This document discusses an assessment of integrated asset management best practices at KGHM International mines. It introduces Nick Seiersen, the corporate supply chain manager, and the topic of how well sites are using best practices in their supply chain and maintenance operations. The assessment approach developed a capability maturity model to measure processes across maintenance, supply chain, and their integration. The project aimed to establish a baseline, improve information sharing between sites, and drive continuous improvement. Lessons learned include ensuring site participation, defining relevant target areas, and providing rapid feedback to sites.

1. M
Pr
Nick Seiersen
Corporate Supply Chain Manager
KGHM International
Ch
I t t d A tIntegrated Asset
Management: How well
iare you using Best
ractices in your Supply
hain and Maintenance
operations?p

2. We are a Top 10 Cu ProduceWe are a Top 10 Cu Produce
resources
Resource base
Southern Copper 58 2
Codelco 93.2
Copper content, in million tons
4 KGHM PM + I 2010* 37.5
Freeport 55.8
Southern Copper 58.2
6 KGHM PM 2010* 29.3
Anglo American 31.6
BHP Billiton 35.2
6
Rio Tinto 17.0
Xstrata 18.1
KGHM PM 2010 29.3
QUX 2010 8.2
Antofagasta 8.9
RAO Norilsk 9.1
Source: Production - CRU Copper Quarterly Industry and Market Outlook, Oct. 2011; Resources – Broo
Q
* Excluding Afton-Ajax project where KGHM has a 51% stake in 1.3 M tonnes of Cu resources
r, & Top 5 in terms of Cur, & Top 5 in terms of Cu
Mined copper production
Freeport 1,441
Codelco 1,757
In thousand tons, 2010
700
907Xstrata
BHP Billiton 1,134
Freeport 1,441
Rio Tinto
7 635
645
700
KGHM PM + I 2018E
Anglo American
Rio Tinto
8
508
526
589
Glencore
KGHM PM + I 2010
Grupo Mexico
10
101
425
488
KGHM I 2010
KGHM PM 2010
Southern Copper
ok Hunt (A Wood Mackenzie Company); KGHM reports
KGHM I 2010

3. KGHM in the World

4. B fit f I t t d A t MBenefits of Integrated Asset M
It focuses on working together to achievg g
Eliminate the “We” and “They” environm
together” corporate culture
Learn from each other to achieve leadin
OP
INFLUENCERS
Learn from each other to achieve leadin
Comparing apples to oranges
Adm
OBJECTIVE
Equipment
Availability
Logi
Main
ReliaAsset
Effectiveness
Capital Cost
Prev
Relia
Life-Cycle
Cost
Maintenance Cost
Prev
Plan
Unpl
Operating Cost Brea
M tManagement
ve leading practicesg p
ment and achieve the “All of us in this
ng practices
PERFORMANCE DRIVERSPERATIONAL FACTORS
ng practices
ministration
• Effective maintenance management
• Communications with ops and planning
S li f
stics
ntainability (MTTR)
ability (MTBF)
• Supplier performance
• Supply & materials performance
• Facilities and resources effectiveness
• Supply cycle time performance
• Maintenance, planning & scheduling performance
• Availability of skilled workforce
• Equipment design & usage
ventive & Predictive Mtce
ability (MTBF) • Equipment design & usage
• Effective preventive/ predictive Maintenance
• Equipment ownership and operator care
• Root-cause and reliability analysis
• Availability of skilled workforce
• Balance of maintenance tactics
• Reliability and predictabilityventive & Predictive Mtce
ned Corrective Mtce
lanned Corrective Mtce
• Reliability and predictability
• Planning and Scheduling effectiveness
• Planning and scheduling Effectiveness
• Materials management & communications
• Effective preventive/ predictive Maintenance
• Effective preventive/ predictive maintenance
• Maintenance, planning and scheduling
akdowns
• Ops/ maintenance communications
• Effective preventive/ predictive maintenance
• Ops/ maintenance responsiveness and learning

5. A Quick Primer on BenchmarkA Quick Primer on Benchmark
Three tiers of benchmarking:
N i l• Numerical
• Appropriate use of Best Practice
• Targeted Peer Reviews: Assess
known to be particularly good inknown to be particularly good in
kingking
es (Capability Maturity)
sment of practice of organizations
specific disciplinesspecific disciplines

6. Project Context
S li it d t KGHM I t t• Scope was limited to KGHM Internat
• High NPV mines were included. Sma
declined
• Maintenance & Supply Chain had re
processes and KPI’s
• Capability Maturity measurement haCapability Maturity measurement ha
Maintenance at some sites and was
• Culture: KGHMI is center-led not cen
All it f lt th t th l d i• All sites felt that they were already in
ti l ti ltional operations only
aller operations were invited but
ecently developed defined standard
ad been attempted before inad been attempted before in
not well received
ntralized (sites did not have to buy-in)
t t f “i iti ti l d”n a state of “initiative overload”

7. Project ContextProject Context
Integrated Processes
Supply Chain Processes
ContractsContracts PurchasingPurchasing LogisticLogistic
Supply Chain Processes
M i t P
17 Processes were defined in
SC
Identify
Work
Identify
Work
PlanPlan ScheduleSchedule
Maintenance Processes
Production Processes
6 Processes were defined in Mtce
DrillDrill BlastBlast LoadLoad
Production Processes
cscs InventoryInventory
To optimize Production,
MTCE and SC
processes must not only
work well, they must
work well together.
ExecuteExecute CloseClose AnalyzeAnalyze
HaulHaul DumpDump Etc.Etc.

