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Don’t debottleneck before stabilising production at a higher flow rate:

When the mining cycle delivers good financial performance, increasing production by adding more capacity becomes desirable. This is often done through debottlenecking exercises and involves substantial financial investment. Debottlenecking is a tried and tested strategy, but TOC offers a way to leverage the returns on this investment. It wrings the maximum performance out of existing resources with very little or no increase in financial investment. This is done by identifying the bottleneck, running it at maximum efficiency and ensuring we have sufficient resourcing in other areas to ensure the bottleneck is never starved or blocked.

But identifying the bottleneck using our current production data is more complex than it seems, especially if we have moving bottlenecks- a situation all too common with balanced capacity production chains. On paper, balanced capacity chains are very efficient, but in practice, high variability in mining and interdependencies means that theoretical efficiencies are seldom achieved.

What does it mean for the system production capacity when we have moving bottlenecks? It means that the average output from the production chain is substantially lower than the actual capacity of the bottleneck. If this were not the case, the work would build up in front of the actual bottleneck, and we would not have moving bottlenecks.

In our experience, when we have moving bottlenecks, production increases of between 10 and 30% can be achieved without investment in more assets. The effect of a 20% output increase, with only an associated variable cost increase, is tremendous. As shown in the article below, in 2015, such an increase for the top 40 miners would result in a 345% increase in EBITDA.

Once the system bottleneck is running at +90% utilisation, it is prudent to look at debottlenecking, and a decision can be made as to what quantum of investment is required. Do we want to maintain the bottleneck in its current position, or are we willing to make sufficient investment to move it to another part of the production system? We prefer to move the bottleneck to the part of the system where it is most expensive to add capacity, typically the processing plant.

The above shows how the Theory of Constraints (when combined with modern people management interventions), can guide traditional mining practices to deliver superior financial results.

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