Operational Excellence

We have developed a series of activities, which seek to achieve not only efficiency gains, but also cost reductions and production volume increases. Our strategy is to pursue excellence on cost control. In this way, we will gain an edge on our competitors and establish greater security in times of falling prices.

In 2017, we created a new Competitiveness division, which is part of our General Management for the Operational Development of Mining (GGDO). The new division is responsible for integration projects and encouraging the mapping and implementation of initiatives that bring efficiency gains to our units, which strengthen the financial management practices for our projects and operations. Our goal is to ensure an alignment between corporate divisions and identify new opportunities to leverage results with better performance in costs, working capital, and other financial indicators, thus contributing to the firm’s sustainable growth.

Significant value levers that enable this positioning are:

1. Increases in production volumes through maximization of asset capacity utilization;

2. Operational stability;

3. Reduction of fixed and variable costs, which seek, among other initiatives, synergy between our Brazil and Peru units.

In this sense, several initiatives have already been carried out and are planned for these units as part of our goal of achieving these three levers of operational excellence. The most significant of these follow.

Mininig

In mining, the best examples of operational excellence initiatives are in the Cerro Lindo and Cerro de Pasco mines, which have aggressive targets to boost the daily volume of concentrate production. Two activities that impacted productivity at Cerro Lindo were the optimization of hours in operations and replacement 50-ton trucks with lighter weight, 35-ton trucks to increase the mine’s productivity. In 2017, the mine reached an average output of 21 thousand tonnes/day of crude ore, which was up from 20 thousand tonnes/day in the previous year, which had been considered to be stabilization level.

Another important activity was the underground connection of the El Porvenir and Atacocha mines in the Cerro Pasco complex. With the project’s conclusion in November, several synergies began to emerge along with greater operational flexibilities seeking an increase in the daily production volume of both units.

Other 2017 Highlights Include

❯ An increase in shotcreting at Cerro Pasco’s underground mines, which is important for the safety and stability of this operation;
❯ Stabilization and increase in production of Atacocha’s San Gerardo pit (145%), and an extension of its useful life (for 5 years);
❯ Contract management work in Cerro Lindo, which has identified cost reductions from 15% to 20%; Focused efforts were also made to reduce fixed costs at Vazante, which allowed for gains at 7% below budget;
❯ Expansion of capacity at the Cerro Lindo desalination plant, with 100% utilization of sea water in the operation, generating savings of more than US$ 563 thousand for the year (212,835 m3);
❯ Obtaining an installation license for Vazante’s dry disposal project, which is significant to the company and the industry in general, as it eliminates the environmental risks related to a traditional dam. Construction will begin in 2018 and it should be operational in 2020;
❯ Greater development during the past three years, of the Vazante mine, which is now 15 km. The unit also achieved its highest level of lead production;
❯ The start of Ambrósia Sul operations, which had a positive impact on Morro Agudo production, which increased by approximately 10%;
❯ A critical asset management initiative to increase reliability in the operation of equipment, which involved a review of the company’s preventive maintenance plan and an analysis of asset quality. The goal was to create more stable operating conditions within our operations across all units.

Smelter

The following were the highlights for operating efficiency projects in 2017:

Jarosita – Conversion of the Cajamarquilla production process from goethite (an iron oxide mineral), to jarosite (iron sulfate), increasing the zinc extraction yield. The unit, which has a nominal capacity of 320 thousand tonnes/year, is expected to hit 340 thousand tonnes/year due to the change in the process. The project will allow an increase in the recovery of zinc of approximately three percentage points the recovery of zinc, thus fulfilling the three important aspects for driving efficiencies: increased utilization of installed capacity, operating stability and cost reductions.

Dehalongenation by Autoclave – Initiated in 2017 in Juiz de Fora, this project is designed to use an autoclave to remove the halogen from Waelz oxide, Flourine and Chlorine. This process removes impurities (Waelz halogen oxide), transforming toxic waste from the steel industry into value-added products (for more information on this project see the chapter on Innovation).

Debottlenecking – Removal of bottlenecks in the halogen oxide removal process in Juiz de Fora is an important step that makes available additional capacity in the ustulator (furnace for the processing of sulfide concentrate), enabling the complete utilization of the productive capacity. Together with the 30 thousand tonnes/year project, it will promote the increase of secondary raw materials and increase the unit’s production volume.

Biomass Boiler – This equipment went into operation in Três Marias, to further align with the goal of raising cost competitiveness, in addition to contributing to improvements in the environmental indicators. (For more information see Innovation)

Sulfide and Silicate Bottleneck – Developed in Três Marias, the project is designed to eliminate bottlenecks in the Sulfide and Silicate Processes, and grow the production volume to 208 thousand tonnes of zinc/year by 2023.

Other Highlights in 2017
❯ Improvements in the installation of the industrial drainage system in Juiz de Fora, which will carry the effluents to a treatment plant (ETE), allowing better adaptation to environmental requirements.
❯ Juiz de Fora tailings dam project will be started in 2018;
❯ Maximization of the use of recyclable materials in Juiz de Fora, such as electric arc furnace dust, brass oxide, and other heavy metals, eliminating these environmental liabilities and transforming them into new products. In 2017, about 20% of the unit’s production derived from recyclable materials;
❯ Stability improvements through the change of the ustulation maintenance methodology, that is now performed with two shorter shutdowns, meaning less downtime for the asset and better optimization of inventory capacity;
❯ Restructuring the Cajamarquilla energy matrix project, which will begin to be implemented in 2018 and completed in 2019. Restructuring the Cajamarquilla energy matrix project, which will begin to be implemented in 2018 and completed in 2019. This is basically the substitution of all liquid fuel (diesel oil, heavy oil from auxiliary boilers, heating the unit and the roaster during the shutdowns) with natural gas, significantly reducing greenhouse gas emissions and fuel costs.