Why would a mining organization use KPIs?
Key Performance Indicators (KPIs) are widely recognized as a vital tool for measuring the performance of a business and identifying areas for improvement. The mining industry is no exception, and implementing effective KPIs can provide significant benefits for companies operating in this field. In this article, we will discuss some of the most important benefits that mining companies can gain by using KPIs, and why they are so essential for success in this competitive industry.
Key performance indicators (KPIs) are an essential tool for measuring and tracking progress towards goals in any industry. However, they are particularly crucial in the mining industry due to its high-risk nature and significant environmental and social impacts. Tracking the right KPIs can help mining companies operate efficiently, manage risks, and demonstrate responsibility. This article will examine why tracking KPIs should be a priority for all mining operations, no matter their size or location.
Safety is paramount in mining, where workers face many occupational hazards on a daily basis. Tracking safety KPIs enables companies to identify risks, implement control measures, and evaluate their effectiveness. Some important safety KPIs include:
- Lost time injury frequency rate (LTIFR) - the number of lost time injuries per million hours worked. A low and decreasing LTIFR indicates improving safety.
- Total recordable injury frequency rate (TRIFR) - the number of recordable injuries per million hours worked. Recordable injuries include fatalities, lost time injuries, restricted work injuries, and medical treatment injuries. A low and decreasing TRIFR is a positive sign.
- Number of fatalities - all mining deaths should be measured. A goal of zero fatalities is ideal. Any fatality warrants investigation into causation and prevention measures.
- Safety training rates - the percentage of workers receiving regular safety training should approach 100%. Insufficient training is a leading cause of mining injuries.
- Safety inspection frequency - regular safety inspections and audits should be performed and tracked to identify hazards. Inspections should cover the entirety of the mining operation including equipment, processes, and behavior.
- Safety meeting rates - regular safety meetings allow workers and management to communicate on risks and controls. Safety meeting attendance rates are a useful engagement metric.
By continuously monitoring these and other safety KPIs, mining companies can identify safety issues as they emerge and make data-driven decisions to eliminate hazards and reduce injuries. A poor safety record also impacts reputation and profits, so tracking safety KPIs provides business benefits in addition to protecting workers.
Optimizing productivity and efficiency is a key focus in mining, which involves expensive equipment, labor, and materials. Unproductive mines will quickly find themselves unprofitable. Productivity KPIs to track include:
- Utilization rates of mining equipment - keeping equipment in near-constant use minimizes waste. Low utilization can signal problems like high downtime or inadequate operators.
- Average payload of mining trucks - under-filled trucks waste capacity and fuel. Over-filled trucks cause spillage and strain components. Payload should match truck capacity.
- Throughput of processing facilities - mineral processing throughput indicates how much saleable material is produced. Throughput benchmarking can identify bottlenecks.
- Labor productivity - total tons or ounces mined per worker shows workforce efficiency. Comparing similar operations highlights productivity gaps.
- Cost per ton/ounce metrics - unit costs show efficiency and should be kept low through productivity gains. Labor, energy, materials, contract services and other costs should be tracked.
- Reserve replacement rates - reserves must be replaced as resource deposits deplete. The rate of conversion from resources to reserves should exceed the extraction rate.
Monitoring productivity KPIs allows mining managers to make data-driven decisions on improving efficiency. For example, low truck payload points to a loading inefficiency that could be addressed through operator training and new processes. Productivity gains directly increase profitability and shareholder value.
Mining operations have major environmental impacts, including land disturbances, natural resource use, and waste and emissions generation. Tracking key environmental KPIs demonstrates commitment to responsible mining practices. Important environmental KPIs include:
- Compliance with permits - adherence to environmental permits and regulations should approach 100%. Violations indicate uncontrolled impacts.
- Energy intensity - total energy consumed per ton/ounce of product. Lower energy intensity reduces costs and emissions.
- GHG emissions - total greenhouse gas emissions from mining activities and power consumption. Emissions auditing aids reduction initiatives.
- Water usage - amount used per ton/ounce of product. Water conservation is especially critical in drought-prone regions.
- Rehabilitation rates - the percentage of disturbed land successfully rehabilitated indicates remediation progress. Rehabilitation should begin as soon as possible.
- Recycling rates - for water, waste rock, tailings and other mining byproducts. Maximizing recycling reduces consumption and disposal volumes.
