Rims Metals and Mining Session

April 20, 2011 Slide # 1

Infrastructure/Logistical Networks' Risks: What can Be Done?

How Can it Be Done? Why Should it Be Done?

A presentation at RIMS 2011, Vancouver May 2nd 2011By F. Oboni, C. Oboni, Oboni Riskope Associates Inc.(c) Oboni Riskope Associates Inc., 2011

Cardio-vascular accidents (stroke) have become one of the

major causes of death.A cardio vascular accident occurs when blood flow is

interrupted to part of the brain (our very own IT system…), a problem occurs in the heart...

Consider the heart as your extractive facility, and the circulatory system as your transportation/logistic network.

You probably have learned to take good care of your heart and your blood vessels: is the mining industry doing the same for its “circulatory” system?

For years we have taken care of civil systems’ digestive/waste “organs”. In the mining world these are: process, tailings, dumps, contamination....

Then large companies have asked us to review “supply chains” (e.g water, electricity, gas, acid etc.), but never used to ask about “moving products away”.

The progression generally was: Tailings, Slopes, Access Road.

We generally had to insist to include for example: Concentrate pipelines, Wharves, Ship-loaders, IT systems...

Other industries/organizations were ahead of miners.

For example:

The Olympics in Torino were concerned by their road network (in and out of the venues), CCC (jewels, perfumes) was also very concerned about moving their products out, as they have very precise schedules, and have “Ali Baba caverns” in seismic areas.

CCC Japan asked Riskope in 1998 (three years after Kobe earthquake) to perform a

Logistic Platform Disaster Recovery and Business Resumption Plan Review.

some of Riskope's notes were:

-The plan is expecting a disaster to hit only during regular business hours!-The plan relies on a rosy scenario whereby major Highways, RR infrastructure and power supply (actually they had auxiliary power, but the tanks were empty...)!! would be running!-IT Servers were not mirrored by hardware located in a safer region!

We sincerely hope they corrected their plans...these common errors have proven critical 13 years later...

Remarkably not one of Riskope’s notes required detailed knowledge of seismology.

People claiming one cannot anticipate an Earthquake/ Terrorist attack/Failure scenario (or any other hazard) because they do not know enough details of possible hazards are missing the point:

Disruptive events can be anticipated and planned in sustainable ways by performing sensible risk analyses.

Detailed knowledge is needed, but at a later stage.

You do not go to the doctor and ask him about the genetic structure of a virus or a disease. You ask him how it might affect YOUR life (scenarios), then you ponder if the “cost of vaccination” vs “reward” is worth time and effort, AND, the chance of secondary effects.

Mining “circulatory” systems encompass ingress and egress, like the human one arteries and veins, all the way from the heart to the end user!

Miners seemed to privilege ingress studies, but to neglect egress studies, contrary to other industries.

Modern transportation systems require effective risk management decision tools to:

-help ensure critical transportation operations' reliability -ranking emergency alternatives-allocating mitigative resources

Transportation, loading/unloading contracts with third parties have the effect to make companies feel “comfortable” that the other parties are taking care of their risks....

when reality kicks in, severe disruptions result from major snowstorms, avalanches, volcanoes or defective valves, gearboxes!!

Let's look at some examples:

Winter 2010-2011

Volcano (Island, 2010)

Production of iron ore, uranium and alumina have all been disrupted in the first three months of 2011 by Cyclone Yasi

A gearbox in the loading equipment failed on Jan. xx, at which time YYY estimated it could take up to two weeks to fix the damaged parts leaving the ZZZ terminal operating at about half capacity.

This 2010 ship loader collapse still requires emergency (and costly) truck transfers to a wharf 500km away….

Examples of hazards capable of generating egress disruptions:

-Earthquakes -Hurricanes, cyclones and floods-Man-made and Natural slopes, rock-falls-Traffic and trackage, strikes-Fires of forests, railroad assets, -Dust, nuclear fall out, terrorism and organized criminality...-IT failures, ....-Maintenance, human error…!!

Once the system potentially hit by disruptive event(s) is studied, risks are ranked and checked towards

tolerability criteria.

it is then possible to effectively allocate mitigative resources, select alternative routes etc. ($).

Not the other way around!

Without clear understanding of tolerability, you will waste your money!

Budgets available for risk analysis and risk-based planning of

hazard protection measures for transport routes and infrastructure

is generally limited because

of the false sense of comfort brought by third parties contracts.

Important definitions like, for example, Force Majeure, are taken as granted boiler plate solutions, in the total misunderstanding of what they do mean, and what they will mean the day reality kicks-in.

