Strategic Business planning: How Kinross develops mine plans and sets company-wide goals

Strategic Business planning is essential to our company’s success but do you know what it’s really all about? Through the Strategic Business Plans (SBP), Kinross formulates its company-wide cash flow plan, built on production and cost guidance over the life of each mine. To accomplish this, each site must analyze the strategies and projects that optimize each operation.

The SBP Process is divided into two main phases: Strategic Options, where the question of “What is the best way to run this mine?” is asked, and Target Case, when we dive down into the details and answer, “What does the plan to run the mine look like?”

Having recently completed the Strategic Options phase in May, Hélène Timpano, Vice-President, Business Optimization, took Kinross World through the process, and explained how this fits within Kinross’ overall annual goals.

Strategic Options – “What is the best way to run this mine?”

“During this phase, we have to step back and consider what we want to do with our mines, essentially, what is the most efficient way to get the gold out of the ground,” said Hélène. “The site is defining its destiny, asking itself, what is the best way to run this mine?”

Ideas are generated and various options for each mine are weighed and considered during this phase.  “It needs to be a cross-functional process, so in the end, we have a feasible plan that is considered from all viewpoints,” said Hélène.

“The goal is to create an overarching plan for each mine over its life cycle. But the idea is not to reinvent the wheel.  The first place to look is at the current mine plan to see if there are ways to optimize it. Sometimes there are new big ideas that get tabled and studied. There is a lot of brainstorming done at the site level as they bring forward ideas at different levels of maturity.”

The Strategic Options phase culminates with the Capital Committee meeting to evaluate and choose the best projects the company would like to prioritize based on the company’s overall strategy. The Capital Committee (whose members include CEO and President Paul Rollinson, COO Warwick Morley-Jepson and CFO Tony Giardini) also look at the required budget, the amount of value the project can bring, and a host of other factors such as risk, permitting timelines, and potential impact on local communities. The Capital Committee also advises on which of the remaining projects need to be further developed and which can be shelved but potentially revisited if conditions change.

At the most recent Capital Committee meeting in April, a project to reprocess tailings at the Santo Antonio tailings facility in Paracatu was approved.

“To put it simply, ‘the best way to run’ Paracatu, among many other considerations, would be to reprocess tailings because it will increase cash flow by reprocessing ounces that we can extract from our tailings at minimal cost, and allow us more time to optimize the cost of the eventual reclamation of the tailings storage facility,” said Hélène.

These chosen projects are then “graduated” to the Target Case phase.

Target Case – “What does the plan look like?”

The next step is to take the collection of approved Strategic Options projects from the different sites and take a big picture holistic assessment of how they fit within Kinross’ overall strategy.

Life of mine models are generated as the approved Strategic Options projects are layered into existing mine plans. “This tells us ‘what we’ve got’ as a company, and provides the road map and sets expectations that the company uses for other important decisions such as exploration activities and potential M&A opportunities,” said Hélène.

These models are then summarized and analyzed and presented at the Toronto “SBP Days” meetings in September. “We now ask the question, what does this mean for Kinross’ portfolio? This gives us a consolidated view of cost, cash flow and capital requirements,” said Hélène.

At this phase, projects like Santo Antonio tailings reprocessing is further detailed and incorporated into the overall life of mine plan.

In Q4 2015, tailings are expected to be reprocessed through Paracatu’s Plant 1 and produce approximately 11,000 ounces. With an estimated capital cost of $20 million, the project is expected to produce approximately 34,000 additional ounces per year at a low production cost of sales of $400 per ounce for a minimum of nine years.

“It’s a great example,” said Hélène. “It was an idea generated and advanced by our people at Paracatu, and now it’s expected to have a large positive impact at both a corporate and site level.”  

Tailings facility at Paracatu

One of the mills at Paracatu