Strategy Optimization For Miners Explained

Strategy optimization has become something of a buzz word in the mining industry, but the term is often misunderstood. Just because your operation is technically feasible and economically viable doesn’t mean it’s optimal. The truth is that you might be leaving a large amount of that value behind.

How optimal is optimal?

We spoke with experts at AMC Consultants, Jayson Tolley and Brian Hall, about what strategy optimization means and the common pitfalls in current industry practice. In the paper “Strategic Decision-making in Mining - Business Optimization Using Flexible Evaluation Models” [link], AMC gives a detailed overview of the strategy optimization process and how it can be used to unlock the hidden value in a mining operation. 

What is the goal of strategy optimization?

Tolley and Hall explained that the primary goal of strategy optimization is to unlock hidden value in a mining operation. This hidden value can be enormous, but many mining projects are leaving significant value behind, even those that are using so-called “optimization” techniques.

Jayson Tolley, Advisory Lead - Strategy Optimization, explained “The optimization we’re talking about is holistic and covers the entirety of the system. That means everything from administration and purchasing through to geology, mining and processing.”



This holistic approach to optimization helps to avoid technical siloing, in which each part of the business optimizes their performance in terms of their own goals. Sounds logical, but those goals aren’t always compatible, and the end result for the business is often sub-optimal. To be truly effective, strategy optimization must focus on what drives the business and builds value rather optimizing a simplistic KPI or target. When done correctly, strategy optimization looks at much more than one solution to one problem.

Short-term goals vs long-term optimization strategy

Effective optimization can only occur when the business gains a thorough understanding of the diverse range of factors and the opportunities and risks they pose to business value.

KPIs and goals, such as increasing productivity, improving efficiency and balancing costs are important, but they are often short-sighted and can be counterproductive if not considered within an overall optimization framework. “Key decisions are made that demonstrably move away from the optimum for value optimization because they’re being measured against sub-optimal targets, like reducing costs or arbitrary production increases” said Tolley.

Optimization also needs to be implemented with a long-term perspective. Where the business is driven by short-term (i.e. daily to monthly) production targets, it is essential that a long-term strategy framework is established. Operating within the framework of a comprehensive optimal strategy can have substantial benefits.

The biggest opportunity for miners is to recognise the value of early-stage, long-term optimization. Tolley emphasised that “the ideal time to do a long-term optimization study is at the concept or pre-feasibility stage”. However, according to AMC Principal Mining Engineer Brian Hall, companies are often tempted to get the project up and running first and worry about optimization later.

Unfortunately, delaying optimization often results in a significant portion of value being “locked out” by the final design. Unlocking that value later can be difficult and needlessly expensive. Early optimization always results in the best overall value.

Addressing the needs of every stakeholder

A properly optimized strategy considers the interests of all stakeholders. The relationships between stakeholders are typically complex, creating potential for multilateral conflicts of interest. For example, the interests of landowners might coincide with the operations in some areas but conflict in others.

By way of example, Hall described a recent AMC optimization project for a large open pit in a developing country. The study identified over 30-plus stakeholders comprising three joint venture partners, three levels of government, numerous local and federal government agencies, and six categories of landowner.



AMC’s strategy optimization methodology enabled the operation to identify goals for each of the 30-plus stakeholders, with the aim of removing conflict and providing a better end-result for all stakeholders and for the operation. As in this case, the optimal result is often a range of options, rather than a single solution.

Why strategy optimization requires specialist human knowledge and software

Tolley and Hall contend that optimization cannot be implemented without specialists. Many associate the term “optimization” with a mathematical algorithm or software program. “Optimization is a deep-domain knowledge problem,” said Tolley, “not just a maths problem.”

Over-reliance on mathematics and software typically results in solutions that struggle to deal with complexity and risk. “Anyone can do the maths,” Hall summarised, “but unless you have the domain expertise to actually make sense of it in a practical mining sense, you’re not going to get the best result.”

Instead, the focus needs to be placed on the specialist, not the specialized software. AMC does not lock itself to any particular software package. “We’ve got to stop focusing on the software.” said Tolley. “We don’t value the quality of their software when an engineer designs a complex mine: we value the skill of the engineer in how they use their software.”



Tolley went on to say that AMC’s approach is to use expert systems, not just software packages. Optimization software is just one component of an expert system, which ensures that the solution isn’t constrained by the design choices of software developers.

Hill of Value^TM

AMC’s optimization process is called Hill of Value™ (HoV): a robust way to uncover and assess all available opportunities. The HoV approach looks at more scenarios and variables than other systems, giving a comprehensive range of strategic options.



Other optimization methods are narrowly focused and only consider the “top of the hill”. Before climbing to the top of the hill there’s one fundamental question that should be addressed: are we on the right hill? Complex systems and sites are over-simplified in an effort to fit into off-the-shelf software. “It’s not just the top of the hill but the shape of the hill, and how the hill responds to a multitude of changes that’s important”, contended Tolley. 

AMC’s HoV can be customized to work for any mine site. By taking a holistic view of the operation, HoV breaks down technical silos and helps the business to identify conflicted KPIs. In this way, HoV enables companies to make better informed decisions that align with the corporate strategy.



As proof of their assertion, Tolley and Hall cite that AMC, using the HoV optimization process, has unlocked more than $2 billion of value for its clients over a period of six years. That gives a reliably exceptional ROI on the cost of conducting an optimization study.

Let AMC help unlock your mining operation's full value

AMC’s paper poses an exciting proposition for many mining operations: just how much value can they unlock? Regardless of whether your project is at the conceptual, pre-feasibility, feasibility, construction, or operations stage, the gains can be enormous.



If you would like to learn more about how AMC’s deep-domain expertise can unlock the value in your operation, fill in the contact form below and a representative from AMC Advisory, from your local AMC office, will be happy to set up a meeting.