Mining Weekly

Physical asset management service provider Pragma’s life cycle costing (LCC) system gives coal mining companies better insight into the total life cycle costs of their assets, says Pragma asset care centre manager BJ Mona.

He notes that the system was implemented in March last year at a coal mining company, in Mpumalanga, where it continues to operate successfully.

Mona adds that Pragma started working on the project in October 2013 and the initial scope was completed by March 2014.

“Implementation then started, after which some additional optimising work was performed, and the optimised model was fully operational by June 2014.”

The LCC model is used as a data source for developing a five- to ten-year-life model of mine assets, and to ensure that the mine’s annual capital expenditure and operating expenditure budgets for its asset management are aligned, says Mona.

“In the mining industry, LCC is applied to quantify costs of asset components and materials used. Correct implementation of the system can assist in decision-making for asset capital investment projects,” Mona says.

He explains that LCC is, however, not commonly applied in the mining industry, owing to complexities involved in analysing and using the data extracted from the model.

One of the challenges that large asset owners face, including mining companies, is understanding the total costs of assets over their life cycle.

LCC is useful in this respect, as it allows for comparative cost assessments to be made over a specified period, taking into account all relevant economic factors in terms of initial capital costs, as well as future operational and asset replacement costs.

Mona says, during the development of LCC, the first step is to identify the critical assets to be analysed, followed by gathering original-equipment manufacturers’ and suppliers’ data to include in the costing model.

Other important resources that provide information include engineering and operational staff, data collated from the maintenance history in the enterprise asset management system and the technical library that provides guidelines on the operation and care of assets, he says.

The asset care centre that Pragma is managing at the coal mining company, for example, gathers information on acquisition and operational and maintenance costs, and Mona says having all the sources of information in place and up to date was important for the successful development of the LCC system.

Improvements
Mona further explains that the LCC system has led to various improvements, including increased asset availability and use, improved understanding of asset financials, the continuous improvement of client and service-provider relationships, as well as improvements in the manner in which planning meetings are conducted.

He adds that there is also improved engagement with other departments, such as production, operations, finance and information technology, which are usually not considered to be directly involved in asset management.

Mona says that, through the successful use of an LCC model, a company can develop an asset plan to achieve organisational goals and a rebuild and repair strategy for the life of the mine, and compute estimated targets for asset availability and use.