Tracking the trends 2018 - The top 10 issues shaping mining in the year ahead - MINING.com
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Tracking the trends 2018 The top 10 issues shaping mining in the year ahead
Contents Changing for the better 03 1. Bringing digital to life 04 2. Overcoming innovation barriers 10 3. The future of work 16 4. The image of mining 22 5. Transforming stakeholder relationships 28 6. Water management 34 7. Changing shareholder expectations 40 8. Reserve replacement woes 46 9. Realigning mining boards 52 10. Commodities of the future 56 Out with the old, in with the new 63 Harnessing the winds of change
C
KI
NG
THE T
RE “The last 10 years have seen the rollercoaster of
N
A
highs and lows in the mining sector continue. During
DS
TR
this time, we have seen an emergence of innovative
10
RY
TH
Y
A
companies adopting transformative practices. As
EA R
S
R ANNIVE
we now stand in the middle of what appears to be
another bull run for some commodities, the next
10 years will see the continuation of rapid change
in the industry against a backdrop of declining ore
body grades, decreasing availability of tier one assets,
and continued focus on shareholder returns. To
thrive amid this volatility, companies must rethink
the traditional mining model. Change is coming and
mining companies must find ways to remain relevant.”
Philip Hopwood
Global Leader – Mining
Deloitte Touche Tohmatsu Limited02
Tracking the trends 2018
Changing for
the better
This 2018 edition of Tracking to strengthen balance sheet image. It is also resulting in a
the trends heralds a milestone, performance, reduce debt, more disciplined investment
marking our tenth year of exercise capital discipline, and approach—one that may
publication. Over the past simplify portfolios, this has ultimately expose the dark
decade, commodity prices resulted in improved valuation side of conservatism as supply
reached both historic highs metrics, record free cash flow, shortages begin to loom.
and historic lows, mining and stronger shareholder
companies engaged in both returns. In many respects, the In this tenth anniversary
significant acquisitions and mining sector is once again report, Deloitte’s global mining
consolidation, and operational poised for growth. professionals once again share
realities shifted irrevocably in their experiences to help
the face of a digital revolution. However, unlike previous cycles, identify strategies companies
For an industry considered mining companies appear to can take to smooth out the
staid, change has been have learned from the lessons recovery and minimize the
surprisingly constant. of the past. In paving new paths industry’s historical boom
for the future, the aim now is and bust cycle. This year,
That theme holds true over to change for the better. This our professionals also share
the past year as well. After goal is driving their ongoing their outlook for the future
hitting the bottom of the cycle, investments in innovation by identifying, in some cases,
prices for many commodities and digitization, inspiring their potential industry disruptors
have been slowly recovering, approach to the workforce of which may be on the horizon.
driven by Chinese government the future, manifesting in their Thank you sincerely for
stimulus and improved commitment to strengthen your years of support. We
demand in both developed and government and community look forward to your input
emerging economies. Coupled relations, and guiding their and feedback.
with the industry’s commitment efforts to repair their public
“As the mining industry’s value proposition is increasingly called into question,
mining companies are beginning to see that they cannot succeed into the future
unless they change the way they operate. This is about more than enhancing
efficiencies. It’s about re-establishing trust with stakeholders and collaborating
to devise better responses.”
Glenn Ives
Americas Mining Leader
Deloitte Canada
031
Bringing
digital to life
Using data–driven
insights to drive value
In recent years, mining waste in the areas of execution,
companies have come to realize process, structure, and design.
that value, like beauty, may be Now, however, it is becoming
in the eyes of the beholder. clear that success for mining
Once measured by how well a companies isn’t truly about
company extracted resources, adopting the latest applications
the industry’s value proposition (apps) and technologies, which
may be shifting to how well a will continue to evolve. Instead,
company acts on information it’s about embedding digital
to optimize production, reduce thinking into the heart of their
costs, increase efficiency, and business strategy and practices
improve safety. In short, data— to transform the way corporate
and the ability to organize, decisions are made. To succeed
manage, and process it—is in this effort, miners need a
rapidly becoming a competitive clear vision of how the future
differentiator and may even digital mine might transform
spur new business models. core mining processes, the flow
of information, and supporting
The adoption of new back office processes.
technologies initiated this shift,
as miners recognized the power
of digital solutions to remove
04Tracking the trends 2018
The future digital mine network that uses Internet of optimize their systems, from
Transitioning to the future digital Things (IoT) sensors to capture pit to customer. The aim is to
mine typically begins by focusing data in real time. create an information layer, or
on core mining processes with digital “nerve center”, that brings
the goal of automating physical Yet, the real value comes together data across the mining
operations and digitizing assets. from unlocking the insights value chain in multiple time
This includes the adoption of within this data. To do so, horizons to improve planning,
autonomous vehicles, drones, companies must rethink the control, and decision making
three-dimensional (3D) printing, way they generate and process (see figure 1).
