Insight | Research Programme 2017: The future of mining

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Research Programme 2017: The future of mining

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The mining sector faces a number of serious challenges that are likely to intensify, and its future success will be determined by how mining organisations choose to take these on.

At the core of these challenges is the commodity downswing – after the early 21st century boom, fuelled by the relentless growth engine of the expanding Chinese economy, global demand has significantly weakened. Not only has product innovation reduced the need for mining’s core materials, it has also identified new ways to reuse materials in the circular economy.

Other developing nations are not picking up the commodity demand slack from China, as many leapfrog conventional resource-rich industrialisation to instead become service economies. This picture is exacerbated by the increasing scarcity of high-quality ore deposits, forcing organisations to expand to remote and difficult-to-access new sites; over the last 15 years, the average cost of producing copper has risen by over 300 per cent, while the grade quality has dropped by 30 per cent.

While these trends threaten mining’s future prosperity, significant technological shifts could help mining to find new ways to navigate these challenging waters.

At the core of all of these is digitalisation – a force which has upturned a variety of markets, but which, as this research demonstrates, has only just started to make an impact in mining. The intelligent implementation of digital technologies like IoT could transform mining, making it more productive, efficient, safer, sustainable, and profitable, and therefore better able to take on the challenges it faces.

While mining organisations have been slower on the uptake of automation and robotics than those from other sectors in this research project, the data indicates these technologies will become a more prominent part of the mine of the future. Indeed, some 63 per cent of our mining respondents expect to achieve greater automation through their IoT deployments at some point in the future. This reveals the way in which IoT networks with smart sensors will provide the foundation for a smarter mine of the future.

63%

of our mining respondents expect to achieve greater automation through their IoT deployments at some point in the future

 

In order to operate in a coordinated way which adapts and reacts to the environment around them, these autonomous machines need to be able to interact with each other and understand what is going on in the mine. By deploying connected smart sensors in a network, IoT makes it possible to automatically pick up data from previously elusive locations and for this data to be communicated rapidly to other devices – sowing the seeds for a network of automated devices that adjusts to environmental conditions in real-time.

At a time when the comfort of the office is becoming a global norm, the mine remains a uniquely hazardous and inconvenient workplace. Automation offers a way around all the risks and expense inherent in employing people in these locations, while bringing the precision and bandwidth of technology to the coalface.

For example, Freeport-McMoRan is already using drones to create steeper slopes in its mine, reducing the amount of rock it needs to move to access materials. These drones can not only scan the mines from perspectives that are dangerous and near-inaccessible to humans, they can also instantaneously communicate any information they pick up. This makes for a more rapid and detailed analysis of the mine slopes without having to deploy workers to the mine. With machines becoming progressively more capable of acting with little manual intervention, a future where adaptable and autonomous machines carry out the on-site, operational tasks of mining while human employees work remotely looks probable and profitable.

Where does human intelligence fit into this vision of the future?

The digital revolution has created new ways for workers to interact with technology, meaning that human intelligence can be augmented with digitally-supplied data. For example, Virtual Reality (VR) can be used to figuratively transport a remote worker directly to the coalface, allowing them to bring their own experience to bear on a situation. Meanwhile, Augmented Reality (AR) can be deployed to ensure that relevant data is relayed to a worker in real-time giving them instantaneous warnings and instructions. However, with less than 10 per cent of mining respondents in our research possessing the strategic and management skills they require to make the most of IoT technology, mining companies will need to develop new skill sets if they are to embrace digital technology’s promise.

“ The future of mining ultimately lies in the capacity to fuse human creativity and experience with technology’s ever more sophisticated ability to collect, process, and analyse vast swathes of data.”

Joe Carr, Director, Mining

Those who do this skilfully will be able to overcome its current challenges through increased productivity and efficiency, and the redeployment of the human resources to more sophisticated roles as automated technology takes on more dangerous and data-heavy tasks.

Data: the new gold for the mining sector

Mining organisations need to treat data like a commodity and use it for profit. They also need to work on upskilling their labour force in order to change the way they work.

