Industry Executives Discuss the Mine of the Future at SME Conference

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The mine of the future will be safer, more efficient, more innovative, more sustainable, more transparent in its interactions with affected stakeholders and staffed by fewer employees, executives told attendees at the keynote session of the Society for Mining, Metallurgy & Exploration (SME) (Englewood, Colorado) annual conference here on Monday.

Today, mining costs are rising by 10% to 15% per year, on average, while productivity is falling by about 10% per year, session moderator Peter Bryant, senior fellow and honorary co-chair of the Kellogg Innovation Network at Northwestern University (Evanston, Illinois), told several thousand SME attendees. Capital project spending is "routinely" over budget by 20% to 40%, and an estimated $30 billion of projects around the world are on hold due to community or stakeholder opposition. "Mining is broken," Bryant asserted, "due to spiraling costs, loss of stakeholder trust and increased government activism. The industry's social license to operate (SLTO) is at risk."

Prices for mined commodities like gold, iron ore, thermal coal and metallurgical coal have fallen from their recent highs, but they still are markedly higher than what they were in 2000, Bryant noted. Long-term global fundamentals like supply and demand remain favorable to Metals & Minerals companies--providing they accelerate their pace of innovation, he said, adding, "Sharpening the industry's innovation edge is not optional."

"I see a bright future for the mining industry," remarked Gwenne A. Hendricks, chief technology officer for Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois). "Transformational changes are needed to realize the vision of the mine of the future. Mining companies can make transformational changes in their operations by piggybacking on the data revolution of the past decade. We may see an unmanned mine within the next decade."

Hendricks noted that the use of data analytics has increased equipment productivity, reliability and safety at mines. Increased operational efficiency across the value chain is helping mining companies built smarter, better connected and more efficient mines. And by operating more sustainably, mines are increasing their resource recovery. As an example of the last point, she said ore sensing and sorting technology has lowered water use and handling costs, which benefits stakeholder relations as well as boosting profitability. Using drones to survey a mine's footprint saves time and money, she added. "Having an end-to-end view of the commodity chain will drive gains for mining companies," she said.

Speakers agreed that advanced process controls have led to sizable operational improvements at mines. Broader use of electronic data allows plants to be operated remotely. And driverless trucks are lowering employee risks and injury rates at mines.

Red Conger, Americas president at Freeport-McMoRan Incorporated (NYSE:FCX) (Phoenix, Arizona), told the SME attendees his company has used advanced technology to lower costs by hundreds of millions of dollars over the last 10 years. Using remote asset monitoring technology, the company has boosted the availability of its haul trucks, while lowering its operating costs, since 2010. On a cost basis, the company moved from third-quartile to first quartile between 2008 and 2013. Conger and other panelists noted that operational efficiency gains include reducing energy use.

Several panelists emphasized that the mine of the future will engage more transparently with affected communities and stakeholders. "The mine of the future will be supported by communities," Conger told the SME attendees. "The mine of the future is not a fantasy. But if you only work with communities when you need them, or when there's a problem, you won't make much progress."

Conger's sentiment was echoed by Bryan Galli, chief marketing officer at Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri), and Dean Gehring, president and chief executive at Rio Tinto Minerals, a division of Rio Tinto Plc (NYSE:RIO) (London, England). All three bristled visibly when asked if transparency and stakeholder engagement were a cynical "flavor of the month" effort to appease mining's social critics.

Transparency underlies some of Freeport's key performance indicators, Conger said. Galli said the "license to mine" is an internal watchword at Peabody. And Gehring of Rio Tinto said, "companies that recognize the importance of transparency will have a competitive edge over rivals. Transparency is not a threat--but ignoring it is. You need to build trust continually, not only at the start of a project and when something goes wrong. You have to show you have nothing to hide."

In conclusion, Conger predicted, "the mine of the future will be grown, not found," suggesting that organic development of existing resources is the best way to turn a small mine into a big mine.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.