and wearable technologies, all information. This involves
operated through a connected using data–driven analytics to
Figure 1: Integrated operational planning, control, and decision support
Integrated operational planning, control and decision support
Real time Data platforms
Real time sensor data to Integrated well governed
drive short interval control in execution, data platforms support all processes
reduce variability, and shorten and all time horizons
planning cycles
Historical Future
Reporting and analysis of historical Future insight derived from
data and insight gained from historical analysis to improve planning,
analysing trends, patterns and Digital mine nerve centre simulate the integrated supply chain,
opportunities for improvement Data driven insights drive improved and predict future outcomes,
learned from experience planning control and decision using analytics and AI tools
support across the mining
value chain
Source: Deloitte1
Integrated Enterprise planning and support processes
Maintenance Supply Energy management HSE & Community Finance HR Marketing
Digital in action
A major global miner in Australia moved its short–term production, planning, and control
activities from its mine sites to a new remote operations center. The operations center
implemented a supply chain visualization tool that provides an end–to–end (pit–to–port) view
of the company’s iron ore supply chain, showing key operational metrics in near-real-time,
permanently displayed on large screens, with data sourced from 16 disparate systems. This
was the first time the company could see its total supply chain in one place, assisting decision
making for the whole business.2
05Tracking the trends 2018
To be sure, analysis of historical Central to enabling this will be an
data will continue to enable insight integrated and well governed data
from trends and patterns to platform to support analysis across
identify opportunities for progress. all time horizons, and a center of
At the same time, however, miners excellence in data management,
will rely even more on real-time reporting, and analytics. It’s up to
data, derived from processing individual companies, however,
equipment and sensors during to determine the best operating
operation, to identify key drivers model for realizing this vision. While
of process variability and drive some organizations are building in-
rapid operational improvements. house analytics capabilities, others
Access to more timely data from are outsourcing their data analysis
across the value chain will allow to third-party partners. There is no
companies to update their ore optimal model, it depends on how
body models, mine plans, and the business plans to transform
financial models more frequently, into the future.
while shortening planning cycles.
Additionally, historical analysis will
inform future insight to improve
planning and predict outcomes.
Digital in action
A major global miner was looking to identify latent system
potential across its pit, rail, and port network. Data-driven
analysis generated over two million scenarios to identify
significant unrealized value in the system and tested each
one against operational reporting data to measure the
feasibility of the proposed changes (i.e., based on historical
performance, the analysis determined if it was possible to
process, move, or operate in each scenario). This determined
the most achievable scenario with the greatest potential
increase in value. The analysis highlighted that higher
production and greater shareholder return could be achieved
by adjusting traditional assumptions in mine and system
planning, all within a system that was previously considered
to be “at maximum capacity”. This rapid scenario-based
analysis is now being used to augment planning decisions on
an ongoing basis.3
06Tracking the trends 2018
Decisions informed by data Convergence of information “Many mining organization
Many mining companies have technology (IT) and operational
are not yet using all of the
already realized the value technology (OT) can further
of tracking data on specific enable automation and data they are capturing
pieces of equipment. The real digitization—allowing work to from operational systems,
payoff, however, will come as be moved to locations which
or are still struggling to
they begin to uncover insights can support a more diverse and
capable of informing their inclusive workforce. Similarly, improve reporting from
operational decisions in areas more mature cybersecurity legacy ERP systems.
from maintenance, safety, and programs can help address the
However, some are now
compliance to mine planning, potential threats introduced by
fleet movement, and resource exponential technologies. realizing that capturing
allocation. Achieving this level and managing the right
of insight will require miners This vision of the digital mine is
data, and using the latest
to go beyond automating core based on existing capabilities
processes and setting up a already being applied in analytic tools, can deliver
digital nerve center. They will other energy and resources significant improvements
also need to re-imagine their companies, although no
in operational productivity,
support processes for functions organization is yet doing it in an
ranging from supply and human integrated way. Those that do maintenance of assets,
resources (HR) to finance. embrace this ideal stand to see and safety of employees.”
more than productivity benefits
In many cases, this is already (typically 10 to 20 percent).
Paul Klein
resulting in companies replacing They also gain the opportunity
Consulting Partner
their enterprise resource to use data-driven insights
Deloitte Australia
planning (ERP) systems to forge closer relationships
with cloud-based solutions, with stakeholders, facilitate
adopting robotic process knowledge sharing and training,
automation (RPA) to automate drive new revenue streams,
repetitive tasks, and using access new markets, and
artificial intelligence (AI) to enhance operational safety.
support knowledge workers.
07Tracking the trends 2018
Leading strategies in focus
Develop a digital strategy updated more frequently, with data from sensors and
Digital initiatives are often and shorten the planning location-aware mobile devices
focused on technical solutions cycle. AI tools can improve to enable better planning,
and are not always driven by planning, simulate the prediction, and simulation
a well-articulated strategy integrated supply chain, and of future outcomes. As an
or a direct link to business predict future outcomes. initial step, companies can
value. For instance, without a RPA can replace some assess their engineering data
vision, a company may equip tasks currently performed management capabilities
operators in the pit with a by humans, presenting an and maturity to highlight
tablet or headset rather than opportunity for cost reduction. any gaps so they can focus
considering how to remove Each form of analysis can their digitization efforts on
people from the pit entirely. To be enabled by an integrated the areas of greatest value
avoid unintended outcomes, data platform, supported by and impact.
