BHP Billiton digs fancy maths
7th October 2005
The world's largest diversified resources company, BHP Billiton, is enlisting some fancy arithmetic to help maximise its profits by better matching its mining operations with market demand for its products.
The company has teamed with mathematicians at the University of New South Wales and the University of Melbourne to develop new mathematical techniques – based on advances in optimisation – to improve its strategic mining plans for iron ore and copper.
The mathematics of optimisation is all about doing the best you can with the available resources: that is, boosting productivity by doing things differently rather than spending more money.
"Our techniques will mean that Australia's mining companies could better manage and capture new and emerging markets and significantly improve Australia's balance of trade," says UNSW mathematician Dr Gary Froyland, who is a Chief Investigator on two research projects with BHP Billiton.
Strategic planning in the mining industry – which accounts for $60 billion worth of exports each year – can be fiendishly complex, says Dr Froyland, who with colleague Associate Professor Natashia Boland recently won a three-year $530,000 Australian Research Council grant to develop mathematics for probability-based strategic planning techniques.
"It's about using the knowledge we have in the most intelligent way possible to construct a mining schedule over several decades that mitigates risk in the geology and demand while maintaining the flexibility to respond rapidly to spikes in demand.
"By understanding the nature of the uncertainty in resource and demand models, and intelligently using that information, the company could respond more quickly to expected spikes in the demand for commodities such as the current surge being fuelled by demand from China."
Dr Froyland says the techniques have relevance well beyond the mining sector and could be applied to a wide range of industrial and commercial activities where uncertainties are significant.
"Despite the sophistication of current geological survey methods, the nature of mineral resources means that they can only be known to certain levels of accuracy," says University of Melbourne mathematician, Associate Professor Boland.
“And despite the sophistication of market research and analysis, the likely demand for the mineral products remains very difficult to predict with accuracy.
"Where we come in is to work out how to balance the geological uncertainty and the unpredictability of demand to help the company's managers to create a strategic plan that strikes a balance between risk and return.”
Funding disclosure
This project is funded by an Australian Research Council grant titled: A mathematical approach to flexible management of open pit mines with uncertain geology and unpredictable demand
BHP Billiton will contribute cash and in-kind funding of more than $310,000 to the project, with the ARC contributing $220,000. The research project will be a collaborative effort with BHP Billiton research scientists Peter Stone, Dr Merab Menabde and Dr Mark Zuckerberg.
Media contacts: Dr Gary Froyland (bh) 02 385 7050 (mob) 0408 757 853, URL http://www.maths.unsw.edu.au/~froyland; Dan Gaffney UNSW science media (m) 0411 156 015
The company has teamed with mathematicians at the University of New South Wales and the University of Melbourne to develop new mathematical techniques – based on advances in optimisation – to improve its strategic mining plans for iron ore and copper.
The mathematics of optimisation is all about doing the best you can with the available resources: that is, boosting productivity by doing things differently rather than spending more money.
"Our techniques will mean that Australia's mining companies could better manage and capture new and emerging markets and significantly improve Australia's balance of trade," says UNSW mathematician Dr Gary Froyland, who is a Chief Investigator on two research projects with BHP Billiton.
Strategic planning in the mining industry – which accounts for $60 billion worth of exports each year – can be fiendishly complex, says Dr Froyland, who with colleague Associate Professor Natashia Boland recently won a three-year $530,000 Australian Research Council grant to develop mathematics for probability-based strategic planning techniques.
"It's about using the knowledge we have in the most intelligent way possible to construct a mining schedule over several decades that mitigates risk in the geology and demand while maintaining the flexibility to respond rapidly to spikes in demand.
"By understanding the nature of the uncertainty in resource and demand models, and intelligently using that information, the company could respond more quickly to expected spikes in the demand for commodities such as the current surge being fuelled by demand from China."
Dr Froyland says the techniques have relevance well beyond the mining sector and could be applied to a wide range of industrial and commercial activities where uncertainties are significant.
"Despite the sophistication of current geological survey methods, the nature of mineral resources means that they can only be known to certain levels of accuracy," says University of Melbourne mathematician, Associate Professor Boland.
“And despite the sophistication of market research and analysis, the likely demand for the mineral products remains very difficult to predict with accuracy.
"Where we come in is to work out how to balance the geological uncertainty and the unpredictability of demand to help the company's managers to create a strategic plan that strikes a balance between risk and return.”
Funding disclosure
This project is funded by an Australian Research Council grant titled: A mathematical approach to flexible management of open pit mines with uncertain geology and unpredictable demand
BHP Billiton will contribute cash and in-kind funding of more than $310,000 to the project, with the ARC contributing $220,000. The research project will be a collaborative effort with BHP Billiton research scientists Peter Stone, Dr Merab Menabde and Dr Mark Zuckerberg.
Media contacts: Dr Gary Froyland (bh) 02 385 7050 (mob) 0408 757 853, URL http://www.maths.unsw.edu.au/~froyland; Dan Gaffney UNSW science media (m) 0411 156 015
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