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3 THE CHALLENGES FACING THE MINING INDUSTRY
The peaks and troughs in commodity prices have in many cases led to the industry cutting costs in those areas not directly affecting production, together with reducing invaluable
knowledge, experienced skills and those areas of output carrying the highest costs. In many
cases this directly impacted research and development (R&D) together with exploration,
all prime feeders in ensuring a medium and long-term future. When prices recovered, the
focus usually shifted to ensure a return for investors and lengthen the life of operations by
returning to now profitable areas, plus increasing exploration spend. As R&D and innovation are pre-dominantly long-term endeavors, they were usually treated as ‘nice to haves’,
with production and stay-in-business capital obviously taking priority. This approach has
damaged the long-term viability of much of the mining industry, where it now lags many
others in terms of its creativity and innovativeness in moving to the requirements for successful enterprise in the 21st Century and beyond. Adoption of new technology to address
the lag and move towards a digital future is now one of the key elements of many of the
major mining Companies and is seen as a cornerstone together with exploration, in ensuring that costs are curtailed, with productivity and safety improved. This is seen to position
those Companies as leaders in their fields and commodities, through providing them with a
competitive advantage. Although much emphasis is placed on incorporating existing technological and digital solutions into the operations, there is also a drive through Centres of
Excellence, Universities and other high-level research and innovation institutions, to leap
frog into a new era.
For those that successfully bridge the gap into a digital future, the benefits are indeed
tangible: The potential economic impact of current and future technologies from Mckinsey
analysis [4] are estimated to be in the region of about USD370 billion per year worldwide
by 2025, or approximately 17% of the anticipated cost base, with assumptions based on a
high-adoption rate of 80% in operations management and 100% in equipment maintenance.
A 2018 Deloitte report highlighted the various challenges faced by the mining industry in
this current and future industrial revolution, driven primarily through adoption of digital
technologies. A Thermofisher blog [17] summary of the Deloitte report aptly highlights the
10 major issues, namely:
1. “Bringing digital to life: Miners need to understand how digital technologies, including
autonomous vehicles, drones and Internet of Things (IoT), may influence the way they do
business.
2. Overcoming innovation barriers: Mining companies are traditionally risk averse, with
innovations involving high start-up costs often being dismissed. Desire for competitive
advantage has also resulted in non-collaboration.
3. The future of work: While digital solutions will empower employees to make better
decisions, they will also create some challenges as manual jobs are automated. Mining
companies need to consider how to create new employment opportunities, and how to
retrain people to learn technology and tools faster.
4. The image of mining: Mining companies need to take proactive steps to address, and
change, the industry’s reputation.
5. Transforming stakeholder relationships: The mining industry must adapt new approaches
to the communities in which they operate to meet various stakeholders increasing demands.
6. Water management: As concerns about water availability grow, mining companies must
find more innovative ways to reduce, reuse, and recycle water in water–scarce regions
7. Changing shareholder expectations: High commodity prices have traditionally meant the
industry overspending. As shareholder expectations grow, mining companies need to re–
establish their credibility with their stakeholders
8. Reserve replacement woes: Depleted reserves currently plague the industry. Due to capital
intensity requirements and rising costs, mining companies are struggling to free up the
exploration and development budgets required to exploit new resources and engage in
new acquisitions.
3 THE CHALLENGES FACING THE MINING INDUSTRY
The peaks and troughs in commodity prices have in many cases led to the industry cutting costs in those areas not directly affecting production, together with reducing invaluable
knowledge, experienced skills and those areas of output carrying the highest costs. In many
cases this directly impacted research and development (R&D) together with exploration,
all prime feeders in ensuring a medium and long-term future. When prices recovered, the
focus usually shifted to ensure a return for investors and lengthen the life of operations by
returning to now profitable areas, plus increasing exploration spend. As R&D and innovation are pre-dominantly long-term endeavors, they were usually treated as ‘nice to haves’,
with production and stay-in-business capital obviously taking priority. This approach has
damaged the long-term viability of much of the mining industry, where it now lags many
others in terms of its creativity and innovativeness in moving to the requirements for successful enterprise in the 21st Century and beyond. Adoption of new technology to address
the lag and move towards a digital future is now one of the key elements of many of the
major mining Companies and is seen as a cornerstone together with exploration, in ensuring that costs are curtailed, with productivity and safety improved. This is seen to position
those Companies as leaders in their fields and commodities, through providing them with a
competitive advantage. Although much emphasis is placed on incorporating existing technological and digital solutions into the operations, there is also a drive through Centres of
Excellence, Universities and other high-level research and innovation institutions, to leap
frog into a new era.
For those that successfully bridge the gap into a digital future, the benefits are indeed
tangible: The potential economic impact of current and future technologies from Mckinsey
analysis [4] are estimated to be in the region of about USD370 billion per year worldwide
by 2025, or approximately 17% of the anticipated cost base, with assumptions based on a
high-adoption rate of 80% in operations management and 100% in equipment maintenance.
A 2018 Deloitte report highlighted the various challenges faced by the mining industry in
this current and future industrial revolution, driven primarily through adoption of digital
technologies. A Thermofisher blog [17] summary of the Deloitte report aptly highlights the
10 major issues, namely:
1. “Bringing digital to life: Miners need to understand how digital technologies, including
autonomous vehicles, drones and Internet of Things (IoT), may influence the way they do
business.
2. Overcoming innovation barriers: Mining companies are traditionally risk averse, with
innovations involving high start-up costs often being dismissed. Desire for competitive
advantage has also resulted in non-collaboration.
3. The future of work: While digital solutions will empower employees to make better
decisions, they will also create some challenges as manual jobs are automated. Mining
companies need to consider how to create new employment opportunities, and how to
retrain people to learn technology and tools faster.
4. The image of mining: Mining companies need to take proactive steps to address, and
change, the industry’s reputation.
5. Transforming stakeholder relationships: The mining industry must adapt new approaches
to the communities in which they operate to meet various stakeholders increasing demands.
6. Water management: As concerns about water availability grow, mining companies must
find more innovative ways to reduce, reuse, and recycle water in water–scarce regions
7. Changing shareholder expectations: High commodity prices have traditionally meant the
industry overspending. As shareholder expectations grow, mining companies need to re–
establish their credibility with their stakeholders
8. Reserve replacement woes: Depleted reserves currently plague the industry. Due to capital
intensity requirements and rising costs, mining companies are struggling to free up the
exploration and development budgets required to exploit new resources and engage in
new acquisitions.