Goldcorp since 1990, and onsite “While there is a large at Marlin Mine since February 2011, Dumas is proud number of people who to be aligned with every pillar of Goldcorp’s Operating support what we are doing for Excellence philosophy. For example, supporting the and understand the vital Grow Safety element, implementation of Dumas’ world role that mining has to play class safety program has resulted in 560,000 man hours with no LTIs at Marlin as of March 2013. Other in enhancing the economy elements of Operating for Excellence are demonstrated of a country by means of by consistent performance increases achieved by Dumas, greater investment and and a commitment to training and employing locally – revenue flows, one of our Guatemalans represent 76 per cent of Dumas’ workforce in core missions is to help instil the country. this belief in the rest of the www.dumasmining.com population of Guatemala,” states national executive director, Mario Marroquin. “This was never going to be a quick process, however trends do suggest that support for mining is slowly growing.” While support for mining continues to build, other challenges lay ahead for Marlin Mine’s operators, in particular the question of what kind of legacy the mine will leave behind once it has closed. This is a question that has been posed not only to Montana Exploradora de Guatemala, but also to Guatemala’s local politicians and its national government. “In planning for the future of the
DUMAS
10,000 Direct and indirect jobs created by the mine. Reforestation in progress
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T H E E X T R AC T I O N O F G O L D A N D S I LV E R With Guatemala having many valuable natural resources, Productos del Aire can highlight the extraction of gold and silver, among others.
M.Sc. Juan Ram贸n Pallais | Special Applications Advisory | Guatemala Air Products, Inc. jrpallais@productosdelaire.com | Phone 2421-0400 Ext. 227
Overland Conveyor, Marlin Mine, GoldCorp, Guatemala
IGC covers virtually all types of services in various areas of engineering and construction. Our main focus began in the electrical-mechanical engineering and construction field. In 1992 IGC implemented a civil work division, due to the growth in the Central America industry. In 1998 the Operation & Maintenance division for thermal power plants was created. IGC basically ensures the coordination of local engineering, constructors and administration. PBX (502) 66 44 18 00 grupoigc@grupoigc.com www.grupoigc.com DELIVERING INTELLIGENT SOLUTIONS TO THE CENTRO AMERICAN INDUSTRY SINCE 1970
Goldcorp - Marlin Mine
68% Of Marlin Mine’s suppliers are local providers
Productos Del Aire
We use a multi-stage process: first extract large amounts of land where the mineral is present then grind until a fine grain, where chemically separating the mineral soil in a process called Leaching. (Dissolving a metal in a liquid, such as water to separate the soil, so that the mineral suspension while floating on the ground or precipitated to the bottom of the tank) This is due to a chemical equation: Gold: 4Au + 8CN-+ O2 + 2H2Og4Au (CN) 2 - + 4OHSilver:4Ag + 8CN-+ O2 + 2H2Og4Ag (CN) 2 - + 4OHThey can be summarized as follows: Mineral + Cyanide + Oxygen + water - Mineral water soluble! Finally this liquid with the precious metal is separated, and by another chemical reaction is precipitated mineral and melts the ingot ready for marketing. E. jrpallais@productosdelaire.com
area around the mine,” explains corporate social responsibilit y director, Gustavo Cabrera, “we are looking at a host of factors, from ensuring the long term wellbeing of the local communities to making sure that they have the tools needed to bring economic activity to the area after we have gone. On-going efforts involve closing the gaps that exist in education, healthcare and
employment in order to boost the economy.” Montana Exploradora de Guatemala has played a big role in various social development projects for the better part
The education complex
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RELIABLE SOLUTIONS FOR THE MINING WORLD Prodac´s Mining Unit specialises in providing solutions to rock mass stabilization in tunnels. For this purpose, we have quality products and professional staff in geo-mechanics, explosives and operations, that can provide technical advice and on site training. Telephone: 51 (1) 613 6666 mineria@prodac.com.pe www.prodac.com.pe
Goldcorp - Marlin Mine of a decade, particularly in the fields of infrastructure, Tritech has been helping industrial customers for more education, productivity, than 40 years. With its origins in Guatemala distributing community relations and the brand Molub-Alloy (now within Castrol Industrial), the healthcare. Through its company has grown into a multinational company serving Sustainable Development the industrial sector from Mexico to Colombia. Focused only Department it has executed on lubrication, we have brought also automated lubricating systems, filtration and most important knowledge into our over 2,000 community offer so we can give documented savings to our customers. development interventions Our relationship with Marlin Mine started in 2005 with a and more than 150 detailed lubrication plan, training, implementation and close projects that have directly follow up in site. To this day we keep these tasks to ensure supported new and existing the best results possible. infrastructure found among www.tritechoverseas.com the local communities. While Guatemala is slowly making positive steps towards greater social and economic prosperity the country does still suffer from significant shortcomings when it comes to education and healthcare, a fact that has long been a major obstacle in raising the rate of national productivity. Montana Exploradora de Guatemala understands that education is the cornerstone in the development of communities and as such it has striven to support the building and development of schools, school kitchens, computer centres and sports parks. To date the company has driven almost 300 initiatives Education in the local communities that share the same goal of improving
Tritech
“Montana Exploradora de Guatemala has made sure to integrate Goldcorp’s Environmental Policy into its Marlin Mine operations� special focus | 159
Quisertec, is a Central American Company with its central offices in Guatemala that offers a wide variety of lines of raw materials directed to the productive sectors of the region for the following sectors: • Food industry • Cosmetics • Pharmaceutical • Bottling • Mining Industry • General Industry In each of the countries in our market area, we have offices, warehouses and highly qualified staff to meet the needs of our customers, permanently keeping a stock of different products. Quisertec would be happy to meet any requirement, as our sales policy is what sets us apart from our competition. Visit our web page www.quisertec.com Tel (502) 23801300 | email ventas@quisertec.com
“Your best partner, in any business”
STEEL
I N D U S T R I A L S E RV I C E S
Steel Industrial Services is a company dedicated to designing, manufacturing and rebuilding of parts for mining equipment and the industry in general. Services: • Installation of equipment • Manufacturing equipment of various structures • Repair and maintenance of various equipment • Welding • Maintaining different types of pumps and motors • Tool Supply • Contractor technicians in the fields of mechanics, welding and electricity • Electrical services Telephone: 00502 7840-3497 E-mail: servicios.industriales_steel@yahoo.com
Goldcorp - Marlin Mine the education standards Quisertec and experiences of those Quisertec, SA belongs to a group of 15 companies based within the municipalities in Central America focused on different activities in of San Miguel, Sipakapa, commerce, industry, services and agriculture. Quisertec, Malacatancito and Tejutla. SA was founded in Guatemala in 1990 with the mission In terms of the help to provide complete satisfaction to our customers in the mine’s operators have our different areas of action. Achieving profitability for our customers, employees, suppliers and shareholders. provided ≠≠towards the Through personalized service and quality products and improvement of healthcare services. Represented in the area major manufacturing in the region it has aided in companies from 5 continents. the building and equipping www.quisertec.com of the Permanent Attention Centre (CAP) in San Miguel. The creation of the CAP is a prime example as a responsible corporate citizen. of Goldcorp’s Sustainable Prosperity The CAP is today seen as an example of programme being put into action, assisting partnership between sectors. In addition in the company’s mission to be recognised to the efforts of Montana Exploradora de
Exterior of the CAP centre
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“Excellence in quality and service�
We have more than 30 years of experience in the design and manufacture of filter elements
Filter elements: Band filters, Rotary Vacuum Filters, Filter Presses, Dust Collectors
Forjas Santa Barbara, S.A. Barrio Oguena s/n, Apartado 49, Amorebieta - Spain Tel: +34 946 730 737 Email: forjas@fsantabarbara.com www.fsantabarbara.com
G R I N D I N G
M E D I A
Materials: Polypropylene, Polyester, Nylon, Aramid, Polyimide, PPS, Fibreglass Our products are manufactured in compliance with the requirements of each process. www.mfisa.com.mx
Goldcorp - Marlin Mine MULTIGROUP
MultiGroup is an industrial-commercial corporation that has more than 26 years of experience with in North America, Central America and the Caribbean. We manufacture and commercialize a wide range of steel products. Our main strength is having three, first-class production facilities that allow us to manufacture according to the needs of our customers and in compliance with international standards. We supply welded mesh for the Marlin Mine, which is used for structural reinforcement of the walls of their tunnels. MultiGroup, has its own hot dip galvanized plant, which can offer all products on galvanized finish, in order to serve the industrial segment and specialized factories. The product portfolio includes many steel products such as steel sheets, steel plates, foundation bars, beams, steel tubing, pipes, structural tubing, conduit pipes, roofing sheets, steel rods, welded mesh and drywall accessories. www.multigroup.com.gt
New operating theatre
Guatemala, the municipality of San Miguel provided the land and the Ministry of Health remains responsible for its operation and good performance. The centre itself is equipped with the very latest technology that is used in a range of medical fields. The investment that all parties have made in the CAP means that today local Guatemalan communities are able to access better health care than they could previously receive. In its role as a responsible mining company, Montana Exploradora de Guatemala has made sure to integrate Goldcorp’s
99% Of the water used at Marlin Mine is recycled and reused in other areas of the mining process Tilapia fish project
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Underground safety that goes beyond bolts, plates and resin.