digital transformation should data scientists and analysts—
first define the desired future either in-house or on an Become an insight–driven
state and the value of the outsourced basis. Yet, even organization
initiatives to the organization while driving digital in “bite To deliver on the digital mine
as a whole. Properly conceived, sized chunks”, it is important nerve center, companies
a digital strategy can enable to work against a plan or need the capacity to use
organizations to quickly test broader roadmap to ensure data to resolve a wide range
new approaches in a pilot or that the system ultimately of business problems. Yet
sandbox environment, and integrates effectively. currently, most organizations
either roll them out in phases only use a fraction of the data
or shelve them easily. Create a digital twin they collect, let alone the
Most asset-intensive potential real-time volume
Start small organizations have difficulty they could capture via the
Delivering on the digital managing their engineering Internet of Things (IoT), and
mine nerve center does not and asset information many still struggle with
need to be an all or nothing throughout the asset lifecycle, limited business intelligence
proposition. Organizations including data integrity capability from historical
can start small by investing in issues and time wasted ERP environments and
improved visualization tools, looking for documents. non-integrated operational
integrating data from multiple Creating a digital twin can systems. To change this
sources, and reducing reliance help address this issue. A equation, miners must embed
on fragmented systems to digital twin is a digital model data science and analytic skills
enable better analysis of of the physical environment throughout the organization,
data. Real-time data captured constructed using geological, by either hiring or partnering
from processing equipment engineering, and asset with scarce analytic talent, in
and machinery sensors information—such as ore a bid to rapidly uncover the
can help identify drivers of body models, engineering insights they need to drive
process variability to enable drawings, parts catalogues, intelligent business decisions.
operational improvements, and service manuals. The
allow financial models to be model is continually updated
08Tracking the trends 2018
From left field
Mining companies operating with no
back office
Could effective use of data evolve to the
point that miners can operate with no
back office? Some of the major disruptive
competitors in the financial services space
have turned that industry on its head by
running with just a fraction of the overhead
required by legacy players. Arguably,
unconventional mining competitors could
run their entire operations out of the cloud,
virtually eliminating the expenses traditional
companies face to maintain a back office.
This vision may not be so far in the future.
After all, many companies already fully
outsource their back office functions—
such as finance, human resources, IT, and
procurement—to shared service centers.
Similarly, many senior mining executives
currently spend a good portion of their
time away from head office, visiting mine
sites, meeting customers and governments,
and attending investor meetings and
conferences, a trend that could ultimately
see them running their businesses virtually.
092
Overcoming
innovation
barriers
Charting a path towards
innovation maturity
Mining executives understand comes to innovation4. Part of
that innovation is necessary the reason is because mining
for the industry to transform. companies continue to face
This isn’t confined to just a number of organizational
technological innovation; it barriers to innovation.
includes the adoption of more
innovative approaches to Identifying the roadblocks
engaging with stakeholders, re– First, mining companies are
envisioning the future of work, traditionally averse to take on
and identifying the commodities new risks that may impact their
that will be in greatest demand cash flow or license to operate,
going forward. reducing their propensity
to pursue transformational
Despite the imperative, innovation. This is due in part
however, industry players to the way their processes are
cannot yet be considered truly structured. When innovation
mature innovators. Deloitte initiatives must compete for
research across Canada, capital against projects with
Australia, Africa, and Latin a shorter–term payback, the
America shows that the sector latter generally wins. This makes
still lacks systemic consistency sense in an age of intense
and strategic focus when it shareholder scrutiny.
10Tracking the trends 2018
Innovation in action
In December 2016, Vale opened its largest iron ore mine, in Brazil. The Eliezer Batista S11D
Complex includes a mine, plant, railroad, and port logistics designed to vastly reduce the
company’s environmental impact. By locating in an already–deforested area outside the
Carajás National Forest, Vale reduced vegetation clearance in the forest by roughly 40
percent. The company also adopted a range of technological innovations that promise
long–term environmental benefits. For instance, rather than using trucks to transport
ore to the plant, Vale installed mobile excavators and crushers, a system that will reduce
fuel consumption by over 70 percent and reduce waste from used tires, oil filters, and
lubricants. Additionally, the ore is being processed using the moisture it naturally contains,
cutting down water consumption by 93 percent relative to the conventional process. The
company also anticipates saving 18,000 MW of electricity per year—enough to power roughly
10,000 homes.5
It just may not bode well for the potentially business–altering distrustful of collaboration
mining sector’s sustainability innovations that majors resist and hampers the juniors’ and
over the long term. adopting given the challenges service providers’ efforts to
associated with calculating co–create or co–invent in
Second, mining companies’ the lifetime value of new partnership with the majors,
propensity to favor short– innovations. despite the fact that this type of
term cash flow generation collaboration can accrue to the
often works to the detriment Third, mining companies benefit of shareholders. Mining
of creating longer–term often lack a clear vision to companies are also accustomed
net present value. As such, guide and enable longer–term to treating access to capital as
innovations that may reduce transformation. Without this a competitive advantage, which
costs over a product’s or vision (i.e., to become the was true when the industry was
process’s lifecycle are often lowest cost operator, minimize able to rely on high quality ore
dismissed if their initial the mining footprint, build a bodies and economies of scale
costs exceed current costs. fully automated mine, etc.), to drive down costs. Today,
Frequently, operators are they struggle to tackle and however, the technologies that
dis–incented from pursuing derive value from innovation. can make a marked impact
initiatives unlikely to deliver Innovation needs focus and on mining performance are
rapid returns. Procurement companies need to take their evolving rapidly and mostly
practices are often so focused vision and align their innovation outside the mining industry.
on lowering per unit costs efforts against a series of key As a result, capital is no longer
that there is an unconscious thematic areas. the constraint. Instead, the
bias against innovators whose companies most constrained
costs exceed the lowest cost Fourth, mining companies will be those unable to
competitors—even if they’re are historically inclined to collaborate with technology
delivering superior offerings. operate in isolation. Concern leaders and integrate
This has become a sticking point around intellectual property that technology into their
among service companies and (IP) rights and competitive operations.
