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Introduction to the M3 Forum

Introduction to the M3 Forum. The Business Roadmap to Operational Excellence in the Mining and Minerals industry Session ID #: INM3 Bob Cook-Russ Barr-Mallen Gajardo-Ben Steyn 11/08/2011 . Pillars of Operational Excellence and Focus of This Discussion. Operational Excellence. Level 3

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Introduction to the M3 Forum

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  1. Introduction to the M3 Forum The Business Roadmap to Operational Excellence in the Mining and Minerals industry Session ID #: INM3 Bob Cook-Russ Barr-Mallen Gajardo-Ben Steyn 11/08/2011 Invensys proprietary & confidential

  2. Pillars of Operational Excellence and Focus of This Discussion Operational Excellence Level 3 (Multi-plant/Multi-site) Environment And Safety People Level 2 (Plant Floor/Area) Asset Level 1 (Resource/Asset) Control

  3. Where The Offerings We Will Discuss Fit Within TheInFusion Enterprise Control System

  4. Agenda • Safety Moment • Industry Drivers • Key Headlines • Outlook • Challenges • The business road map to operational excellence in the Mining and Minerals industry

  5. Industry Drivers • Getting technology to bear on operational and business performance. Businesses are looking to automation to help “push tonnage,” lower costs, and alleviate the strain on skilled human resources, especially at remote sites. • Adjusting operations to meet the emerging regulations and public expectations around climate change and GHG emissions.There is increasing emphasis on efficient energy usage and reduction in emissions. Respective to governments’ response, this could actually put some operations out of business. 

  6. Headlines 1. Quebeclaunches mining expansion plans-Mining Engineering-June 2011 2. China's Chinalco is planning to start pre-production at its $2.2 billion Toromocho copper mine in Peru in March 2013 and initiate start of operations later in October of 2013. Peru is the world's No. 2 copper producer after Chile and has attracted billions in investment from Chinese miners hungry for commodities. Mine WEB-Sept 2011 3. Mines will be required to submit H&S reports in South Africa-Mining Engineering-June 2011 4. Australia lifted its projections for iron ore output and exports on Tuesday, defying concerns over the global economy as Asian demand roars along, though it cut its forecast for coal output on slow recovery from natural disasters. Mine web - September 2011 5. Cliffs Natural Resources set to acquire Thompson Iron Mine for C$4.9B Mining Engineering May 2011 6. Molycorp expands to Europe (AS Silmet acquisition completed-mining Engineering – May 2011)

  7. Past and Projected Metal Prices 1UBS 2BMO 3VM Group 4Credit Suisse

  8. Long-Term Outlook Developing countries will continue to increase modernization China, Southeast Asia, India, Mid-East now Most of Latin America and Africa now Metal inventories are now being consumed Anincrease in prices over the next several years Production will struggle to meet future demand (Freeport Grasberg) Russia and China try to control critical commodities (Platinum, Rare Earth)

  9. China Still moving 20 million people a year into cities (over the next 15 yrs) GDP growth of +9% per year A power grid the size of the UK each year for the next 16 years Largest consumer of the world’s mineral production

  10. India Encouraging greater participation of private sector Ranks third among coal-producing countries; coal production expected to double to 1 billion tonnes by end of 2012 Iron ore consumption to double to 150 Mt by 2011 Industrial growth forecast at +8% per year through 2015; GDP +8%

  11. Other Regions Africa Becoming a major supplier of mineral commodities; corruption a problem Southeast Asia A growth area for mineral production South America Brazil Chile and Peru: are bright spots Argentina: the new “Evita”

  12. Challenges Social opposition to mining development Rising energy prices will affect high energy consuming projects like mining and smelting Declining supplies of energy threaten operations Shortage of skilled laborers and experienced professionals

  13. Forecast An event of concurrent shortages of virtually all mineral commodities A few companies control key commodities, their output and prices Higher base prices for most commodities

  14. Invensys in the Minerals Industry

  15. Invensys Operations Management We work with: All of the top 10 Global Mining Companies 23 of the top 25 petroleum companies 47 of the top 50 chemical companies 19 of the top 20 pharmaceutical companies 30 of the top 50 nuclear power plants More than 650 fossil power plants • We help produce: • 20% of the world’s metals • 23% of the world’s chemicals • 62% of the world’s Liquid Natural Gas • 20% of the world’s electricity generation • 36% of the world’s nuclear energy generation • 17% of the world’s refined products • Annual sales US $ 2Billion • 9,000 employees serving 35,000 customers, in more than 200,000 locations across 180 countries • Over 600,000 active software licenses

  16. Invensys Mineral Processing Industry Breakdown Energetic Minerals Coal Uranium Non-Energetic Minerals Iron ore Non-Ferrous (copper, zinc, etc.) Non-metallic minerals (lime, kaolin, etc.) Precious Metals (Gold,silver,platinum) Mineral Based Chemicals Soda Ash, Phosphates, Borates, etc.

