MINING EPC / EPCM
Wood ’ s Michael Woloschuk says the company ’ s work with IAMGOLD at the Côté Gold project , in Ontario , Canada , starting in 2011 , has helped identify more than $ 450 million of improvements in net present value ( credit : IAMGOLD )
identify more than $ 450 million of improvements in net present value ,” he said .
Risky business
Long-term partnerships such as the one referenced by Wood ’ s Woloschuk are rarer than many would think ; reflecting the way the market has evolved in recent years .
In the decade since Wood commenced work with IAMGOLD on the gold project in question , the miner-EPC / EPCM contractor dynamic has changed .
After a spate of projects commissioned during the most recent boom suffered cost and schedule blowouts , many ‘ burnt ’ miners looked to offload the execution risk that comes with mine development onto contractors , selecting a model resembling a fixed-price , turnkey EPC project . This saw the onus placed squarely on the contractor to bring the project in on time ; being rewarded with a ‘ carrot ’ for timely delivery that was in line with the budget and hit with a ‘ stick ’ for delays and capital expenditure overruns .
This shift in market sentiment moved many in the contracting game towards such a model , with competitively priced bids that reflected lower commodity prices and a sparse project pipeline .
This may have delivered projects on time and budget , but it was not a sustainable choice for all market participants .
In the throes of another supposed commodity boom and guided by market pressures tied to sustainability , this dynamic has further evolved . Kaid explained : “ Over the recent years , we have seen competitors back away from high-risk contract models , which demonstrates that a project is most successful when all involved parties jointly work towards established valuedriven objectives , rather than offering the lowest price with unacceptable project schedule and cost risk .”
For Fluor , the “ partnership model ” will always provide the highest value to the full lifecycle of an operation , he added .
“ The most cost-effective approach to project execution is for the risk to reside with the partner that has the expertise and ability to manage such risk , and the associated financial impact ,” he explained .
Collins has witnessed the same evolutionary process in the major projects Hatch is involved in .
“ In the mining space on major projects we are trending towards integrated project teams where
Teck Resources ’ QB2 project comprises a 143,000 t / d copper concentrator , a high-capacity desalination plant and a 165 km water supply pipeline ( credit : Teck Resources ) the owner supplies expertise in areas where it has the best local knowledge and experience – ore reserves , geomechanics , indigenous agreements , government relations , etc – and Hatch supplies project delivery disciplines such as engineering , project controls , procurement , construction management , quality assurance , commissioning , etc .”
Stantec ’ s Rusk said the market has taken some time to find its feet with this type of model , struggling to comprehend what it meant for running their businesses and serving clients . “ We were on a learning curve on how to operate in a partnership ,” he said .
The business model has since been embedded within the offering of major providers , with the underlying delivery mechanisms established .
“ We ’ ve been delivering on more partnership projects , to the point where we can now approach clients and offer our services including partnership elements ,” he said . “ Stantec continues to work with our clients to learn and improve on more cooperative and integrated project delivery .”
Like most major providers in the space , Wood leverages a variety of contracting models to provide commercial flexibility , but Woloschuk said its most successful projects are those where execution strategy has a “ balanced risk / reward between contractor and owner ”.
Like Hatch , Wood often works with “ a true integrated project team ” where all stakeholders are incentivised to deliver projects safely , on time and on budget , he added .
While AFRY ’ s Tikka argues the EPCM model remains the most cost efficient and technologically robust method for mining projects today , Bechtel , in response to demand in its core mining and metals markets , is highlighting the benefits of a direct hire , integrated EPC execution model whereby the prime contractor has all the controls and tools necessary to influence the final outcome .
Ailie MacAdam , President of Bechtel ’ s Mining & Metals division , explained the rationale for this move at the CRU World Copper Virtual Conference 2021 in April .
“ Our shareholders are seeking ways to guarantee project outcomes and avoid costly surprises and our communities are expecting to be consulted and included in the success ,” she said . “ For these reasons , we ’ re extending our strategy beyond innovation , capital efficiency and execution to delivery models that ensure that our company can control the outcomes of our projects and meet the high expectations that our customers have for our work .”
The direct hire , integrated EPC execution model has been deployed around the world and has delivered “ tremendous results in key sectors including those that are already part of the
38 International Mining | NOVEMBER / DECEMBER 2021