john marsden
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©2005 Phelps Dodge Corp.1 September 12, 2005
Phelps Dodge’s Approach to Technology
Development and Innovation
John O. MarsdenSenior Vice President, Technology & Product Development
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2 ©2005 Phelps Dodge Corp.
Introduction
Technology development and innovation can be a real source ofcompetitive advantage within the copper industry
Mining industry typically spends between 0.1% and 1.0% of salesrevenues on research and technology development
Varies dramatically through copper price cycle
Varies dramatically by company
Phelps Dodge has a rich history of technological innovation
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Long, Successful Track Record of Technology Deployment
0
500
1,000
1,500
2,000
2,500
3,000
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Year
C o p p e r P
r o d u c e d ( m i l l i o n s o f p o u n d s )
• Large scale SX/EW• Computerized haul truck dispatch• GPS ore control• Leach recovery optimization• Concentrate grade enhancement
TyroneSX/EW
MorenciSX/EW
ChinoSX/EW Candelaria 1
Candelaria 2
• “Expert” control systems • Concentrator adaptive control• Mine for leach• Haul truck tire technology• Concentrate leach (2003)
Morenci MFL,El Abra ROM
CyprusAcquisition
CurtailmentCommenced
Chino 1/3Acquisition
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Technology Development - Strategic Guidelines
Primary focus on copper extraction
Focus on applied technology development, not fundamental “research”
Center of excellence in selected areasMaterial characterization
Hydrometallurgy
Mineral processing
Reclamation & remediation
Project management rigor
Identification, evaluation, ranking, and prioritization of projects
Stage-gate process
Strong focus on implementation
Institutionalization of best practices
Strategic partnerships/alliances
Collaborative research
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Technology Development - Strategic Planning
Updated annually
Clear vision & mission
Identify critical issues
Develop projects & programs to address critical issues
Prioritize projects & programs
Develop execution plans – apply stage gate process Follow up
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Stage Gate Process – Technology Development
White - No progress Green - Completed (successfully)Orange - In progress Pass GateFail GateFuture GateBy-pass Gate
ConceptualDevelopment
LaboratoryTesting
Pilot ScaleTesting,Process
Development
&PreliminaryEngineering
ContinuousPilot Scale
Testing,Basic
Engineering,Fatal FlawAnalysis,
HERA
CommercialDemonstra-
tion(if required)
Design,Construction& Operation
BasicEngineering,
FeasibilityStudy
CommercialApplication
Design,Construction
& Operation
STAGE - GATE PROCESS FORTECHNOLOGY DEVELOPMENT
ScopingStudy
2
DemonstrationFeasibility Study
& AR
4
Proof ofDemonstration
5
Post-CompletionEvaluation
7
PreliminaryFeasibility
Study
3
3
CommercialApplicationFeasibility
Study & AR
6
Strategic Fit -Project Rank &Prioritization
10Stage-Gate
D e c i s i o n
B a s i s
A
c t i v i t y
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Why Stage Gate?
According to study by Hatch/Washington Institute, the averagecommercial success rate for new technology is;
One in 3,000 at proof-of-concept/scoping stageOne in 30 at pilot plant scale
One in 4 at demonstration scale
Benefits of stage-gate process
Manage risk - fail fast or succeed fastFocus resources on best projects
Manage technology development costs
Downsides with stage-gate process
Miss hidden gems
Kill too early
Limit options
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Technology Development – Phelps Dodge’s Focus Areas
New transformational step-change technologies
Mining
Processing
Continuous improvement of existing operations & technology
Mining
Processing
Effective reclamation and remediation in anticipation ofclosure
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Using Technology to Transform Mining Operations
High-speed wirelesscommunications
Full GPS/inertial navigation
Smart autonomous miningequipment
Integrated mine management
systems – real-timeintelligence
Continuous mining process
Large-scale selective mining withlarger equipment
Reduced process variance
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Using Technology to Transform Processing Operations
Concentrate leaching, solution extraction and electrowinning
Commercial demonstration proven
Concentrate leaching and direct electrowinningCommercial demonstration in construction
Leaching of low-grade chalcopyrite stockpiles
Commercial demonstration test in progress
Novel electrowinning technologyCommercial demonstration test in progress
New milling technology
High-pressure grinding rolls to be used at Cerro Verde
Material characterization by “QemSCAN”
Commercial operation & application
Environmental remediation technology
Commercial operation
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SX/EW Development in 1980s and 1990s
Secondary sulfide
and oxide ores
Primary sulfide
ores Mine
LeachingFlotation
Refining
Smelting
Rod Mill or Customer
SX
EW
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0
500
1,000
1,500
2,000
2,500
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Conventional SX/EW
Example of Technology Transforming Copper Production
(PDC share; millions of pounds)
1983 – 100% conventional2004 – 66% SX/EW
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Concentrate Leach Technology Replaces Smelting/Refining
Secondary sulfide
and oxide ores
Primary sulfide
ores Mine
LeachingFlotation
Refining
Smelting
Rod Mill or Customer
SX
EW
ConcentrateLeaching
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Concentrate Leach Demonstration Plant at Bagdad
August, 2003
Safety: Zero recordable injuries since December 20, 2002
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Bagdad Concentrate Leach Plant Copper Production
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
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D e c - 0 3
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P r o d u c t i
o n
( l b s )
Production (lbs) Design Basis Production
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Note - Use yellow to highlight font colors
(but never titles)
High-Pressure Grinding Rolls
Cerro Verde milling circuit toinclude high pressure grindingrolls (HPGR) instead of SAG mills
Advantages
Higher throughput
Greater energy efficiency
Greater flexibility
Lower unit cost
Disadvantages
Additional capital cost
Financial Impact
Significantly reduces power
consumption and unitproduction costs
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Material Characterization – QemSCAN Technology
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Using QemSCAN Data to Improve Decisions
TickMarks
Triangle lines
COR AC2
COR AC3
MET AC3
MET AC4
MET AC5
NWX AC2
NWX AC3
NWX AC4
NWX AC5
Ksp
Qz
Se
TickMarks
Triangle lines
COR QSAC1
MET QSAC1
MET QSAC2
MET QSAC3
NWX QSAC1
NWX QSAC2
Ksp
Qz
Se
TickMarks
Triangle lines
COR QSAC1
MET QSAC1
MET QSAC2MET QSAC3
NWX QSAC1
NWX QSAC2
Ksp
Qz
Se
Morenci Alteration Codes – QemSCANData
QemSCAN Alteration Codes – QemSCANData
QemSCAN Alteration Codes – XRD Data
Precision and
accuracy of datagreatly improved
Improves:
Ore control & oretype routing
Process control
Mine design &sequencing
Plant design
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Key Enablers for Effective Technology Development
Champion(s)
Vision, capability, experience, dedication
Infrastructure/EnvironmentResearch & development facilities
Operational excellence
Technology implementation capability
Resources
People, money, timeThe devil is in the details
Ability to manage expectations
Communication to key stakeholders
Economic conditionsMaintain initiatives through industry downturns
Make hay when the sun shines
Long term perspective
Senior management, Board, shareholder commitment
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Thank You