Overcoming the Commodity Management Challenges in Metals & Mining

Overcoming the Commodity Management
Challenges in Metals & Mining
Simon Reid
Global Head of Trading & Risk
Management Practice, everis
Michael Schwartz
EVP & Chief Marketing Officer,
Eka Software
Preeti Ramesh
Director - Product Marketing,
Eka Software

USA | India | United Kingdom | Australia | Canada | Singapore
Agenda
2
Featured Speaker – Simon Reid
• Challenges in Metals & Mining
• How Can Technology Help?
Eka Background – Michael Schwartz
• About Eka, Customers, Global Presence
• Next-Generation Smart CM Platform
Eka Metals Solution – Preeti Ramesh
• Business Challenges
• Metals & Mining Platform
Join the conversation:
@EkaSoftware
#ekawebinar

Featured Speaker
3
Simon Reid
Global Head of Trading & Risk
Management Practice, everis Consulting
• 17 years of commodity trading and risk
management experience, including “hands-on”
experience as business controller, trader and head
of risk management, and management of
commodity management software vendors
• Provides advisory services to clients ranging from
business operating models and change
management to technology strategy in commodity
markets
• BSc Banking & International Finance from CASS
Business School, London UK

Contents
1. Introduction to everis
2. Challenges in Metals & Mining
3. How can Technology help?
4. Summary
4

• Everis founded in 1996 with a new vision for
consulting, investing in talent, innovation and
excellence.
• Average annual growth of 20%
• Joined the NTT DATA group in 2014,
• Provides a comprehensive range of consulting
and IT services globally
Introduction to everis
history
A great group with great capabilities.

Top 10 Business Risks facing Metals & Mining*
* Source: 2013-2014 EY Report “Business risks facing mining and metals”
Challenges in Metals & Mining
Other Challenges
• Water
• Concerns regarding availability and management of water in many
mining areas
• Increased regulations regarding controls and monitoring
• Regulations & Compliance – time and cost
• Impacts the entire mine “life cycle”
• On-going regulatory requirements regarding safety, water quality,
emissions, environmental, trading etc)
• Decline in Quality
• Increased costs due to remote/extreme mines to access higher
grade deposits, and more complex extraction operations of lower
grade locations
1. Capital allocation & access
2. Margin protection &
productivity improvement
3. Resource Nationalism
4. Social license to operate
5. Skills Shortage
6. Price & Currency volatility
7. Capital project execution
8. Sharing the Benefits
9. Infrastructure Access
10. Threat of Substitution

 General global financial and economic volatility. Changes to
quantitative easing and monetary policy of producer
economies will increase currency volatility
 Overall increased demand from Asia & rapid growth
economies
 Supply chain constraints (e.g. freight, warehousing)
 Inequality of supply & demand (over/under-shooting of
supply as reaction to changes in demand)
 Impact of abrupt changes to macroeconomic policies within
emerging markets
 Changes to pricing mechanisms within contracts for raw
materials – trend away from annual pricing to monthly or
shorter.
Drivers of Volatility
Price Volatility
Response
• Identify & quantify price and credit risk – requires tools
• Establish a risk policy and actively manage the risk via hedging
program (requires position visibility and risk monitoring)
• Improved mine production sequencing taking into account new
market price data
• Increase flexibility in cost structure to enable rapid response to
price and currency volatility
Impact
• Increased price risk and counterparty credit risk
• Increased pressure on margins – volatility in
energy and raw materials costs in addition to
metals prices and currency
• Increased cost of capital and erosion of investor
confidence

 Margins being squeezed by decreasing commodity prices
and increasing costs.
 We have seen wide-spread redundancies, closure of mines
and companies selling non-core assets.
 Mining companies prioritising long-term optimisation of
costs and capital allocation versus growth
 Period of high commodity prices gave rise to inefficiencies
that can no longer be supported
Threats to Margin
Margin Protection
Response
• Optimisation of variable costs and assets
• Establish a risk policy and actively manage price risk via
hedging program (requires position visibility and risk
monitoring)
Impact
• Increased energy and raw materials costs directly
impact margin
• Redundancies and divestiture of assets
• Increased cost of capital and erosion of investor
confidence

 On-going regulatory requirements regarding safety, water
quality, emissions, environmental, trading, resource
nationalism, employment and migration, land access,
permitting, fraud and corruption, climate change, conflict
free mineral independent verification, and disclosure of
government payments
 For example in trading, MIFID II removes exemption for
commodities traders - aimed at preventing uncontrolled
speculation by traders and hedge funds – mandatory
position limits and real time position and limits monitoring
 4 primary streams of trading regulations: Reporting;
Clearing; Risk Mitigation; Trade Surveillance
Regulatory Pressure
Regulatory Compliance
Response
• Establish IT tools to easily access all relevant data for
regulatory reporting requirements (e.g. Business
Intelligence)
• Improve internal and external communication regarding
obligations and compliance
Impact
• Increased costs due to regulatory compliance
• Cost and impact on reputation of non-compliance,
leading to reduced access to capital and impaired
government relationships

