BENEFITS ACHIEVED AT CANADIAN MALARTIC, MALARTIC

THROUGH OPTIMIZATION OF MRO INVENTORY MANAGEMENT

OMOC, TORONTO 2015

By Robert Lamarre, B.B.A., M.A.ScOctober 8th, 2015

Optimizing Mine Operations Conference 2015

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• Canadian Malartic is one of Canada’s largest gold miners

• Agnico and Yamana operates the Canadian Malartic gold mine in

Malartic, Quebec, and continues its exploration work in Canada and

Mexico

• One of the biggest gold reserves in production in Canada

• The first gold bar was poured on April 13, 2011 and commercial

production began in May 2011

• Proven and Probable Reserves of 9.371 million ounces of gold

OMOC, TORONTO 2015

Who is Canadian Malartic Mine?

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• Canadian Malartic Mine faces the same challenges as all industial

organizations trying to manage spare parts

• First objective is to maintain continuity of operations

• Intermittent demand

• Critical parts

• Large number of multi-references families

• Difficulty to forecast demand

• Variable lead times

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The challenges of inventory optimization

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• Manual Min-Max on more than 17,000 items

• The operations context is evolving

• Maintenance requirements in continual evolution

• Nobody dedicated to inventory analysis

• Not enough service on critical spares

• Not enough service on A items

• Too many small orders in purchasing and at receiving

• Limited use of scorecard

• No use of exception reports for inventory management

Portrait of the Situation - May 2013

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• One dedicated inventory analyst

• More than 75% of Min-Max now dynamic and calculated scientifically by IMAFS

• Management of inventory by product family and product class

• Bigger focus on service for critical parts and A items

• Constant follow up of inventory management scorecard

• Continual use of exception reports for inventory management

Major changes since May 2013

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Some results

Family Month ClassA C D S

Consumable May-13 91.7% 95.2% 82.4% 90.5%Consumable Mar-14 97.0% 98.6% 98.6% 97.9%

Mine/Mobile May-13 94.5% 94.9% 91.9% 94.2%Mine/Mobile Mar-14 99.2% 97.8% 96.2% 96.0%

Plant May-13 95.8% 93.5% 97.0% 93.5%Plant Mar-14 98.7% 97.6% 99.7% 97.8%

80% Reduction of backorders on A items

45% Reduction of backorders on S item

Globally, the product availability has increase by 3,5% from 93% with a 5% increase on critical items

Evolution of service

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Some results

Mine/Mobile was the first family implemented Results in about a year

Evolution of inventory and service for Mine/Mobile

14 ju

in 2013

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9 sep

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7 nov

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Mine/MobileClass A

+ 5%

Class S+2%- 24,5%

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Identify product family and demand stream

Criticalor

not

Stockor

non stock

New

Inactives (no usage for X

months)

A B C DBased on Hits or

usage value

Reparableor

not

Obsoleteor

not

Cla

sses

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Parts classification - Process

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Measures existing levels

Allows service goals on part’ criticality level

Allows service goals by class, by family, by warehouse

Safety stock set in line with service goals

Simulations to measure impact of service goals variations

Dashboard to track service results

Tools to take corrective actions

Managing serviceCanadian Malartic Mine now tracks parts availability compared to

goals

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Management

by demand

flows

Determining

seasonality

Intermittent

demand

Automatic

data

cleansing on

extreme data

Better data for accurate forecasts

Managing demand

At Canadian Malartic Mine, we have 2 demand flow, 1% of items are

seasonal, 87% of items are intermittent

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Good solid statistical forecasts

Forecasting methods that account for

demand trends, seasonality and

intermittence

Best fit by item

Possibility of manual

adjustments

Filters & alerts

Canadian Malartic Mine is now using forecasted demand to dynamically adjust Min-Max

Better forecasts = better service + less stock

Forecasting demand

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Bad lead time information result in stock outs or surplus stock

Canadian Malartic Mine now have a closer management of both vendor lead times and internal lead times

Lead time

Dynamic calculation

By vendor and transport mode

Cleansing of extreme delays

Internal lead time managed by components

Possibility of manual control

Compare real lead time with

vendor promises

Managing lead times

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$Ordering Stocking costs costs

DATA BASE ERP or CMMS

Calculation

SSLead time

MinMax

ForecastingLot sizes

FINAL PARAMETERS

Service objectives per class /

family/ warehouse

AdjustmentsSimulation

Optimizing inventory parameters

Canadian Malartic Mine now uses IMAFS’ calculated Min-Max on 75% of items

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Key Performance Indicators

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• Parts availability up by 3,5% overall and 5% on critical items

• More availability of production equipment’s

• Inventory of items dynamically controlled by IMAFS went down by 15% overall with 24% on parts for mobile equipment, the first product family that Canadian Malartic Mine implemented

• A complete set of KPI’s with the tools to manage service

Key results at Canadian Malartic Mine

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Thank you

Questions?