In addition to being the leading manufacturer of resin cartridges for more than 40 years, Minova is a global leader in chemical and steel based consumables, associated equipment and services for rock bolting, ground consolidation, ventilation and water control for the underground mining industry. These are just a few of the many products in the Minova family of innovative safety solutions: AirtiteÂŽ fiber-reinforced pre-mixed coatings for use on stoppings, overcasts and other ventilation controls. Carbothix instantly thickening, fast curing injectable two-component silicate resin for sealing bolts. Tekcrete Fast M low dusting, ultra-rapid hardening, high-strength gunite.
Ground Support Systems
Minova Mining Services, S.A. | Lo Echevers 300 | Quilicura, Santiago | Chile +56 9 9918 1878 | www.minovainternational.com
Seen Sika AG, Switzerland, is a globally active specialty chemicals company. Sika supplies the building and construction industry as well as manufacturing industries (automotive, bus, truck, rail, solar and wind power plants, façades). Sika is a leader in processing materials used in sealing. The Sika target markets are: concrete, waterproofing, roofing, flooring, sealing and bonding, refurbishment and industry.
Contact us today and put your company in the spotlight! www.sika.com
vincent@bus-ex.com
Goldcorp - Marlin Mine Environmental Policy into MINOVA Ground Support Systems its Marlin Mine operations. Part of Orica Limited, Minova is a leading global provider As part of this policy the of ground support and ventilation products used in operators are committed to underground mining. the responsible use of water, Minova manufactures mechanical, structural and chemical waste management, carrying based solutions for underground mining, infrastructure, out regular environmental tunneling and civil engineering applications. Since 1970, Minova has offered a wide range of products monitoring, reforestation, and services for rock bolting, ground consolidation, promoting environmental fiberglass reinforcement, ventilation and water control. education and the reclamation Orica’s operations are in 50 countries, on six continents, of mined areas. meeting customers’ productivity, efficiency, safety and A sophisticated closed environmental challenges globally. circuit system means that www.minovainternational.com approximately 99 percent of the water used at Marlin Mine is recycled and reused in other areas of back for reuse. There are two water treatment the mining process, while processed water, plants in the vicinity of the mine itself, one of or sludge, is treated onsite before being which treats aerobic sewage while the other discharged into the tailings and then pumped processes it into tunnel water that is then
Nursery environment
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E-Mail: info@netcoretechno.com www.netcoretechno.com
ALL IN TECHNOLOGY FOR SURVEYING AND GEODESY • Netcore Technologies is a solutions integrator company for different fields and applications covering the Geodesy and Survey fields. • We have a group of market leading brands to complement and accurate solutions that meet the needs of industry. • In Netcore Technologies have experience at regional level for several solutions. Working with large corporations in field solutions and equipment. • As representatives of Trimble, a world wide leader in GNSS solutions, we have helped many organizations and countries in Central America to solve their needs in GNSS systems. “WE ARE A CENTRAL AMERICAN COMPANY IN EXPANTION, LOCATED NOW AT GUATEMALA, EL SALVADOR AND PANAMA.”
Goldcorp - Marlin Mine safe to release back into the environment. EVERLIFE is a Guatemalan company, founded in 2004 Montana Exploradora de with the mission to provide advice and consultancy in Guatemala has worked hard environmental, social and business management. Today, we to establish and implement serve several of the largest and most important companies regular environmental in there sector. We are conformed by a multidisciplinary monitoring programmes that team of professionals with extensive experience in extractive industries, renewable energy and transmission take place around Marlin and distribution of electricity. Mine. These programmes We know our business and we know how vital this is for look to identify and monitor yours, so we offer integral solutions with the highest terrestrial and aquatic professionalism and quality, supported by the use biological resources and of ultimate technology and equipment approved and wildlife with the aim of helping recognized by international environmental agencies. to maintain Guatemala’s www.everlifegt.com ecological balance. Soi l mon itor i ng is conducted annually to identify vegetation, macronutrients and nematodes, samples of which are in turn analysed at the laboratories of agronomy at the University Of San Carlos Of Guatemala. Meanwhile, studies of local flora and fauna are conducted by teams of ornithologists, mammalogists, herpetologists and entomologists in order to catalogue species of plants and animals and monitor their respective
EVERLIFE
300
hectares Amount of land Montana Exploradora de Guatemala has helped in the reforestation of to date Livestock project
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At Soiltec we specialize in the following areas: • Soil Nailing • Foundations • Marine Works • Industrial Works • Civil Works • Large Capacity Storage Domes • Soil Improvement Visit us at www.soiltec.com.gt
NEW PRECIOUS RESOURCE DISCOVERED
Click here to visit our dedicated homepage for the mining community www.bus-ex.com/mining BEST PRACTICE IN MINING
Goldcorp - Marlin Mine population numbers. crelosa To date Montana • Repair everything related to radio equipment. Exploradora de Guatemala • Diagnosis office equipment without cost and scope of the has helped in the reforestation capital (applies departmental cost varies by region). of more than 300 hectares of • Vehicle Fleet Monitoring with GPS. land in the municipalities of • Construction and installation of towers. San Miguel and Sipakapa, • Consultancy on special projects. • Rent of TEAM radio communication. while more than 50 hectares of • Sale and installation of CCTV equipment . land was reforested between www.crelosa.com the two municipalities in 2011 alone. Indeed the operators are playing a core role in one of the Guatemalan government’s most important environmental schemes, that being the Forest Plan. The aim of this plan is to reforest an area of 199.5 hectares, of which over 100 hectares have already been covered. From a social perspective, Montana Exploradora de Guatemala’s track record in recent years for generating local jobs cannot be disputed, what with some 10,000 direct and indirect jobs created through the mine’s operations, however it is aware that the task at hand now involves building up the capabilities of these same people in preparation for when the mine does close and the possibility that alternative employment may be required. “One of our responsibilities, as we see it, is to provide our local employees and communities with the skills and expertise A local farmer
“One of our responsibilities, as we see it, is to provide our local employees and communities with skills that they’ll need to take on other roles in the future” special focus | 169
Reforestation panorama
Goldcorp - Marlin Mine that they will need to take on other roles in the future, both inside and out of the mining sector,� Cabrera highlights. “We know, for instance, that the land around the mine has great agricultural potential. Therefore, what we have been doing is working to establish relationships with big businesses such as Wal-Mart in Guatemala and in Mexico in the hope of creating a scenario in which local Guatemalan agricultural companies can one day earn long-term supplier contracts.� On top of creating employment opportunities, Marlin Mine has also contributed hugely to the development of Guatemala through the paying of taxes and royalties during its lifetime. Indeed the operators of the mine are recognised today as being one of the biggest tax payers in all of the country. The Mining Act of Guatemala specifies that for each mining operation, one percent of the total gross sales from the production of gold and silver must be divided equally between the government of the country and the municipality of San Miguel. In its near decade of activity in the country Montana Exploradora de Guatemala has been more than happy to contribute such royalties, the proceeds of which have already begun to create a long lasting legacy by funding crucial infrastructure improvements within the area and beyond. For more information about Goldcorp - Marlin Mine visit: www.goldcorpguatemala.com
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Petroperu
mbracing the modern way
Talara Refinery Modernization Project is Petroperu’s gest undertaking, the results of which will contribute atly to the sustainable economic development of Peru
written by: Will Daynes research by: David Brogan
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Petroperu
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t was in July of 1969, during the presidency sulphur content to a maximum of 50 ppm, of Juan Velasco Alvarado, that Petroperu thus requiring the company to essentially was created based on La Pampilla Sate formulate an entirely new project that Refinery and expropriated refineries. In would comply with the said standards. This the more than four decades since the is what inspired the company to embark company has been a major contributor to the on its mission to develop a modern Talara Refinery with fuel production which meets country’s economy. This comes in spite of the considerable the quality requested by the country’s political, administrative and macroeconomic legal regulations and international challenges it has faced over the years. From the markets, within a framework of social outset Petroperu was tasked with operating responsibility, environmental protection and maintaining virtually every complex oil and adequate profitability. A megaproject of engineering and patch in the country by itself. It was thanks to the skills and dedication of its Peruvian construction, the modification involves the workforce that is was able to continue expansion of existing units at the refinery as well as the installation of deliver i ng pet roleum products without any supply new process units, services disruption, thus becoming and other requested facilities. The project itself exists the most important stateowned company in Peru. within a framework of social Today Petroperu’s largest responsibility, environmental The year that Petroperu project is the Talara Refinery protection and the generation was formed Modernization Project, of market opportunities and has been given the name an undertaking that the company highlights as an example of a “Proyecto Modernización Refinería Talara” successful South American mining energy (PMRT). Upon completion it is expected to and minerals project that is increasing its result in cleaner air due to the reduction in influence locally and internationally. sulphur content in diesel and petrol, clean The company’s involvement with the waste gas emissions from the refinery, reduced Talara Refinery dates back to 1998 when liquid fuel imports and an improvement in it first contacted Texas based-consultancy the commercial balance of hydrocarbons. The social and environmental impact of Bonner & Moore to carry out a study to help adapt the refinery to current needs, the project is expected to benefit the Peruvian improving the quality of diesel fuels with population on a number of levels. The Talara a maximum sulphur content of 2,000 parts economy will be boosted by additional direct and indirect works, especially during the per million (ppm). The passing of legislation in March 2006 construction period and this will undoubtedly brought in rules regulating diesel fuel result in better economic opportunities
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Making our planet more productive Operating in Peru since 1996, Praxair is now the country’s leading manufacturer of industrial gases—supplying atmospheric, medical and specialty gases nationwide. Its eleven industrial gas facilities are strategically located across the country, helping ensure supply reliability for all customers. Praxair also offers a wide range of technologies that can help customers increase efficiency, improve productivity and enhance environmental performance. In short, Praxair provides the products and services that are making our planet more productive.
