Digital Intensity as a Lens for Growth

Digital Intensity as a Lens for Growth
October 5, 2016 Digital Intensity
Mine Digitization

The Digital Mine – Image: VCI

~ Gideon Malherbe, Partner ~

Scenarios describing the future of mining are certainly unfolding in surprising ways. It seems the dust is settling somewhat on a period marred with heavy debt loads, oversupply, and more complex, lower-grade ore bodies. We have probably not heard the last of critical civic voices calling for lower mining footprints and less carbon usage. Stakeholders are in line and supported by social medial with the post-modernist shift to calls for increased transparency and more involvement.

The dust is also settling on the deep cost cutting events and asset disposals with that last grinding efforts of those that realized their portfolio optimization strategies a bit too late. The days when cost-cutting alone could solve every problem are over. The industry is exploring new ideas, including new business models, disruptive technologies and networked structures for more advanced decision support. It is time to turn the page and change the management chatter from describing the mining doldrums to a pro-active opportunity-seeking narrative.

Modern Mining

Rio Tinto’s Iron Ore operation in Western Australia was the first out of the gate with their Industry Leadership Project (ILP) that essentially paved the way, and showed miners how much can be gained by embracing technology. Rio’s Iron Ore division is still the world leader in safe, quality unit cost production – and they have no fundamental advantage. Rio leads the digital pack because they are consistently focusing on leveraging digital opportunities for their people, processes and technologies to stay ahead of the pack. It is worth the while to follow the competitive interplay between Rio, BHP and FMG as they are mining in the same region, using same mine methods, and selling to the same markets and thus the full value chain is in a neck-to-neck competition to produce iron ore at the lowest unit cost.

VCI designed and facilitated the ILP project for Rio Tinto. The key breakthrough was when we convinced Sam Walsh to take his whole senior team around the world to look at leading digital practices that they could “adopt” from the defense, computer, aircraft and automobile industries. The end result can be found today inside a squat building at Perth airport that bears the Rio Tinto logo: it’s the digital collaboration center where the company’s far-flung network of highly automated trains, trucks and processing systems are controlled remotely. Walsh was always dismissive of the efforts of his rivals. “My competitors don’t get it,” he frequently said. “My competitors think it’s a technical solution – it’s not. It’s a cultural solution.

Dundee Precious Metals opted for a digital drive to improve their operational performance in their underground mine Chelopech. As CEO Rick Howes likes to say, “We have taken the lid off the mine.” DPM proved to the rest of the mining companies that one could use wireless IP networks in large scale with 100% connectivity underground. Their network at the Chelopech mine connects everyone, most of the edge devices and equipment underground, including unified wireless IP phones, video surveillance cameras and telepresence devices.
Part of its success is the deployment of internally developed mining operations application software, as this is the keystone to short interval work cycle optimization. To complete the digital mine, programmable logic controllers (PLC’s) on the conveyor and in the mill, all the lights, fans, blast doors, and power are consistently upgraded and the digital intensity improved (i.e. the amount of sensors and controllers). They have also digitized the blasting system.

Like with Rio Tinto, VCI started its consulting support to DPM with facilitating a scenario based strategic plan. Following mobilization of the senior management team, we rapidly shifted to developing a technology roadmap. This is effectively based on first doing a full digital intensity assessment at Chelopech to give management a digital baseline from which to work. Dundee is now working on the next phase of digitization that will include further functional and systems integration and algorithm-based optimization.

Several other miners are following suit. Barrick is partnering with Cisco to drive their digital reinvention. John L. Thornton, Barrick’s Executive Chairman, explains, “Harnessing the potential of digital technology will unlock value across our business, helping us grow our free cash flow per share.”

Delighted Cisco Executive Chairman John Chambers remarked, “Any company that fails to reinvent itself by harnessing digital technology will soon be left behind.”Barrick has long been known for its focus on innovation, and with Cisco’s advanced technologies they believe they can extend the frontier of the natural resources industry. The partnership will initially focus on the Cortez mine in Nevada—embedding digital technology in every dimension of the mine to deliver better, faster, and safer mining. Once the Cortez concepts have been proven out, they envision transforming the entire business—bringing digital technology to all of its mines as well as to its head office.
Over the last decade, VCI has worked with, and implemented scores of digital solutions for our mining and oil & gas clients to help them gain a competitive advantage. Today, we are focusing on doing digital intensity assessments because it draws the management teams into a real conversation so that they can discuss constraints and opportunities based on facts, not innuendoes and ideologies disseminated by vendors.

The best strategy to support our clients’ getting to affordable digital solutions fast is through our Digital Intensity Assessment. We see great potential in new digital solutions that are bringing new value propositions to the market. Whether it’s low cost sensors tracking all people and vehicles, underground WiFi networks, 3D visualization in collaboration centers, or digital production optimization, digital deployment will play a large role in the mines of the future.

We like to start the digital roadmap with the mine’s production short interval cycle visualization and optimization and link this to improved people performance and processes improvements. This is not a trivial issue, as it requires a lot of detailed design and deployment of work. But it buys a locked-in production jump at the onset of a mine’s digital future.

Digital Road Maps

As technology strategists, we are working with our clients to help them define and execute their digital strategies and not feel compelled to subject their mines to vendors’ strategies. Our Digital Road Maps define integrated, optimized, and appropriate technology solutions for each operation.

Digital opportunities in mining give management and owners good reasons for optimism. Lots of new technology solutions are entering the market every day. We find increasingly that mining companies are looking for digital solutions to overcome their production constraints. As the digital transformation is beginning to affect mining, VCI will continue to ensure we deliver Digital Intensity Assessments and Digital Roadmaps that enable miners to deliver real value to their stakeholders.

VCI ( http://www.govci.com ) is a strategic consulting firm working in the Mining and Oil & Gas industries, providing Digital Intensity Assessments, technology roadmaps, and digital strategies to improve operational efficiencies. VCI has offices in the United States, Germany, Australia, and South Africa, and represents a network of the world’s leading experts at the forefront of industrial digital transformation. VCI’s unique competitive advantage and value-add over mass consulting firms lies in its ability to envision, articulate and navigate the multiple dimensions of complexity that face large organizations in the digital age.