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DICE unlocks significant value for the Jansen Potash Project

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Abstract and Figures

The use of fertilizers is responsible for half of the world’s current food production. We will need more fertilizers to feed our growing population. Potash is a potassium fertilizer mined from ancient salt beds found mainly in Canada, Russia, and Belarus. BHP is developing the Jansen Potash Project. It will be the first conventional greenfield potash mine built in Saskatchewan for some decades. We go through an extraordinarily rigorous process of studies to get the project details right. DICE is our rigorous operations research model for defining Jansen’s production capacity. DICE enabled a large reduction of our current capital expenditures, unlocked a significant gain in production, and increased Jansen’s return on investment. Every day, our team works to find and design safer and better ways of developing Jansen. Operations research has given BHP a competitive advantage. DICE has been a significant enabler to the optimisation of the project, positioning Potash, through Jansen, to become a new commodity in the BHP portfolio, subject to Board sanction. On behalf of Amec Foster Wheeler and the BHP Jansen project team, thank you to the Edelman committee, judges, and coaches for your consideration of our work and congratulations to our fellow nominees. Potash in Saskatchewan has a very bright future, and we believe we will play a leading role.
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DICE unlocks significant value
for the Jansen Potash Project
Forward-looking statements
This presentation contains forward-looking statements, which may include statements regarding plans, strategies
and objectives of management, future performance and future opportunities. These forward-looking statements are
not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other
factors, many of which are beyond our control, and which may cause actual results to differ materially from those
expressed in the statements contained in this presentation. BHP Billiton’s Annual Report on Form 20-F filed with the
US Securities and Exchange Commission identifies, under the heading Risk Factors, specific factors that may
cause actual results to differ from the forward-looking statements in this presentation. BHP Billiton does not
undertake any obligation to update or review any forward-looking statements.
No offer of securities
Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell
BHP Billiton securities in any jurisdiction, or be treated or relied upon as a recommendation or advice by BHP
Billiton.
Confidentiality Agreement
Some of the information contained in this presentation is considered commercially sensitive and is being provided
under the terms and conditions of the Confidentiality Agreement between BHP Billiton Canada Inc. and The Port of
Grays Harbor.
3 April 2017
2017 Franz Edelman Award Competition
Disclaimer
3 April 2017
2017 Franz Edelman Award Competition
Potash provides demand diversification relative to other BHP Billiton pillars
Growing Demand
Higher
demand
for food
New
diets
New sources
of demands
for crops
Limited Supply
Limited number of players
able to bring on additional capacity
3 April 2017
2017 Franz Edelman Award Competition
First major capital potash
project in Canada Greenfield development
New
commodity
Challenges
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2017 Franz Edelman Award Competition
Achieving high
certainty of
outcomes
Understanding
complex, large
operations
Producing strong
project economics
Challenges
Detailed
Integrated
Capacity
Estimate
3 April 2017
2017 Franz Edelman Award Competition
3 April 2017
2017 Franz Edelman Award Competition
3 April 2017
2017 Franz Edelman Award Competition
$300M
capex
deferred
Value
and
Impact
$300M
capex
deferred
ORGANIZATIONAL
Board
approved
transition to
feasibility
Scope
and cost of
feasibility
study
$300M
capex
deferred
ORGANIZATIONAL
Board
approved
transition to
feasibility
Scope
and cost of
feasibility
study
Approach
David Bleiker
Amec Foster Wheeler
Vice-President, Mining
Operating
Environment
BHP Billiton
Potash
Project
Environment
Optimized operations
Operational baseline
3 April 2017
Concept
Pre-
feasibility
Feasibility
Construction
Optimized operations
2017 Franz Edelman Award Competition
Concept
Pre-
feasibility
Feasibility
Construction
Optimized operations
Cost of changes
Design flexibility
Strong stakeholder buy-in
Low cost of change
Low engineering re-work
No off-the-shelf model available.
