Technology developments in the mining sector

20 August 2018

Rising adoption of technology globally is not only changing the demand dynamics of certain commodities but it is also altering the conventional approach to mining. With the industry still facing a marginal operating environment, there is a greater need to deliver growth in the face of pricing volatility, to maximize project efficiency and become both leaner and safer in operations.

Miners are embracing digital technologies to streamline their business models and improve core operational processes to build a more efficient and safe mining value chain. This digital age of mining is also altering the risk pattern for miners particularly from the perspective of cyber risk.

Rising adoption of technology such as automation and robotics, big data and analytics and Internet of Things (IoT) coupled with altering consumer behaviours are some of the key factors contributing to this shift. For example, rising adoption of autonomous and electric vehicles (EVs) and the development of more fuel efficient engines are helping to lower energy consumption in the transportation sector, the single largest user of oil.

The growing interest and likely ramp-up in EV manufacturing is expected to create a massive impact on the demand for certain commodities such as lithium, cobalt, graphite, nickel, rare earths, copper, manganese, aluminum, silicon, steel and platinum metal groups (PMG). If we were to enter a 100% EV world, demand for these commodities would change significantly compared to the existing demand in the global market today as outlined in the graphs below:

Technology developments in the mining sector Technology developments in the mining sector

Source: UBS research report, World Bank

Similarly technological advancements in the renewable energy sector, coupled with declining prices for installation and commitments made under the December 2015 Paris Climate Change Accord will shape the demand of certain commodities in future. According to a United Nations Environment Program (UNEP) in 2017, the amount of new renewable capacity installed increased from 127.5 GW in 2015 to a record 138.5 GW in 2016.

One prominent reason why installations increased was a sharp reduction in capital costs for solar photovoltaics and onshore and offshore wind, dropping by 10% in 2016, when wind, solar, geothermal, biomass, small hydro and marine accounted for 55% of all the gigawatts of new power generation added worldwide.

TECHNOLOGICAL TRANSFORMATION IS DRIVING THE INDUSTRY

The mining industry has traditionally been conservative in its approach towards new technological developments. However, a combination of market volatility, changing global demands and cost and productivity pressure is challenging the status quo.

Accenture Consulting reported in 2017, nearly 82% of mining executives expect to increase investment in digital technologies over the next three years and nearly 28% expect those contributions to be significant investments in their business model.

From discovery to the shipment of product, miners are deploying a range of technologies including robotics and automation, sensors, wearables, drones and integrated remote operations.

ROBOTICS AND AUTOMATION

Robotics and automation of mobile and fixed assets are helping miners drive productivity gains, optimize cost and improve safety.

According to the aforementioned Accenture Consulting report, 54% of the mining executives cited this as the top spending area in mine operations with the use of autonomous vehicles a key area of focus. Some of the mining companies that have already invested in automation include:

  • Rio Tinto has deployed robotic drilling, tele-remote ship loaders, automated rock breakers and semi autonomous crushers at some of its sites. Rio Tinto also recently signed an agreement with Caterpillar Inc. and Komatsu Ltd. to convert traditional trucks to autonomous vehicles to deliver USD 5 billion in productivity gains from 2017-2021
  • BHP is deploying driverless trucks and drills in its iron ore mines in Australia
  • Chilean copper miner Codelco, is utilizing robotic machinery to monitor equipment and boost safety standards at its Gabriela Mistral project
  • Iron Ore miner Fortescue Metals Group has deployed autonomous haulage technology (AHS) for 56 trucks at the Solomon Hub in Western Australlia that improved the productivity by 20%. The company is planning further rollout of AHS for 100 trucks at its Chichester Hub later this year.
Technology developments in the mining sector

Robots in the mining industry include devices with artificial intelligence or self-learning capabilities that can assist in excavation, haulage, sampling, survey and mapping, as well as drilling and explosives handling, and can also monitor mining operations, such as temperature, rock stability and other conditions to improve worker safety.

Technology developments in the mining sector

Automation in mining refers to usage of centralized control systems and software, and advanced communication systems to coordinate and monitor equipment, with the emerging use being seen in self-driving or autonomous ore carrying vehicles.

As robotics and autonomous technology becomes further ingrained into mining operations, companies are exposed to a significantly greater risk of network failures, physical damage, business interruption, product liability, and third party liability.

Technology is also improving efficiency and safety at a personal level. Collection of real time data for visualization and analytics through sensors, using IoT technology, enables more robust planning and control and miners are embracing wearable technologies for field maintenance and real-time inspection, and to improve safety.

