NEXT GEN MINING BY MCKINSEY & COMPANY PERUMIN

NEXT GEN MINING BY MCKINSEY & COMPANY PERUMIN

1. MINING
Next Gen
Harnessing the Full Power of
People and Technology in Mining

2. McKinsey & Company 2
Beyond its
positive impact in
economies and
communities…
…mining is an
enabler to
global
sustainability
Mining is living
an exciting
moment in its
history.

3. McKinsey & Company 3
Mining has achieved
significant milestones
and made substantial
progress in recent
years…
Safety Frequency Index in
mining in Peru
2013
2.82
-15%
2022
2.4

4. McKinsey & Company 4
Mining has achieved
significant milestones
and made substantial
progress in recent
years…
Number of safety incidents in
mining in Peru
2013
144
2022
-78%
Thousands
32

5. McKinsey & Company 5
Mining has achieved
significant milestones
and made substantial
progress in recent
years…
Employment in mining
2013
177
31%
2022
232
Thousands

6. McKinsey & Company 6
Mining has achieved
significant milestones
and made substantial
progress in recent
years…
Copper mine production
2012
1.3
85%
2022
2.4
Millions of metric tons

7. McKinsey & Company 7
Copper, of course, is playing a key role in building the low-carbon
economy as alternative power sources become prevalent
Global copper demand for energy sources,
Mt
Power grids Alternative: EV Batteries, Solar,
Wind and EV Charging
0,5
2,2
2020
0,5
2,2
21
1,7
3,6
28
2,0
4,0
29
0,9
2,7
23
1,1
3,0
24
1,2
3,1
25
1,3
3,2
26
1,4
3,3
27
2,3
4,3
2030
0,7
2,5
22

8. McKinsey & Company 8
We are expecting that the commodities industry will step up to the
plate as long-term demand races ahead of supply –Copper Example
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
2022
25.8
Growth
10.8
10.1
Growth
21.9
2022
Demand Supply
4.6
2032 Supply
gap
Copper demand from energy transition will
constitute ~ 30% by 2030
2032
36.6
32.0
2032
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

9. McKinsey & Company 9
Given this
important challenge…
…we believe an
energizing visioncan
help the mining industry
meet it

10. McKinsey & Company 10
A vision of “Next Gen
Mining” performance can
move us to achieve more
faster
No accidents nor
incidents
Motivated
workforce
Very highly predictable
equipment behavior
Optimal valuable
metal recovery
Minimal environmental
impact
Perfect mine planning
with optimal knowledge
of the ore body
Performance at the
true technical limit
10McKinsey & Company

11. McKinsey & Company 11
The digital, analytics and automation opportunity
is key to bringing us closer to Next Gen Mining
Productivity
Time
McKinsey & Company 11
1910
Mechanization
Age
1980s
Large
Machine
Age
1950s
Diesel and
ElectricAge
Digital,
Analytics &
Automation
Age
2020s

12. McKinsey & Company 12
Digital, Analytics, Automation and other innovations allow:
Visibility &
Awareness
Advanced
IROC
Live operation
visuals
Control &
Stability
APCs with Advisory ML
optimizers
Real Time
IoT
Prediction &
Optimization
AI process
optimization
Advanced
digital twin
Process &
Chemistry
Grind
circuit
roughing
Primary
sulphide
leaching
Coarse
particle
scavenging

13. McKinsey & Company 13
What does this do to the copper supply gap?
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
2022
25.8
Growth
10.8
10.1
Growth
21.9
2022
Demand Supply
4.6
2032 Supply
gap
Copper demand from energy transition will
constitute ~ 30% by 2030
2032
36.6
32.0
2032
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

14. McKinsey & Company 14
Example: In the case of copper, technology combined with projects
coming to the line, may close the 2032 supply gap
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
2022
25.8
Growth
10.8
21.9
2022
Demand Supply
2032
36.6
34.4
2032
2.2
2032 Supply
gap
Primary sulphide leaching
12.5
Growth
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