SMAC – A new Enterprise IT model
• Social media allows people to connect and
interact while leaving a trail of data on
preferences and relationships with other
people.
• This data trail can be harnessed to provide
insight into products, trends and sentiments.
social
• Handheld devices and wireless infrastructure
and communication
• The Mobile Web is bringing users closer to
businesses and giving businesses the
opportunity to interact with their customers
in more engaging ways, taking advantage of
the user’s context (who, what when, where
and how) to delivery robust, context-aware
business services.
mobile
• Emerging technologies such as Big Data, Data
Science, and advanced visualization are
allowing companies to ingest, process, and
visualize information beyond the capabilities
of conventional BI and BW
• This new level of analytics create business
value and innovation through
• improved decision making.
analytics
• Cloud computing provides efficient, elastic
computing capacity allowing organisations
to pay only for what ‘s needed and efficiently
scaling in response to varying demand.
• Cloud computing has given rise to several
“XaaS” variations such as Infrastructure as a
Service , Platform as a service , Software as a
Service and even Mobile Backend as a
Service.
cloud

11
• IT spend on SMAC technologies expected to reach $360bn by 2016 [Gartner]
• The SMAC Stack is driving customer engagement, innovation and business productivity
SMAC Stack – Driving business productivity

SMAC Stack Services - Commodities
• For Public Relations Management
• Sentiment Monitoring
• Improving perception
• For Internal Collaboration
• Improve communication
• Encourage collaboration
• Improved knowledge management & transfer (e.g. video sharing)
social

• Handheld devices and wireless infrastructure and communication
• Significant opportunities for increased efficiency and productivity of “field” resources (smart
devices, wearable technologies, heads-up displays
• In physical trading, opportunities for improved real-time data collection of logistics operations.
• Sensor Technologies
• Intelligent sensors coupled with mobile technology to capture and transmit physical property
data (e.g. load/discharge actuals)
• Access external data, like unstructured data from social media, location data.
mobile

• Today we have access to other external sources of data including social media unstructured data
• The ability to manage and analyse Big Data, identifying patterns across multiple inter-related data
sets to predict values
• Moving away from tradition BI approach (store limited data-set, analyse, report) to a near real-
time, complex event processing.
• Advanced Descriptive Analytics, Predictive Analytics, optimisation, simulation
• Big Data is a set of technologies that enable organisations to store and analyse massive amounts of
data with low response times.
analytics

 Distributed file system on different machines
 Independent node-based structure, allowing scalability
 Fault Tolerance by replicated data structure to support failed nodes
Distributed Storage
 Executing processes divided among N nodes operating in parallel
and achieving high performance
 Greater system processing is simple, adding new nodes
 This method allows real-time processing
Parallel Processing
 Non-relational databases, key-value
type
 Great write speed and data recovery
 The database has no scheme, the
tables structure design is not
required.
 The information is not distributed in
tables, it is stored in an integrated
way
DB / No SQL
Analytics – Managing Big Data

• Lower adoption of cloud technologies in commodities than other sectors due to security and
reliability concerns
• Benefits of cloud include lower TCO and faster deployment, scalability
• More appropriate for non-differentiating applications and for functions such as Big Data Analytics
which may require sudden increases in scale/
cloud

SMAC Stack Services – case study
Skybox aims to deploy a fleet of satellites that will be able to
map any place in the world with high resolution and high
fidelity Imagery (with sub-meter resolution imagery), five to
seven times a day.
Maritime Monitoring and Financial Trading Intelligence.
Monitor ships entering and exiting ports with HD video to
inform supply chain optimization decisions. Access
proprietary information to make more informed and
competitive investment decisions.
Google acquires satellite eye-in-sky
Skybox for $500m (Jun’14)
Consumer watchdog Public Citizen has called on US regulators
to conduct a review of Google’s recent acquisition of aerospace
startup Skybox Imaging, concerned that Skybox’s satellite
technology may aid manipulation of commodity markets. Public
Citizen said that access to Skybox’s satellite images of oil, gas
and power infrastructure is already helping deep-pocketed firms
such as banks and hedge funds “gain a financial trading
intelligence advantage” in commodities.
What it is coming in Analytics & Big Data Technologies…

Smart Technologies - Case Study

1. Multi-channel and Reputation in social media Dashboard.
2. Detection of commercial opportunities from the information
available in social media and internal systems.
Business Case
 Leverage Big Data systems to provide multi-channel customer data and corporate reputation analysis in social
media Dashboard.
Result
SMAC Stack Services – case study

