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Leadership, Risk and Value
22 May 2014
University of New South Wales
Mitsubishi Lecture
1
Who is MMG ?
2
• Explores, develops and mines base metals deposits around the world.
• Aims to be the next generation’s leading mid tier global diversified minerals and metals company.
• Majority shareholder is China Minmetals (about 70%);
• Institutional and retail shareholders hold remaining Hong Kong Stock Exchange listed shares.
• International management team led by CEO Andrew Michelmore.
• Uniquely positioned to invest and grow.
• One of six business centres within China Minmetals Corporation (CMC)
• CMN is the managing and operating platform for CMC’s non ferrous businesses
• CMN is focused on “China strong” and “China weak” non ferrous metals
• Strategic objective to grow to one of the top ten mining and metals companies in ten years
• CMN is seeking to establish integrated and value accretive industry chain for “China strong” commodities (e.g. tungsten and rare earths) and secure upstream resources for “China weak” commodities (e.g. copper, zinc and nickel)
MMG is CMN’s flagship for overseas upstream nonferrous
metal
MMG’s remit includes: • Securing financial exposure to non-ferrous minerals
where China has a supply deficit • Enhancing China’s reputation as a global business
operator • Building mining capability transferrable to CMN
China Minmetals Nonferrous Holdings
China Minmetals Corporation (CMC)
Ferrous Trading
Ferrous Mining
~73.69% ownership
MMG Limited
4 other listed entities
3 Diversified Business Centres
China Minmetals Nonferrous
Metals (CMN)
State owned Assets Supervision and Administration
Commission
25 Ministries and 38 Centrally
Administered Government Orgs.
State Council
Standing Committee of the NPC
National People’s Congress (NPC)
President
Who is MMG ?
MMG’s footprint
copper/gold/lead/ silver/zinc
Golden Grove
copper/gold/lead/ silver/zinc
Rosebery
zinc/lead/silver
Century
zinc/lead/silver
Dugald River
copper
Sepon
copper Kinsevere
copper/lead/silver/zinc
Izok Corridor
Operating assets
Development assets
Exploration areas
copper/molybdenum/gold/silver
Las Bambas
At MMG, we mine for progress. • What does progress mean to us?
• It is the everyday progress our employees make – each contributing to our ultimate goal;
• It is the opportunities for personal progress – diversifying our skills, attempting new challenges and striving for continuous improvement and development;
• It is the progress that provides real and lasting benefits to the communities in which we operate; and
• It is humanity’s progress as the world develops and evolves using the metals we produce.
MMG’s belief
5
MMG’s approach to business
Century coarse ore stockpile
6
• To operate its assets in a safe, efficient and cost-effective manner.
• To use its existing assets to provide a platform for future growth.
• To create a simple and scalable business.
• To seek value accretive growth opportunities.
• To continue to pursue MMG’s long-term strategy and vision.
MMG’s Queensland Operations
7
Century zinc-lead-silver mine mining and processing operations at Lawn Hill and port facility at Karumba
Dugald River project underground mine development project
A number of questions
8
Who thinks they will be a leader ?
Who thinks they will be a CEO ?
Who thinks they can make their world (whether big or small) a better place ?
What is leadership ?
9
Leadership is ultimately about having a vision for the future
not a nostalgic longing for the past…..
What is leadership ?
10
All men dream, but not equally. Those who dream by night in the dusty recesses of their minds wake in the day
to find it was vanity, but the dreamers of the day are dangerous men for they may act their dreams
with open eyes to make it possible
T E Lawrence The Seven Pillars of Wisdom 1921
What is leadership ?