juniors that have developed advantage makes companies
11Tracking the trends 2018
A bold new vision Ecosystems and the role of in isolation. The research and
To some extent, these mining services in fostering development (R&D) groups at
innovation barriers exist greater collaboration most mining majors have been
because the design of mines A review of the innovation hollowed out, both in terms of
and processing plants hasn’t barriers in the mining industry human resources and budgets
changed in decades. Although reveals that collaboration is (see figure 2) since their apex
the equipment is more modern, frequently not within mining in the 1990s. As a result, the
miners from 50 years ago companies’ DNA. Why? In model for innovation has
would find little has changed some cases, organizations fundamentally shifted.
if they entered today’s mines, have not clearly defined which
a situation that certainly innovations to collaborate on Increasingly, original equipment
doesn’t hold true in other and which to retain in–house. In manufacturers (OEM) and
industries. That means that other cases, legal agreements supply companies have access
actual transformation requires between potential partners to more innovation capital
a new vision for the future, one become so complex that and resources and hence a
bold enough to drive a step their value is diluted—making challenge for the industry is to
change in performance and collaboration more difficult. figure out a way for miners and
enable more ambitious results The very structure of many the service sector to collaborate
from innovation. mining companies also makes more around innovation. This
it difficult to drive synergies will however require companies
The upshot is that mining across mine sites—resulting in to move beyond traditional
companies can only achieve siloed operating approaches procurement relationships.
true innovation maturity if rather than fostering a culture
they go beyond the basics of of collaboration.
operational improvements
to embrace innovation in a Critically, the nature and scope
broader sense and embed a of the industry’s challenges are
series of capabilities within making it less viable to operate
the organization.
“Although commodity prices have begun recovering, mining executives are still
feeling the sting of the recent downturn. As a result, they are collectively more
cautious than their peers likely were just five years ago. While this is spurring
ongoing focus on innovation, it also means their innovation efforts are increasingly
constrained by the need to demonstrate near–term returns. The catch is that,
unless you are trying new things, you are not learning, and if you are not learning,
you will fall behind.”
Andrew Swart
Global Mining Consulting Leader
Deloitte Canada
12Tracking the trends 2018
Figure 2: Mining consistently underspends in
innovation relative to other sectors
R&D/Sales
10
9
8
7
6
5
4
3
2
1
0
Mining Consumer goods Technology
2005 2006 2007 2008 2009 2010 2011
2012 2013 2014 2015 2016
Source: Deloitte analysis
While collaboration is not the in collaborative development The general idea is reciprocity.
only approach to resolving projects, a process that If juniors, for example, work
the innovation conundrum reduces innovation costs on improving exploration
among mining companies, while empowering industry performance with a focus on
it can go a long way towards stakeholders. Collaborative high–quality deposits, they will
encouraging the steady stream ecosystems can even enable increase their value to majors.
of innovations needed to cross–border collaboration If majors work on improved
build sustainable business by uniting mining clusters recovery with a focus on lower–
models over time. Structured with similar challenges across grade deposits, they will reduce
deliberately, collaborative geographical boundaries. the pressure on juniors. That’s
ecosystems allow mining a win–win where everyone has
companies to reduce risk in the These types of ecosystems increased cash for investment,
innovation process. make it clear that innovation juniors to adopt/commercialize
does not require prohibitive innovations and develop assets,
Through open industry forums, budgets. As service companies and majors to buy juniors.
for instance, suppliers and and juniors have amply
other members of the mining demonstrated, it can often
ecosystem can work together be accomplished with
to resolve mining company constrained funds, particularly
issues. Similarly, events such as when external partnerships
“hackathons” encourage large are leveraged.
numbers of people to engage
13Tracking the trends 2018
Leading strategies in focus
Develop a systematized implement governance to champion innovation by
approach to innovation systems to empower decision enabling them with the right
To determine the types of making throughout the tools, processes, technologies,
innovation to pursue so as organization. To become and know–how.
to realize transformational embedded in the organization,
change, mining companies innovation needs the support Develop metrics and
must define their innovation from senior leadership incentives to guide
strategy and rally their together with an acceptance performance
people around it. This that not all innovation Before innovation can be
includes articulating the succeeds and that failing fast is delivered as a discipline,
dimensions of their vision okay. Organizational support organizations must have the
so they can assess where to should also not only occur ability to both measure its
innovate (i.e., by focusing on from within, but collaboration effectiveness and incentivize
automation, reducing their needs to include external appropriate employee
carbon footprint, partnering parties like competitors, behaviors. This means
with stakeholders, etc.). From suppliers and communities. companies should aim to
there, companies should monitor innovation from
manage innovation as a Secure the right resources concept to prototype to
portfolio against the thematic and competencies pilot. Similarly, metrics and
areas and have a defined way To progress towards more incentives should be aligned
to move innovations from mature innovation, corporate to a company’s innovation
concept all the way through innovation efforts must strategy and reward people
to commercialization. It be adequately funded and for their accomplishments.
involves adopting structured supported with the right One global company is tackling
innovation processes that resources and capabilities to this challenge by setting aside
cut across business units deliver. In some cases, this may small portions of its mine
and support innovative ideas involve hiring ambitious talent sites as innovation testing
that arise from every level of from the technology industry, grounds where operators are
the business cultivating the types of skills not held to stringent quota
required for different kinds of and production requirements.