  17. Some Invensys Mining and Metals Clients

  18. Key Areas of Operational ExcellenceImpacting Your Profitability • Maximizing the return on enterprise assets • Balancing effective availability and utilization • Physical, inventory, human, and knowledge assets • Optimizing profit through operations and maintenance • Maximizing the effectiveness of people and systems • Empowering all operating personnel • Enabling collaboration efficiencies • Minimizing variable cost impact of plant operations Productivity Excellence Asset Excellence • Optimizing performance through production and business control • Optimizing production efficiency through better control • Combining business control with automation • Bringing real-time business variables under control Control Excellence • Balancing profitability with safety and environmental sustainability • Minimizing emissions and waste from industrial assets • Increasing equipment, people and environmental safety • Relieving environmental constraints on business value Environment & Safety Excellence

  19. Capabilities to Address Operational Excellence for Optimal Profitability Focus Areas - Addressing Your Business Needs Product Capabilities Service Capabilities Control Excellence Collaboration, Visualization, Intelligence Capabilities (Decision Support) Business Value Consulting – identifying the opportunities and designing the strategy Asset Excellence Packaged Industry /Cross Industry Capabilities (Applications on Platform) Change Management - prepare for and support the organizational changes required Productivity Excellence Comprehensive Portfolio of hardware and software offerings Project Execution – global expertise to implement complete integrated solutions Environment and Safety Excellence Connectivity Across Invensys and Other Vendor Applications (Open Platform) Sustainability- support capabilities to ensure ongoing value and avoid obsolescence

  20. Packaging Model Empower What (Real Time Profitability Control) How (Measure, Empower, Improve) Packaging Control Excellence Real Time Business Control Measure Improve Asset Excellence Asset Performance Control People Excellence Time to Performance Safety Excellence Real Time Profitable Safety

  21. Plan/Scheduling &DPM Optimization Event Management Model-Based Control Advanced Control Process Control Process Measurement Safety Management Availability Measurement Enterprise Asset Mgt. Condition Monitoring Condition Management Model-Based Asset Opt. RCM Plant Asset Management Asset Performance Management Utilization Economic Value Availability Real-Time & Historical Plant Database

  22. Mining Concentrating Crushing Grinding Flotation • Required Solutions • Real-time Financial Visibility • Reduced Cost • Asset Availability • Increased Throughput • Enterprise-wide Business • Strategic Alignment within Operations Finishing Industry Building Power Mineral Processing • Market Drivers • Cyclical market demand • Demand based mineral prices • Older production assets

  23. . Operational Excellence Helping the organization achieve profitability through strategic alignment of business objectives The goals would be reached as part of a measurement and improvement Process The next 2 presentations (Codelco and Minerality) will demonstrate how this is done.

  24. Mining, Metals and Mineral Processing INM3(40 Minutes) Presented by Russ Barr and Mallen Gajardo Invensys proprietary & confidential

  25. Mining, Metals and Mineral Processing INM3(40 Minutes) Presented by Mallen Gajardo, Russ Barr and Ramón Hernández Invensys proprietary & confidential

  26. World Copper Reserves Rusia Canadá 4% 1% Polonia Kazajstán 5% 3% Estados Unidos 6% China 5% México 7% Indonesia 6% Zambia Perú 12% 3% Australia 4% 20% Chile 13% Another Countries: 13%. Source: U.S. Geological Survey, January 2010.

  27. CHILE AT A GLANCE LOCATION: SW South America, neighboring Peru, Bolivia and Argentina AREA: 4,300 km long, 180 km wide for 756,000 sq. km, excluding Antarctic territory CLIMATE: Desert in north, Mediterranean in central region, cool and damp in south POPULATION: 15.3 million, including 5.7 million in the capital Santiago LANGUAGES: Spanish (official). English is common in business and tourist circles. GOVERNMENT TYPE: Republic. ECONOMY: Market-oriented with high level of foreign trade GROSS DOMESTIC PRODUCT: Parity - US$153 billion (2000e), US$10,100 per capita. Mining represented 8.5% of GDP during 1990s NATURAL RESOURCES: Copper, timber, iron ore, nitrates, gold, silver, molybdenum, hydropower COPPER PRODUCTION: 4.7 million tonnes fine copper (2001) — 64% by private companies and 36% by state-owned EXPORTS: US$18 billion (f.o.b. 2000) — mining accounting for 48% GLOBAL RANKING: 1st in copper production, 1st in copper reserves, 14th in gold prod., 1st in lithium prod., and 4th in borate prod.