www.praxair.com
PRAXAIR
With its 50-year track record of serving the refining industry worldwide, Praxair has the experience to help refineries succeed in today’s challenging environment. For decades, Praxair has supplied hydrogen gas to produce cleaner burning transportation fuels and applications technologies that help refiners improve their processes. Praxair’s innovative industrial gas-based application technologies help our refining customers to do more with less, from enhancing product performance to reducing environmental impact. Refineries are facing a number of challenges today. Government regulations are tightening fuel specifications and standards. The crude slate has become heavier and increasingly sour, requiring additional process flexibility. These demands have intensified the search for more efficient ways to use and manage hydrogen supplies. For this reason, Praxair
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delivers the expertise and innovation required to optimize efficiency and reduce costs associated with refinery hydrogen use. Praxair’s optimization technologies and experience can reduce volumes by recovering the hydrogen and heavier hydrocarbons from refinery fuel gas, saving both hydrogen and fuel costs. This reduces operating and capital costs, enhances margins and decreases greenhouse gas (GHG) emissions. Managing the fuel gas system is integral to running refineries at optimal efficiency. Inefficiencies can often occur when the fuel gas and hydrogen systems are too closely linked, with purges and bleeds from the hydrogen system going directly to fuel gas and significantly impacting both its quality and quantity. Praxair has the in-house expertise to analyze such systems and find technologies to meet overall energy and hydrogen
PETROPERU Petroperu
requirements. In addition to conventional methods, Praxair refinery gas-processing technology enables the use of problematic fuel gas streams as feed for a steam methane reformer or as fuel for a gas turbine. This leads to higher returns, since those streams no longer need to be blended or segregated, something that further exacerbated “fuel gas long” issues. Praxair is focused on designing and constructing the most effective industrial gas plants, on time and on budget, using stringent industry safety standards. Praxair uses its extensive operating experience to design and build its hydrogen facilities to the highest standards, ensuring the utmost in safety, reliability and efficient supply. We also strive to enhance supply reliability and offer customers a high level of operational flexibility by investing in necessary infrastructure where
possible, including pipelines and byproduct sources. In addition to Praxair’s hydrogen expertise described above, Praxair has also developed expertise in various technologies for refining industries. One such technology increases the throughput of fluid catalytic cracking (FCC) units that are air blower limited, cyclone velocity limited, coke burn limited or wet gas compressor limited by injecting oxygen into the combustion air. Praxair has installed more than fifteen FCC oxygen enrichment units around the world. Global refiners are discovering how oxygen enrichment in their FCC increases the unit processing capacity with a small capital cost investment. This is accomplished while realizing other significant operational advantages. www.praxair.com
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Petroperu
The Talara refinery
for Talara. Furthermore, local businesses in Talara and other parts of Peru will be tasked with providing goods and services to the refinery during the construction and operation phases, providing economic opportunities to many people. From the point of view of environmental feasibility, the Talara Modernization Project
will improve the air quality of Peru, as well as the surrounding water quality, and it will not release oily or solid waste which is harmful for the environment. The proposed updates and the new units that will be added to the Refinery will be designed to comply with or exceed World Bank environmental rules, national rules and all local regulations.
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El Milagro refinery
“This project will help guarantee that Petroperu is able to continue creating significant value for Peru and its citizens for many years to come� The environmental investment projections are included in the general capital investment required for the modernisation. The current estimate is that the capital investment for the environmental part will be of approximately $1.3 billion. This amount includes the contingency factor or the location factor. It cannot be denied that it has been a long and challenging process to get the project to
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the point where it is today. It was recognised from a very early stage that such a large scale project would require a significant investment of time, technology and capital resources. Based on a feasibility study carried out on behalf of Petroperu by Arthur D.Little it was clear that the costs of the project would be substantial and that even when taking into account its use of fast-track engineering and
Petroperu
The Conchan refinery
construction strategy it would not be able to commence operations until 2016. While these factors may have put off a number of operators or companies, the fact is that the numerous social and environmental benefits that the modernization project will bring to the region make it very much worth the time, cost and effort of all concerned. This project will not only result in bringing in an attractive economic return, but will also help guarantee that Petroperu is able to continue creating significant value for Peru and its citizens for many years to come. Today the implementation of the modernization project is well under way, with the preliminary engineering and technology phase having commenced at the end of 2009.
Worker inspecting the pipeline
Come the estimated culmination of the undertaking in 2016 it is expected to have achieved a number of positives, not least of all increasing the value of Petroperu as a business. On top of this the project will have transformed the Talara Refinery into one of Latin America’s most modern, increased its production capacity by approximately 50 percent and most importantly of all it will have done more to promote the sustainable economic development of the region than perhaps any project of its kind before. For more information about Petroperu visit: www.petroperu.com.pe
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Initiating a revolution
President of PZS Stabilization, Bruce Coulthard discusses the creation of the company’s SNCA Products’ SGA-1 and how it is set to revolutionize the oil and gas industry’s hydraulic fracturing process to extract oil and gas
written by: Will Daynes research by: Robbie Hodgson
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PZS Stabilization-SNCA Products
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SGA-1 has no adverse environmental impact
PZS Stabilization-SNCA Products
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his move into the oil and gas hydraulic fracturing market is something that’s new and exciting for our company,” enthuses Bruce Coulthard, President of PZS Stabilization LLC. The move in question has come as a result of forming a manufacturing company, SNCA Products LLC, and including exclusive rights to distribute a revolutionary new line of products globally. One of those products, SGA-1, is formulated specifically for the hydraulic fracturing process of oil and gas extraction - also called “fracing”. Until now, the lack of an alternative product has resulted in the oil and gas industry using millions of gallons of hydrochloric acid and other toxic chemicals in the fracing process. A semi-noncorrosive acid in the company’s SNCA Product line, SGA-1 has been specifically designed to replace hydrochloric acid with hydronium. Unlike hydrochloric acid, SGA-1 has no adverse environmental impact. The basis for this revolutionary scientific technology is a patented stabilization and production process related to the H9O4 molecule. The proprietary system enables isolation of hydronium, the ion that determines the pH of acids. “This is a product,” Coulthard continues, “that you can literally hold safely in your hands, swipe across your lips and use down the hole of a well. It’s really that safe to use. The seeming contradiction though is that it’s powerful enough to dissolve rock in much the same way as hydrochloric acid without creating the same ground water contamination, worker safety and fume problems.”