In an information-rich world, the collection and clever use of data has become a primary source of competitive advantage for businesses in any number of industries, from Google with search to GE and its predictive maintenance for aeroplane engines.

Mining is no exception – information is key to understanding where and how best to extract valuable materials from the ground with the greatest productivity and least amount of risk.

For those mining businesses becoming digital-first the value is significant – with 2025 EBITDA projections for the most innovative companies being 70-200 per cent higher than digital laggards, according to the World Economic Forum. Despite this, mining organisations put less than 1 per cent of their data to effective use. Our own research found that outside of IoT development, 44 per cent reported that they were not exploring any other form of digital transformation. Why is this the case, and what does the industry need to do to take advantage of its data – one of its most significant assets?

44%

of mining respondents aren't exploring any form of digital transformation beyond IoT

“The fact that the analysis and use of data is often referred to as data ‘mining’ is instructive ”

Joe Carr, Director, Mining

The heart of the issue for mining organisations is that they need to look at data as they might do a precious metal, and establish the infrastructure and expertise to extract, share, and analyse this new gold. On top of this, they also need to build data security throughout their operations to protect this highly valuable asset.

Mining businesses need to start with improving data access and relevance. Experimentation and innovation can only ignite when the right people across organisations are able to see the data and apply it to their specific challenges, discovering new ways of working. Miners already produce large amounts of data from sensors embedded across operations – either directly such as through surveys, or indirectly as a by-product from their general operations such as in fleet management or secondary data produced from drilling and blast hole activity.

The growth in computational power means that there has been a step change in the analytics and intelligence to be gained from data in recent years. This is a key area in the innovation chain where mining needs to increase its focus. Machine learning and improved statistical techniques mean patterns and observations about data previously unseen are being made visible. Predictive maintenance patterns, geological modelling, and logistics chains can all be improved through better analysis.

An example of how the use of indirect data leads to greater efficiencies is through the examination of the flow of mined materials from initial extraction, processing and to final transportation. Unscheduled events like a mechanical breakdown, inefficient use of transportation vehicles, queuing times at dumping points and processing facilities all build up delays and costs. Data from the entire process journey can be collated and analysed for pinch-points, enabling the production of a highly specific plan for each mining operation to improve performance within a business.

Data and the infrastructure to support it are one thing, but if you don’t have the right people in place to use it effectively then little innovation will occur.

Like nearly every industry in every part of the world, there is a pressing skills shortage – many people just can’t learn fast enough to keep pace with the potential that new technology is bringing. However, mining faces some additional challenges. Its workforce is ageing. Older workers may be more experienced and have deep industry knowledge, but they are also less comfortable with digital tools and collaborative work. Globally, there is stronger competition for new talent. Millennials are shunning more mechanical-physical careers and traditional corporations and the most talented digital natives tend to not look at the mining industry favourably. These factors have played out in our research. Overwhelmingly, the mining industry has a skills shortage when it comes to developing and deploying the IoT successfully. Respondents to our research reported a shortage of skilled people at the strategic, management, and operations of IoT-solutions with many turning to outside partners to help fill the gap.

It is highly probable that this shortage is contributing to the delayed development of digital-first operations compared to other sectors.

There is a paradox here – as jobs become more advanced and need higher level skills, the work becomes more attractive for the most talented people. However, for organisations, without the most talented people, embracing new ways of thinking and the ability to jump on the opportunities that digital transformation presents, is much harder.

If data is the vast masses of undifferentiated material that is extracted from the ground, information is the valuable seams of ore hidden within those masses.

Despite this, the mining industry has not yet put in the place the secure and stable infrastructure or recruited the skills required to do this. Mining organisations might be in a perpetual race to exploit any promising new seams of physical material, yet their approach to this new gold of the digital economy, data, belies this reputation. Without the appropriate infrastructure and skills in place, the industry will continue to lag behind others who are exploiting data for productivity and profit.

Digging deeper: going beyond the commodity cycle through innovation

The cyclical nature of the mining industry is preventing innovation and adoption of technologies that can have a tangible benefit to the bottom line.

A fundamental feature of the mining industry is its exposure to the global commodity marketplace.

