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12.5% Cost Reduction With New HME Fleet Strategy

Mining Asset Management Strategy Insight Case Study by COSOL /

At a glance

  • Mining client required a new HME fleet strategy to optimise costs and align equipment decisions with mine closure in 10 years.
  • Asset replacement was complicated by ageing fleets, labour shortages, capital limits, and long acquisition lead times
  • COSOL developed a fact-based HME fleet strategy, modelling whole-of-life costs, risks, and mine plan demand to guide decisions.
  • Results included a 12.5% cost reduction, 4% uplift in asset availability, and 8.2% less maintenance labour demand.

While maintaining consistent performance over 10 years

Developing an effective fleet strategy is a complex task for mining companies. Asset performance, maintenance tactics, labour factors, business risks, life of mine, OEM pricing and capital availability all influence fleet replacement decisions.

For internal decision-makers, this can lead to:

Uncertainty over how to accurately evaluate the options available - while understanding the business impact of those options.
Defaulting to less effective methods - like industry benchmarks, OEM defaults, and replacing before major maintenance spend.
Higher business expenses over an asset's life, because these methods don't consider financial parameters - like time value of money.
Cost reduction cycle
The company operates a large iron ore mine, rail and port in the Pilbara region, and was uncertain whether replacing or extending the life of its heavy mobile mining assets represented the best choice for its business goals.
COSOL specialises in strategic asset planning and decision support for mining companies.

Challenge

With 10-years remaining until the mine's end of life, our client needed to make critical strategic decisions on their fleet, including replacement and maintenance. The COSOL team knew that they had to consider the site's unique financial, maintenance, performance and risk parameters, including:

Performance issues of an ageing fleet - reducing asset availability.
Industry-wide labour shortage - hampering maintenance capabilities
Acquisition lead times of up to two years - affecting timelines and turnaround.
Closure of the mine within 10 years - necessitating careful capital investment.
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Considering these issues, COSOL approached the client's heavy mobile equipment (HME) fleet strategy with three success criteria in mind.

  1. Improve asset availability and reliability
  2. Reduce capital and maintenance expenditure
  3. Minimise on-site maintenance labour demand

Solution

Working with the client's team, COSOL undertook a comprehensive analysis and decision process to ensure that the recommended fleet strategy was backed by fact-based insights. This involved:

01

Gaining a clear understanding of asset demand over life of mine

02

Aligned decisions on the best solutions - considering the unique business context

03

Coordinated actions to deliver results quickly

01 Understand
Define assets for assessment
Analyse mine plan demand
Map maintenance strategy

Most fleet replacement analyses across the mining industry use one of three techniques:

  • Industry benchmarking
  • Equipment manufacturer (OEM) replacement age recommendations
  • Lowest maintenance cost points

However, these methods alone don't consider critical factors specific to a mine and its assets - leaving significant value unrealised. COSOL would build upon these basic principles to formulate a strategy most suited to the client's situation.

To determine how to achieve these best-for-business outcomes...

COSOL examined relevant high-impact quantitative and qualitative data - including:

Mine plan demand
requirements

Whole-of-life costs
and labour requirements

Depreciation, inflation
and cash rate

Capital
availability

Asset suitability for
the client and project

Unique business and
site characteristics

Technical
risk

Fleet automation capabilities
and integrations

Carbon emissions
and ESG implications

02 Decide
Identify spend and timings
Model asset whole-of-life
Evaluate scenarios
Provide recommendations
Over 12 months, COSOL developed and implemented a new strategy to maximise the value of the client's fleet - refining the company's fleet lives to match their business requirements and life of mine.

Outcomes

  1. New fleet strategy with improved replacement points for each asset – including order points that consider acquisition lead times:
    1. Hydraulic excavators – replaced at 54,000 hours
    2. Caterpillar 793 and Hitachi EH5000 – run to the mine’s end of life, supported by new and individualised maintenance strategies that mitigate late life failure modes (like cracking and repair downtime)
    3. Bulldozers, loaders, drills and graders – aligned to the most economical replacement points, considering residual value at the mine’s end of life.
  2. Verified business value case shown in Net Present Value.
  3. Optimised capital spend profile, outlining impacts that spend decision scenarios will have on whole-of-life business costs, maintenance and labour requirements.
  4. Toolset for client’s team to analyse subsequent fleet strategy scenarios and capital spend options.
  5. Training for client’s engineering team in fleet strategy decision-making, data analysis, toolsets and process improvement.
For a total investment of less than AUD 1 million, COSOL enabled the client make confident and informed decisions about its assets. Optimal replacement ages and maintenance strategies have locked in substantial cost savings over the 2023-2032 period.
Revenue icon

AUD 142.3 million
Net Present Value to client; a reduction of 12.5% in total costs (NPC)

Reconfigured icon

Up to
4% improvement
in asset availability, with no decline in performance

Reduction icon

8.2% reduction
in maintenance labour demand

Increased Icon

Additional value from
increased production
through identified asset configuration options