Build the innovation, making creativity This frees them up to think big,
organizational support related processes more test small, fail fast, and iterate
To turn innovation into an flexible, and designing more quickly before scaling proven
organizational core capability, inspiring work environments. innovations to other parts of
companies must make it Mining companies also need the mine or to other sites.
a leadership priority and to empower their leaders
06
14Tracking
Trackingthe
thetrends 2017
trends 2018
From left field
With slowing global mine supply growth and a
shortage of world–class deposits in key commodities
like copper and gold, innovative exploration
strategies are needed. One option is undersea or
deep sea mining, prospecting for minerals on the
ocean floor. According to the World Economic Forum,
the world’s undersea reserves include 10 billion tons
of polymetallic nodules.6
Despite the resource potential, deep sea extraction is
very challenging. Yet, technical advances are making
it more commercially viable. Deep sea robots, used
extensively by the offshore oil and gas industry,
are being used in undersea mining. Innovations in
surveying technology may also allow miners to better
locate and identify undersea ore bodies.
Critically, complex environmental and access issues
will need to be balanced against the likelihood
of untold and largely untapped mineral wealth
lying beneath the waves. Environmental concerns
include the impact of plumes of dust, stirred up
by excavation of the ocean floor, on a delicate
ecosystem. As a result, some companies are
pursuing less intensive exploration techniques.
DeepGreen Resources, for example, is focused on
the exploration and development of polymetallic
nodules from the seafloor, which lie on the top part
of the seafloor. Due to their distinct mineralogy,
polymetallic nodules lend themselves to
metallurgical processing solutions that offer the
potential for significant environmental benefits.
DeepGreen’s patented process is aiming for zero
tailings, representing an important step change for
the minerals industry.
153
The future
of work
Re–envisioning talent
management in the digital age
As the digital mine becomes support the mobile workforce
a reality, the nature of work is across all platforms, and
poised to change dramatically, digital systems will simplify
at both the mine site and in work scheduling, while
the back office. In essence, the more robust cybersecurity
digital mine envisions that a programs mitigate the risks.
lean set of corporate processes These technologies will enable
will be augmented by RPA to core mining activities to be
automate repetitive human performed from locations that
activities, by autonomous can support a more diverse and
equipment to reduce labor inclusive workforce, including
intensity and enhance safety, primary caregivers, part–time
and by AI to support knowledge workers, and people with
workers. Fully integrated physical disabilities.
communications networks will
Automation is transforming the labor market. Deloitte
estimates that by 2035 approximately 35 percent of
current jobs in the UK will be automated.7 Similar trends
are expected in other parts of the world.
16Tracking the trends 2018
Inside the future of work
A global mining and metals organization was a relatively early adopter of RPA within the
industry. After an initial proof of concept focused on the invoicing process in its global shared
services center, it is now applying automation within its supply function. The objective was
to automate the manual work of the supply team in expediting material orders and seek
to increase expediting coverage beyond the top 25 vendors, which it was limited to due to
a manual time–consuming process, high volume of work, and frequency of updates. The
solution included automation of SAP supply data into an integrated data platform, the
development of a dashboard for faster inventory analysis and reporting to site supervisors,
and RPA for automation of the vendor communication process.8
Charting the implications As more work moves to shared as well. For instance, Worsley
While digital solutions will service centers and centers of Alumina—a South32 business—
augment human performance expertise, the available pool created gender–neutral drilling
by empowering people at of labor will also expand as equipment that enabled the
all levels with information to companies begin to employ deployment of its first all–
enhance their performance a mix of on–shore, off–shore, female drilling crew.9
and insights to drive better and robotic workers located
decisions, they will also cause anywhere in the world. The ramifications on work
upheaval. As manual jobs scheduling are similarly
are automated or replaced The implications are equally as significant. In the not too distant
by robotic processes, labor dramatic for frontline workers. future, mining organizations
dynamics in local communities With sensors, for instance, will be able to post available
will shift significantly. maintenance workers can work shifts online and enable
get alerts before equipment employees to use a mobile
On the positive side, this can breaks down, allowing them application to choose the shifts
translate into new employment to improve scheduling and they prefer to work. In this way,
opportunities as new roles increase equipment uptime. mining companies could attract
are created. It can deliver Similarly, shift supervisors a more diverse workforce,
significant safety benefits for can pinpoint the location of while giving frontline workers
the mining industry by literally equipment in real time, enabling greater freedom to manage
moving workers out of harm’s faster decision making and their careers.
way, and boost productivity by improving worker safety. With
reallocating those workers to interactive dashboards, mine On the other hand, greater
more productive occupations. It managers and supervisors reliance on digital solutions
can accommodate the realities can electronically interact with could result in job losses, raising
of shifting global demographics engineers with greater levels concerns about companies’
by enabling more women and of precision. And, by optimizing social responsibility towards
seniors to enter and remain in mine plans in real time, the their existing workforce. Given
the workforce. It can position whole nature of work and the imperative of mining
companies to achieve greater scheduling will change. companies to work in harmony
diversity by attracting workers with local communities, the
from historically under– Not only can work be industry’s shift to the future of
represented populations. redesigned, but equipment can work will need to be measured.