11
We can all be a leader and make a difference
It is about turning ‘whingers’ into ‘winners’
Risk and Value
12
Mining is a hazardous business
It cannot be a high risk business
Incr
easi
ng A
dver
se C
onse
quen
ce o
f Ev
ent
Increasing Number of Events
High frequency low impact
Low
frequ
ency
hig
h im
pact
Managing People Risk
14
Century Hazards Identified and Rectified
• Q1 2014 95% hazards rectified at time of identification
• Q1 99% hazards rectified within one week
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1,000
1,200
Jan-
12Fe
b -1
2M
ar-1
2A
pr-1
2M
ay-1
2Ju
ne-1
2Ju
ly-1
2A
ug-1
2S
ept-1
2O
ct-1
2N
ov-1
2D
ec-1
2Ja
n-13
Feb-
13M
ar-1
3A
pril-
13M
ay-1
3Ju
ne-1
3Ju
ly-1
3A
ug-1
3S
ept-1
3O
ct-1
3N
ov-1
3D
ec-1
3Ja
n-14
Feb-
14M
ar-1
4A
pr-1
4
Hazards rectified at tim
e of identification
Haz
ards
Rec
ogni
sed
Hazards Recognised % Rectified at time of identification
15
0
3
6
9
12
15
0
5
10
15
20
25
30
35
40
45
50
2006
2007
2008
2009
2010
2011
2012
2013
2014
YTD
Total Recordable Frequency rate per m
illion hours worked
Num
ber o
f inj
urie
s by
yea
r
RWI MTI LTI TRIFR (RH Scale) Glide Path (RH Scale)
Century TRIFR 2006 thru 2014
0
2
4
6
8
10
12
14
16
0
5
10
15
20
25
30
35
4020
09
2010
2011
2012
2013
2014
YTD
Serious Significant Incident Frequency rate per million hours w
orked N
umbe
r of S
igni
fican
t Inj
urie
s by
yea
r
SSI Classification 4 SSI Classification 3 SSI Classification 2
SSI Total (Unclassified) SIFR (RH Scale) Glide Path (RH Scale)
16
Century Serious Significant Incidents 2009 thru 2014
Increasing Level of Geological
Knowledge and Confidence
Consideration of Mining, Metallurgical, Economic, Marketing, Legal, Environmental, Social and Government factors
(The “Modifying Factors”)
Exploration Results
Mineral Resources
Inferred
Indicated Probable
Measured Proven
General Relationship between Exploration Results, Mineral Resources and Ore Reserves JORC Code Figure 1
Consideration of Mining, Metallurgical, Economic, Marketing, Legal, Environmental, Social and Government factors
(The “Modifying Factors”)
Exploration Results
Mineral Resources
Inferred
Indicated Probable
Measured Proven
Increasing Level of Geological
Knowledge and Confidence
Decreasing technical and sustainability risks
Dec
reas
ing
geol
ogic
al ri
sk
General Relationship between Exploration Results, Mineral Resources and Ore Reserves JORC Code Figure 1 with a risk overlay
Exploration Results
Mineral Resources
Inferred
Indicated Probable
Measured Proven
Decreasing Technical & Sustainability Risk
Increasing Knowledge of and Confidence in Modifying Factors
Incr
easi
ng L
evel
of G
eolo
gica
l Kno
wle
dge
and
Con
fiden
ce
Dec
reas
ing
Geo
logi
cal R
isk
General Relationship between Exploration Results, Mineral Resources and Ore Reserves JORC Code Figure 1 with a risk overlay
Prospect Identification EXPLORATION TARGET
EXPLORATION RESULTS/Prospect Testing
Exploration Target Confirmation
INFERRED MINERAL RESOURCE Scoping Reserve
INDICATED MINERAL RESOURCE
PROBABLE ORE RESERVE
MEASURED MINERAL RESOURCE
PROVED ORE RESERVE
Residual Resource Risk Production
High Medium Low
Incr
easi
ng L
evel
of G
eolo
gica
l Kno
wle
dge
and
Con
fiden
ce
Dec
reas
ing
Geo
logi
cal R
isk
Decreasing Technical & Sustainability Risk
Increasing Knowledge of and Confidence in Modifying Factors
Prospect Identification EXPLORATION TARGET
EXPLORATION RESULTS Exploration Target Confirmation
INFERRED MINERAL RESOURCE Scoping Reserve
INDICATED MINERAL RESOURCE
PROBABLE ORE RESERVE
MEASURED MINERAL RESOURCE
PROVED ORE RESERVE
Residual Resource Risk Production
Incr
easi
ng L
evel
of G
eolo
gica
l Kno
wle
dge
and
Con
fiden
ce
Dec
reas
ing
Geo
logi
cal R
isk
Decreasing Technical & Sustainability Risk
Increasing Knowledge of and Confidence in Modifying Factors
Silver King
Eastern Fault Block
Silver Hills Silver Star
Watson’s Lode
Union Jack
Anglo American
Zinc Hills NE Limestone
Bald Hills Greater Britain
Stars & Stripes
High Medium Low
Century Stage 11
Big Banner
North Mitton
Lone Hill Epsilon
Century Tailings
Dam
Horseshoe
Lamington Black Snake
Lilydale
Delta Dorothy
Silver Pigeon
Little Wonder Fig Tree
Cassowary Annulus Centre
Wattle
Thistle
Edith
Sirdar
Leek
Plastic Sparrow
Quinlan’s Lode
Wooden Duck
Prince Charles
Ian’s Knob
Coglan Creek
MacGregor
The Federal
Widdalion
Anglo Australian Burke
Copper Mine
Mt Jennifer Base Metals
Unnamed 368397
Kamarga Road
Riversleigh Unnamed 388203
Unnamed 379382
Riversleigh Lineament Corridor
Phoenix Anomaly
12
Century Stage 8/10
Century Managing Production Risk
Risk isn’t static it changes ………….