  28. Production split in seven sites: RADOMIRO TOMIC CHUQUICAMATA DMH POTRERILLOS ANDINA VENTANAS EL TENIENTE World #1 Copper Producer 100% State Owned

  29. Concentrator Refinery Oxides Underground Mine Smelter Open PitMines Codelco’s Processes

  30. Yesterday Today Tomorrow The Evolution in the Mining Industry Physical Effort Technology Knowledge

  31. Our Challenges • Make more PROFITABLE the everyday more complex minerals. • Continuous improvement and PRODUCTIVITY INCREASE. • Continue with the AUTOMATION of the productive processes. • SUSTAIN and develop clean mining (“friendly” with the environment). • Increase SAFETY of the operations and improve the QUALITY OF LIFE of the workers. • Cultural change to manage the KNOWLEDGE and to support continuous INNOVATION.

  32. Automation Projects Department (DPA) The DPA (Departamento de Proyectos de Automatización) is part of TICA (Tecnologías de Información, Comunicaciones y Automatización) Corporate Management. The DPA responsibility is to incorporate automation technologies into Codelco key processes. • Our main partners are the knowledge, innovation and technology • What yesterday was successful it is no guarantee of future ...

  33. Codelco’s motivation for Advanced Applications Due to the proven potential benefit of applications such as Advanced Process Control technology, the DPA defined this technology application as one of the most important tasks to be developed within Codelco, stimulating the development of Advanced Control at all Codelco processes. The added value in the smelter process is very narrow, then is necessary to optimize the efficiency in this process. In order to achieve this goal, we define APC technology as a solution for improve the smelter efficiency. After successful implementation of APC solutions on key unit process at the smelter, Codelco defined Invensys as a partner for reach this objective.

  34. Advanced Regulatory Control Experts Systems Multivariable Predictive Control Business Control Dynamic Simulation (OTS) Advanced Applications

  35. Codelco’s Advanced Applications Agreement with Invensys Chile • On May 2009 a three-year Development Agreement on Advance Applications was signed between Codelco and Invensys Chile. • The scope of such Agreement includes Advanced Process Control, Multivariable Process Control, Advance Regulatory Control, Operator Training Simulator Systems and Dynamic Performance Measurement.

  36. Concepts behind the Agreement The main objective of an APC is to reduce variability in such way that allows to move its normal operation point closer to the limits, getting a better utilization of the assets and therefore adding value to the Client business. Absolute Optimal Operation Point Economical Optimization: Operation closer to the Optimal Point Restriction Restriction Without APC: Significant Variability With APC: Reduced Variability

  37. Concepts behind the Agreement (2) The increase of utilization also is due to an increase of the availability. Both variables shown graphically, gives an absolute add value. Utilization Asset Value Availability

  38. Concepts behind the Agreement (3) Dynamic Performance Measurement Administración Empresarial Reportes Financieros Mensual Administración Productiva Diario Administración de los recursos Tiempo-Real Base de los Recursos Productivos CEO Business Measurement Business Operation COO CFO Performance Gap

  39. Concepts behind the Agreement (4) • All the projects developed under the agreement were justified by the expected benefits. • The benefits came from different sources: • Variability Reduction • Savings in maintenance • Increasing on Throughput • Mayor durability of the materials • etc • Share the best practices between all Codelco plants and process units.

  40. Executed Projects Engineering Studies • Smelter in División Ventanas, • Smelter in División El Salvador, • Acid Plants in Chuquicamata, • Oxygen Plants in Chuquicamata, • Rotary dryers in Chuquicamata.

  41. Executed Projects (2) Implementations • Teniente Converters # 1 & # 2 In El Teniente, • Teniente Converter # 2 in Chuquicamata, • Flash Furnace in Chuquicamata, • Teniente Converter # 5 in El Salvador, • Acid Plants in Chuquicamata, • Up grade in Teniente Converter APC, El Teniente, • Up grade in Flash Furnace APC, Chuquicamata, • Teniente Converter in Ventanas, • Acid Plant in El Salvador. All these applications were developed and implemented using SimSci-Esscor ConnoisseurTM

  42. Next Advanced Applications to be implemented… • Oxygen Plant, • Concentrate Drying, • Oxide plant (SX/EW) • DPM at the Flash Furnace • OTS for the Acid Plant

  43. Conclusion • Total Investment by Codelco under the APC Agreement: • US$ 2.500.000 • Total benefits up today: • US$ 10.000.000 • Total expected benefits on current projects under development: • US$ 2.000.000

  44. Special comments These are not simple developments. It requires high knowledge level, experience, know-how, commitment, great willingness and a good teamwork in-between Invensys and Codelco to achieve the challenge. • Invensys has been and is currently a very important Codelco partner for this kind of projects. • Invensys has a real commitment and always responded soon and correctly when Codelco need technical assistance in those projects. • A important mention for: • Alan Morrow, Gonzalo Iglesias, Carlos Quinteros and • Mallén Gajardo • And a special mention to: • Bob Cook, Russ Barr and Ramón Hernández

  45. Thanks for your attention

  46. Mining, Metals and Mineral Processing INM3 (35 Minutes) Presented by Ben Steyn, Minerality Smart Grind Invensys proprietary & confidential

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