17Tracking the trends 2018
Rather than eliminating jobs When it comes to hiring, this use of social tools that improve
wholesale, this will likely means mining companies will communication, collaboration,
translate into concerted require access to a broader and connectivity. Leaders will
efforts to retrain people to use array of systems experts also require the capacity to
technology or redesign jobs to operate and monitor align competency frameworks
to take better advantage of autonomous machines, and to account for new robotics,
people’s existing human skills. data analysts to turn growing cognitive, and AI requirements;
To this end, mining companies volumes of data into meaningful deploy employees replaced by
should think through how to insight. This quest for scarce these technologies; and reskill
reskill and retrain people to digital talent, including software employees to complement
learn technology and tools engineers and experts in these tools.
faster, and how to design the robotics and mechatronics, will
technology so it takes almost no put mining companies against Although these issues raise
training to use. more attractive industries in potentially uncomfortable
the attraction and retention of challenges, the future of work
A new kind of miner key talent. has arrived and companies
As automation becomes more that fail to embrace this
prevalent and technology As such, miners may have disruptive opportunity could
transforms the nature of to redefine roles, change find themselves at a competitive
work, organizations will also corporate cultures, attract and disadvantage in today’s
be forced to redesign certain train in new ways, and reimagine digital age.
jobs. At the mine site, manual traditional career paths. They
workers will need to learn will also need to rebrand to
how to integrate technology raise their appeal among the
into their job functions. Those millennial talent joining the
who are more comfortable workforce. This is particularly
working with technology will salient for organizations that
also need to train and mentor continue to run their back office
employees who have less digital functions in antiquated ways. A
experience. lack of innovation in these areas
will make it harder to attract
In the back office, the those people who will be in
convergence of IT and OT is greatest demand going forward.
driving the emergence of a new
kind of mining professional, one Leadership skills will also have
that combines traditional mining to evolve. As the workforce
skills with advanced technology becomes more diverse,
skills. Mining professionals now distributed, and connected,
need to be digitally literate, mining leaders will need the
along with having strong ability to foster and support an
problem solving skills and the inclusive culture, manage across
ability to think creatively. generations, and model the
18“Companies need to realize that
they will not be able to recreate
previous career paths as we head
into the future. Job descriptions
and the skills required are
changing wholesale, mandating a
complete re–conception of the way
in which miners must attract and
retain talent.”
Ian Sanders
Mining Leader
Deloitte Australia
19Tracking the trends 2018
Leading strategies in focus
Retrain and upskill Source and integrate talent Create a new social
Gaps in employee digital across networks contract with communities
knowledge are undermining Attracting new skillsets and governments
technology transformation from other industries may To prevent potential backlash,
efforts. In a 2016 global be a particular challenge to it is important for mining
survey of managers and mining organizations. As a companies to work with key
executives conducted by MIT result, there is a growing stakeholders to develop a
Sloan Management Review need for miners to partner shared vision for the future
and Deloitte, only 11 percent with organizations that have of work. This can include
of respondents said their deep technology expertise. working with schools to
company’s current talent Companies will need to design ensure the future labor
base can compete effectively and evolve their partnership force is properly trained,
in the digital economy. The networks to access the best explicitly discussing labor
main barriers include lack talent for specific work and issues with mining community
of agility, complacency, and cultivate a continuum of talent stakeholders, and committing
inflexible cultures.10 This sources—on and off balance to employee retraining.
speaks to the imperative for sheet, freelancers, crowds,
mining companies to compare and competitions.
their current talent pipeline
against skillsets they anticipate Redesign work for
needing in the future and technology and learning
hiring or retraining to close As the future of work becomes
identified gaps. a reality, companies must
move beyond process
Adopt new attraction and optimization to find ways to
retention strategies enhance machine–human
To attract and retain scarce collaboration. This includes
digital talent, miners should identifying areas where digital
place greater emphasis on technology can augment
nurturing and developing their worker performance as
people, creating interesting employees shift to more
and purposeful work, and productive work—for instance,
building an environment by harnessing technology to
with career flexibility and give workers richer real–time
tools that enable employees information or using AI to
to collaborate and exchange complement human judgment.
ideas transparently.
06
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From left field
If AI technologies follow
the tenets of Moore’s Law,
then the cost of automation,
robotics, and cognitive
solutions are bound to
continue falling over time,
leading to a notable uptick
in adoption rates. As remote
operations become more
pervasive, and automation
becomes more sophisticated,
the miners of the future could
arguably use video game–
like controllers to operate
mine site equipment from
any location in the world.
The result? A mine with no
frontline workers. Should
this type of future come to
pass, the whole role of HR will
shift in the organization of
the future.
214
The image
of mining
Changing public, employee,
and customer perceptions
Although the sector has taken and engage in dubious
significant strides to improve practices abroad.
the image of mining in recent
years, in some cases, it is still As mining companies know
operating under a legacy of from harsh experience, negative
weak environmental practices, perceptions can do more than
fractious community relations, damage reputations and affect
stock price underperformance stock prices. They can also spill
relative to other sectors, over into community protests
and a historic lack of and violence, and result in
workforce diversity. the loss of a social license
to operate.
Despite the significant
contribution of the mining In a world increasingly
sector to the world’s economy, influenced by round the clock
the industry’s reputation news cycles and opinions aired
remains tarnished in many in the court of social media, this
countries due to perceptions type of backlash is only bound
that mining companies to spiral. This mandates mining
contribute to environmental companies to take proactive
damage, cause a negative steps to address, and change,
impact to the community, their reputations.