All this while many people are starting to ask more general questions, such as for example: was Katrina really a natural disaster, or was it man-made, or man-induced and to what extent?

On Jan 13th the FT published a short article explaining how snow proofing UK's airports may force passengers to pay higher fares if winters turn “permanently” colder.

Reportedly the “Arctic weather conditions” before Christmas cost 37.7MUS$ in one week.BAA said airlines “shared responsibility for the disruption as they had agreed to a recovery plan that failed to account for deep snow”.

Airlines needed to renegotiate the emergency plan, which could lead to an increase in operating fees...

Needless to say BAA was heavily criticized for the disruption.

Foreseeability, a key parameter in FM, indeed requires the definition of a threshold likelihood: for example a tornado in Salt Lake city was unforeseeable, by scientific consensus, until one happened in 1999?!

The optimization of Force Majeure formulation, when renegotiating contracts in the future, or for new contracts, constitutes an important proactive mitigative measure with very large ROI (Return On Investment).

There are numerous areas where optimization can take place, for example under the form of a more detailed explanation of terms, definition of threshold values, definition of considered mitigative levels,“common practices” or “best practices”, negligence.

Going back to our clairvoyant and planning oriented clients, their business areas range from:

Torino 2006 Winter Olympic GamesMilitaryFood

Jewellers, and lately, Mining

Modern transportation systems are complex and therefore require effective risk management decision tools.

These help to: -rank alternatives, (literally hundreds)-allocate resources, (how much is reasonable!?)-avoid alternatives with major side-effects

the reason is in the following slide

As someone has said:

“The time to look for the emergency aisles and where the exits are located is before takeoff, not after the wings fall off the plane”.

We must always have a plan in place to deal with unanticipated events, a “just-in-case things head south” plan.

Ideally, one puts this plan together when you are objective and unemotional and calmly contemplative — not when things are figuratively and literally melting down.Or in the aftermath of an accident!

“The Problem is when we don’t know what we don’t know we don’t know.”

An ingress-egress study covers:

The links between two or more geographic points allowing transit of goods, energy, information or people by means of discrete traffic (roads, railroads) or continuous flow (pipelines, channels, cables, fibre-optics) linear facilities LF.

LF are running in increasingly more congested transportation corridors and are becoming absolutely critical to our society...remember the Cardio-vascular analogy?

Certain equipment, such a specialized ore ship loaders can take up to one year to replace. Restoration time for port facilities, can be very long and daunting....it's like being on a waiting list for a cardiac operation!

Finally, the destruction or damage of the IT assets (for example Network Management Center) could also cripple the egress from a mine,

and that's exactly why a European army has contracted us to deliver a consistent and rational Risk approach (not an IT approach! An information RM approach) for a whole country.

Although managers try to avoid “complex mathematics”, hard numbers are crucial in

differentiating risks incurred, sometimes by hundreds of components of a similar system (which can be

anything, from a road homogeneous segment to a valve, a tank along a pipeline) leading to the need for

CS1: Seismic BI

Conclusion was to propose a B2B strategy whereby the client would actually team-up with RR and buy replacement bridges. Insurance could be reduced and serviceability ensured in a far better way.

CS2: Multimodal/ multihazard logistical transportation network

Loading

Wharves

UnloaderProduction Centre Y

Export B

Ships to W zzzT

Possible mitigation Routes

Production Centre X

End User A

XX% productionRR

Tunnels andBridges End

User C

Tunnels andBridges

Insurance can be cut in half. Authorizations and agreements should be passed in view of possible future occurrences.

CS3: Mine’s personnel shuttling: Air plane vs buses

Risk assessments can be used to help decide whether a different transportation system would be better than an existing one.

Several levels of analysis are possible, the top one including CDA-ESM, an alternative comparison tool which allows considering risks and avoids all the pitfalls of NPV.

-help ensure critical transportation operations' reliability -rank emergency alternatives-allocate mitigative resources-faster understanding on the situation in case of a crisis situation regarding 3rd parties

Infrastructure/Logistical Networks' Risks:

What can Be Done? Once the system potentially hit by disruptive event(s) is studied evaluating the

limits of Force Majeure events, risks are ranked and checked towards tolerability criteria.

How Can it be done? Alternatives, emergencies routes are studied and ranked, including side effects. Force Majeure clause from 3rd parties contracts should be (re)-negotiated and sustainable solutions designed.

Why Should it Be Done?

The benefits

Create the basis to avoid a slide into a crisis, by proactively controlling

the situation.Mind your heart and

your circulatory system!

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