8. Objectives
• To build an un biased “Cold Eyes
maturity and compliance (Mainte
integrate)
• To have buy-in from the sites
• To establish a baseline of capabi
• To improve networking between
information sharing)
• To establish a “driver” for continu
s” measuring stick of process
nance, Supply Chain & how they
ility maturity at all high NPV sites
sites (facilitate collaboration &
uous improvement

9. ApproachApproach
Develop CMM:
• Set expectations on What to measure and Why
• Focus questions on those expectations and defin
• Achieve consensus from the working grou
Perform CMM:
• Assessment
• Analysis
• Report
• Present results• Present results
• Improve
Initially lead by PwC but going forward
Y 1
KGH
Initially lead by PwC but going forward
by KGHM
•Year 1
PwC / KGHM
• Y
KGH
ne the capability definitions
p
this assessment process will be lead
HM / PwC
this assessment process will be lead
Year 2
HM / PwC
• Year 3
KGHM

10. The toolThe tool

11. Wh t th O t t L k LikWhat the Output Looks Like

12. CMM Project Timeline
June 2012
Sudbury AM Mtg
Jul - Dec 2012 Jan - Feb 2
Decision
RFP/AFE &
Selection
Desig
Trai
Sudbury AM Mtg.
• All sites participated
• Develop externally
• 4 RFP’s
• 3 Responsesp y
• Cost Split
• Committee review RFPs
• PwC awarded
Note:
Criteria for RFP award: (i.e.
Bid b t t h• Bid scope best match
• Least intrusive to sites
• Estimated total cost of
2013 Mar - Apr 2013 Apr - Jun 2013
n &
n
Application Feedback
• Mar: Sudbury
• CI on tool
• Site result sent
• Follow up mtg.
• Apr: Robinson
• 2014 Sierra Gorda
p g
• Site comparison
• AM Group review
Why did we award to PwC?)
t RFP tto RFP request
s
f initiative

13. Continuous ImprovementContinuous Improvement
• Suggestions to prioritize focus were
made to the Site based on potentialmade to the Site based on potential
value and difficulty to implement.
• Decision remains with the Site
DRAFT FOR DISCUSSION PURPOSES
Referenced the benefits of
work already in progress:y p g
• Reduced perception of
Initiative overload
• Enhanced trust by giving
credit where it was due

14. Early ResultsEarly Results

15. Lessons learnedLessons learned
Site Consultation and Participation – Thp
they participated in its development.
higher credibility as its was performe
Definition of assessment Target AreasDefinition of assessment Target Areas
relevancy if very different areas are
group size is too large. Scores will te
i t t iti l b iimprovement opportunities less obvi
Specific Wording of Questions – the int
floor to general manager. Questionsg g
the organization understands the jar
Rapid Feedback - Commit to feed back
specific timeframe The shorter the tspecific timeframe. The shorter the t
he tool was relevant to each site as
Also, the assessment itself has
ed by peers.
– Assessment results will lose– Assessment results will lose
combined in one assessment or the
end towards “average” making
ous.
terview audience ranges from shop
should be worded so that all levels of
rgon, acronyms and vocabulary.
k to the assessed Area within a
timeframe the bettertimeframe the better.

16. Key Summary PointsKey Summary Points
• The tool was designed to assess bot
f ti b t b tt till it ifi llfunctions but better still, it specifically
together
• The tool is based on best practices f
SCOR, PAS55 and the developing IS
• The project had better acceptance b
• were consulted in the decision to do the p
• participated in the design of the tool,participated in the design of the tool,
• have ongoing participation in the executio
• expanded their network by visiting other s
• A deliberate effort was made to crea
the tool and for Continuous Improvem
th the Maintenance and Supply Chain
h ll th ky measures how well they work
from industry recognized standards,
SO55000
ecause sites:
project,
on, and
sites.
ate “pull” from the sites for the use of
ment to be internally self motivated.

17. Ma
yo
y
M
Nic
KG
NiNic
o: 4
Integrated Asset
llanagement: How well are
ou using Best Practices in
l h i dyour Supply Chain and
Maintenance operations?
ck Seiersen
GHM International
k i @k hck.seiersen@kghm.com
416 642 9214/c: 647 391 8360

18. When we work
once seemed
becomes i
k together, what
d impossible
inevitable.