The New Approach To Project Development
Companies in the mining sector can’t afford to leave money on the table, even during an upswing. Lower capital costs remain the highest contributor to improved project economics while operating costs and production capacity must meet commitments in order to succeed; it is lower capital and operating costs that keep companies in the game.
Canadian miners are focusing on increasing efficiency. Traditionally, mining companies contract out engineering, procurement and construction managers (EPCM) to deliver projects, but a number of factors that go into choosing the right fit can often still lead to projects being overbudget and delivered late.
Project Management Acumen
The mining industry is shifting to alternative approaches to project development to reduce budget and improve schedule efficiencies. G Mining Services Inc. is a leader in the “self-construct” approach to mining companies wanting to build their project, in association with the owner to form a single project team.
G Mining’s implication in mining projects ranges from early scoping studies to final feasibility, detail engineering, and project construction. While gold projects are an important part of its business, G Mining also has a proven record working in iron ore, base metals, industrial minerals and diamonds, providing advisory services which entails peer reviews, due diligence reviews for financings or valuations for potential project acquirers.
Whereby the typical EPCM contracts do not allow for alignment of objectives between the project owner and EPCM firm, G Mining establishes incentives aligned with the project goal around safety performance, cost performance and timeliness of project delivery for the company and all team members.
Formed in 2006, the Canadian-based company was founded by Canadian Mining Hall of Fame inductee Mr. Louis Gignac, former President and CEO of the international gold producer, Cambior Inc.
Throughout Cambior’s history, the company always managed and self-constructed their projects successfully compared to adopting the more conventional approach of awarding an EPCM contract where, more often than not, the budgets would be overrun, and timelines not respected.
G Mining came about after Cambior was sold to IAMGOLD Corporation for C$1.16 billion in September of 2006. At that time, Cambior was operating three gold mines in Quebec, another gold mine in Suriname as well as a Niobium mine located in Quebec, and a calcined bauxite operation in Guyana.
“G Mining Services was founded as a multidisciplinary company offering a wide range of services to both underground and open pit projects,” says Gignac. “We look to collaborate with clients ranging from exploration companies to large multinational producers. Our services cover geology and resource estimation, mine design and mineral reserve estimation, infrastructure design, operating and capital cost estimation, project management and construction services.”
G Mining Services is very much a family affair: Gignac’s three sons, Louis-Pierre, Mathieu, and Michael now run the company which currently counts over 70 full time employees and 100-200 employees seconded or transferred to construction projects as needed.
G Mining Approach
“The G Mining approach entails having a more streamlined approach to change management and quickly taking decisions during construction,” says Gignac. “The self-perform approach allows this as we direct hire most workers and therefore have more latitude to make adjustments to priorities and plans as opposed to breaking out a project into packages where it becomes difficult to have synergies between them.”
Projects overseas are more challenging if there is not a mature mining industry and local expertise is lacking. Many companies choose to bring that expertise in from Canada or
elsewhere. “To award packages to third parties transfers risk that must be rewarded with a profit which brings up project costs,” explains Gignac. “The self-construct approach retains more of that risk but allows us to reduce construction costs to a minimum by cutting out middle men and their administration and profit margins.”
Unique in the Industry
One of the large differentiators is that we have a holistic view of a project from the study phase to construction and then operations. Many of G Mining’s team members have an extensive mine operations background which is important in making the right decisions.
“Most projects we are involved with are overseas in remote locations,” Gignac says. “We have a strong logistics team that takes care of moving and tracking everything for the project from the vendor to the project site. Having a good knowledge of where materials are and when they get to site is key to delivering a project on time.”
With the self-perform approach, there is a smoother transition from construction to operations as very often key people transfer to operations. During the construction period, the mining team is established early to take care of all mass excavation projects and pit stripping activities. This same team seamlessly transfers to operations. “In several cases, there are synergies between pit stripping activities and tailings management facility construction which can lead to important cost savings,” says Gignac. “The same goes for the general and administrative functions that service construction (such as HR, camp services, employee transportation, accounting, etc.) and continue with operations.”
When asked about the mining landscape in Quebec, Gignac says competition is very high. “Good projects are difficult to come by. Today, most projects are challenged with more difficult economics resulting from lower grades, high construction costs, high environmental standards, permitting risk, and financing challenges, etc.”
Gignac continues to say that many G Mining employees speaking French, English and Spanish helps to develop projects in Latin America and other French speaking jurisdictions in West Africa. “In 2008, G Mining was building the Essakane Project in Burkina Faso where most of the expatriate workforce was sourced in Quebec facilitating language barriers. Today, we are working in Ecuador where we are working with Lundin Gold Inc. on the Fruta del Norte Project, and are happy to have fluent Spanish speaking people with many others picking up the language.”
For an example of G Mining’s services, let’s look at Newmont Mining, one of the top gold producer in the world, and only gold company to appear in the S&P 500 Index. When Newmont needed support on their Suriname-based Merian Project, they called on G Mining to lower the construction cost of the project. G Mining led the Feasibility Study for the project. Lower it, they did—the project was approved with a budget of US $915 M and was completed almost 20 per cent below budget, on time and with an excellent safety record.
The plan for the next few years is to continue to work with clients to build new mines. “We would like to be involved with the construction of a new mine at any given time which generates some timing challenges,” says Gignac. “It requires that we be working on various Feasibility Studies that have good chances of obtaining approvals, permits and financing. We are also interested in mandates that involve operating roles with the preferred situation being the operator role of a project we construct.”