Mining and Metals Companies Could Save Billions on Capital Projects, Accenture Research Finds

  Mining and Metals Companies Could Save Billions on Capital Projects,
  Accenture Research Finds

  Improved front-end project planning can mitigate risks and reduce cost of
                        increasingly complex projects

Business Wire

NEW YORK -- November 28, 2012

Faced with delays and budget overruns – which can add billions to total
project costs – mining and metals companies could significantly reduce the
cost of large capital projects by improving planning and addressing workforce
shortages, according to Accenture (NYSE: ACN) research on capital projects
delivery in the mining and metals industries.

The research was based on 31 interviews with mining and metals executives with
responsibility for capital projects around the world. Less than a third (30
percent) of the respondents report staying within 25 percent of approved
budgets for all projects, and less than a fifth (17 percent) said they
completed all projects within a 10 percent budget range.

The tremendous scale and complexity of mining projects – which are often
multi-billion dollar investments – mean that budget overruns and delays in
completion are not unusual. Among the contributing factors are infrastructure
needs such as roads, ports and electrical power in less developed regions; the
lack of talent and skilled workforces; and environmental and regulatory
requirements in developed regions. When asked what typically causes delays in
project schedules, survey respondents cited the availability of talent (57%),
new or unconsidered regulatory requirements (45%) and insufficient detail
during the planning stage (42%). Metals companies tend to have fewer delays
and smaller budget overruns due to the reduced size and complexity of plants
as opposed to mining projects.

Accenture research estimates that metals and mining expenditures for capital
projects will reach more than U.S. $140 billion in 2012^1, and between U.S. $1
trillion and U.S. $1.5 trillion during the period from 2011 to 2025^2. Even
with the current downturn in commodity prices, long-term demand for minerals
and metals, driven by economic growth and social development throughout the
world, continues to spur investment in mining and metals. With $100 - $200
billion in annual spend, the impact of project delivery overruns on individual
companies and the industry as a whole is enormous.

“The potential savings and returns through effective management and delivery
of a capital project investment can be huge,” said Jose J. Suarez, managing
director for Accenture’s North American Mining industry group and the research
lead. “Keeping on budget and within planned timelines across a portfolio of
multi-year projects can save millions for a company – in today’s environment
strong project management can be an important competitive advantage.”

More than two-thirds of the survey respondents indicated that their portfolio
of projects will grow larger, and 81 percent said their complexity will
increase. When asked about their top priorities in optimizing capital project
management in response to the expected growth in project size and complexity,
the executives cited ensuring the availability of the right leaders and talent
for project delivery (72 percent), improving front-end planning and scheduling
(52 percent), improved readiness for start-up and a more effective transition
from planning to operations (43 percent), and effective stakeholder engagement
(39 percent).

Based on the research findings, analysis and Accenture’s experience working
with mining and metals companies, Accenture has identified five key areas for
improvement in project delivery:

  *Establish strong project governance and risk management capabilities.
    Multi-year capital projects have many variables, making strong governance
    and the ability to manage risks essential requirements.
  *Proactively manage stakeholders’ increasing expectations for
    sustainability. The already broad range of environmental issues, including
    biodiversity, is growing, and concern for sustainability is becoming a
    major barrier to moving forward with capital projects.
  *Optimize scarce talent through portfolio management, organizational
    flexibility, selective outsourcing and training. Since talent in a wide
    range of areas will be in high demand for many years to come, companies
    should find the best ways to leverage resources, develop a strategic
    talent plan to identify and train the next generation of workforces, and
    improve productivity and safety with more effective training, especially
    with new hires who have little or no mining and construction experience.
  *Integrate information systems among capital project players. The progress
    of a project cannot be accurately measured if proper data standards are
    not established at the outset and integration between the information
    systems of functional areas and service providers is not promoted
    throughout the project’s life cycle.
  *Accelerate operational readiness. A well-planned and managed handover
    process – from a completed project to operational readiness – can help
    companies avoid rework and delays and support high production levels from
    the initial operation of the mine or plant.

“While it is difficult to anticipate all of the changes that can arise from a
multi-year project, companies can improve their project management delivery,
reduce risks and boost returns on investment by looking beyond aspects of
engineering and procurement. To be leading performers, companies will need to
increase their focus on governance, human capital strategy, and integrating
information systems with business suppliers and operations,” said Suarez.

^1Accenture Research, © 2012 Capital IQ.
^2Accenture Research analysis, Industrial Info Resources, Oxford Economics.

About the research and research methodology

Achieving Effective Delivery of Capital Projects, Insights from the Accenture
global survey of the mining and metals industries is based on primary research
conducted by a third-party firm on behalf of Accenture. Thirty-one interviews
were conducted with executives in the metals and mining industries between
February and May 2012. All respondents were C-level executives and decision
makers or influencers in the management of capital projects in their
organizations. Interviewers conducted a phone survey with executives in North
and South America, Europe, South Africa, India, Russia and China. Accenture
defines a capital project as a long-term investment in excess of $50 million,
involving either greenfield or brownfield projects. For this survey, Accenture
focused on delivery of major assets costing at least $1 billion to build and
taking more than a year to deliver. To gain insights on leading practices,
Accenture also looked at characteristics of companies that self-reported
higher scores for capital project delivery.

About Accenture

Accenture is a global management consulting, technology services and
outsourcing company, with 257,000 people serving clients in more than 120
countries. Combining unparalleled experience, comprehensive capabilities
across all industries and business functions, and extensive research on the
world’s most successful companies, Accenture collaborates with clients to help
them become high-performance businesses and governments. The company generated
net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its
home page is www.accenture.com.

Contact:

Accenture
Allen Valahu, + 33 153235754
allen.valahu@accenture.com
or
Christine Yee Fields, + 216 535 5092
christine.fields@accenture.com
 
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