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Introduction to asset optimisation

Copper ore ready to be transported out of the open pit at Los Bronces mine in Chile, where mining takes place at an elevation of 3,000-3,500 metres above sea level

Introduction to Asset Optimisation

Following the ‘One Anglo’ approach of moving towards a common framework of values and standards, Anglo American has been rolling out a value based management (VBM) methodology across the Group.

Within the VBM framework, Asset Optimisation (AO) is the single most important programme in a range of value creating initiatives that are under way. The AO programme is designed to improve the performance of the Company’s existing long life asset base through cost and productivity improvements in order to unlock maximum value from its existing assets.

A programme to transform Anglo American’s supply chain operations globally also has been mobilised. The new Supply Chain function will consolidate spend to manage it in a more strategic, holistic manner and deliver an overall spend reduction of 10% and benefits of $1 billion by 2011, further details of which can be found within Performance against KPIs. In addition, three shared service centres, in Asia Pacific, Latin America and South Africa, have been established to provide common accounting and employee services.

The AO programme involves a thorough review of all mining activities and includes benchmarking the performance of all assets and processes, internally and externally.

The business units have established dedicated teams to coordinate the implementation and embed the AO process with support from central technical resources. Formal benchmarking procedures are being developed with a common and searchable AO database to maximise best practice opportunities.

All business units have now completed the initial phase of their AO programme and targets have been calculated. The Group target is $1 billion over the next three years in addition to $1 billion savings from procurement.

Truck loading in the open pit at Base Metals’ Mantos Blancos copper mine, Chile

Tyres

In 2008, global tyre contracts were finalised with Michelin and Bridgestone that secure pricing and a major part of supply in large off-the-road (OTR) tyres for the foreseeable future. The benefits of building these strategic partnerships were clear when there was a shortfall in OTR tyres in 2008. Michelin was able to make volumes available to Anglo American, easing the pressure on some mines which would otherwise have had to buy more expensive tyres on the spot market.

In addition, each of the business units and mine sites collaborated on tyre allocations through 2008. One example was at Platinum’s Mogalakwena mine in South Africa, which needed to buy spot market tyres at prices higher than the contract price. Through a cooperative effort across the Group, the global supply and procurement team managed to source tyres for Mogalakwena from El Soldado mine in Chile, which needed fewer of these tyres than anticipated owing to improvements in tyre lifetime. This collaboration led to a direct saving of $2 million.

Substantial improvements in tyre life, which reduces the need to buy tyres, can be attributed to a programme set up by Anglo Technical in 2007. This programme was rolled out globally and is undergoing constant improvement. Increasing tyre lifetime enables the organisation to close supply gaps caused by a market shortage of large OTR tyres, as well as to deliver overall savings to the Group.

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Tyre contracts

Strategic partnerships and global contracts with suppliers meant that spot market purchases were largely avoided, resulting in savings of $15 million $15m Savings

Pumps

Increased fuel pump flow rates at Anglo Coal Australia’s Dawson mine are yielding benefits of around $4 million per annum. By doubling the flow rate, haul truck refuelling time has been halved, with a consequent reduction in the haul truck fleet’s downtime $4m Savings
Employees carrying out a safety check at Anglo Platinum’s Rustenburg mine, South Africa

Group approach to Asset Optimisation (AO)


In 2008, major progress was made in improving the Company’s cost and productivity performance and a substantial cost reduction programme, targeting $1 billion of cost savings from procurement and shared services by 2011, was announced. In addition, the Asset Optimisation programme will add a further $1 billion over the next three years. $2bn Uplift to operating profit from Asset Optimisation and procurement initiatives