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A stable acid that does not decompose under normal conditions, SGA-1 completely dissolves calcium, iron, zinc, magnesium and mild-steel and is readily biodegradable, breaking down into water and oxygen. Confirmed by independent testing, the product has a dermal toxicity similar to water and has been awarded a Hazardous Materials Identification System rating of zero. “Perhaps the greatest benefit of this formulation is that its base components are food grade.” Lab tests on SGA-1, conducted using FDA Antimicrobial Effectiveness techniques have been nothing short of striking. The product passed the test with 100 percent kill rates for E.Coli, Staph aureus and other bacteria and virus remain even from 1-14 days. Tests on Phytophora Ramorum have the recorded the same results. The task of spreading word of the product is already well underway with the company making strong use of social media and with Coulthard himself deep in discussion with as many as nine of the largest players in the oil and gas market. “Early reports have been astoundingly positive and there is a growing buzz in the industry,” he highlights. “More and more companies are starting to understand that use of this product has political, environmental and economic
advantages and that discarding old methods is simply the right thing to do.” Strictly from an economic perspective, one of SGA-1’s core benefits is that it may allow the oil and gas industry to get far more oil or gas to the surface and increase daily production. Looking forward, however, when it comes to how this revolutionary
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PZS Stabilization-SNCA Products
Bruce Coulthard, President of PZS Stabilization
product will shape the future not a start-up venture. But, of oil and gas operations, while one can’t realistically Coulthard is convinced that say that within six months it will be intertwined with every oil and gas company greater field use. “In a way, will be putting this product the oil and gas industry down their drilling holes, The length of time spent researching and will effectively become our it has not stopped us developing the product partner going forward. Our from strategically planning technical staff is getting for rapid expansion and them started, but in turn, putting new manufacturing their engineers will give us feedback so we facilities in key regions across the globe.” may focus on the manufacturing options we Having firmly established itself within many have available. It will help us develop the industries including the mining sector with its work on stabilizing soils and controlling next generation of products.” “Where we are today is a result of eight dust, PZS Stabilization’s foray into the oil and years of research and development. This is gas industry is very much seen within the
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“we have proven our commitment to sell environmentally-responsible products that actually work” business as being a natural progression. For his part, Coulthard’s focus in the short term is to create a financially stable business model that is environmentally-sound as well. “By selling first our PennzSuppress dust control product and now our SNCA Products, we have proven our commitment to sell environmentally-responsible products that actually work,” Coulthard
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proudly states. “I think it’s fair to say that with a product as powerful as this, we can make a difference. Chemically, it speaks for itself,” Coulthard says. “It really is amazing what this product is capable of doing in so many differing industries. It will control TCA, the cause of cork taint in the wine industry, as well as other microbial problems in the horticultural
PZS Stabilization-SNCA Products
SGA-1 has multiple uses across other sectors such as the horticulture, healthcare and wine industries
sector while also being useful in treating burn victims in war zones and burn centers throughout the world,” Coulthard says. “The oil and gas industry has started taking it seriously because it’s a resource that can solve all manner of operational issues while increasing its ability to be even more proactive on justifiable environmental concerns.” In advance of what the company sees as the expected demand for the product, PZS Stabilization has made efforts to automate the production process so that it could conceivably produce 100,000 gallons of SGA-1 per day per facility with only a few people overseeing the automated plant. It’s even possible that larger oil and gas companies will want an onsite manufacturing unit to potentially reduce costs.
As Coulthard himself concedes, the truth is that there are still multiple manufacturing and use possibilities at this stage in the game. “While we can’t be one-hundred percent certain what the years will bring, it hasn’t stopped us from looking at the future of SNCA Products broadly. We’ve mastered making a new, important product. Our job right now is to get it out to as many people as possible so they can see for themselves just how revolutionary it is. For more information about PZS Stabilization-SNCA Products visit: www.pzsstabilization.com
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Chantier Davie
More than shipbuilding Davie is more than just Canada’s largest shipbuilder – more than any kind of shipbuilder: its ability to provide end-to-end turnkey solutions and its strategic location makes Davie an ideal partner for a range of industries from oil & gas to defence
written by: John O’Hanlon research by: Celina Bledowska
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Chantier Davie
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he Davie shipyard at Lévis, just director of that company and Davie’s present across the Saint Lawrence River CEO Alan Bowen, conducted a thorough due from Quebec City, traces its origins diligence exercise before committing to their back to 1825 when it was founded bid, which was accepted in November 2012. by an English sea captain called The yard has had many different owners, Allison Davie. Over its long lifetime it has but none with the experience this team built more than 700 vessels and drilling and had in working with investment companies production platforms and seen shipbuilding and turning around distressed shipbuilding technology develop from wood and sail. During assets. “Before we bought Davie we spent World War II, Davie built 35 warships (mine about nine months actually at the shipyard sweepers, corvettes and destroyers). Davie has with a team of about ten people with a mixed also fabricated numerous other products for a set of skills – technical, legal, commercial, variety of industries including financial, operational and power, defence and transport. the like – looking to see what It is not altogether clear had gone wrong before, and how we could make it better.” how Davie got into such Ultimately, he points out, a mess, culminating in its failure to be selected for the Davie is the largest shipyard Canadian Government’s $33 in Canada, one of the biggest billion National Shipbuilding in North America, and one Cost of each vessel Davie Procurement Strategy (NSPS) of the largest general steel is building for Cecon in 2011. Not for the first time fabrication sites with coastal in its long and largely very access in Canada. It may not distinguished history it had been rescued from have built a ship since 1997 but it has completed administration, this time by a joint venture some very big projects, equivalent in scale to a between the leading Canadian engineering new build, including the conversion of LASH group SNC Lavalin, a Korean shipbuilder and carrier to a DP pipelay vessel as well as a major the Canadian Upper Lakes Group. However upgrade for a Petrobras semi-submersible when it failed to get any part of the major production platform to almost double its defence business these backers pulled out and production capacity. the provincial government of Quebec, which One of the things that gave ZM Industries had been putting money into the yard to keep an edge over its competitors – and there were it ticking over, was again left with the problem several heavyweight international groups of what to do with it. involved in the process – was its singleThere followed a period of uncertainty, minded commitment to the acquisition, culminating in the purchase of Chantier Davie Vicefield thinks. “We took a big risk by Canada Inc by ZM Industries, an O&G service dedicating a significant amount of resource group. The ZM team led by Alex Vicefield, a to the project, commissioning environmental,
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legal, operational and management studies and getting vendors in at an early stage to see where improvements could be made. I think that stood us in good stead during the bidding process.” One of ZM’s core competencies, he adds, is its project management experience. Just before the purchase of the Davie yard the company had completed the $100 million conversion of the oilfield installation ship Sampson to a pipe-laying vessel. By giving the job to the Viktor Lenac yard in Croatia, itself just out of bankruptcy, he says, the job was done to international standards of quality, at the lowest possible cost: the high risk was offset by putting together a team of experts from within the group and running the project on best yard management practice. With unequalled skills and all the scale necessary, Davie was nevertheless stuck with some outdated systems and practices. The biggest change has been a radical change in the manner of working there, says Vicefield. “Previously they were doing ‘build by discipline’, which meant that teams of electricians, welders, pipe-fitters and so on would be working simultaneously across the whole ship. During the due diligence we noted that was causing a lot of reworking. We changed that to a ‘work zone’ and ‘work package’ approach. For each work package we separate the ship into zones and have a zone manager responsible for each. That allows us
to keep real time control of the build and it is a more accurate way of measuring progress than simply counting the man-hours spent. This way we can record the work packages as they are completed: it is much more accurate.” Another major departure was to install an RFID system throughout the yard, working in parallel with the shipyard management system that covers all functions from procurement to workflow management, financial controls, health and safety and HR. Workers had been used to using paper clock-in tickets: now they
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Chantier Davie
The senior management team
have RFID swipe cards, and The contracts were worth the completion of every work something in the region of package is logged in real time. $170 million each - a major In addition to its knowledge headache for Cecon that first of shipyard management one brought Alex Vicefield and ZM into the picture: “They were of ZM’s key strengths was the financially heavily reliant on ability to unpick the complex Davie’s weekly steel financial involvement of the those ships being delivered,” construction capacity he says. The financing that several interested parties. Davie is of strategic important had been arranged with major to the provincial government international bondholders and the federal government but also to the had to be restructured, and Vicefield was owner of the three vessels that were already appointed to the Cecon board to represent under construction in the yard. The Norwegian these bondholders’ interest. “When the offshore and subsea installation contractor opportunity came up to buy the shipyard we Cecon had contracted three specialised vessels jumped at it because we knew that it was a for pipe-laying, installation ROV and seismic unique facility in terms of the O&G business, work in 2007 but in 2010 work was suspended. let alone its other potential.”