15. McKinsey & Company 15
Example: In the case of copper, technology combined with projects
coming to the line, may close the 2032 supply gap
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
2022
25.8
Growth
10.8
21.9
2022
Demand Supply
2032
36.6
34.9
2032
1.7
2032 Supply
gap
Coarseparticle scavenging
13
Growth
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

16. McKinsey & Company 16
Example: In the case of copper, technology combined with projects
coming to the line, may close the 2032 supply gap
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
2022
25.8
Growth
10.8
21.9
2022
Demand Supply
2032
36.6
35.4
2032
1.2
2032 Supply
gap
AI process control
13.5
Growth
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

17. McKinsey & Company 17
Example: In the case of copper, technology combined with projects
coming to the line, may close the 2032 supply gap
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
2022
25.8
Growth
10.8
21.9
2022
Demand Supply
2032
36.6
36.6
2032
0
2032 Supply
gap
Grind circuit roughing
14.7
Growth
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

18. McKinsey & Company 18
Example: In the case of copper, technology combined with projects
coming to the line, may close the 2032 supply gap
Copper mine supply and refined copper deficit, 2022-2032
Mtpa
25.8
10.8
21.9
Demand Supply
36.6
36.6?
Additional developments
¿?
2022 Growth 20222032 20322032 Supply
gap
Growth
Source: MineSpansQ3 2023 Update; McKinsey Integrated Demand Model Q3 2023

19. McKinsey & Company 19
However, adopting technologies at scale with
consistent results is not easy
Challenges to the successful adoption of technology at scale -not exhaustive
People challenges Technology challenges
Profound connection to Purpose required
to ignite the passion for real transformation
Many domains involved ranging from
analytics, to advanced engineering
Mindsets of innovation, evolution and
learning hard to instill broadly
Technology evolves rapidly so keeping
up is difficult
Scarcity of resources with technical skills
There are many different processes
in the mining value chain
Organizational structure and processes
attuned to more traditional model
A future-proof technology architecture
is required to facilitate adoption

20. McKinsey & Company 20
Because of these challenges, so far ‘Industry 4.0’ has failed to
deliver strong productivity growth
Trendline of labor productivity growth, total economy
% year-over-year
-5
2
1890 101900
6
20 30
-4
200040 50
8
60 70 80 90 10 2020
-3
3
1
-2
-1
0
4
5
7
USA Euro area
Post-WWII productivity
boom aided by advanced
mass productionand
automation
Roaring 20s
aided by mass
production
technologies
Source: Bergeaud, A., Cette, G. and Lecat, R. (2016), “Productivity Trends in Advanced Countries between 1890 and 2012”, Review of Income and Wealth.
vol. 62(3), pages 420–444, McKinsey analysis
Note: Productivity defined as GDP per hour worked, US 2010 PPP. Calculated using a Hodrick-Prescott filter.

21. McKinsey & Company 21
How can
we face
the challenge
and win?

22. McKinsey & Company 22McKinsey & Company 22
Maximizing adoption and benefit
of technology requires a holistic
approach, combing:
•Lean
•Digital & Analytics
•Change Management
•Subject Matter Expertise
Productive assets
Management Systems
Principles &
Behaviors
Digital and analytics
Purpose
& Strategy

23. McKinsey & Company 23McKinsey & Company 23
Leaders embody purpose in
new and meaningful ways.
Purpose defines why the
organization exists and
creates a common cause.
Strategy is to close gap with
respect to the next gen
mine along key dimensions
Productive assets
Management Systems
Principles &
Behaviors
Digital and analytics
Purpose
& Strategy

24. McKinsey & Company 24McKinsey & Company 24
Principles and behaviors to
achieve the strategic
vision and establish a
culture of trust, respect,
and constant innovation.
Mindset of unconstrained
possibility–of theoretical
limits.
Productive assets
Management Systems
Principles &
Behaviors
Digital and analytics
Purpose
& Strategy

25. McKinsey & Company 25McKinsey & Company 25
Management systems in place
that develop leaders, build
and drive desired behaviors
and mindsets.
Measure performance relative
to the Next Gen Mine, e.g.,:
•Near term: Best possible
hour, shift, day, week
•Medium term: Reach
theoretical limits of
performance
Productive assets
Management Systems
Principles &
Behaviors
Digital and analytics
Purpose
& Strategy