SMAC Stack in Commodities Trading
Conclusions
 IT Strategy driven by
• Need (internally generated)
• Opportunity (arising externally)
 Embrace the new Normal
• Leverage digital technologies to drive business innovation and differentiation, and
address sector challenges
 Learn from other sectors - Apply best practices and lessons from other “early adopter”
industries
Technology Solutions
• Tools such as BI and CTRM to provide transparency of position data for
accurate identification and quantification of price and credit risk, and
effective management of hedging program
• Leverage SMAC technologies for optimised mine production sequencing
and resource & capital deployment
• Leverage Smart technologies to optimise variable costs and assets,
including supply chain logistics
• Analytic and BI tools to easily access all relevant data for regulatory
reporting requirements
Business Challenges
• Price & Currency Volatility
• Margin Protection &
Productivity Improvement
• Regulations & Compliance

Eka Smart Commodity Management
Eka Metals

Evolution: ETRM to Smart Commodity Management
22
1990 2003
2003
2014
2008
2008 2014
ETRM
Energy Commodities
• Oil
• Power
• Natural Gas
Additional Commodities
• Ags
• Metals / Ore
• Biofuels
Broader Footprint
• Supply Chain
• Compliance
• Manufacturing
Data to Foresight
• Predictive Analytics
• Visualization
• Optimization
CTRM
CM
Smart CM

Eka Software Solutions: Company Profile
Position: Global leader in on premise & cloud served Smart Commodity Management solutions
Founded: 2004
Employees: 315
Global Offices: 7 offices. 3 development & support centers
• Americas: Stamford CT HQ, Calgary AB
• Asia Pacific: Bangalore India, Singapore, Adelaide & Perth AU
• Europe: London UK
Investors: Silver Lake Partners - GP Group - Nexus Venture Partners
Customer Base: >50 leading global enterprises on 4 continents
• Cargill, Rio Tinto, Mitsui, Bunge, BMA, EDF Trading, Graincorp, Viterra, Louis Dreyfus, Noble,
CBH, Mitsubishi, Pinnacle Foods, Twin Eagle, Boliden, Tata Steel
Solution: InSight Commodity Management (CM) Platform
• End to end financial and physical transaction management
• Cross asset trading and position management – Ags, Energy, Metals, and Bulk
• State of the art enterprise risk management
Commodity Analytics Cloud
• Analytics specific to commodities
• Multiple data sources internal and external to Eka
• Prebuilt and custom apps
23

Customers
M E TA L S & M I N I N G
E N E R G Y
A G R I C U LT U R E

Intelligent. Integrated. Innovative.

Industry Expert
26
Preeti Ramesh
Director - Product Marketing, Eka
• 13+ years of experience in banking,
finance, and CM domains
• 7 years of product management,
product marketing,
implementation, and presales
experience at Eka
• Master of Computer Applications,
National Institute of Technology
Tiruchirappalli and BSc, Math, Delhi
University

Business Challenges in the Metal Industry Supply Chain
Producers
• Supply Chain
visibility
• Risk Management
• Logistic planning
• Operational
efficiencies
• Assay management
• Revenue
recognition
Smelters
• Visibility over
material
consumption
• Yield Management
and free metal
content tracking
• Assay management
• Metal accounts
Traders
• Position tracking
• Risk management
• Analytical and
decision making
tools
• Margin analysis
Fabricators
• Risk Management:
protecting
fabrication margins
• Hedge
effectiveness
measurement
• Operational
efficiencies
27

Source
Transport &
Store
Process Transform Distribute Market & Sell
Eka’s Solution for Metals & Mining
28
A fully integrated platform for managing commercial, supply chain, and risk
management needs across the entire metals & mining industry

Eka Platform
29
Best of Breed
Market
Standard
System
Product
Platform,
Workflows &
Controls
Business
Intelligence,
Visibility,
Analytics
Technology
Platform
Metals &
Mining
Industry
Requirements
Supply Chain
Operations
Eka’s Competitive Advantage

Product Overview
30
Eka’s integrated product strategy is to offer a range of products and modules
to meet specific requirements across the metals and mining supply chain.
Bulk Handling
• 3D Stockpile
modeling
• Mining and port
site task
management
• Anti-collision
software
Concentrates
• Contracts
• Pricing
• Penalties
• TC/RC
• Umpire rules
• Assaying
• Settlement
• Physical and Pricing
Optionality
• Receive Material
from mines
Tolling
• Metal balance
• Internal tolling
• External tolling
• Metal Accounts
• In Process Stock
• Free Metals
• Metal Balance
Valuation
• Pledging
Mine
Marketing
Smelting Trading & Risk
Advanced
Supply Chain
CTRM
• Trading
• Logistics
• Inventory
• Position
• MtM & PNL
• Settlement
• Risk
• Hedging
• Analytics

