The $400,000 Isolation Switch: Why "Wishful Thinking" is the Most Expensive Part of Your Shutdown

Wishful thinking in investments

There are many indicators for investment feasibility: IRR, NPV, free cashflow, etc. These are all taken into account when making  decisions. Sometimes the need for investment is greater than the financial implications are. If the need for investment > greater than feasibility, one might be tempted to “check” the numbers again. As both investment and operating costs affect feasibility, both can be “checked” again. The mining world knows many examples, and the known cases are likely just the tip of the iceberg.

For example, in a nickel project the investment was estimated as 652,24 musd and operating costs as 53,13/ton of ore. With these estimations the following were achieved: IRR 26,26%, NPV8 1722 musd and net cash flow at 7304 musd. Not a bad investment.  ~1 year after construction began the company came to the conclusion that the investment required is an additional 592 musd from the original 567 musd. Did investors jump at the opportunity? No, invested money was written off and they were off to the next opportunity. 

Wishful thinking in operating costs

Optimism can hit operating costs the same way, they are filed down in excel until the numbers are satisfactory. In the end the numbers are so unrealistic that even working personnel don’t believe them. One mine got past the construction phase, but not the operational phase. The concentrator’s feed concentration was increased for February to account for having less days. This simple move made the TEM (Techno Economical Model) look good. Naturally, geology wasn’t a fan of this move. Aside from the leader, the employees either rolled their eyes or laughed out loud. Who won? No one, but the excel looked good.

Wishful thinking in shutdown management 

No function is safe from wishful thinking. When scheduling a maintenance shutdown, optimism can override schedule planning if there is no available information of realistic task duration. If the duration of a single task is based on wishful thinking, it can ruin the scheduling of the entire shutdown. In one particular shutdown this became evident. An isolation switch was scheduled to be switched on a conveyor belt that was also due for a new belt. The duration of changing the isolation switch was estimated to be significantly lower, and it made sense to switch it before the belt. In the schedule, the new switch would be installed when the old belt was cut and the new one was attached. In reality? The isolation switch took 3x the time scheduled for it. The shutdown overran by 10 hours because of this one optimistic estimation by the electricians. This mistake cost 400k$ in revenue.

How we solve wishful thinking mistakes

In order to make realistic estimations when scheduling maintenance shutdowns, one needs accurate historical data or extremely strong professional judgement. Sights fixes the issue and protects you from unnecessary risk. Sights provides historical data of all completed tasks down to the minute, with a full audit trail including reasons for delays. With Sights you can make data-driven scheduling decisions and protect yourself from “tribal knowledge” being lost when employees inevitably change. Book a 20-minute technical exchange to learn how Sights can help you perform more predictable shutdowns.