Mining Magazine – Miners are searching for the richest returns from data as the ‘digital revolution’ starts to change the view of the future
Dingo CEO, Paul Higgins, showcasing Dingo’s Field Inspection App
Deloitte’s Philip Hopwood heard it loud and clear at MINExpo in Las Vegas, US, last year, and at Mining lndaba in Cape Town, South Africa, in February this year. Dingo Software CEO Paul Higgins has heard it, too. And so have Jan Philipp Bender and Thomas Vogt at Boston Consulting. They’ve all heard, as one of them called it, the “rich discussion” in mining circles around the world about the looming impact of digital technology on the industry.
And they’re all wondering about the answer to the question that invariably flows from all the talk; when will miners join other major industries in converting the speculation to real investment and outcomes?
Global management consulting firm McKinsey & Co has said global mining industry spending on innovation and R&D remains low compared with other major industries: less than 1% of sales versus 3-5% for pharmaceutical and other sectors. Digital is a key area of under-investment. Less than 1% of all the data being collected by mining companies is being put to use in better decision-making.
Large French IT firm Dassault Systemes, which made a significant bet on mining’s rapid digital transformation with its investment in Canada’s Gemcom in 2012 during the last mining investment boom and has been underwhelmed by progress to date, says mining “companies need to accelerate their efficiency programmes and invest more significantly in innovation”.
“In many cases, miners struggle to adopt technologies proven to work at other mining companies, let alone those from other industries. As a result, innovation becomes less of a technology problem and more of an adoption problem,” Dassault says in its latest industry whitepaper.
The view has effectively been endorsed by captains of the world’s biggest mining companies, including BHP Billiton’s Andrew Mackenzie, who has said: “More balanced markets require us to get much sharper on operating and capital productivity to expand margins and increase returns, no matter where prices go.
“We do not yet know where the limits of productivity lie, but we can be sure that we are not close to them.”
BHPB is one company that is increasing investment in innovation and digital technologies.
Hopwood, author of Deloitte Touche Tohmatsu’s new ‘Tracking the trends’ report on mining’s shifting regulatory, financial and technology landscape, believes others will inevitably follow.
“I’m a bit of a student of history with these types of things, and what’s going on now in the mining sector is very, very similar to what happened in the 80s and 90s in manufacturing,” Hopwood told Mining Magazine from Cape Town, where he was attending the annual Mining lndaba event.
“I’m old enough to remember what a manufacturing plant looked like in the 1970s, and it was like a mine – a standalone facility working in isolation with almost no connection to other assets in the business.
“Now all those old plants, and the manufacturers who owned them, are either gone, or because of automation and, increasingly, digitialsation, they look [different] and work very differently today.”
Digital disruption, says Deloitte’s new report, is “changing business and operating models … and in some cases completely altering the fabric of an industry”.
Emerging from several years of severe cost-cutting that yielded productivity gains and now, at a time of recovering commodity prices, stronger margins and profits, miners now need to embrace innovation to drive the “next wave of improvements”, Deloitte says, repeating an oft-heard message from some big mining company CEOs, and even big investors in the industry. Digital is at the centre of most of the ‘innovation’ talk.
Are there real incentives for miners to plan beyond just cashing in on higher commodity prices?
“The potential for digital to reduce waste and create value is massive,” says Deloitte – all the way along mining’s project-development and asset-management chain.
The World Economic Forum (WEF) and global consulting giant Accenture, in another new white paper, ‘Digital Transformation Initiative: Mining and Metals Industry’, speculated that digital transformation initiatives in the mining and metals industry could generate more than US$320 billion of “industry value” over the next decade, with a potential benefit of US$190 billion for the mining sector and US$130 billion for the metals sector.
“Our value-at-stake analysis is a quantitative model that aims to assess the cumulative value impact… [for] customers, society and the environment,” the WEF/Accenture report says.
The eye-popping value estimate is equivalent to 2.7% of industry revenue and 9% of industry profit projected over the period.
The WEF/Accenture report also notes that digital adoption rates in a time of further expected mining industry consolidation would likely produce clear winners and losers. “This is expected to drive further industry consolidation through M&A and the elimination of unviable businesses,” their report says.
Deloitte’s Hopwood says that digital disruption has separated leaders from also-rans in car manufacturing, the aerospace and utility industries, as well as the financial-services sector. He thinks it will do the same thing in mining.
And the momentum from that dis parity shift will be a real catalyst for change in the mining space.
Deloitte suggests that automation and digitalisation are already helping some miners to eradicate execution and process waste by reducing process variability and enhancing decision making.
The challenge for most in the industry, though, is in turning potential benefits into reality. A long-term hurdle of adapting technology to meet the specific needs of miners has been overcome, according to experts.
Boston Consulting Group principal Jan Philipp Bender and associate director Thomas Vogt say affordable and robust digital technologies are available to enable miners to address “daunting challenges such as productivity losses, cost control, and cash leakage” in key areas such as:
- Digital mine planning: Miners can integrate data from multiple sources (such as geological conditions, weather forecasts, and equipment availability) to develop mine plans, incorporating insights from dynamic simulation modelling and other techniques to identify those that will generate the most value for a given environment. “Combined with a deeper, data based understanding of the end to-end value chain, this process helps miners develop more informed and value-optimal plans than before,” say Bender and Vogt.