Inputs were not fully benchmarked.
Previous models lacked details.
Previous models were not integrated.
Input uncertainty was not considered.
Process flow diagrams were not
sufficiently validated.
DICE
Integrated from mine face to customer
3 April 2017
2017 Franz Edelman Award Competition
Mining
Model Hoisting
Model Processing
Model
Outbound
Logistics
Model
Marketing
Model
Technical Solutions
Keith Quan
Amec Foster Wheeler
Manager of Operations Analysis Group
3 April 2017
2017 Franz Edelman Award Competition
Integrated
scope
Integrated
team
Integrated
technique
Discrete
Event
Simulation
Capacity
analysis
Constraint
analysis
RAM
analysis
Monte
Carlo
Forecast
Inventory
theory
3 April 2017
2017 Franz Edelman Award Competition
3 April 2017
2017 Franz Edelman Award Competition
Mining Hoist Process Logistics Marketing
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2017 Franz Edelman Award Competition
142,000 configurable variables
Highly detailed
and complex
High influence
High
complexity
High
influence
Highly
detailed
High
influence
Highly
detailed Highly detailed
and complex
High influence
High
complexity
Results
Bryan Monk
Amec Foster Wheeler
Senior Operations Analyst, Operations Analysis Group
10%
15%
Automation
Hot seating
25% gain in
operational availability
Mining
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2017 Franz Edelman Award Competition
Hoisting
$60M NPV gain by aligning
hoist and mill maintenance events
About $300M capital cost deferred
by not equipping one of the two shafts
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2017 Franz Edelman Award Competition
Processing
$54M NPV gain by changing the
planned maintenance schedule
$33M NPV saved
by not reducing the stockpile size
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2017 Franz Edelman Award Competition
Origin of the value created
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2017 Franz Edelman Award Competition
0 102030405060708090100
Mining
15% Hoisting
27% Processing
58%
Downtime
41% Recovery
29% Ore throughput
22%
Start End
100%
115 – 120%
Pre-feasibility
Integrated capacity
Value and Impact
Dr. Sylvie Bouffard
BHP Billiton Canada
Manager, Studies Optimization
3 April 2017
2017 Franz Edelman Award Competition
$300M
capex
deferred
Value
and
Impact
$300M
capex
deferred
ORGANIZATIONAL
Board
approved
transition to
feasibility
Scope
and cost of
feasibility
study
$300M
capex
deferred
ORGANIZATIONAL
Board
approved
transition to
feasibility
Scope
and cost of
feasibility
study
Technical
impact Define the workplan and
cost of the feasibility study
Mining: Scope of the borer demonstration trial
Process: More gains in the mill layout
Hoist: SLICE identifies hopping bottleneck
3 April 2017
2017 Franz Edelman Award Competition
Mining: Scope of the borer demonstration trial
3 April 2017
2017 Franz Edelman Award Competition
Detailed
Integrated
Capacity
Estimate
Linear
Integrated
Capacity
Estimate
Simplified
Technical
impact Define the workplan and
cost of the feasibility study
Mining: Scope of the borer demonstration trial
Process: More gains in the mill layout
Hoist: SLICE identifies hopping bottleneck
3 April 2017
2017 Franz Edelman Award Competition
33
Technical
impact Define the workplan and
cost of the feasibility study
Mining: Scope of the borer demonstration trial
Process: More gains in the mill layout
Hoist: SLICE identifies hopping bottleneck
3 April 2017
2017 Franz Edelman Award Competition
Financial
impact
3 April 2017
2017 Franz Edelman Award Competition
About $300,000,000 capital deferred
from current study budget
From the
start
to the end
of the
pre-feasibility
study
15-20% increase in annual production capacity
in Stage 1
More than $500,000,000 NPV gain in Stage 1
12-16% increase of the all-stages Jansen NPV
3 April 2017
2017 Franz Edelman Award Competition
Organizational
impact Board approval to progress