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With more than 750 lawyers and other professionals in six Canadian cities, Borden Ladner Gervais LLP (BLG) is a pre-eminent full-service, national law firm focusing on business law and commercial litigation solutions for our clients. As legal counsel to Davie Canada Yard Inc., we understand the complex legal and practical issues that present unique business, regulatory and legal challenges to our clients of the Transportation industry as well as the Oil and Gas industry. For further information, visit blg.com or contact: Marc Babinski | 514.954.2566 | mbabinski@blg.com Marc Duchesne | 514.954.3102 | mduchesne@blg.com
Calgary | Montréal | Ottawa Toronto | Vancouver | Waterloo Region Lawyers | Patent & Trade-mark Agents Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.
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Seen
Contact us today and put your company in the spotlight!
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Naturally the first priority was to restart the work in progress on the three ships awaiting completion. The sale of Davie to ZM Industries in December followed by the completion of a $280 million financing agreement with York Capital Management on 20 February this year came as a huge relief to the shipowner. The first vessel, already 80 percent complete, will now be delivered by November of this year. The other two will follow in 2014. With the business secure, other pending projects could go ahead. As we said, Davie has over the years been a strategic asset to the Quebec government. On May 16 its ferry operating agency La Société des traversiers du Québec (STQ) was able at last to confirm its order for two dual-fuel LNG ferries to operate on the St Lawrence River. Each 92 metres long,
Chantier Davie
A vessel under construction
these vessels will have over 625 lane metres across two decks, allowing the transport of over 115 vehicles, 200 passengers and ten heavy goods vehicles. The dual-fuel LNG engines, an environmentally friendly choice, are a perfect fit with Davie’s specialisation in advanced propulsion and vessel manoeuvring systems says Vicefield. “We come from the O&G sector where you build vessels with unique designs rather than churning out
commoditised vessels. This allows us to play on our core skills in specialised propulsion systems and unique designs.” Alan Bowen, the CEO of Davie is a global authority on dynamic positioning (DP) systems, he adds. The vessels being built for Cecon are to be equipped with DP3 dynamic positioning systems, the highest grade with least two independent computer systems and a separate backup system. It’s one of the reasons why ZM
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was undoubtedly a better owner for this yard than any of the large Asian shipbuilders that had expressed an interest. Such companies are versed in the production of commoditised tankers and container ships whereas ZM has brought in the know how associated with the specialised, highly customised vessels needed increasingly by the hydrocarbon sector, as well as defence and even fishery customers. Among the residual equipment at the yard is the commencement of a project to build two
accommodation vessels for 400 personnel – also with DP as an important part of the spec. That project was stalled when the original client went bankrupt, but Davie is now planning to build these and either operate them on its own account or lease them out. “The market for vessels of this kind is very strong at present,” he says. Losing out on NSPS was undoubtedly a kick in the teeth for Davie, but the situation is different now. The yard that was chosen is much smaller
“We have never been to a shipyard where we have seen such high quality workmanship in welding and the other key shipbuilding skills”
Working below decks
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Chantier Davie
The fabrication workshop
capacity than Davie, with a steel construction capacity of around 70 tonnes a week against Davie’s 300. Nevertheless there is still a lot of defence work to be contracted out, and in any case NSPS would have tied up the shipyard for many years to come, which may not have been the ideal situation for a company that could still mop up much of the requirement for auxiliary naval vessels, and in the immediate future the coastguard fleet and O&G exploration vessels. As the only Canadian shipyard with the capacity to take on these requirements it has a strong competitive advantage: if anyone wants to operate in Canadian waters for over a year the vessel has to be registered under a Canadian flag, meaning being built in Canada – or pay an import tax of 25 percent!” Alex Vicefield is clearly enthusiastic about
the future for Davie. Under the Plan Nord Quebec is investing $80 billion in developing mining, fishing and energy industry in the north of the Province. “We are working with the government of Quebec to meet some of the needs of that infrastructure development,” he says. “And the quality of the workmanship here is nothing short of unique. We have never been to a shipyard where we have seen such high quality workmanship in welding and the other key shipbuilding skills. This is the best deal we have ever done, and I’d say our problems now are all high quality ones!” For more information about Chantier Davie visit: www.davie.ca
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University of Kentucky - Lean Systems Program
Adopting the lean approach
More companies than ever before are taking part in The University of Kentucky’s Lean Systems Program. Program Director Glenn Uminger discusses just what it is that makes the lean approach so attractive
written by: Will Daynes research by: Vince Kielty
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wouldn’t say I have seen a change in the market in recent years, so much as that I have witnessed an increase in realisation from companies and businesses that in order to implement lean correctly it requires the understanding of management, strong leadership and a complete culture change,” explains Lean Program Director, Glenn Uminger. “So many organisations have tried in the past to implement lean and have come up short in their goal. It is only when they understand that culture change and leadership have to be foundations on which to build that they start to see the benefits take hold.” The lean approach to manufacturing was first developed by Toyota’s Taiichi Ohno in the aftermath of the Second World War. In the decades since, the lean approach has spread across the globe, delivering vast improvements to the manufacturing sector in the process. It was during the 1990s that Toyota began working with the University of Kentucky’s (UKy) College of Engineering to develop the Lean Systems Program (LSP) to help impart the true philosophy to nonToyota companies in the US. In more recent times the approach has also spread into all areas of business and industry, from health care and retail, through to financial services and government. “When it comes to organisations and businesses using lean,” Uminger continues, “there has certainly been much more movement beyond just production and manufacturing, with all manner of industries realising that this approach applies everywhere, in all
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Students performing standardized work on a moving assembly line
University of Kentucky - Lean Systems Program
types of businesses and in all parts of the organisation itself.” In Uminger’s opinion, this desire and drive to adopt a lean approach to business is a direct result of increased competition and a continuous need for self-improvement. “The first thing we do,” he says, “is give companies a total perspective of what lean is, which includes the concepts of clear vision, leadership, culture change, having the right people in the right places and systematic problem solving methods.” What people behind the LSP find is that companies that approach them get most excited about the idea of improving their problem solving capabilities, often because they see it as a quick way of getting results by taking something that they do and making it better. “What we find we have to do in this situation,” Uminger highlights, “is rein them back in somewhat and explain that problem solving is in fact the end game. Having a problem solving culture throughout your organisation is what you want to end up with, but to get there you have to ensure that all the pieces of the puzzle are in place to support such a culture. This includes creating an environment where people feel free and encouraged to raise concerns
and problems in the first place, and having management that shows its appreciation to those who do so.” This September will play host to the third annual Lean Users Conference and Uminger hopes that it will follow in the footsteps
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University of Kentucky - Lean Systems Program
Students engage in problem solving and learn to apply lean principles to standardize and improve processes
of the two that have come before it. “The 2012 Lean Users Conference,” he enthuses, “was very successful and provided a forum for a wonderful exchange of ideas between our associated companies, each of which brought with them a very clear presentation of improvements that they had made through their use of the lean approach.” One such presentation came from a hospital, which highlighted the changing performance of a particular state clinic. Previously, said clinic suffered from having a 40-day waiting period for those wishing to receive care, the consequences
of which included falling patient numbers and revenue. “What the hospital did,” Uminger says, “was rebuild the clinic from the ground up using all of the lean principles. The result of this was a reduction of the waiting time to two weeks, which remains a leading figure amongst the clinics’ competitors. This has in turn brought patient levels back up, brought in increased revenue, but most importantly the use of lean principles has led to an improvement in patient care levels.” Part of the focus of the LSP over the last year or so has been to become
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much more actively involved with those companies looking to implement the lean process throughout their operations. This has meant a more active approach to coaching, physically going to the company ’s premises and from there developing a clear picture of what a true lean organisation should look like. “What this approach has done,” Uminger says, “is move us into a real world scenario where we are applying and implementing what we teach. Again, this is a process that takes time, but it is one that has already begun reaping rewards. It also enables us to coach companies on a deeper level, allowing us to apply to the teaching what we ourselves have experience with clients in the field.” The vast majority of those that use the lean approach would agree that the key to achieving the ultimate goal of being a lean business is having fundamentally good management and strong leadership in place throughout an organisation. “Leadership is the starting and ending point of it all because it is the leaders who help create the culture that everybody then follows,” Uminger concludes. “I am a firm believer in that principle. It is the essence of what lean is all about and personally I have yet to come across any organisation for which the true lean approach does not work.” For more information about University of Kentucky - Lean Systems Program visit: www.lean.uky.edu
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Program instructors provide frequent one-to-one coaching to clients taking any course
University of Kentucky - Lean Systems Program
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SMTC
The perfect manufacturing partner President and co-chief executive officer, Claude Germain, and executive vice president and chief operating officer, Paul Blom, discuss how the company has successfully evolved into the business that it is today
written by: Will Daynes research by: Candice Nice
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SMTC PCB Test
SMTC
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oday a global Tier II Electronics grow its top line significantly more than Manufacturing Services (EMS) the industry average as a result of its focus provider, delivering integrated on business development and account cont r ac t ma nu f ac t u r i ng management. “While we are not of the services to original equipment view that we can reinvent the economics manufacturers within the industrial, of being a Tier II EMS player,” Germain computing and communication market continues, “what we do know for sure is segments, SMTC has come a long way in its that we can always do a better job when it comes to driving our top line. Thanks to our 25-plus year history. After going through a phase of adoption of various strategic initiatives we consolidation during the 1990s, the market have been able to grow our top line in the crash of 2001 resulted in the company, last year by as much as 36 percent. It was headquartered in Ontario, Canada, having this achievement that saw SMTC presented to deleverage its assets in fairly rapid order. with the Frost & Sullivan award for being This led to a near ten year the fastest growing global period where the company EMS player in 2012.” focused itself on retaining a Where the company has solid balance sheet. garnered similar praise over “By 2011, the process the years is in its use of world class IT systems and tools to of deleveraging was Top line growth SMTC largely complete,” explains support the core processes has achieved over the president and co-chief related to engineering, supply last year chain and manufacturing, executive officer, Claude Germain, “so we embarked providing customers with upon a more balanced strategy that focused significant added value. on growing our operating cash flow, and “The IT systems we utilise,” states executive increasing the investment in our business. vice president of operations, Paul Blom, “are Since 2011, and by reducing our costs and absolutely key to our success, and to the increasing our top line, we have generated services that we bring to our customers. additional cash. We have invested this into We leverage Agile and Valor to support working capital to support our top line engineering and new product introduction growth, into upgrading and modernizing activities. Agile is also key to the management our equipment, into engineering and of several hundred thousand part numbers design, and into mergers and acquisitions.” and a high volume of customer engineering Business conditions in the electronics changes per year. Meanwhile, on the market have a tendency to oscillate from procurement and quoting side, Quotewin by year to year. Though 2012 was not a stellar PolyDyne is used to support a global quoting year for the industry, SMTC was able to and commodity management process. And
36%
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As the leading provider of strategic sourcing and quote management software, PolyDyne solutions streamline processes in product costing, commodity management, contract negotiations and outsourcing decisions.