- Predictive maintenance: Some miners are already using predictive maintenance technologies. For example, truck fleets equipped with sensors transmit data on their operational status and performance. Systems using smart algorithms then analyse the data, sometimes in cooperation with equipment suppliers, to optimise maintenance schedules. Results include significant improvements in equipment productivity and reduced maintenance costs. “To manage all this, miners must bring together technology, business process improvements, and cultural change – no easy feat,” say Bender and Vogt.
- Inventory management: Many mines keep ‘squirrel stores’ that contain extra stock for maintenance, repair and overhaul (MRO). Many of these parts end up lost or are thrown away because they become obsolete before they are used. By deploying digital technologies such as an inventory management platform, companies can ensure that requisite levels of inventory are kept in stock (using advanced analytics) and that unused inventory is sold off in time. Digital inventory exchange platforms can settle these transactions without the need for miners to go back to the original equipment manufacturers. All this helps reduce inventory costs and working capital requirements.
- Digital processing plant: Mine and plant general managers face complex product-flow optimisation problems that digital technologies can help them surmount. Advanced algorithms can be used to conduct flow simulation and optimisation using varying inputs (such as grade, hardness and mineral type). The goal is to define product flows that deliver maxi mum value by optimising concentrate grade, recovery rate, or throughput. Such algorithms can even learn over time and adapt their optimisation outputs accordingly rather than relying on manual interventions and adjustments. Analytics that go beyond traditional optimisation lead to significant yield improvements.
- Integrated supply chain planning: Digital technologies can help miners achieve unprecedented efficiency in their supply chains. Cloud-based logistics and load sharing platforms (applied live in container shipping today) are cases in point. Miners can also use digital tools to manage and execute on sales contracts; for instance, to quickly and accurately determine pricing, as well as manage product flows and inventories in ways that reduce transportation costs and lower working capital. “Transaction and asset tracking tools – using existing technologies such as RFID tagging – can boost benefits even further,” say Bender and Vogt.
Many digital solutions present low-risk, low-capital-intensity opportunities to materially promote productivity, reduce costs, and enhance safety, they say.
For miners ready to truly adopt it, digitalisation can significantly improve their agility, help them manage complexity, and collaborate in ways that spark fresh ideas about how to do business. Digital is not just about doing things better; it can also be about doing them very differently from the past.”
This is a view echoed by the likes of Dassault: “Operational excellence requires an enterprise-wide view of operations. Rather than undertaking isolated initiatives at individual mines, companies need a common language and approach to drive operational excellence across the organisation. This takes more than a doctrine – it also requires a cultural transformation.”
Dingo CEO Higgins says the September 2016 MINExpo – unlike any of the shows he’d been to over more than a decade – provided evidence that a cultural transition is under way in the industry. “We are in that [digital mining] space, so from our perspective it was very positive that something that we’d been talking about and advocating for a long time – using data to make good decisions – is becoming very much mainstream,” he says.
“We’ve been building our approach [to mobile asset management] for over two decades, so we still think they’re missing the boat a little bit in some instances.
“One of the things that we still see a lot is this latent data that is underutilised. We’ll often go to a mine site and find they’ve got data sitting there that is being ignored, and yet they are suffering the consequences [equipment failure/unscheduled maintenance] of not using that data. But it’s very positive to see much more rich discussion around the use of data.”
It’s certainly positive for Dingo, and others, to see follow-up sales activity from an event such as MINExpo – a real barometer of mining’s digital talk turning to action. The company has had a breakthrough sale to a significant miner in India confirmed after preliminary talks in Las Vegas, and Higgins says the freeze on capital spending in the industry generally has continued to thaw.
“We are starting to see more investment,” he says. “We’ve got a very strong pipeline right now and our January numbers are significantly better than last year.”
Higgins says that BHPB’s significant investment in its Brisbane maintenance centre of excellence in Australia, and projects such as its ongoing collaboration with Dingo on a new version of the Trakka Field Inspection App for iPhones and other mobile devices, which won the supplier a 2015 Austmine innovation award, show an appetite for investing in the future of the industry.
Dingo itself was sponsoring local trade training institutions to give people the digital skills they will probably need in a few years’ time.
“They will be better prepared to be able to go down this path of more intelligent maintenance when they get out into the workforce,” Higgins says.
“But the big [mining equipment] manufacturers have had a lot of influence in these trade training areas and it’s really only just starting now that this digital revolution is being introduced in the courses.
“The other key cultural step is the leadership at the mines. Enabling people on the shop floor to use data and make decisions is a different model from the sort of command and-control model that has been prevalent in mining for decades.”
The WEF/Accenture report also concluded that “technology and innovation often fail, not through lack of investment or weakness of the technology, but through a lack of cultural change”.
“The digital worker of tomorrow must be engaged and prepared today,” it says. “Successful digitalisation will require collaboration between industry leaders, communities and policy-makers.”
Liv Carroll, a senior manager in the digital transformation/analytics arm of Accenture Resources, indicates that major change can be a long-term aim, but short-term goals still have to be met.
“People say mining doesn’t like change, but I think the real concern is that everyone is always under so much pressure to meet targets that they don’t want to factor in change, because that takes time,” she says. “It’s all well and good installing technology – and it is amazing and getting better week-by-week – but it’s about a process change and helping people engage with that process change. The whole company needs to embrace the change from the top down and bottom up.
“If they can do that they tend to find relatively quickly that the invested time has made mining safer, more manageable and additional value is being captured from the orebody.”
Mining Magazine │ March 2017