Will management consultants save mining?

Recent suggestions that the industry will be saved by management consultants deserve a response. The suggestions come from former leaders of failing or failed mining consultancies who have jumped ship to join the big management consulting firms. I generally refrain from commenting on competitors, but the management consultants are not competitors at present and will, I expect, have little penetration into the mining business improvement space.

Management consultants are loved by senior executives in large corporations including mining companies, because they lend weight and credibility to decisions to reduce staff numbers, something companies are uncomfortable doing without an independent report. What the consultants cannot do is apply a geologist’s, metallurgist’s or engineer’s eye to the improvement opportunities that will increase operating margins rather than simply cutting costs.

Here is a recent example. A mine with high equipment maintenance costs brought in management consultants, who recommended some tweaks in the number of fitters and stock levels of spares. Then AMC came in and saw immediately that the benches were too high, causing oversized rock and impact damage to the shovels. With other benefits, AMC’s business improvement solution was worth tens of millions of dollars each year.

A second example completed for a major mining house on a very modest budget: through some experience-based mine planning, AMC was able to balance the site processing cut-off grade enhancing utilization of two processing plants while maintaining product quality, as well as simultaneously re-sequencing the pit staging strategy to deliver sustained reductions in peak material movement. The result, a 5% increase in saleable product, combined with a huge +20% reduction in peak material movement – making the operation hundreds of millions of dollars over the course of the life-of-mine. At the same time, the client had engaged management consultants at a much larger cost (magnitudes higher), with very little gain realized, certainly paling into comparison compared to the sustained value derived from some smart mine planning.

Real business improvement and value accretion is derived by utilizing experts who have a deep understanding of how a mining operation makes money, which comes from both sides of the profit equation. Very little of the factory-floor improvement experience of management consultants will translate to the mine environment.

The other difference between consulting models is, of course, cost. AMC’s Operational Health Check, for example, is designed as a low-cost service that can be added to any site visit attended by the right experts. It galls me that management consultants can charge hundreds of dollars an hour for interns, and will not take on a client for less than a million dollars. Entrenched through the business schools at C-Suite level, these firms are not subject to the same scrutiny and cost constraints that AMC deals successfully with every day, delivering far greater value for each dollar spent.

There, I got that off my chest.