Unrealistic expectations fail projects

By Wray Carvelas, CEO of DRA Global

Across the world investment appetite seems to be returning to our sector as investors look to unlock the untapped potential the global mining and minerals landscape has to offer.

DRAWe are seeing an increased number of enquiries and studies and this together with the increased activity in M&A transactions in our sector are certainly positive indicators that the market is coming off the bottom.

While I sense that we are witnessing a turning point in our industry, and I expect far more stability moving forward, it does appear that the investment community remains somewhat cautious to invest. For the fourth consecutive year the industry reduced spending on exploration, worldwide, to barely one-third of the record allocated in 2012. Overcoming the increasing regulatory hurdles is somewhat routine for investors and the return on investment remains high, so why do they shy away?

One of the biggest deterrents to investment in the mining sector is the inability of projects to deliver on investment promises. There are many recent examples out there. This is often a result of a poorly defined project scope, a poorly understood mineral resource and the inability to deliver on project costs and schedule. Earlier this year one emerging gold producer provided the industry with a real example of just how quickly something ‘simple’ can go very wrong. Production delays and lower grades together with inaccurate resource estimates, but how could they have done it right?

To attract investment, it has become a necessity for organisations to complete projects under budget and well ahead of schedule. Unfortunately, with the overwhelming need to secure funding, many organisations make promises or assurances that they simply cannot deliver. Shareholder expectations guide the output of any business, moving budget and schedule predictions to create a buffer. This just doesn’t wet the lips of any investor in the current market.

Projects do fail but can it be avoided? If we delve under the surface of projects in the graveyard, we find some overwhelming evidence of what not to do.

We find several knocks to profitability, from inexperience, miscalculating risks, unrealistic stakeholder expectations, naivety, unrealistic estimates, lack of strong leadership and, of course, the human element. One fatal blow is the expectation of stakeholders. Expectations are a funny thing. It’s a bit like a guessing game of what could be but, in the absence of a crystal ball, you never really know for sure. However trivial, expectations often have the power to bend reality and no matter how unrealistic, once accepted they are treated as fact.

All too frequently poor expectations are used to set project deadlines. These expectations are fuelled by inexperience and the drive to under promise and over deliver typically yields the opposite for both. This, in turn, lowers confidence levels and decreases the propensity for future investment.

So why create an expectation? Project managers and firms commit to secure the work. The market is tough and the pipelines are dry but, as we’ve seen, empty promises are far more difficult to recover from in the long term.

Aggressive deadlines can drive teams and individuals to achieve more and innovate under pressure but unrealistic expectations result in reputational damage, compromised quality and safety standards and missed deadlines.

Accurate studies in conceptual, pre-feasibility and definitive feasibility studies are the first check point for successful projects. This is the solid foundation for any successful project. While there is always a degree of uncertainty, experience and the right technical partner can build a strong foundation for future success. Knowing which risks are navigable and which aren’t determines the real feasibility of a project and having the aptitude to listen can mean the difference between profit and loss. While exploring and elaborating on the idea of the project, excitement grows, as do expectations, and the ability of the project leader to answer with an informed ‘no’ is arguably the most important skill within this team.

While technological advancements aid in determining and mitigating risk, there’s a lot to be said for hands on experience. The theory of navigating climates, leadership, equipment, systems and socio-economic factors is very different to the practical application and there is no algorithm to guide these decisions.

The recent market pressures have highlighted the importance of potential efficiencies and digital technologies to accurately predict and optimise performance.

We are seeing mining companies, worldwide, shift their strategies to adopt new business and operating models to include new technologies – at a more rapid pace than ever before. This fundamental shift has the potential to transform safety outcomes, enhance performance and ultimately unlock new benefits in the sector.

That being said, a knowledgeable partner will know how to mix the old with the new. Innovative systems while running concurrently with sound advice can see studies through to successful project completion.

Having realistic expectations from the start and listening to honest feedback and advice is key to successful collaboration. This provides a strong foundation on which the project will be built. Agreeing on the result allows project and client teams to build a realistic budget, timeline goals and drive collaboration from the onset.

We’ve worked with hundreds of teams in the past and we have learned that by collaborating with other experts and organisations, you are ensured a wealth of knowledge and the ability to formulate realistic project plans that deliver results.

Understanding the project is as important as understanding the client and expectations as a project developer too need to be managed. It’s not about managing control it’s really about managing expectations. These exist for both the project team and project owner.

So where does that leave us? Leave the emotion behind. A rational approach to new opportunities and challenges in execution will inevitably manage expectations from the onset and keep them at bay. In today’s changing landscape there’s a lot more at risk and an indefinite number of variables but genuine understanding and collaboration can navigate most of these challenges.

A clear goal leads to a clear path. I know from experience that expectations outlined and agreed on in the study phase can grow and diminish as projects move through implementation. There is no textbook or memoir that can guide a team in political instabilities, safety and environmental concerns and availability of skills, so remaining flexible is key.

The global landscape is volatile as too is the industry but through sound leadership and collaboration we can ensure a stable foundation from which to start our projects. Where inexperience drives ambition and where gains outweigh risks, it is important that we listen to one another and learn from each other. Experience does not crush innovation, it simply provides the lessons learned to be mixed up into something that works today, after all there is no room for a one size fits all approach. Each project needs to be judged on merit, evaluated by well-qualified and experienced people and driven through collaboration.

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