to feasibility study
DICE
30% increase in
probability
of a positive
project NPV
3 April 2017
2017 Franz Edelman Award Competition
Conclusions
Giles Hellyer
BHP Billiton Canada
President
42
43
Transferability
Feasibility, construction, and operations
DICE and SLICE
Value and
impact
15 to 20% gain in production capacity
Higher probability of success of Jansen
Source-of-the-truth for project governance
Implementation
Greater understanding of value drivers
Alignment of KPIs
Challenges
One of the most detailed and
complex mining models ever built
Technical
solution
3 April 2017
2017 Franz Edelman Award Competition
46
47
DICE enabled
project progression
+15-20% production increase
>$500M Stage 1 NPV gain
>$300M removed from Stage 1
Billions more
to spend
>$3 billion spent
48
Optimized operationsConstructionFeasibilityPre-feasibilityConcept
49
50
51
52
53
54
55
56
Project: Jansen potash mine and logistics
Challenges: New commodity, new country, new asset
Goals: Robust design, predictable outcomes, higher value
Study phase: Feasibility
Client: BHP Billiton
Service provider: Amec Foster Wheeler Operations Analysis Group
Joint team: 5 full-time employees, 2 part-time employees
Stakeholders: Mining (5), Hoist (2), Process (2), Logistics (2)
Training: 10 staff members but 1 model custodian
Cost of development: Approaching $3M (not including BHP Billiton labour)
Duration: Jan 2015 – present (2+ years)
Scope: Jansen Stage 1 and future stages
Chain modelled: Mining, Hoist, Process, Rail & Port, and Customer
Innovation: Integration of five sub-models integrated into one
Techniques: DES, Monte Carlo, inventory theory, capacity
analysis, constraint analysis, RAM analysis,
forecasting algorithms
Model features: Scale, granularity, complexity, and detail
Model inputs: Approx. 140,000 inputs, factual and benchmarked
Detailed inputs in the area of concern, process
Model QA/QC: Isolation runs, warm-up runs, seeded runs
Scenarios: Over 2,000 in pre-feasibility and feasibility
Problem, Challenges, and Governance Technical Solution
Revenues: 15-20% gain of annual integrated capacity
Project NPV: Stage 1: more than $500M NPV gain
Future stages: 12-16% NPV gain
30% increase of probability of positive Stage 1 NPV
Value drivers: Less downtime, higher ore throughput,
higher potash recovery
Areas most affected: Process (bottleneck) Hoist Mining
Capital changes: Sparing, equipment redundancy, stockpile size
Operating changes: Maintenance frequency, maintenance scheduling,
automation
Value
Three value metrics :
Technical: Define the scope of work for the feasibility study
(borer trial, hopping bottleneck, process design)
Financial: $300M capital deferred from current budget
Organizational: Board approved transition to feasibility study
Alignment of KPIs to integrated capacity
Transferability of DICE:
Other project stages: feasibility, construction, ramp-up, operations
Similar project developments: BHP Billiton potash basin develop.
Other business lines: Copper and Coal
Impact and Transferability
Detailed Integrated Capacity Estimate (DICE) model for Jansen potash project
Fact Sheet
Model Structure
3 April 2017
2017 Franz Edelman Award Competition
Equipment
Model Process Model
Surface Model
Special Equipment
Labour Model
Customer Model
Rail and Port Model
Ancillary Control Algorithms
Mine Model
Forecasting
Crew Allocation Algorithm
Inventory Theory
Activation of Mining Equipment
RAM
Specialized Algorithms
Inventory Theory
Continuous Process Modelling
Control Algorithms
Model Structure
3 April 2017
2017 Franz Edelman Award Competition
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Equipment
Model Process Model
Surface Model
Special Model
Labour Model
Customer Model
Rail and Port Model
Ancillary Control Algorithms
Mine Model
3 April 2017
2017 Franz Edelman Award Competition
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