26. McKinsey & Company 26McKinsey & Company 26
Technical systems that
eliminate waste, improve
stability and deliver value to
stakeholders.
Incorporate new technology
where valuable or helpful.
Generate usable data.Productive assets
Management Systems
Principles &
Behaviors
Digital and analytics
Purpose
& Strategy

27. McKinsey & Company 27McKinsey & Company 27
Technology that accelerates
human capabilitiesto
continuously improve.
Making digital and analytics the
new normal, e.g.,:
•Advanced Analytics to provide
new insights.
•Useful Digital, such as smart-
co-pilots for maintenance, VR
integrate the field to the IROC.
•Pervasive prediction, decision
support, field management
optimization.
Productive assets
Management Systems
Principles &
Behaviors
Digital and analytics
Purpose
& Strategy

28. McKinsey & Company 28
The Next Gen Mine can unfold in a series of interconnected
events triggered by a purpose that resonates
Purpose
accelerate
sustainable
growth
AA in plant
Skills,
mindsets
change
AA spread by
self-motivated
teams in plant
Pervasive digital:
wearables, VR,
phones, tablets
Skills, mindsets
change
“Ecosystem
for the future”
Academia
3
rd
parties
Operating
asset adapted
per AA learnings
Autonomous
Self-optimizing
Plant
Closed loop
features
Short Term:
“Next Gen Day”
Medium Term:
“Next Gen
theoretical Limit”
Plant
targets
All targets
“Next Gen”
AA is
“the new excel”
Incentives

29. McKinsey & Company 29
The Next Gen Mine can unfold in a series of interconnected
events triggered by a purpose that resonates
Purpose
accelerate
sustainable
growth
AA in plant Skills,
mindsets
change
AA spread by
self-motivated
teams in plant
Pervasive digital:
wearables, VR,
phones, tablets
Skills, mindsets
change
“Ecosystem
for the future”
Academia
3
rd
parties
Operating
asset adapted
per AA learnings
Autonomous
Self-optimizing
Plant
Closed loop
features
Short Term:
“Next Gen Day”
Medium Term:
“Next Gen
theoretical Limit”
Plant
targets
All targets
“Next Gen”
AA is
“the new excel”
Incentives

30. McKinsey & Company 30
Examples of where industrial sites choose to begin
the journey to Next Gen Operations Excellence
Reach
Operational
Excellence
3 4
Evolve the
Ecosystem
for the future
Target
Productive Asset
Innovations
5
Set
Incentives
and targets
2
Revitalize
Purpose
1
Revitalize
Purpose
1
Set
Incentives
and targets
2
Reach
Operational
Excellence
3 4
Evolve the
Ecosystem
for the future
Target
Productive Asset
Innovations
5

31. McKinsey & Company 31
Consistent work
environment
Long-term
Linked to
purpose Understanding
Value
throughout
Connection to
vision/purpose
Translated goals
Value stream
Right 1
st
time
Value stream
alignment
Smoothing
customer demand
Match
resources
Customer
forecast
Transparency/
Prioritization
Cross-team alignment
Measure what
matters
Goal
visibility
Performance
discussions
Direct
observations
Environment/ culture
Clear
expectations
Trust &
transparency
Skill
development
Skill transparency
Training
Be a coach
Develop teams
Talent
development
Work
documented
Updates -
Implement
Sharing
mechanism
Best
practices
Innovation
Resources
Prioritization
Skills
Methodology
Problem
solving
Match
work &
resources
Team
performance
Build in
quality
Deploy
strategy
Customer
value
Visual systems
Improvement
mindset
Identify
opportunities
Role
expectations
Behaviors
Leader
practices
Relevant
vision
External
stakeholders
The McKinsey Next Gen Mining OEI objectively
measures the markers of Next Gen Mining
Owner and Confidential
Deliver DiscoverConnect Enable

32. McKinsey & Company 32
Is your data providing awareness,
prediction and optimization?
McKinsey & Company 32
Is your team engaged and
motivated to reach your
aspirations?
Is true technical limit being
reached?
Closing thoughts
Next Gen Mining