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Assessing operations risks at a remote mine site

Summary

Broadleaf conducted a review of site operations risks for a remote gold mine, to form the basis for an integrated risk management process for the site. The Board required regular risk reports, and the Mine Manager saw risk management as a key step in a continuous improvement process for mine operations.

We used a risk management process following ISO 31000 to conduct a series of seven workshops covering all the operating areas at the mine. From the workshops we generated a risk register that became the focus of continuing management activities and reporting. It also provided an input to quantitative modelling activities.

The involvement of a wide range of site personnel in the workshops was an important contributor to acceptance of the risk management process and its outcomes.

Introduction

The gold mine was a joint venture between two listed companies. It was located in a remote desert area and staffed on a fly-in-fly-out basis.

Parts of the operation were outsourced to contractors, including mining, some exploration drilling, some explosives management, and management of the 'hotel' services at the mine site – accommodation, catering and cleaning.

We facilitated a risk review of site operations for reporting to the Board, to complement and extend initial risk assessments undertaken by the Mine Manager. This case outlines the processes that we followed and the outcomes of the assessment.

We also conducted extensive risk management training for personnel at the mine, including employees of the JV and contractors. The training activities are not described here.

Approach

The general approach to the assessment was based on the risk management standard ISO 31000.

We facilitated a series of seven workshops.

  • The first workshop focussed on establishing the context, to provide a consistent structure and process for the risk assessments. It had a large training component, to familiarise mine staff with the risk management process, the benefits it would yield and the structure of the assessment workshops to follow.
  • The next five workshops identified, analysed and evaluated risks in five different areas of mine operations.
  • The final workshop addressed risk treatment, implementation and monitoring processes.

Establishing the context

The main activities involved in establishing the context were undertaken through a workshop with senior site personnel.

Stakeholders were considered and the main ones noted (Table 1).

Table 1: Stakeholders

Group

Examples of constituents

Owners

JV participants, shareholders

Traditional owners

Local owners, local indigenous land council, other indigenous owner representative groups

Site and related personnel

Employees, families, consultants, contractors, suppliers, air charter organisations

Government

Mines Minister, Indigenous Affairs Minister, taxation office, other Government agencies

Regulators

Mines regulator, environmental regulators, roads and transport regulator

Others

Natural habitat, environmental lobby groups, the public, the market

The objectives of the stakeholders were considered, and condensed to form a set of six criteria for analysing the consequences of risks:

  • Profit
  • Safety
  • Compliance
  • Image
  • Sustenance (certainty, predictability, continuing operation and employment)
  • Culture.

Key elements were developed to provide the basic structure for the brainstorming activities for risk identification, with different structures for each workshop (Table 2). They were designed to cover all aspects of operations at the mine, and grouped so that personnel only needed to attend the sessions relevant to their expertise and knowledge.

Table 2: Workshop and key element structure

Workshop

Elements

Exploration

Choice of ground, tenements, people and equipment, exploration practice, finance, choice of commodity, data management, interpretation and reporting

Mining and geology

Exploration, surveying, geotechnical, modelling, site preparation, drill and blast, load and haul, grade control, ore cartage, rehabilitation

Processing and laboratory

Crushing and grinding, leaching and adsorption, tailings disposal, gold recovery, sample preparation, preventive maintenance, environment, quality control, instrumentation, reporting

Engineering

Plant improvements, maintenance, power, water supply, cranes, mobile equipment, light vehicles, stores, waste disposal, critical spares

Administration and human resources

Accommodation, industrial relations, health and medical, training and recruitment, communications, contract management, royalties, accounting, accountability and public relations

Risk assessment workshops

The five assessment workshops had several purposes:

  • To identify the relevant risks for each key element and the controls in place for managing them
  • To assess the consequence of each risk on the criteria for the business, given the controls
  • To assess the likelihood of each risk arising at the designated level of consequence, given the controls
  • To derive initial risk priorities from the likelihood and impact assessments
  • To review each identified risk and confirm its priority, given the controls.

