THE PREDICTABILITY PREMIUM - 1/5: The capacity was already there

A mine averaged 9,612 tonnes of ROM per day against a budget of 13,000.

Yet its best three days averaged 14,136 tonnes.

That is a 32% gap between everyday performance and capacity the operation had already demonstrated.

The usual response to a record day is predictable:

“You said you needed more resources, but you have just shown that you can do it.”

Before long, the record becomes the new target.

That draws the wrong conclusion.

Those exceptional days did not prove that the workforce should produce 14,136 tonnes every day. They showed what happened when the production chain briefly aligned: the necessary equipment was available, interruptions were absorbed and each production area supplied what the next one needed.

Most days, that alignment did not occur.

When buffers are too small and non-constraint areas lack protective capacity, interruptions reach the constraint. Once time is lost at the constraint, those tonnes cannot be recovered. At the same time, producing more in another department does not increase sales if the constraint cannot process it.

The loss therefore sits between departments. It appears in no single manager’s report, and no one owns it.

In this case, redesigning the operating system around flow lifted average production from 9,612 to 12,047 tonnes per day—a 25% increase without a conventional capacity-expansion project.

The gap to demonstrated capacity fell from 32% to approximately 15%, placing the operation within 7.3% of budget.

Once the true constraint and its relationship with saleable output became visible, the investment case for targeted capital also became much clearer. Capital could be directed to the point where it would increase total mine output, rather than dispersed across departments.

For a high-fixed-cost asset, the value can be disproportionate: much of the additional revenue, after truly variable costs, contributes directly to EBITDA.

For an active owner or board, the question is not whether the best day can become the daily target.

It is how much of the gap can be recovered before approving more capital.

ANALYZE YOUR OWN DATA

Best-Day Diagnostic: https://diagnostic.stratflow.com.au

Paste in your daily ROM data and the diagnostic compares everyday production with the highest rates the operation has demonstrated.

 Preferably use six months of daily data, with three months as a practical minimum. A short period may capture only the best day in an otherwise poor month rather than the operation’s genuine upper-end capability.

 Remove reporting artefacts first. For example stockpile reclaim recorded as ROM, reconciliation adjustments allocated to one day, or month-end catch-up postings.

Keep real high-production days in the data. They may be unusual, but they are evidence of what the physical system has achieved under favourable operating conditions.

All calculations take place in your browser. Nothing is uploaded or stored, and I never see your production or financial data.  

If you oversee an operating mine or mining portfolio, I would be interested to hear whether the gap is materially different from the 32% found here.