Annual Report & Accounts 2013
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Overview of operational efficiencies in 2013

In 2013, Vorkutaugol has completed its major preparation plant’s modernization. The Pechorskaya preparation plant’s upgrade was based on knowledge transfer from Severstal’s US coal operations. The plant’s layout was designed in the US, using mostly international equipment. The Pechorskaya preparation plant is now able to process 9.5 million tonnes of coal a year, or + six per cent more than previously. Production costs should go down, as fewer operational and maintenance personnel are required now.

Two inclined shafts at the Zapolyarnaya and Vorgashorskaya mines will reduce costs substantially by removing three skip lifts and eliminating transport bottlenecks. They will also add four million tonnes of processing capacity at a quarter of the cost required to build a new plant of the same capacity.

At PBS Coals, volumes can be highly flexible, and adapt to the volatile export market, while maintaining domestic supply. We have idled the least efficient mines to reduce costs and preserve cash flow – one open mine and five deep mines remain in operation. We will be able to re-open the idled mines when the market picks up.

Karelsky Okatysh continues to focus on cost control at its open pit operations. Apart from switching to higher tonnage equipment (220t truck fleet and 30 m3 shovels) it managed to lower its drilling costs in 2013 by 14 per cent, compared with 2012. Major cost reduction at Karelsky Okatysh has come from enhancements to maintenance works. Better cost control was achieved through insourcing of maintenance teams and training them to be multifunctional specialists. The headcount of our in-house maintenance teams was reduced without losing maintenance productivity or equipment uptime.

We continue analyzing opportunities to enhance our operational efficiency. In April 2013, a second dry magnetic separation unit (DMS) was commissioned at Karelsky Okatysh. The DMS technology enables a significant reduction in losses that can result from contamination of ore in the ore-shoot and in large-bucket excavation. DMS technology also helps to substantially reduce costs for ore transportation to the dressing plant.

Our new dry magnetic separation unit is unparalleled in Russia. We have built on our experiences gained from the first DMS unit which has been operating smoothly for a few years at the edge of the open-pit mine at our Korpangskoye deposit and has provided significant benefits. We were the first Russian plant to use DMS in this way, and we will continue innovate and improve our production processes.

Karelsky Okatysh’s use of DMS technologies at the edge of an open-pit mine where ore undergoes primary breaking is unique within Russian production. Following the DMS process, the fragments move on a conveyor belt to a magnetic separator to be split into two flows: rock and finished ore, with the latter channeled to a crushing-and-dressing plant.

The second DMS unit has been built, thanks to experiences gained from the first unit, with a larger coarse-ore bin which facilitates loading from 136–tonne dump trucks. An overhead crane has also been installed with the new unit to facilitate maintenance and repairs, and a modified vibration feeder has also been included. These and other innovations have significantly added to the output of the new unit; whereas DMS-1 processes 3 million tonnes of contaminated ore per annum, DMS-2 is capable of processing 4 million tonnes.

The unit is automated nearly all year round, requiring just a single operator to control both ore breaking and dry ore sorting. Surveillance cameras are installed in the DMS storage bin in the dump truck discharge area for accident prevention purposes.

In February 2014, Karelsky Okatysh launched production of new iron ore pellets with higher iron ore content. The Cherepovets Steel Mill, part of Severstal, will be their main customer.

Producing high quality iron ore pellets through separate ore processing is one Severstal’s key initiatives to improve production efficiency. The new technology for producing high quality iron ore pellets underwent testing in February and June 2013.

In the past we produced fluxed pellets with up to 63.2 per cent iron ore content, which fully satisfied our customers’ needs, but we have since raised the iron content to 64.3 per cent. We began separately processing free-milling and refractory ores on February 1, and expect to be producing pellets with a 66 per cent iron content by the end of the year.

Using iron ore pellets with higher iron content will increase the profitability of our blast furnaces and help to decrease our raw material consumption. This will result in reduced pig iron production costs at CherMK. Using Karelsky Okatysh’s new product we expect to save an additional 286 million rubles a year.

Olkon’s cost structure should benefit from the commissioning of a high-angle conveyor. With that conveyor it will be able to reduce haul lengths at its largest pit, the Olenegorsky mine, by approximately five times. Even without this, the mine managed to control its cost through many efficiency initiatives in all mining processes, so that the cost of 1 m3 mined decreased by 11 per cent, as compared with 2012. Installation of wet screens allowed Olkon to stabilise its concentrate quality at a level of 65.7 per cent. Modernisation works at the plant are underway and should guarantee stable volume output during 2014 and 2015. A new dryer is to be commissioned before the end of the year, which will help to decrease fuel consumption. Apart from this Olkon focuses on cost control.

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