  • Rio Tinto and Anglo American have deployed wearable technology (SmartCap) in Australian coal mines, while BHP has deployed this technology in Chile for improving safety performance
  • BHP's usage of drones at various sites in Queensland has saved ~AUD 5million a year for the firm 5
  • BHP´s Olympic Dam mine in South Australia is using drones to inspect overhead cranes, towers and roofs of tall buildings
  • Mining firm South32 is partnering with Airobotics to trial the fully autonomous drone at its Worsley Alumina project in south-west Western Australia
  • Montego's Taylor mine in Nevada is rediscovering a huge but abandoned silver deposit, by deploying drones to produce 3D maps of the mine's subsurface.

These real time technologies expose miners to the risk of loss of data and software as well as reputational damage liability.

Adoption of these technological advancements is helping miners to effectively control and manage their operations on a near real time basis through remote operating centres. The industry adoption of such remote operating centres is rising.

  • In September 2017, an integrated coalmine operating centre was opened by BHP in Brisbane that is expected to drive lower costs across its Queensland coking coalmines
  • Rio Tinto already runs much of its Australian iron-ore mining, transport and port logistics from an operations centre 1,500 km away in Perth.

Remote operating centres and innovative technology, are no doubt helping miners improve productivity and safety, but these advancements also introduce new risks including an increased exposure to hacking, cyber-crime resulting in business interruption incidents.

EMERGING MINING RISKS

This digital age of mining is therefore altering the risk profile of mines. A rising adoption of these technological advancements is leading to an increased cyber risk exposure such as disruption of systems, or a security breach.

For miners, valuable intellectual property such as proprietary methods of ore processing, resource and reserve information and details about pending mergers and acquisitions (M&A) prospects could be more easily targeted by cyber criminals as previously isolated systems and areas are linked up. In addition, the rising convergence of Information Technology (IT) used for data-centric computing with operational technology (OT) systems used to monitor events, coupled with a greater investment in digital technologies is increasing the risk for miners.

Companies are often reluctant to report cyber breaches but the industry has witnessed incidents recently. In 2016, Goldcorp Inc. became the victim of a data breach where the attackers took 14.8 GB of miner's private information online 6. Such incidents can negatively impact the productivity and the reputation of a firm if not dealt properly.

Given the changing risk landscape, cyber-attacks are now considered a principal threat to the day to day operations of mining companies. The impact of a cyber incident can be grave and losses can have a longstanding impact on the balance sheet with any system outage, however brief, potentially having severe consequences. Mining companies invest heavily in exploration for potentially viable new ore-bodies and these projects often contain lucrative data making them a key target for cyber espionage campaigns.

Cyber exposure can take many forms from the loss of key financial, commercial and exploration data through to acts of hacktivism which can result in loss of access controls, major supply chain disruption and interferences with safety critical controls. Some of the potential loss scenarios could include:

  • Loss of exploration and financial data
  • Loss of intellectual property such as production methods, mineral processing methods, chemical formulae, custom software, etc.
  • Extortion/threat of destruction of data (ransomware)
  • Non-damage business interruption caused by disruption to computer systems, controls and data
  • Loss of personal information (may be employee’s, but could also be royalty payment details – GDPR regulation in Europe which became effective on 25 May 2018 imposes large financial penalties for breaches of privacy form loss of data)
  • Loss of reputation from adverse reporting in the media of a cyber breach
  • Physical damage caused by the failure of industrial control systems/ vital safety systems.

As the mining industry becomes further automated these risks become ever more prevalent and mining companies should ensure they have the correct mitigation strategies in place to combat these evolving exposures.

CYBER INSURANCE

With the limited cyber cover available in the property market (under clauses such as NMA2914 & NMA2915) under pressure now is the time to review mining cyber exposures in detail.

In order to design an optimal cyber program, the process begins by conducting detailed exposure analysis, establishing a clear understanding of the risks and outlining key coverage scenarios to ensure that the program is fit for purpose. Cyber insurance is offered in a modular format and provides both first and third party coverage.

Our cyber team can offer a full range of insurance solutions for cyber risks. However, there is no one solution to mitigate and manage this risk and companies today require best-of-breed providers across multiple disciplines to solve these challenges. JLT’s cyber risk consortium is a unique collaboration of leading companies across the software, hardware, advisory, consulting, and legal industries that effectively support clients around their strategic, operational, financial, and people issues impacted by cyber risk. The consortium brings together content, best practices, and subject matter experts to collaborate and solve cyber risk.

For more information please contact ClientFirst@jltcanada.com.