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Why does ROM (Run of Mine) production run well below budget?

We observe an interesting phenomenon when looking at various mines and their ROM production. The  ROM production average is always below the budget number. Average ROM typically hovers at the 80% mark and below.

Why would that be? When we set the budget, resources are allocated to each production department to achieve the budgeted production, and yet, it rarely does. Departments are usually resourced such that maximum efficiency can be obtained everywhere- the “just enough of everything” philosophy. This leads to the creation of balanced capacity chains. But mining is subject to significant variability (surprises), and in combination with the interdependency of the parts of the production chain, this causes starvation and blockage of resources, leading to lost production, which cannot be caught up with.

When the gap is >25%, we know from experience that we are dealing with a balanced capacity chain, high variability (often moving bottlenecks) and output substantially lower than the assets can deliver. This creates a high-risk, high-stress environment for management and workers.

The good news is that substantial capacity can be liberated very quickly without capex. All it requires is working according to flow principles and managing the bottleneck differently.

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