Understanding Mining’s Technology Paradigm

January 31, 2017

I recently attended a mining conference where the general theme centered around the “digital transformation” taking place in the mining sector. Buzzwords like IoT, OT, Machine learning, Analytics, were being thrown around like confetti on New Years Eve.

Then the tough conversations began; The Challenges! Many CIO’s, CTO’s technology vendors, even a CEO attempted to describe the challenges facing the industry when it comes to technology transformation. I even caught myself at times falling into the traditional trap of micro-analyzing each individual conversation on the subject.

It was quite clear. Practically everyone in the room felt that when it comes to technology, change and the adoption of new technology, the mining industry is lagging. So why is this the case we all asked? Many industry leaders and CIO’s yelled “culture”, some shouted, “leadership”, others felt it was somehow IT’s fault, and others felt it was where technology OT/IT sat in the organization structure. What I argue in this article is that all of the above are symptoms of two primary forces. The first force is external and one that is driven by economics, and time. The second force is internal and driven by human behavior.

First Force: ET (economics + time)

In the simplest terms, a mine is a hole in the ground, albeit a very large hole. They are massive ore bodies, relatively static, and require substantial exploration, engineering, and capital. These make for very high barriers which is why many junior mining companies stop at exploration and get sold to larger companies who have the capital an expertise to develop the mine. What does this have to do with technology you may wonder? Quite a bit!

Mines are large finite assets that can span decades, but they are finite, which means, they will be shut down. This fact indicates a specific and unique economic model. Mines aren’t like buildings or automotive plants that have indefinite lifespans. The lifespan of a mine is generally well understood. When engineering a mine you take into consideration many things. One important thing to note is the time frame in which the mine was engineered. For example, a mine engineered in 1995 that has a 25 year lifespan was engineered at a time when the internet didn’t exist, when mobile technology was vastly underdeveloped, and when data analytics were primitive in comparison to today. The equipment running the mine was different as is the technological skill set of your workforce. Mine operating models and mine planning decisions have to be made in the beginning and are generally static. The nature of mine economics and the time span of such a large finite asset plays an important role in the adoption of technology. In many cases a mines ability to adopt, digest, introduce new technology is limited to when it was built and how long it will last. Going back to the example above, a mine built in 1995 will be well entrenched in it’s operating model, labor force, culture and technological capabilities come 2010. As the profitability of a mine diminishes over time it becomes harder and harder to introduce new technology. This is different than renovating a building built in the 60’s or retrofitting a manufacturing plant built in the 80’s. These types of assets persist whereas a mine does not.

Force Two: Rich person’s syndrome

I’ll start with an example. Say you’re a fairly wealthy person looking to purchase a new vehicle. You’ve been wealthy for a long time, not overly concerned about your expenses, and have done a pretty decent job of managing your finances. When you go to purchase a vehicle how likely a factor is the vehicle’s fuel economy going to play into your decision making? For most people it wouldn’t play much of a factor. Now let’s bring that into the mining industry. Say you’re a mining company who has benefited from high commodity prices, years of decent profits, little competition. How concerned are you going to be about the fuel economy of one of your trucks?

The “rich person’s syndrome” is really about natural human behavior that is not just applicable to the mining industry. This syndrome is also time sensitive. By time sensitive it means that for the syndrome to correct itself, the industry has to sustain a long period of economic depression. Mining is inherently cyclical so when a downturn occurs it has to be sustained for a period of time before the industry makes structural changes in productivity. In order to make a structural change we need technology. That is why automation and every technological innovation we have seen in an industry followed a period of sustained economic pressure. The problem in mining is when the economic downturn is temporary and not sustained, then mining companies will not invest or change in a sustained way and technology change will lag.

In summary the mining industry is full of bright, intelligent and very capable people. They have a tremendous amount of engineering and technology today. The awareness of these forces is something mining leaders can understand better when planning their mines and when managing their operations. IT leaders who understand this can appreciate the challenges better and work within these forces.

Or……I could be completely crazy in which case we do nothing and wait until a technology company like Planetary Resources disrupts the mining industry in a profound way.

 

 

By Joe AbiDaoud –

Joe AbiDaoud