Email us at: info@polydyne.com 512-343-9100 www.polydyne.com
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Contact us today and put your company in the spotlight!
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SMTC finally, Kinaxis is used to Exact MAX execute planning, demand With decades of experience serving entrepreneurs, Exact simulation and production understands the issues that manufacturing companies face planning activities.” when running their business. Exact MAX helps growing These platforms have manufacturers control their resources with an easy-to-use been tailored to perfectly solution that reduces the cost of manufacturing, automates complement one another manufacturing compliance, and improves profitability all while enhancing customer service and satisfaction. and remain constantly Through seamless integration with Microsoft Dynamics GP and updated so as to provide Intuit QuickBooks, MAX offers the power of integrated ERP SMTC with the most up-toand boasts a particularly strong footprint with manufacturers date data available when it that must maintain compliance with government or industry comes to customer forecasts, regulations, manage recalls and control and document product bills and materials and revisions and engineering changes. engineering changes. By max.exactamerica.com updating the said platforms on a continuous basis the company is able to ensure that it is always procuring and quoting parts at the most accurate of levels, while also doing a rapid job of introducing new products. “Increasing SMTC’s contribution to each of our customer relationships,” Blom highlights, “is our value engineering team. Working closely with our customers, leveraging the skills of our strong internal team, and involving external partners, we identify appropriate opportunities to achieve cost and lead time reductions. The SMTC value engineering team focuses on design-for-manufacturing, design-for-supply SMTC engineering
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“I see SMTC continuing to evolve the ways in which we deliver services to our customers, and investing further in both IT systems and employee skills” chain and the leveraging of SMTC’s global procurement capabilities.” Another example of the way SMTC strives to work with customers every step of the way, is its ability to undertake what it calls AVL expansion projects. It is during these that
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the company goes back to its customers and presents recommendations on who to add to the approved vendor list on the bill of materials to drive cost and lead time reductions, and product life cycle optimization. “During these AVL projects,” Blom says,
SMTC
SMTC manufacturing plant
“we focus on several key areas, the first is driving cost reduction by leveraging our preferred suppliers. The next is a focus on risk reduction and improved continuity of supply, particularly during periods of material shortages – here we look to increase the number of options available for global sourcing of components and assemblies.” Looking forward, Blom points out that SMTC’s customers will continue to experience various competitive pressures within their markets, thus they will continue to turn to SMTC to provide proven value engineering and supply chain solutions. “I see SMTC as
a business continuing to evolve the ways in which we deliver services to our customers, while at the same time investing further in both IT systems and employee skills. Each customer has different needs, evolving over time. It is key that we proactively anticipate these requirements, bringing the right solutions to our customers at the right time, in order to address these needs.” For more information about SMTC visit: www.smtc.com
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Polycorp Ltd
FLEXIBLE FORMULATION Polycorp is a specialist in polymer products for the transportation, industrial and mining sectors: for two successive years selected as one of Canada’s Best Managed Companies, it is growing fast and focused on international expansion
written by: John O’Hanlon research by: Jeff Abbott
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Transportation railseal extrusion
Polycorp Ltd
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t was in 1988 that BF Goodrich, the company that first discovered how to bond rubber to steel, decided to divest the industrial businesses it had accrued and focus on its aerospace assets. The US rubber lining business was sold to RJF International Corporation, while its Canadian operations to Epton Industries Incorporated. In 1996, Peter Snucins purchased the assets and intellectual property of Epton Industries and created Polycorp Ltd in Elora, Ontario. On August 26, 2002 Polycorp purchased Polymeric Protective Linings, the RJF International business, establishing Polycorp as the largest manufacturer of rubber linings in North America, and heir to an accumulation of unrivalled know-how in the field of polymers going back nearly 90 years. There are many industrial applications for rubber. Polycorp made an early decision to focus its R&D investment and marketing on just three strategic areas: Transportation, Protective Linings and Mining. “One of the things that makes our company unique is that we have these three divisions,” says Vice-President and General Manager Andrew Haber. What is common to each division is the design and use of rubber to protect against corrosion, wear, impact, noise and vibration. The three divisions, all serving growing markets, are roughly the same size when it comes to sales turnover. The key strategy in each sector is to position Polycorp strongly with its customers in North America, then expand into markets around the world where similar technologies and issues are encountered. The policy has been a success as evidenced by its sales growth – from $66
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Congratulations to Polycorp’s success. AirBoss is proud to be a supplier to this world class company.
