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Innovation still a tough sell to mining financiers

Industry Top Trends 2021: Metals and Mining

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

Essential Metals & Mining Insights - August 2020


Innovation still a tough sell to mining financiers

Withthe current downturn in full swing and commodity prices tipped to be low for sometime to come, miners are being urged to become more innovative to cut costs andimprove productivity. But cost and a lack of confidence from financiers are provingtough hurdles to jump.

Whilelarger miners, the likes of Rio Tintoand BHP Billiton Group,are making leaps and bounds in innovating their operations, smaller miners are increasinglybeing left behind.

AustmineCEO Christine Gibbs Stewart told SNL Metals & Mining that more mining companiesneed to adopt innovative technologies in the current market or risk going out ofbusiness.

"Thecommodity price is not going to come up for a long time," she said. "Itis said to be the new market norm. So they're going to have to cut costs out oftheir business, and really the only way they can do that is by becoming more innovative,more efficient and more productive in what they do. I think it's an imperative forthe industry."

But whilethe downturn is nudging more miners toward innovative technologies, it is seeminglya lot harder to convince those that fund the projects that this is a necessary move.

GibbsStewart said the finance community does not necessarily look at innovation as away to improve the performance of mining companies.

"Sopeople who are financing the mining projects, they talk about cost cutting, butthey talk about cost cutting in terms of people because that's really all you cando," she said. "Maybe in terms of some of the equipment, trying to screwdown your suppliers, but they don't think about innovation, or they don't valueinnovation in that investment.

"Sothere's a lot of pressure on mining companies not to spend that money on innovationand perhaps do something easier for a short-term gain than investing in innovation,which would obviously impact on the longer term."

Rio Tintois one of the most advanced in innovation with the rollout of automated haulageand automated drilling systems across its Pilbara iron ore operations in WesternAustralia.

The miningheavyweight has 69 autonomous trucks in operation at its Pilbara sites moving high-gradeore and the number of trucks is set to grow in coming years.

In 2008,Rio Tinto successfully trialed its automated drilling system at the West Angelasmine in preparation for deployment across the Pilbara operations over the next fewyears.

The companyis also in the process of rolling out the world's first fully autonomous heavy haul,long-distance railway system, known as AutoHaul.

MichaelGollschewski, managing director, Pilbara Mines for Rio Tinto said at an industryconference in early March that the company optimizes its system of mines, rail andports as a whole and that its operations center in Perth, Western Australia, isthe "nerve center" of this system.

"Thisfacility brings together controllers and schedulers from pits, plants, rail, portsand utilities for our Pilbara operations to work together in a control room andadjacent office block in Perth, using technology and co-located expertise to providewhole-system visibility, whereby at any time we can see the location of every train,truck and dig unit and the throughput of our ports and plants," he told delegates.

"Wecommunicate and monitor in real time to execute daily operating plans. We are ableto maximize tonnes through the system and ensure customer quality and shipping parametersare always met.

"Weare able to respond to opportunities and challenges with the most up-to-date informationavailable, meaning better, smarter, faster decisions at every level."

Meanwhile,unmanned aerial vehicles, also known as drones, are increasingly being used by Australianminers to improve the safety and efficiency of their operations.

Dronesare already in use atRio Tinto's iron ore and diamond mines in Western Australia. Fortescue Metals Group Ltd. purchased an unmanned aircraftsystem and software after trialing the technology at its Cloudbreak mine, part ofthe Chichester Hubin Western Australia, and BHP Billiton is also investing in the use of drones acrossits operations.

The latestinnovation that could transform mining and exploration is Lockheed Martin's hybridairship, which can transport cargo and passengers to and from remote locations.

U.K.-basedStraightline Aviation recently signed a letter of intent to purchase up to 12 hybridairships, which are due for release to the market in around three years, with apotential value of about US$480 million.

StraightlineAviation, the world's largest airship company, expects its first customers to befrom the mining and oil and gas sectors.

LockheedMartin said the hybrid airships require little or no fixed ground infrastructureand burn significantly less fuel compared to conventional aircraft, making theman environmentally friendly solution to remote cargo delivery.

Minersare increasingly seeking innovative technologies that will help them get more outof the assets they have. These technologies now span most aspects of the miningprocess from blasting and ore haulage through to processing.

"Theway they blast the pits now, that's all automated," Ray Bull, managing directorfor Emma Mining — a contractor to BHP Billiton and Rio Tinto, told SNL. "It'sall done by computer.

"Theway it's blasted now is done in such a way that it's got lifters on the outsideso it formulates the blast now so it doesn't blow out all over the show. It actuallyjust lifts it and puts it back down to where it came from."

Austmine'sGibbs Stewart said that even a 1% saving can mean a lot of money for a mining company.

"Whatwe know is that when [mining, equipment, technologies and services] companies, sosuppliers, go to speak to mining companies they better be sure of what value they'rereturning or what savings they are making for that mining company because that iskey to their pitch, if you will, in getting into that mining company and supplyingto it," she said.

The advantageof the downturn, according to Gibbs Stewart, is that mining services companies,particularly the smaller players, are now gaining greater access to miners.

"Whatwe're seeing is that miners are certainly more receptive to talking to suppliersand looking at the different options available, particularly small companies, wherein the boom they couldn't get an audience with a miner, but if they have a reallygood technology or solution, miners are certainly more willing to speak to them,"she said.

"Wenotice too from an Austmine perspective that miners are looking for solutions andso they've become more active and more accessible to us in terms of presenting toour members."

However,while miners might be more open to discussing and considering implementing innovativetechnologies, there are still many that are yet to do it.

"AsI said before they are more receptive, but that doesn't mean it's any easier toget in," Gibbs Stewart said.

"Miningcompanies by their very nature are very conservative, so it still takes quite along time to get technology adopted into the mining supply chain, but I guess itis the fact that they are now willing to look at smaller players who have innovativetechnologies and can help them with certain issues whereas in the boom they weren'tinterested in that."

EmmaMining's Bull said for most miners the decision to be more innovative depended largelyon the return on investment.

"It'snot so much what the cost is to actually do the job, it's all about the payback,"he said. "It's all about how quickly they can retrieve that money and whenthe money was high and the tonnage was overseeing the value of the commodity, theirpayback was probably within the first 10 years, whereas now that the price has droppedthe payback is not there."