0
10
20
30
40
50
60
0
5
10
15
20
25
30
Rai
n (m
m/d
ay)
Wal
l Vel
ocity
(mm
/h)
rainfall 1 2 3 4 5 6 7
TARP RED – No Mining
TARP GREEN – Mining With Controls
TARP AMBER – Mining With Controls
24
FAILURE
ONSET OF PERFORMANCE DEGRADATION
EARLY REPLACEMENT
HIGH MAINTENANCE
COST LOW
OPERATIONAL RISK
LOSS OF VALUE
Managing Maintenance Risk
25
Century Managing Maintenance Risk
Acknowledged M Albertson Mainstream May 2014
26
Century Managing Maintenance Risk resulting in………….
Acknowledged M Albertson Mainstream May 2014
27 Acknowledged M Albertson Mainstream May 2014
Century Managing Maintenance Risk resulting in………….
28
$30,000,000
$50,000,000
$70,000,000
$90,000,000
$110,000,000
$130,000,000
$150,000,000
2013 2014 2015 (Jan - Aug)
Annu
al E
xpen
ditu
re A
$
2013 Budget forecast
2104 Budget forecast
Century Managing Maintenance Risk resulting in………….
Acknowledged M Albertson Mainstream May 2014
Record breaking underground development
100 person Accommodation Village completed in 2013
29
• 14,078m of underground mine development and 45,157m of diamond drilling
• Completed
• Accommodation village
• Main and village access roads, including emergency airstrip
• Five-day metallurgical test of Dugald River ore at Century in late 2013
• Identified:
• Ground conditions which were more challenging than prior assumptions similar to George Fisher
• Significant ore body complexity
Project halted and construction suspended
Dugald River Managing Business Risk
30
South Mine North Mine
• MMG Board approved trial stoping program for 2014
• The purpose of the program is to: • Confirm the preferred mining method • Gain practical mining experience –
establish revised geotechnical and mine design parameters
• Optimise underground mine design • Determine mine productive capacity
• A$55m programme
Dugald River Managing Business Risk
Dugald River Managing Business Risk
Highly instrumented trial • Aiming to measure rock mass
response to blasting and mining to maximise safety, productivity and mine economics
Downhole camera survey
Installed Instrumentation & Data Logger Blast Monitoring
32
• ELOS indicates degree of overbreak; higher ELOS lower grade.
• First three stopes’ performance as predicted along 15m stope span vertical line
• Programme now to progressively expand stope span to 25m
• Positive for project; overbreak (ELOS) remains constant for increasing stope spans. Minimises safety and business risk
• Negative for project; overbreak (ELOS) increases for increasing stoping spans
15 m stope span
25 m stope span
Dugald River Managing Business Risk
Young Leaders Managing Risk and Value
Leadership is about making a difference
We manage risk and maximise value every day
of our working lives
Hope is not a method
One and one always make two, not three when it is production tonnes and one when it is their cost
Leaving you with………….
34