- Environmental incidents - spills, permit exceedances and unplanned releases should be minimized through controls. A worsening incident trend warns of insufficient risk management.
Publicly reporting performance on these KPIs demonstrates environmental stewardship. Transparency creates trust with stakeholders and motivates continuous improvement. Poor performance flags the need for increased investment and management focus on environmental aspects. Responsible mining operators realize minimizing impacts is an ongoing process, with KPIs as objective guideposts.
In addition to environmental issues, mining profoundly affects local communities, including through displacement, influxes of workers, and boom-bust economic cycles. Tracking social KPIs helps manage these community impacts through corporate social responsibility programs. Relevant community KPIs are:
- Local employment - the proportion of the workforce hired from local communities supports sustainable economic benefits.
- Community investment - total funds spent on health, education, infrastructure and other initiatives that enable local development.
- Resettlement rates - the proportion of displaced households successfully resettled based on livelihood restoration plans. Resettlement should be tracked long-term.
- Grievances - the number of community grievances lodged, addressed, and resolved indicates the state of the corporate-community relationship. Prompt resolution is ideal.
- Support for local suppliers - spending on goods and services sourced from local businesses bolsters economic growth.
- Community trust surveys - periodic surveys gauge the local perception of the mining operation across factors like trust, satisfaction and fairness.
Monitoring these KPIs motivates meaningful community engagement, not just public relations. mines viewed negatively by host communities face greater risks of unrest and instability. Investing in local people represents an enlightened social license to operate, with socioeconomic KPIs guiding program effectiveness.
Operational Risk Management
Mining is an inherently high-risk industry, with large capital investments exposed to commodity market volatility and myriad technical, environmental and political hazards. Tracking risk management KPIs helps avoid threats to continuity and profitability. Critical risk KPIs include:
- Project budget performance - actual expenditure remaining on budget indicates financial risk control. Overruns may signify poor estimation or execution.
- Production variance to forecast - meeting quarterly and annual targets demonstrates operational reliability and planning rigor.
- Equipment availability - prolonged equipment downtimes impair productivity. Availability should be benchmarked between fleets.
- Mine closure provision - full allocation of closure funds lowers liability exposure. Provision levels can be benchmarked to expected costs.
- Geotechnical stability - pit wall and tailings dam stability must be continually monitored, measured and modeled to avoid failures.
- Security - violent attacks by armed groups are unfortunately common in some regions. The frequency and severity of incidents quantify security risks.
- Political stability - mining investments are vulnerable to adverse government actions like contract revocation or nationalization. Political risk analysis is prudent.
Tracking performance on these KPIs reinforces risk management and allows corrective actions before consequences escalate. Mines that wait for disasters to spur improvements often suffer severe financial, social and reputational damage. Being proactive with risk KPIs provides major competitive and sustainability advantages.
Benchmarking for Continuous Improvement
A final benefit of tracking KPIs is enabling performance benchmarking between business units, competitors and industry averages. No mine has perfect performance, so benchmarking reveals areas for improvement. Helpful comparisons include:
- Internal benchmarking - comparing similar deposits, fleets or facilities across an organization highlights top performers to emulate.
- Competitor benchmarking - anonymized industry associations let miners confidentially benchmark against peers. Outliers get scrutinized.
- Best practice benchmarking - leaders set benchmarks that become minimum standards to reach. Toyota’s lean manufacturing system exemplifies operational excellence.
- Historical benchmarking - an operation’s present KPIs should favorably compare to past performance, illustrating advancement.
- Theoretical benchmarks - physics and engineering fundamentals dictate theoretical minimum energy usage, equipment downtime, etc.
Regular benchmarking motivates teams and managers to close performance gaps through creativity and technology adoption. Even modest incremental gains accumulate substantially over the life of a mine. The best operators continually stretch their benchmarks higher through an attitude of constant improvement.
This examination reveals why diligently tracking KPIs must be central to any mining company’s strategy and operations – they are the pulse of performance. Leading miners utilize KPI dashboards to monitor every facet of their business in real-time, enabling data-backed decisions and accountability. When safety, productivity, environment, community and risk KPIs are optimized and balanced, mining can sustainably extract resources while protecting workers, local development and shareholder value. With society demanding responsible mining, KPIs have become integral measures of operational excellence.