22Tracking the trends 2018
Raising the bar
In recent years, Rio Tinto set a new bar for tax transparency by voluntarily disclosing details
of the taxes and royalties it pays on an annual basis. BHP followed suit in 2015, committing
to develop detailed taxes–paid reports—making the two companies industry leaders in their
goal to enhance public accountability and improve corporate credibility.12
New behaviors Rio Tinto all passed shareholder of radical transparency
Notably, companies are coming resolutions regarding increased encourages companies to keep
to realize that this is not simply disclosure on climate change.11 themselves honest, creating
a public relations (PR) issue. To an environment of shared
rebuild trust with employees, “Mining companies are responsibility.
investors, communities, coming to realize that radical
governments, and the public, transparency is now a In other instances, mining
mining companies must back up prerequisite for trust,” explains companies have begun going
their messages to these groups Carole Cable, a Partner at beyond philanthropic donations
with action. This mandates a Brunswick, a communications that typically end once a mine
change in behavior. firm focused on helping site shuts down. Instead, some
companies build trusted miners have begun contributing
Increasingly, leading companies stakeholder relationships. a portion of their local revenues
are taking more decisive public “This requires them to marry to foundations that empower
stances around corporate social their social purpose with their community members to allocate
responsibility. For instance, financial purpose and craft a funds based on local needs.
in addition to enhancing the narrative that clearly articulates
transparency of their tax the value they bring to society.”
disclosures and anti–bribery
stances, many have begun to This imperative is playing out
demonstrably reduce their in interesting ways. In some
exposure to countries where instances, mining companies
the perception of corruption now enable local communities
has been on the rise. Several to test the quality of a site’s
mining companies have water emissions by setting
begun adhering to voluntary up CCTV cameras or apps
sustainability standards, that provide citizens with
including those set out by the online access to water quality
Taskforce for Climate–related data. Others give community
Financial Disclosure, the Global members the option to
Reporting Initiative, and the physically visit water discharge
Carbon Disclosure Project. sites to conduct their own tests.
Additionally, in the past year, In addition to empowering
Anglo American, Glencore, and local communities, this type
23Tracking the trends 2018
Re–engaging employees If companies truly hope to repair
These efforts to regain trust their reputations, however, Raising the bar
are also happening internally, they must also recognize that The BHP Foundation
as companies work to create new operational realities are was established to
a new culture to support their required, especially if they help address some of
visions for growth and hope to attract the talent of the the unprecedented
re–engage employees. future. This likely means making development challenges
structural changes at the mine society currently
One indicator of this shift site to automate the physically– faces. Through its
is the mounting focus on challenging or dangerous Natural Resource
mental health as mining tasks that may not appeal to a Governance program,
organizations work to address new generation of workers. It it aims to reduce the
the pressures many employees also means fostering a culture potential for corruption
face both within and outside of diversity and inclusion so and bribery across
the workplace. The Mental typically under–represented the resource value
Health Commission of employee groups feel a sense chain by enhancing
Canada, for instance, recently of belonging. transparency. Its goal is
began offering a mental to provide citizens with
health first aid course to the Although some companies access to information
mining industry in Northern have begun to embark on that shows the flow
Ontario.14 In Australia, as part the arduous task of shifting of funds related to
of a state–wide campaign to perceptions, there is little natural resources in
generate awareness of mental doubt that much work remains. their country, giving
health issues and the support The alternative, however, is them both the data and
available, Rio Tinto’s Hunter untenable. Miners simply cannot the tools required to
Valley mines traded their hope to sustain their license hold local institutions
standard yellow truck trays for to operate, cultivate employee to account.13
blue to indicate their improved loyalty, or win the hearts and
capacity to provide peer minds of other key stakeholders
support and related mental if they don’t engage in a
health programs.15 Glencore concerted, and multi–year,
also introduced the Mates in effort to repair their reputations
Mining program in Queensland and regain public trust.
to encourage more open talk
about the risk of suicide.16
“If mining companies truly hope to repair their image, they must do more than
change their messaging. They must also fundamentally change their behaviors
around the way they mine how they engage with communities, attract talent,
and deliver on their promises.”
James Ferguson
Global Mining Tax Leader
Deloitte UK
24Tracking the trends 2018
Reimagining reputations
When the ePrix, the electric vehicle version of the Grand Prix, makes its debut in Santiago in
2018, it will be sponsored by Antofagasta Minerals. The company’s decision to put its name
on this first edition of the all–electric race was not simply a PR exercise. In fact, its aim was
to bring attention to the company’s commitment to help contribute to a cleaner world by
reducing carbon emissions. Antofagasta is demonstrating this commitment in myriad ways,
not least by using renewable sources, including wind and solar, to generate 45 percent of its
power at its Los Pelambres mine.17
Creating a new image begin offering products over Mamba ores with higher
with customers which they can exercise more phosphorous Brockman
In addition to rebuilding control, particularly relative to ore, Rio Tinto created a
trust externally and among pricing. China’s new modern premium product to meet
employees, some companies steel furnaces, for example, the unique demands of steel
are trying to reposition are configured to run on mill customers. Since its
themselves in the eyes of their high quality iron ore and introduction into the market
customers by demonstrating met coal, encouraging steel roughly one decade ago, the
their capacity to deliver mills to favor higher grade Pilbara blend has become
greater value. As the industry iron ore. This is true across the world’s most traded iron
works to articulate its value commodities. China’s drive to ore product.18
proposition to shareholders, reduce emissions and improve
there’s been a collective soul the environmental footprint As mining companies continue
searching that has led, in some of individual processes will to remake themselves from
cases, to the development of underpin demand for higher the inside out, leaders will
differentiated, higher margin, quality raw materials. Similarly, likely focus more diligently on
proprietary products tailored India is structurally short of high understanding customer needs
to meet the needs of certain quality coal reserves. and developing boutique or
customer segments. niche products to meet them—
Some companies have already reaping the rewards of both
With economies moving taken steps to meet this improved customer satisfaction
along the urbanization demand by creating more and higher margins.