For each key element, risks were identified in a structured brainstorming process. Risks were defined as events that could arise and prevent or limit the organisation in achieving its objectives. For each risk, the primary controls in place were noted briefly. The risks and associated controls that were identified during the workshops were listed in a risk register, with the associated consequence and likelihood ratings, agreed priorities and allocated responsibilities. (Note that the focus of these workshops was on threats, where the consequences were negative. We did not pursue opportunities, risks with positive consequences.)

The risk identification and analysis described above was conducted during the initial stage of each workshop session. A second stage was used to review all the identified risks, with their initial priority ratings, to develop an agreed set of risk priorities, given the controls. As a guide:

  • High risks were likely to arise and to have potentially serious consequences, even with the controls in place. They required detailed management planning.
  • Medium risks could be likely to arise, or to have serious consequences, but not necessarily both. They should receive some management attention, but this may be delegated.
  • Low risks tended to be infrequent and of low consequence. They are often managed by routine procedures.

Workshop outcomes and risk treatment

We identified 363 risks in the five workshops, of which 55 had high priorities. For individual risks, the consequence and likelihood ratings provided a guide to the kinds of specific risk treatment actions that may be appropriate, as illustrated in Figure 1.

Figure 1: Guide to individual treatment actions

Several common or related risks were identified in the workshops. In some circumstances, effective risk treatments may be determined more appropriately for groups of related risks rather than on an individual basis. A sample of groups with three or more high risks is shown in Table 3. This grouping was not intended to be definitive, but rather a guide to be reviewed by the appropriate managers when determining whether risk treatment actions could be applied usefully across a range of individual risks (Figure 2).

Table 3: Risk groups (with three or more high risks)

Post-workshop classification

High

Medium

Low

Safety

21

29

34

Equipment

6

18

41

Fire

6

3

Environment

3

6

19

Mining productivity

5

11

18

Process productivity

3

7

4

Personnel issues

3

9

10

Total in all groups

55

117

191

Figure 2: Collective treatment options and trade-offs

Quantitative analyses

The qualitative risk assessments described above were supplemented by quantitative analyses where warranted. Particular areas of interest included modelling the uncertainties in physical measures like quantity of gold produced, and modelling the financial uncertainty associated with the mine plan, the operating budget and operating efficiency measures like total operating cost per ounce of gold. The @Risk package was used for these models, allowing meaningful sensitivity analyses to be conducted and simple graphical outputs to be produced to assist in management decisions.

Specific analyses were also conducted for particular aspects of the operation and particular projects. For example, an analysis was conducted of the variability in completion time for the installation of a new pinion and girth gear for the SAG mill. This was of interest not only as a project control estimate, but also as an input to the mine financial plan as an estimate of the time the processing plant would be running at reduced efficiency while it relied on smaller and less productive mills for processing ore.

Subsequent activities

The Mine Manager subsequently developed a Risk Management Plan for the mine. It covered all aspects of mine operations, with the aims of:

  • Providing a structure for risk management across the business
  • Managing legislative changes
  • Dealing with public perceptions.

Its benefits included better:

  • Understanding of risks in all areas (not only in workplace health and safety)
  • Project financial evaluation
  • Contingency planning
  • Ability to reduce exposures and impacts
  • Mechanisms for monitoring the progressive reduction of risks to the operation.

The Risk Management Plan provided for monthly reviews of risk status to ensure that a progressive reduction in risks was applied to the operation. Risk reduction progress was tracked and included in management reports to the Board and the shareholders.

The risk management process was extended down into site operations to streamline and reinforce the importance of 'toolbox meetings' to discuss safety issues and job safety analyses as part of the site safety management system. An integrated approach to all aspects of risk management was promoted and accepted by the workforce. The involvement of a wide range of people from all areas of the operation in the original risk workshops was an important factor in gaining acceptance for these initiatives.

After a year of implementation activity, the Mine Manager summarised the effect of risk management on mine operations in this way in a presentation to the Board:

Diligent application of these risk management procedures supplies mine managers with tools to:

  • Provide more focussed thinking about risks and opportunities
  • Reduce exposure to bad publicity, legal action and penalties for non-compliance
  • Improve business outcomes for the mine.
Client:
Joint venture between two listed gold companies
Sector:
Mining and minerals processing
Services included:
Risk assessment and risk treatment
Risk assessment