As the key supplier of the raw materials that make up the modern world, from the foundations of skyscrapers to the intricate electronics of an iPhone, the industry is subject to the global economic forces that determine demand for its goods. The result is that mining organisations have historically been conditioned by the global commodity cycles, characterised by boom periods followed by downswing phases, and back again.

This can be seen most dramatically with the global commodities boom of the 2000s, which followed a period of significant depression during the 1980s and 1990s. This has had a distinct impact on the industry’s approach to innovation – and not necessarily in a positive way.

“The predictability of this cycle means that mining organisations often maximise pure volume during the favourable conditions of boom phases, while turning to sharp cost-cutting measures during downswings.”

Joe Carr, Director, Mining

The problem with this approach is that it is necessarily short-term – boom periods are for generating as much profit as possible to shore up the organisation during the inevitable downturn, where the focus turns solely to surviving long enough to reach the next boom. In this mind-set, every move which deviates from the norm must have an immediate and calculable pay-off in profitability terms.

At a time when the depletion of easily accessible seams is putting structural pressure on mining organisations, it’s becoming increasingly important for them to find ways to improve productivity in a way that transcends the ebbs and flows of the global commodity market and create a long-lasting change to profitability.

How can mining businesses develop new ways of working when such a cyclical, shorter-term worldview pervades?

There is certainly a more cautious approach recorded in our research, but there are signs that IoT, alongside machine learning, robotics and 3D printing, is being explored.

While mining is lagging other sectors in its adoption of new technology it can afford to be bolder – as the returns on innovation are starting to be seen across other sectors, bringing greater confidence to ‘fastest followers’. The World Economic Forum has calculated that the economic impact alone from digital transformation for the mining sector could be between $428bn to $784bn for the period 2016-2025. So, the potential gains are significant enough to attract senior level support to think longer term when it comes to innovation, and there has been some significant progress in mining businesses taking a digital-first approach.

A stunning example of innovation in the sector is the Rio Tinto Mine of the Future – set up in 2008. The initiative has resulted in the deployment of several automated systems – Rio Tinto operates the largest fleet of automated haulage trucks in the world, and has developed an automated long distance railway system – both of which have increased transport efficiency while reducing cost and waste. The automated trucks have already saved approximately 40,000 litres of fuel every year, and reduced haul and load operating costs by approximately 13 per cent. The company has also trialled an automated drilling system, making it easier and safer to operate mines.

Other examples of where IoT-based solutions can be pivotal is in the development of automated exploration drones, enabling a more accurate assessment of territory before drilling begins. Precision readings mean wasting less energy and resources when trying to access ore for extraction.

Robotics and automation are also able to improve the recovery and recycling of materials and removes humans from the need to be present at the most hazardous points of the mining process.

However, while there are plenty of examples of innovation in the mining industry and the potential of digital transformation is accepted as just around the corner, it is impossible to not see in our latest research that the mining sector is in the very early stages of development, particularly when we compared the results to the other sectors in our survey.

This picture of a prohibitively restrained approach to innovation is supported by the way mining organisations deal with the data they generate through IoT. Generating data from novel sources and sending it between devices is at the core of the technology, and the application of this data to business problems is key to unlocking its value.

Despite this, almost a third of mining organisations have no plans for the data collected through IoT. Without putting this data to use in the business through experiments that seek to fuel innovation, the industry will always struggle to identify ways to dramatically improve productivity or cut costs. Moreover, when access to this data is restricted to IT and senior management, the potential for it to be used to address operational and business problems throughout the organisation is severely restricted.

Innovation thrives in an open ecosystem, where information is shared, different disciplines collaborate, and new approaches are brought to the fore. The conditions of the mining industry – subject as it is to the global commodity market – has made it function in a way which isn’t conducive to this approach. The proximate objectives of either maximising a boom or surviving a downturn tend to take priority over creating an enduring advantage through innovation. With persistently low productivity taking its toll, however, the industry needs to adjust its approach if it is to find its way out of the doldrums.

Developing a response to a new security threat

Mining businesses are aware that they are more vulnerable than ever to security breaches, but they need to move faster to counter these challenges.