curve and demanding more differentiated products. Rio
sophisticated products, Tinto’s Pilbara blend is a case
miners may increasingly in point. By blending Marra
25Tracking the trends 2018 Leading strategies in focus Enhance transparency and the development of disclosure. The technology Companies have already healthcare programs. They required to do this may even taken great strides to may also need to give key end up providing valuable improve the transparency stakeholders an inside data companies can use in of their tax disclosures. A look at their operations, decision–making. similar spirit will likely need by empowering citizens to to pervade a broader range monitor the quality of their Develop a crisis of activities going forward. water outputs, for instance, or management response plan Mining companies need to explaining the rationale behind Mining companies must more clearly demonstrate changes in strategic direction continually work to educate the role the industry plays in to employees at all levels of the their stakeholders about supporting and sustaining company. the industry and keep economic growth. Companies them apprised of corporate must continue sharing Up efforts to build, activities. This means examples of the efforts they measure, and report on staying ahead of the curve are making to remediate sustainability by anticipating criticism and any environmental damage While many governments now having a ready response. To they cause. They must be require certain disclosures, repair reputations, mining more proactive in sharing over–reporting shows a real companies must consistently the impact they are making commitment to sustainability. be honest and upfront about in local communities and Companies can only do this, any incidents and how they are countries, not only in terms of however, if they invest in tools addressing them, even if they employment, but in terms of that can help them report are only minimally involved. infrastructure investments, consistently and with the improved access to education, same rigor used for financial 06 26
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Align operational decisions Work directly with
with stated commitments governments and
To shift public perceptions, communities
mining companies must Most large mining companies
walk the talk. This means already do this, but all miners
avoiding jurisdictions rife should meet regularly with
with bribery and corruption, key stakeholders before,
reducing safety incidents during, and after a mine is
and fatalities, and rigorously operational. This is about more
adhering to the most stringent than good optics. It is good
environmental practices business—and it will provide
possible. It may also mean companies with confidence
shifting corporate cultures in the face of criticism when
to ensure employees truly they know they are actively
prioritize the maximization of respecting and incorporating
value over the maximization the views of the communities
of production. To turn culture they operate in.
into a productivity lever,
mining companies should
seek out best practices from
organizations that already
understand that their real
assets are their people.
275 Transforming stakeholder relationships The growing need to achieve measurable social outcomes To expand local employment Mounting volatility opportunities, increase tax These demands are taking revenues, and meet increasing various forms. In Russia, for community demands for instance, community concerns improved infrastructure around coal dust pollution may and greater environmental result in a ban on the use of protection, many governments grabbing cranes, which are used of resource–rich countries by ports to load more than 50 continue to put pressure percent of Russia’s seaborne on the mining industry. As a exports. If passed, these result, mining companies in measures could see Russian many jurisdictions still face coal exports fall by up to 80 considerable obstacles to million tons, dropping back to investment, ranging from 2007 levels.19 high royalty rates, permitting challenges, and uncertain tax rules to growing requirements for local beneficiation. 28
Tracking the trends 2018
Stakeholder management in action
Diamond producer De Beers has been operating in Botswana since 1967, the year after the
country achieved independence. As part of a public–private partnership that has extended
over 50 years, the company entered a 50/50 joint venture with the government to form
Debswana, the primary producer of diamonds in the country. In recent years, De Beers
moved both its diamond sorting operations and its international sales function to Botswana.
An analysis of the partnership in 2014 showed that it employed almost 8,000 people, of
whom 96 percent were Botswana citizens, including almost 85 percent of management.
A further 12,870 jobs in the broader economy were supported through the partnership’s
supply chain contribution. In addition, the partnership spent approximately US$6 million on
550,000 hours of training and skills development for employees. Today, the partnership is the
largest single contributor to the Botswana economy, besides the government itself.24
In Colombia, the mining industry New approaches the mining industry remains a
has been beset not only by Although many of these major employer. Historically,
protests, road blockades, regulatory risks can be traced to the contract between mines
and new tax measures, but politically volatile jurisdictions, and communities has revolved
also by mining bans that have there may also be a secondary around job creation. As mines
forced some major miners underlying cause. Some of move towards more digital
to halt operations in certain the social initiatives mining operations, however, the basis
municipalities.20 El Salvador companies have undertaken in of this social contract will
went one step further, banning the past have failed to deliver shift. To prevent unrest and
mining entirely.21 on their intended results. mitigate backlash, companies
Increasingly, the industry will need to leverage the
In Tanzania, Acacia Mining was is coming to realize that its digital infrastructure on behalf
hit by a US$190 billion fine, traditional approaches to of communities, potentially
US$40 billion in unpaid taxes community and government using it to create new
plus an additional US$150 relations must change. education models, improve
billion in interest and penalties, communication, develop
prompting the company to This imperative will only suppliers, or deliver other
reduce its operational activity heighten in the digital age. digitally–enabled services.
in the country.22 The total bill Despite the benefits that This will require companies
represents roughly 40 times automation, robotics, and AI to be more creative in
Acacia’s 2016 revenues and deliver, their effect on local uncovering the real needs of
comes in at four times the size employment is bound to these communities.
of Tanzania’s GDP.23 spark government concern,
particularly in regions where
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