Polycorp Ltd million in 2012 to an expected Airboss $75 million this year. “The AirBoss develops, manufactures and sells high quality, target is to hit $100 million rubber compounds. We also engineer and mould specialty by 2015,” says Haber, “and rubber-based products for the transportation, defense this will be largely achieved and industrial markets as well as for our own proprietary through export growth.” designs of military protective wear. Transportation does not With a capacity to supply over 250 million pounds of rubber annually to a diverse group of rubber manufacturers, adequately describe what the AirBoss is one of North America’s largest custom first of these divisions does, compounding companies. Our shares trade on the TSX though it was this market under the symbol BOS. that prompted Polycorp’s Our formula for delivering what our clients demand— owner, President and CEO products that offer enhanced productivity and Peter Snucins to purchase the performance—is built on three pillars: Consistent Quality, company in the first place. Cost Efficiency and Dependability. www.airbossofamerica.com Polycorp’s Epflex Railseal Interface is designed to match the contours of the rail at freight railroad level grade crossings. Epflex Railseal Interface is an extruded virgin rubber profile designed to absorb the destructive energy from both rail deflection and vehicular traffic thereby extending the crossing life and significantly cutting maintenance costs. “Polycorp guarantees Epflex Railseal Interface to be reusable for at least two grade crossing rehabilitations. This translates to a lower cost per year in crossing maintenance when amortized over
“Liner replacement is a critical part of the entire mine operation”
Mining press
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$100 million Targeted turnover 2015
Mining hand lining
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the products life,” Haber says. In recent years, the Transportation division has developed a Track Encapsulation System for urban transit systems. “We looked at the expanding market in light rail transit systems, street cars and tramways being installed across North America in cities such as Toronto Ontario, Salt Lake City Utah and Houston Texas,” says Haber. A rubber system provides several benefits in these applications. Noise and vibration reduction is very important in urban areas of course, but these systems also call for the electrical isolation of the whole rail, since what is called ‘stray current corrosion’ can damage pipes and other underground structures in the vicinity. With many North American cities installing or extending transit networks, this is a growing market segment for Polycorp. These projects do not happen overnight and there is always a long commissioning and engineering design stage to go through. To develop the international market, Polycorp is working with engineering design firms such as Alstom, transferring North American designs and technology to other geographic regions. The Protective Linings division is where Polycorp’s chemistry expertise comes in strongest. It has a huge portfolio of over
Polycorp Ltd
Mining press line post curing
80 lining formulations and decades of proven performance in their application in industrial situations that call for protection of tanks, pipes and equipment from corrosive or abrasive environments. The material is supplied uncured, applied and then cured in situ to form a continuous protective rubber membrane. In many cases the lining can last over ten years, dramatically increasing asset life for customers. “An engineer can expect to specify these materials only a couple of times in their career. Mitigating the risk associated
with hazardous materials is a key factor in their decision making process,” Haber says. Polycorp chemists are constantly working with customers to develop new formulations to suit whatever aggressive chemicals they may need to handle. Mining, the third division, is particularly buoyant at this time. In this market, Polycorp is a leader in designing and manufacturing grinding mill liners. Ball mills, semiautonomous grinding and autonomous grinding mills require a replaceable liner
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ETSM specialises in the custom design and manufacture of Coil Winding Equipment & Metal Fabrication Services
We offer a diverse range of technical services to include: • Custom machine design • Machining • Welding • Automation and process control • Millwrighting • Sheet metal fabrication • Prototypes • Small Production Runs Telephone: 519-827-1500 | Email: sales@etsm.com | www.etsm.com
NEW PRECIOUS RESOURCE DISCOVERED
Click here to visit our dedicated homepage for the mining community www.bus-ex.com/mining BEST PRACTICE IN MINING
Polycorp Ltd systems to protect the mill shell and to enhance the ETSM has formed a long standing relationship with movement of the ore slurry Polycorp by specializing in CWB custom welding services. for optimum throughput and In addition, we pride ourselves on being master machine grinding performance. Mill builders. We specialize in the custom design and liner replacement is a critical manufacture of coil winding equipment for the electrical part of the entire mining transformer and power distribution industries, and also have the expertise to build custom machinery for the metal operation. If the mill stops, forming industry. the whole process stops. It www.etsm.com is critical that the mill liners achieve the required service life. “Preventive maintenance schedules depend on replacement on a regular basis. If you are off by a week they have to do an unplanned shutdown – and this can have huge financial consequences,” Haber points out. Mill liners can be designed to last anywhere between three months for aggressive applications in large SAG mills, to a couple of years in smaller ball mills. There are three types of mill liners, Haber explains, all steel, all rubber and rubber/steel combinations where the rubber is moulded to a steel insert providing protection at the leading edge. Manufacture of these parts is highly customised, with each mill having its own specification and design. Over the last four years Polycorp has focused its R&D toward the advanced design and engineering of these parts, working with Dr R Rajamani
ETSM
90 years Polycorp’s technical heritage Mining finishing saw
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at the University of Utah who has developed computer models that simulate the flow of ore slurry through grinding mills. This virtual prototyping approach allows for evaluating different ways mill managers and engineers can run the mill and find what design gives the best efficiency and the longest life to different parts. “Our approach to mining has become more design intensive as opposed to a materials approach. The right formula is one
essential ingredient. Mill liner design is just as important in getting performance right.” Mining looks to represent the largest market potential for Polycorp, with geographic expansion opportunities leading the way. “We are targeting regions under serviced by our competitors. Currently we are pursuing opportunities in Kazakhstan, Mongolia and in emerging resource-driven African countries like Ghana, Mali and Ivory Coast,”
“Our approach to mining has become more design intensive as opposed to a materials approach. The right formula is one essential ingredient”
Protective linings warming mill
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Polycorp Ltd
Mining press
says Haber. In these markets, developing local agents with a good understanding of the mine operations is a key. Manufacturing, engineering, customer service, sales & marketing and product development for each of the divisions is located at the Elora Ontario plant, a lean operation employing just over 150 multi-skilled people. The company has been investing to grow its manufacturing capacity. In 2012 a third calender line for manufacturing Protective Lining products was launched. Currently a very large multi-daylight press and automated handling systems for manufacturing mining products is in the process of being installed. These investments will ensure that Polycorp has the capability to support its $100 million vision.
Last year, the management team was honoured with being raised to the pantheon of Canada’s 50 Best Managed Companies sponsored by Deloitte, CIBC, National Post and Ontario’s Queens School of Business. Re-election as one of Canada’s Best Managed Companies this year, underlines the through-and through excellence of the business. “It provides our customers with independent validation of the soundness of our business strategy and commitment to the industries we serve” says Andrew Haber. For more information about Polycorp Ltd visit: www.poly-corp.com
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Metro de Santiago
Serving Santiago CEO Roberto Bianchi talks about the extensive expansion programme being undertaken to improve the infrastructure of what is South America’s largest subway system
written by: Will Daynes research by: Louisa Adcock
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Aerial view of the Metro line runing through Santiago
Metro de Santiago
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ounded in 1542, Santiago has been the capital city of Chile since colonial times. Located within the country’s central valley, its cityscape is shaped by several stand-alone hills and the Mapocho River. Situated mere hours away from both the mountains and the Pacific Ocean, visitors to Santiago are also treated to views of the iconic Andes Mountains from most places across the city. In recent decades Santiago’s steady economic growth has helped transform it into something of a modern metropolis, home to extensive suburban development schemes and a rising skyline that includes the tallest building in Latin America, the Gran Torre Santiago. The city has also developed a modern transportation infrastructure which includes the Metro de Santiago, South America’s most extensive subway system. “It was on 24 October, 1968,” explains Roberto Bianchi, CEO of Metro de Santiago, “that the then President of the Republic, Frei Montalva, signed the decree that resulted in the birth of the Santiago Metro. Just over seven months later, on 29 May, 1969, work commenced on the first stretch of Line 1, between the San Pablo and La Moneda stations. The first journey carrying passengers would take place on 15 September, 1975.” Today the network boasts 108 stations, which cover five lines, four maintenance garages and a corporate office, from which its control centre monitors the whole operation. As of December 2011, the company employed more than 3,200 people in various positions throughout the operation. “Today,” Bianchi continues, “we are
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THALES Thales is a global technology leader for the defence & security and the aerospace & transport markets. In 2011, the company generated revenues of €13 billion with 67,000 employees in 56 countries. With its 22,500 engineers and researchers, Thales has a unique capability to design, develop and deploy equipment, systems and services that meet the most complex security requirements. Thales has an exceptional international footprint, with operations around the world working with customers as local partners. Thales is a world leading supplier of cutting-edge railway signalling solutions for main line and urban rail which guarantee the safe, reliable and convenient transport of passengers and freight. Thales has widespread international experience in all aspects of control and safety technology, network integration and corresponding
services concerning technical operations and maintenance. The product portfolio includes, among others, the following solutions: • AlTrac for interoperable train control also comprising ETCS solutions (European Train Control System), • LockTrac for train routing, also including the leading electronic interlockings from Thales together with field equipment and • NetTrac for network management, disposition and control. Thales provides turnkey solutions that increase performance and line capacity while reducing operating, maintenance and infrastructure costs. Thales’ goal is to be its customers’ long-term partner to help them address major challenges for continual growth. www.thalesgroup.com
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in operation, they will half the travel time for residents living in the northwest and southwest of the city, travelling to the centre. This way, the arrival of the Metro could even bring new job opportunities to parts of the city which were previously considered too far away and difficult to access. “Furthermore” Bianchi says,” our new passengers will be able to access the many services available in the Metro stations. They may, for example, run errands or shop without deviating from the route home, or enjoy the varied musical and artistic events organised by the Corporación Cultural MetroArte (MetroArt Cultural Corporation). We are talking about a Metro which thinks of the people, which incorporates the best underground trains in the world and the most advanced technology.”
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Metro de Santiago
Metro de Santiago prides itself in maintaining the highest standards
Once complete, Lines 3 and 6 will feature some of the most important and advanced innovations on the whole network, from modern platform doors and tracks that eliminate the risk of electrocution, to trains with more security cameras and more efficient driving. Line 6 is expected to commence operation in 2016, with Line 3 to follow in 2018. Total investment has been calculated as being approximately $2.75 million.
