How to prevent equipment breakdowns that drive mining losses

  • Lyndon Broad Operations Manager, FM Global

Electrical and mechanical breakdowns – particularly $100 million draglines and other pieces of high-value, specialist equipment – can expose mine operators to shutdowns lasting weeks or months. In fact, mining is one of the industries most exposed to equipment failure losses.

This is backed up by FM Global data spanning the last 20 years. During this period, more than one-quarter (27 percent) of mining industry losses incurred by FM Global – equating to more than $US1 billion – relates to mechanical breakdowns. Electrical breakdowns account for a further 19 percent. Combined, this equates to losses of more than $US470 million.

We found a range of ‘equipment factors’ typically drove the frequency of these losses. These include maintenance, operating conditions, environment, operators and history. Inadequate maintenance, harsh environments and poor operator training are all red flags.  

When more than three of these negatives are involved, the propensity for loss increases tenfold and the severity spikes by a factor of five. Factors that mitigate the severity of losses include safety devices and contingency planning.

Single Point Of Failure

Losses are exacerbated by the fact that critical single-line pieces of equipment often take a long time to replace. For example, it can take weeks or even months to get a new ball mill motor when there’s high demand within the mining sector.

Notable losses have also been incurred due to equipment failure on semi-autogenous grinding (SAG) mills. The wraparound motors effectively treat the mill as a rotor so inadequate clearances between various components can cause electrical motors to fail.

Not being able to use a $50 million mill to grind ore is typically catastrophic for production. Given the cost of these mills, it’s fair to assume there won’t be a spare one lying around. If a mine operator doesn’t undertake ongoing condition monitoring and vibration analysis of this equipment – preferably with non-penetrative testing scheduled once a year – they elevate the risk of a breakdown.

The impact of breakdowns is typically more severe during periods of lower demand and tighter profit margins. While coal and iron ore prices have recovered, and gold mining is stable, tolerance for interruptions is still generally lower than during the mining boom.

Knowing Your Risk Profile

So how can mine operators predict and protect themselves against high-risk exposures during these times of capital restraint? Especially when investment in preventative maintenance or new equipment is more difficult to justify.

By undertaking detailed risk assessments, mine operators can protect their business against costly electrical and mechanical breakdowns that could cause substantial delays or even cripple a project.

FM Global helps mine operators around the world understand where losses are most likely to occur and to prevent them happening. Our Canadian operations insure mining operations carried out by Brazilian mining giant, Vale.

Here in Australia, our clients include leading players like Fortescue Metals Group (Fortescue) and MMG. We also insure single-location operations such as the Northparkes mine in central western New South Wales.

Our engineers – who work with clients to deliver these risk assessments – are among the highest qualified in the industry. Once they join FM Global as qualified engineers, they gain about four years’ experience before being introduced to mining. They must then undertake up to five years training with highly experienced coordinators before being accredited as industry specialists.

Each engineer takes an holistic view to assessing risk, ranging from the potential for a fire in an accommodation block for fly-in, fly-out workers to the likelihood of a release from a tailings dam.

The Power Of Predictive Analytics

FM Global applies predictive analytics to help clients prioritise investments appropriately. For example, we know that two percent of locations drive about one-quarter of large losses, which we classify as anything more than $3 million. That’s a 13x to 16x uplift relative to statistical probability.

There are inherent factors at a location that predispose it to loss. For example, at the large Antamena poly-metallic ore mine in Peru, the business interruption value runs into the millions of dollars per day. So it doesn’t take long for an outage to start chewing through profits. Other locations might be predisposed to losses because there’s a high-risk of flooding or earthquakes.

Our engineers work with mine operators to identify priority areas of risk management based on the previously mentioned equipment factors. Once they identify the factors that drive the frequency and severity of losses, and the locations predisposed to large losses, they can make recommendations to the chief financial officer or risk manager. There’s great value in knowing where to minimise risk exposure because it helps deliver the highest return on investment.    

Of course, these assessments extend well beyond electrical and mechanical breakdowns. Fires, floods, explosions and collapses are also major concerns for mine operators. For example, at a time when a client was experiencing capital constraint – which meant the business couldn’t afford an interruption – one of our engineers identified an excessive dependence on a single computer room.

This computer room was effectively housed in a large, flammable polystyrene box. A fire here would have had a seriously negative impact on the business. By identifying and prioritising the issue, the risk was mitigated.

Predictive analytics, combined with the critical eye of experienced engineers, is the key to mitigating the risk presented by equipment hazards. FM Global has the experience and the technical capabilities to help mine operators predict losses and take the measures necessary to prevent them.