IMPROVING THE ODDS Only 2.5% of mining projects globally are considered successful
Industry consortium Construction Industry Institute (CII), based in the US, has launched a project definition rating index (PDRI) tool for mining projects, which was showcased during a CII-hosted webinar last month.
The PDRI tool was originally going to be revealed and demonstrated during the 2020 CII Annual Conference. However, the event was cancelled owing to Covid-19.
A PDRI is a useful tool that helps identify and precisely describe each critical element in a scope definition package. It also enables project teams to swiftly identify the project risk factors associated with the desired outcomes for cost, schedule and operating performance.
The PDRI method enables teams to capture mitigation action items and evaluate the completeness of scope definition at any point prior to detailed design and construction.
Various PDRIs have been developed by the CII for a range of industries and applications, with the PDRI mining tool being one of the latest to be added to the suite.
The research and development for the CII’s new PDRI was commissioned by the CII Africa Chapter and CII Upstream, Midstream and Mining Sector Committee in response to the “significant shortcomings” and “unacceptably frequent” failures in the mining project management sector.
Speaking at the webinar, CII Africa Chapter director Dr Giel Bekker said research showed that only 2.5% of mining projects globally are considered successful, with average global cost overruns in such projects since 1965 ranging between 20% and 60%.
Mining projects currently under way globally are expected to suffer cost overruns of between 25% and 30%. This means that, although about $1.5-trillion is allocated for mining projects globally from 2011 to 2025, expected project overruns will amount to an additional $3.75-billion to $4.5-billion.
“The PDRI tool for mining ent should be used to establish alignment among project members and to foster a common understanding of the risks and areas requiring further development,” Bekker explained.
While the tool can be used at the end of front-end planning to give decision-makers a sense of the readiness of the project study to proceed to the next phase, much more value can be extracted by using it regularly during the project study to align team members around the areas that require more work.
The PDRI evaluates several key elements, which are weighted according to their relative importance. As these elements mature, the overall PDRI score decreases from 1 000 to 0. Typically, a cut-off score is suggested, at which the project can then progress to the next phase of development.
Bekker said that a PDRI needed to be developed specifically for the mining industry since mining projects include a unique combination of factors that need to be considered. These factors include ore extraction, processing and logistics, as well as environmental, socioeconomic and political-impact considerations.
Development and Testing
The approach that the CII adopted for developing the PDRI for mining was similar to the approach used when developing PDRIs for other industries.
This started with the identification of the relevant elements. After solicited input from industry having the development team conferred with experts from mining houses and from engineering, procurement and construction management companies to identify, refine and assign weights to all the elements.
The development included inputs from participants from countries where significant mining activities take place. It did not consider smaller, so-called “stay in business” projects.
The CII’s PDRI for mining includes up to 180 elements. For comparison, the CII’s previously developed PDRIs for industrial projects had only 70 elements, infrastructure projects had 68, and small infrastructure projects only 41. Moreover, the PDRI for mining is the only PDRI to have four sections instead of three .
“This illustrates the complexity of mining projects,” Bekker says.
The additional elements include those that are critical to the mining sector such as, for example, the evaluation of the jurisdiction where the project will be executed, and revenue generation assumptions regarding royalties, government charges, hedging, and import/export laws.
Once weights were assigned, the relevant cut-off scores were determined by testing the PDRI against completed projects. This helped to determine the reliability of the tool.
Six measures of project success – schedule performance, cost performance, change performance, performance score, customer score and operating score – were used to test the PDRI tool’s validity.
Research proved that a 100-point decrease in the PDRI score equated to a 46% increase in the project’s performance score – which is an indication of how actual performance of the delivered project measured up to the expected performance. It would also lead to an 11% increase in the customer score, and an 11% increase in the operating score, as well as a 5% decrease in project duration and project cost.
The PDRI for mining project management has been proven to enable project management teams to measure the level of maturity of a mining project study, and can assist both decision-makers and project team members in assessing the readiness of a project study to progress to execution.