The on-going work taking place across the network reaffirms the fact that one of Metro de Santiago’s core initiatives is to reinforce its commitment to its users. One such action it is taking is the implementation of a service strategy called Pasión por el cliente” (Passion for the customer). “We are already developing a series of measures to keep our passengers informed before and during journeys,” Bianchi enthuses.
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“Through the use of social networks like Twitter we have implemented an information system, which, as well as delivering current reports regarding the state of operation, allows us to respond to each and every one of the enquiries we receive from our customers. In the near future we will also implement an information system via text message for cell phones and a special app for smartphones. In addition to this, in April last year the
company created a free phone number (1411), which allows its passengers to make a complaint in the event that they are presented with a situation that involves some kind of risk to health. “We want to continue being the safest public place in Santiago, with 0.37 crimes reported for every million passengers,” Bianchi says. On top of the improvements described above, the Metro is also working to establish is Communications Based Train Control (CBTC)
“The metro is already regarded as an efficient, non-polluting mode of transportation, with very low greenhouse gas emissions”
Metro de Santiago implements initiatives to lower its carbon footprint
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Metro de Santiago
Underground entrance
conduction system. This system will begin operating during 2013 and its introduction will coincide with the arrival of 14 new trains. While the Metro is already regarded as an efficient, non-polluting mode of transportation, with very low greenhouse gas emissions, it remains aware of the responsibility it has to implement new initiatives that will lower its carbon footprint further still. In 2011 the Metro achieved a saving of roughly 63 Gigawatt hours per year, equivalent to the average annual consumption of 35,900 households. During the early months of 2012, Metro reduced its consumption reaching a rate of 2.93 kilowatthours used per month, in comparison with 2.98 in the previous period. “Together with the growth of the Metro
network,” Bianchi continues, “the company promotes non-tariff businesses, the lease of real estate space and the sale of advertising space, aspects which have contributed to the Metro being one of the few self-financed subways in the world. For the local economy meanwhile, the Metro represents not only the generation of jobs, and payment of wages and taxes, but an important support for local companies through their incorporation into our supply chain. These are all things that we hope to continue to contribute towards as we expand the network further in the months and years to come.” For more information about Metro de Santiago visit: www.metrosantiago.cl
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Air Parts International Sales, Inc.
Single source purchasing General manager Michael Peter Balwan, Jr. describes how the company has become a pioneer in the commercial aviation aftermarket
written by: Kenneth Connor research by: James Boyle
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Air Parts International Sales, Inc.
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ighty years ago, back in 1932, “I joined the business in 1961. I was Air Parts International Sales sweeping floors in the warehouse while I Inc. started serving the needs of was still in high school. I eventually became commercial aviation customers a buyer, then a salesman and eventually worldwide by providing a complete took over as general manager. API has been range of aircraft materials, services support a part of my life for so long now that I surely and ground based equipment. “Not every must have Shell Aviation lubricants coursing business can say they’ve been around that through my veins,” he chuckles. long,” says API General Manager, Michael “The success that we enjoy today, like back Peter Balwan, Jr. in 1932, is built on the fundamental principle “By the time World War II broke out of providing personalized and comprehensive the company had moved from Glendale to services and support to our commercial Burbank and in order to support the war aviation customers. We do everything possible effort, we became an aviation overhaul to assist them. We focus on our customer’s buyers and material planners shop. We’d call it an MRO who depend on our speed (maintenance, repair and overhaul) facility today.” and efficiency to keep their After WWII wound down, fleets flying. Airplanes API went back to being a only make money when domestic aviation aftermarket they’re flying; they’re very Air Parts International supplier of materials and expensive machines to have established sitting on the ground. services. “In 1958 my “During the 80 years API father, Michael Balwan Sr., purchased the firm and began changing has been in business, we have steadily grown its focus to target and service international into one of the most experienced and stable airline customers. His first international suppliers in the industry. Based on our record, customer was, Ethiopian Airlines. Back in our customers can rest assured that we will that day, we could only communicate with be here to serve them today, tomorrow, and them by ‘Telex’ an extinct word now, or via in the years ahead,” says Balwan. “Our customers find that one of the a phone patch hook-up through Rome, Italy,” greatest advantages in dealing with us is the says a smiling Balwan. “For 20 years, Ethiopian was our largest convenience of single source purchasing. With international account. Over the years we API, there is no need to waste time and money added Air France, Indian Airlines, Malaysian searching for a variety of suppliers. Whether Airlines, TAP Portugal, HAECO in Hong your list includes an aircraft tow tractor, a Kong, Air Zimbabwe, TAAG Angola and complete jet engine or any other commercial many others as international clients. We’re aviation components, you can let our expert still doing that today. buyers do the sourcing for you,” he explains.
1932
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Some ThingS Were DifferenT in 1932…
But some things never change. Since 1932 Air Parts International has been a pioneer in the provision of spare parts and MRO services to the commercial aviation industry. The world’s airlines know API is there at the ready when needed. We don’t expect that to change any time soon. We’ll still be here, providing the same worldwide service and total aircraft support we’ve delivered these past eight decades.
API/Air Parts International Sales, Inc. Burbank, California U.S.A. T: 1-323-849-2141 • F: 1-818-848-9017 E: sales@apisales .com
Air Parts International Sales, Inc.
Left To Right. Abel Soto, Vice President International Sales. Danilo Ruiz, Sales Manager. M. Peter Balwan, General Manager. Steve Zoelle, Purchasing Manager. Nicolas Zumbiehl, Vice President International Sales
“In our business, when you need something, you generally need it now. To that point, we’re as near to you as your email, phone or fax machine. Your enquiry will be acknowledged immediately and in any case within 24 hours. Our time sensitive locating and buying procedures enable us to fill orders in the shortest possible time and most importantly, at competitive prices.
“Your order will be packed and shipped to any point in the world via the most expeditious routing, using the best carrier operating to the destination. API’s broad and deep international shipping experience will facilitate the timely delivery of your goods to and at the destination. No one with a grounded aircraft likes to have an urgently needed shipment hung up in customs for days.
“Airplanes only make money when they’re flying; they’re very expensive machines to have sitting on the ground” be americas | 245
The shortest elapsed shipment time wins in this phase of the game,” notes Balwan. Air Parts International Sales, Inc. representatives regularly call, in-person, on customers in all parts of the world. “Whether it’s a new customer or one we’ve seen frequently before, our sales team are there to answer your questions and to become more familiar with your individual operation and particular needs. In addition and for your future reference, you will be supplied with informative and current literature on the specific products you buy from us. Remaining sensitive to the diverse and ever changing needs of our clients is one reason API enjoys a reputation for consistent professional service.” Looking at API’s sales brochure you’ll see: “Call us - we will respond to your emergency whether it is an aircraft-on-ground situation (AOG) or a ground support system problem. Count on us - you have access to our staff and services 24/7, 365 days a year.” Nicholas Zumbiehl, API’s vice president international sales stated: “We can also handle your repair orders on rotables when your airline doesn’t have in-house capability. Your material would be cleared in the US, picked up from the airport, delivered to the manufacturer, overhauled, and returned to you. Likewise, one-to-one exchange
arrangements for rotables can be done as and when required.” GM Balwan said: “Air Parts International Sales, Inc. is familiar with various terms of payment: letters of credit, documentary drafts, wire transfers, etc. We can also arrange open accounts with credit limits to cover normal day-today transactions for which documentary procedures can be cumbersome.”
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Air Parts International Sales, Inc.
Quality assurance All material requiring an FAA authorized repair station certification will be tagged with the appropriate FAA/EASA tag. All factory new FAA Class II units will be supplied with the manufacturer’s Certificate of Conformance and/or the Airworthiness Certificate 81303. FAA overhauled and certified material will also include the 8130-3 Airworthiness Certificate. Class III material- piece parts, hardware or components will not be sold in any condition except new with the OEM certificate of conformance. All shipments will be accompanied by an Air Parts International Sales ATA Specification 106 form. The certificate will describe the condition of material being supplied. Air Parts International Sales, Inc.
has in its records, or those of its suppliers, evidence of the source of the parts being supplied for history and traceability. Rejections will be credited when material is promptly reported and returned in accordance with commercially approved practices. All materials sold to you which were directly purchased from the manufacturer will carry the standard manufacturers’ warranties. Material sold from FAA/EASA airline excess stocks will carry the Air Parts International Sales, Inc. warranty. All material is sold subject to your inspection and approval. For more information about Air Parts International Sales, Inc: sales@apisales.com
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