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Capital Projects Services

Capital Efficiency

Challenges mining companies face
Our experience has shown that every large capital project should include a detailed value improvement process coupled with a rigorous capital business case review. The need for a robust process has been highlighted by the current worldwide economic conditions where capital funding is constrained and it is crucial that projects deliver on the promised projected returns.

How does the Deloitte solution address the business issue?
Our approach encapsulates a detailed value improvement process coupled with a rigorous capital business case robustness review. Value enhancement is achieved by working closely with the project team, targeting areas of potential value through various techniques focusing on efficiencies, waste and new sources of value. The position of the project in the overall project lifecycle will determine the focus of the review and the warranted analysis. During the business case robustness review, the business case is evaluated, assumptions tested and validated, while risks are framed and key drivers are modeled stochastically providing a view on the uncertainty associated with the reported project return.

Benefits to your organisation
Big capital projects take a considerable amount of time to develop. During this time many configurations are tested and assumptions made on which decisions are based, while the business case is continuously updated and changed. Since the world can change significantly over the project study period a structured value improvement and business case robustness review could add value by providing decision makers with the peace of mind that the optimal value has been identified and that the project return numbers are sound.

Contact
Louis Kruger
Tel: +27 (0)11 209 6444
Email: lokruger@deloitte.co.za

Navesh Ragoonanthun
Tel: +27 (0)11 806 5000
Email: nragoonanthun@deloitte.co.za

Portfolio Optimisation

Challenges mining companies face
Capital markets expect great things from corporate boards when it comes to capital planning. While stock exchanges follow companies’ short-term earnings guidance, they also value companies based on long-term strategic opportunities and capital spend forecasts. The challenge for an executive board arises when one considers the trade-offs between projects with competing strategic objectives, especially when funding requests exceed available capital or dramatically impact annual cash flows.

How does the Deloitte solution address the business issue?
Capital portfolio optimisation aims to determine which projects should be selected that would maximise the value objective for a certain funding level, while taking into consideration constraints and dependencies. Our approach firstly consists of understanding the corporate strategy and business objectives to optimise towards thoroughly, after which, project data is collated and analysed to insure robustness and consistency throughout. Thereafter advance optimisation algorithms are used to determine the optimal portfolio of project for a specific capital/cost funding level limit.

Benefits to your organisation
Advanced portfolio optimisation analysis has a broad spectrum of benefits for management when it comes to making the correct decision at the appropriate time. Through improving the speed of decision making it allows additional time for management to have executive conversations which unlock deeper insights into their own business. The resultant effect of this process is that managers and the board can rest assured that the decisions they make on capital projects are optimally aligned to maximise shareholder value.

Contact
Louis Kruger
Tel: +27 (0)11 209 6444
Email: lokruger@deloitte.co.za

Werner van Antwerpen
Tel: +27 (0)79 497 5876
Email: wvanantwerpen@deloitte.co.za

Project execution readiness

Challenges mining companies face
Executing major capital projects can involve significant risk with many projects overspend and delivered late. When a project is not set-up for success from the start the project can be over budget and behind schedule from day one.

How does the Deloitte solution address the business issue? 
Our approach covers a review of both the project management framework as well as a review of the various business functions to ensure that the project is ready for day one execution. The project management framework review is based on the key fundamentals of governance, risk management, financial management, and process improvement The purpose of project management framework review is to evaluate the control elements and management practices that most contribute to the project success or failure. These assessments typically focus on the organisation, the financial and management controls, project systems, tools and work processes that have been established as well as those planned for the design, right-of-way acquisition, permitting, procurement and construction of the project. The functional readiness review, is conducted concurrently with the project management framework review and refers to the identification and planning of activities that would ensure that the project is not delayed when execution commences and addresses the readiness of the different functional areas such as exploration, geology and mine planning, development, beneficiation, engineering and maintenance, HR, finance, HSEC, security, systems, services (including ventilation and refrigeration, administration) prior to project execution.

Benefits to your organisation
Major capital projects are expensive and if not managed well delays and over runs could result in major losses. By focusing on the project set-up, processes and frameworks while ensuring project execution readiness the project will be given the best possible chance of success from the start.

Contact
Louis Kruger
Tel: +27 (0)11 209 6444
Email: lokruger@deloitte.co.za

Anton Torlutter
Tel: +27 (0)11 806 5000
Email: atorlutter@deloitte.co.za

Operational readiness

Challenges mining companies face
The high degree of uncertainty that accompanies operational readiness can often be mitigated, simply by identifying the challenges that the project can pose and the impact that these challenges could have on the projects. Understanding the challenges and their potential impact on capital projects provides an indication of the preventative measures required in order to ensure that the project retains the maximum NPV possible. It is often the case however, that these challenges and impacts are not accounted for or factored into the operational planning process in the development phases, negatively affecting the return on investment.

Challenges

Impacts

People readiness

  • Addressing skills and capacity shortages during transition
  • Ineffective service delivery
  • Quality related issues
  • Increased costs due to imported skills
  • Poor safety performance

System readiness

  • Ensuring management information readiness on day one
  • Inability to produce management reports
  • Limiting management effectiveness

Legislative compliance

  • Environmental and socio economic related (license to operate)
  • Late start up due to urgent applications
  • Potential fines or shut downs for non-compliance

Services and infrastructure readiness

  • Peripheral services and external infrastructure
  • Inability to supply necessary services
  • Increased costs for temporary services
  • Delays due to external constraints

Procurement and supply chain readiness

  • Establishing new vendors, necessary infrastructure and systems to support inbound materials
  • Insufficient capacities
  • Stoppages due to stock outs
  • Material and critical part shortages

Equipment readiness

  • Ensuring the timely commissioning and operability of new equipment
  • Delayed start up
  • Slower ramp up
  • Inability to achieve design capacities

How does the Deloitte solution address the business issue? 
The Deloitte experience has shown that project teams have come to understand the capital project assurance imperative, usually applying rigorous focus to the technical design and build aspects of the project. A similar focus on operational readiness is often neglected from the outset, potentially leading to practical challenges in achieving the anticipated return on investment. Deloitte can assist your business in the following key focus areas in order to ensure maximum return on investment:

  • Understanding the complexity of the operational readiness planning
  • Defining accountability and ownership of projects
  • Accounting for a ‘uniqueness’ factor in each project
  • Establishing team integration
  • Structuring the top level correctly
  • Establishing suitable ramp-up plans for the project
  • Establishing operational reporting and controlling

Benefits to your organisation
Operational readiness planning requires consideration, planning and importantly, a budget from as early as the study phases of the project. An operational readiness project plan should be created and integrated into the overall project plan. Making the decision to integrate operational readiness planning into the project development process is the starting point. Effective operational readiness will benefit your business if managed correctly, building the NVP of the project, improving the realisable value of large capital projects and ultimately increasing shareholder value.

Contact
Louis Kruger
Email: lokruger@deloitte.co.za
Tel: +27 83 388 7261

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