To successfully hack a mining business would be a major scalp for a would-be attacker and the sector faces threats from a whole range of actors with very different objectives and motivations to cause harm. While the risks from cyberespionage, environmental groups, online warfare from state-sponsored groups and even just common criminals have increased, the mining industry has also become more vulnerable due to a range of structural changes to the way it operates in recent years. In this context, the advent of IoT-based tools and wider digital transformation poses significant data security challenges that must be rapidly addressed.

Organisations taking a digital-first approach to their innovation and operations stand to gain significant advantage over their competitors, but without the right security in place, any digital-first initiative will likely come crashing down before gains can be made. Our research uncovered that mining businesses are aware of the threats that they face and 94 per cent thought that their approach to cybersecurity could be improved with 67 per cent also stating that their data security measures would need a complete overhaul to be fit for IoT deployments.

67%

of mining respondents said that their data security measures would need a complete overhaul to be fit for IoT deployments

The increasing risk from cyberattacks can be traced around four main events: the increased centralising of functions and merging of IT and OT (operations technology), an increase in government led cyberattacks for commercial sabotage or cyberwarfare, the rise of environmental hacktivism, and the mining sector’s increased dependency on technology to operate profitably.

Improvements to computing and network infrastructure technology has allowed mining businesses to rationalise costs by centralising functions wherever possible across their supply chains. The use of more sophisticated systems and networked connectivity has enabled a globally disparate workforce to be more easily directed centrally and to work together over different regions. Alongside this development has been the ongoing convergence of information technology with operations technology. Where OT supports the physical value creation and manufacturing processes, IT combines the technologies needed for information processing. There are many benefits in business efficiencies to blending these two areas, however, a key difference between IT and OT is that the latter tends to be much older, having been deployed with a longer life expectancy to meet returns on investment than most IT systems. The result is a greater risk of access from hackers to older systems that were not designed for today’s security challenges.

Mining is a major contributor to national infrastructure and in many parts of the world operations are state owned.

The sector is therefore of political interest and as intelligence agencies and the military have improved their hacking capabilities, the mining sector has never been at greater risk of attack.

Firstly, states have directed their intelligence agencies to hack into competitors to their own state-run companies with the aim of stealing commercial knowledge for their own use, or to gain intelligence that can give them an advantage in contract negotiations. Secondly, state actors have sought to deploy malware to disrupt operations and weaken political/state opponents.

Another distinctive threat faced by the mining industry is from environmental groups and individuals prepared to act illegally to further their campaigning objectives. Despite the efforts of the mining industry to meet the needs of all their stakeholders, the environmental lobby remains active in many parts of the world, trying to disrupt operations. In previous decades, many groups would try to physically infiltrate mining land and attempt to gain media exposure by destroying plant machinery and occupying sites to prevent mining operations. Today, they can have a more significant disruption and media attention through hacktivism.

The final challenge comes from the increased dependency the sector has on data for its operations and profitability. The impact of a data breach on the operations of mining businesses becomes greater every year, meaning the risks of not having adequate security in place are also growing exponentially. Whereas 20 years ago a data breach would have been an inconvenience, today a mining company might grind to a complete halt, being unable to operate.

“Less than half of organisations are investing in new security technologies to tackle this enhanced security threat.”

Joe Carr, Director, Mining

Our research suggests that mining organisations need to move faster to counter these challenges. While two thirds felt that their IT security needed a complete overhaul, when asked what specific measures were being taken, the response was somewhat muted.  Less than half of organisations are investing in new security technologies to tackle this enhanced security threat, and innovations such as IoT are rarely accompanied by the full complement of security measures that are necessary to protect the various vulnerable points that these technologies open up.

While there is a focus on investing in new technologies of upgrading existing security technologies, there are a lot more softer measures that can be undertaken in improving the policies and processes of employees and partners, and how they handle data. A more rounded approach to data security needs to develop in the short-term as more IoT solutions are deployed. A failure to do so, could be catastrophic.

Introduction

The future of the agritech sector

The future of the energy sector

The future of the transport sector