Product Portfolio
31
• Metals Solutions:
• Concentrates
• Base Metals
• Bulk Handling Solutions:
• Site Automation
• Commodity Site Manager
• 3D Stockpile Manager
• Anti Collision

Eka Metals High Level Solution Map
32
Contract Capture Product setup Discrete Stock Back To Back
Provisional &
Final Invoice
Exchange
support
Real time
Physical +
Financial
Counterparty
Limits
User Views
Approval
Workflow
Flexible Pricing:
QP, event any day
Consolidated
stock
Inventory
To Sale
Prepayment
invoices
Instrument
support
Physicals +
Financial
Advanced
Physical M2M
Trader Limits
Standard
reports
Calls offs: delivery,
quality & Pricing
TC/RC
Pile
management
Domestic &
Export
Credit & Debit
Notes
Trade capture FX Realized P&L Credit Limits
Drag n drop
reporting
Multiple pricing
types
Payables &
penalties
Stock matching
Multi-modal
Transport
Payments &
Receipts
Trade
management
Open &
Inventory
COGS VaR Dashboard
Template & Drafts Umpire rules
Warehouse
Transfers
Documents
Day & Month
End process
Allocation To
Physicals
Derivatives
Accrual
management
Stress
Testing
Analytics
Amendments &
Cancellation
Splitting limits
Weight
Adjustments
Weight
Management
Service Invoices
Broker
Management
Priced
Vs
Un-priced
Metal Balance
Valuation User Access
Allocations
Assay
management
Inbound &
outbound
Internal tolling A/R & A/P Margins
Hedged
Vs
Un-hedged
Open, inventory
& realized
Audit Trails
Contract confirms Blending External tolling VAT handling Settlement
Position
Change
Revenue
Recognition
Release orders
Options
Valuation
Metal
accounting
PNL change
Physical
Contracts
Concentrates Inventory
Logistics &
Tolling
Settlement Derivatives Position
COGS &
P&L
Risk Reporting

Trading & Risk Management
33
Base Metal, Concentrate, and
Contracts:
• Contract Management
• Flexible pricing
• TC/RC definition
• Configurable payable rules
• Assay exchange rule
• Optionality
• Call off process

Trading & Risk Management (cont’d)
34
Position, P&L and Risk Management:
• Position by Concentrates
• Exposure by elements
• Projected Fx exposures
• Unrealized, Inventory and realized P&L
for Physicals, Derivatives and FX Trades
• Metal Balance Valuation
• P&L attribution and P&L change
analytics
• Hedge Correction on Assay Finalization
• Cash Flow Management
• Stress Analysis

Hedging
35
Derivatives and Currency Hedges:
• Supports for multiple exchanges
and instruments with configurable
settlement rules
• Derivative trades lifecycle
management
• Currency hedging –Forwards and
options
• Hedge allocation to physicals
• Capture comprehensive market
quotes
• Trader’s Card Report
• Clearer statement
• Broker margins

Assaying, Operations, & Accounting
36
Assaying
• Record and import multiple assays
• Economic value calculation
• Assay Finalization based on Umpire Rule or
override Umpire Rule
• Integration with Assay Inspection
laboratories
Operations & Inventory Management
• Multimodal Transportation
• Internal Stock Transfer
• COG calculation
• Inventory valuation
Settlement
• Advances and Adjustments
• Auto calculation TC/RC and Penalty
• Final Invoices, VAT Invoice handling
• Cost Management and Service Invoices

Tolling
37
Tolling
• Internal & External
• Stock Pile Management
• Stock Blending
• Metal Accounts –Debts by
Counterparty
• Smelting Yield Capture and
Free Metal Content Tracking
• Pledging of elements
• Warrant Management
• Sale of intermediate and
finished goods

Analytics
38
Management Dashboard
• Summary of position and p&l
• Position and Exposure Dashboards
• P&L Attribution
• Detailed P&L reports
• Mobile and tablet enabled

USA
Two Harbor Point Square
100 Washington Boulevard,
Stamford, Connecticut 06902
United States of America
T: +1.203.810.4250
EUROPE
2 Sheen Road
Richmond , TW9 1AE
United Kingdom
T: +44.208.973.2683
AUSTRALIA
Level 5 185 Victoria Square
Adelaide 5000 SA Australia
T: +61.0.4479.77831
SINGAPORE
17 Phillip Street
Grand Building 05-01
Singapore 048695
Tel No: +65.8363.2635
INDIA
Embassy Tech Village, Phase II
Aster Building 2A, East Tower
Devarabeesanahalli, Outer Ring Road
Bangalore 560 103 India
T: +91.80.40819200
CANADA
Suite 730, 734 - 7th Avenue SW
Calgary, AB , T2P 3P8
T: +1.403.237.7740
Download Webinar Recording:
http://info.ekaplus.com/metals-mining-webinar

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