Market Fundamentals

In order to ensure Xstrata Copper’s current and future operational needs are met, general manager support services & logistics Tomas Martinez says the process must go beyond traditional interpersonal relationships.

“We Formalise our arrangements through Service Level Agreements and review processes with agreed outcomes,” he says.

“Supplier selection is important and needs to fit with the individual mine operation.”

“Mines are often located in remote areas so a strong local presence to support the supply is highly regarded.”

“Committed suppliers with local representatives who understand the requirement and are responsive to changing circumstances underpin the reliability of supply,” Martinez says.

“Taking a collaborative approach to supplier management is vital. At Xstrata, we work through the projected usage requirements with our key suppliers to ensure that supply, shipping and surface transport schedules are met.”

In addition, cost control in the supply chain is critical.

“Xstrata systematically monitors its expenditure areas to identify cost control opportunities,” Martinez says.

“This approach seeks to gain market leverage by consolidating operations expenditure and standardising, where practical, common processes and suppliers.”

“It involves either a global or regional approach to supplier negotiation,” he says.

“Mineral concentrates, metal or coal all rely on a rail transport system that has the capability to consistently move product as required and meet the contractual requirements and shipping schedules of export customers,” Tomas Martinez says.

“Xstrata works collaboratively with rail transport service providers to determine the detail of schedules and projected volumes.”

“Port infrastructure is also a key component in the supply chain,” he says.

“Xstrata operates its own ship loader and storage facility at the Port of Townsville. However a strong working relationship with the Townsville Port Authority is required to ensure that loading schedules are achieved.”

“We believe that timely communication and collaborative planning is the key to our successful working relationship.”

“With regard to inbound consumables, a mine will expect to have hundreds of consignments in transit on any given day,” Martinez explains.

“Supply departments require a high level of visibility to ensure components arrive where and when required. Transport suppliers must be able to support their services with accurate performance data and real time tracking functionality if they are to retain transport service contracts with the larger mining operations.”

According to Tomas Martinez, attracting and retaining skilled people to work in remote locations is one the mining industry’s biggest challenges.

“Xstrata supports a wide range of education and training initiatives to proactively address the skills shortage,” he says.

By way of example, Martinez points to the $1.2 million Xstrata Skills Centre in Mount Isa, which was established by Xstrata’s north Queensland operations in partnership with Mount Isa TAFE in May 2006.

“This facility currently runs the largest apprenticeship program of its kind in north west Queensland, with an annual budget of around $7 million,” he says.

Martinez also believes obtaining access to a reliable, clean and economic source of energy to support mining operations and expansion is crucial, as it underpins the cost of production.

He says sustainable development within the mining sector is likely to drive technological change both within mineral processing and supply chain management.

“The move towards more energy efficient equipment that reduces emissions is one key area as on-site haulage fleets can be significant users of diesel,” he says.

“Effective water management and conservation is another important area that is likely to drive change particularly in relation to access, storage and transportation of this vital resource.”

Martinez maintains that in order to maximise cost efficiencies in both inbound and outbound supply chains, Xstrata’s north Queensland operations require access to a more efficient rail network that will support heavier payloads and quicker train cycle times, as well as improved port facilities that accommodate larger vessels to support the shipping requirements of export clients.

“Transport infrastructure that can support the requirements of a growing mining sector is a significant challenge and is crucial for the industry to remain viable,” he says.

“Xstrata is working with all levels of government and other industry representatives to improve energy and transport infrastructure in north west Queensland.”

Other opportunities to improve supply chain reliability and efficiency could include industry collaboration to store critical spares.

“Some spares are very expensive however they are kept on site to mitigate the impact of a breakdown situation,” he says.

“Improved collaboration could see the development of Business Continuity Arrangements between mining operations located in close proximity to each other.”

“The market fundamentals are still encouraging and continue to support investment,” Martinez enthuses.

“Xstrata is optimistic about the future of its operations and further expansion within the sector.”

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