The mining industry is now focused on adopting digital technology, and miners are producing a lot of useful data about operations. But they are really just in the early stages of these efforts—and the manner in which they take the next steps and pursue digital transformation will be key to unlocking US$38 billion in value over the next few years.
Today, miners are typically using digital technology in limited, standalone projects, and they are struggling to scale those efforts to more areas of the company. Thus, they are using only a small portion of their growing amounts of data to generate actionable insights and fundamentally change the way they work.
The question is, how can miners step up their digital transformation efforts? A recent Accenture analysis1 of how the industry is using the technology points to some answers.
Unify the vision. Central governance of digital initiatives is key to broader digital transformation. It lets companies align their various proof-of-concept projects and other digital initiatives, and create a roadmap for how it will all fit together in the future. A unified vision also makes it possible to create a foundation infrastructure and framework that can be used across digital projects, which will support their closer alignment going forward.
Broaden your ecosystem. Miners can draw on insights and skills from outside the company. Some are using crowdsourcing with outside parties to uncover new ideas about, for example, identifying profitable deposits2 and improving efficiency and safety. Others are forging strategic partnerships with companies in other industries to develop technology roadmaps,3 educate the workforce about computer technologies4 or improve operational efficiency. Industry associations5 and OEMs6 can also act as partners that help enable innovation.
Adopt Agile development practices. Agile methodologies can be a powerful tool for taking advantage of digital technology, because they engage end users from the beginning of a project, helping to drive higher success rates. This also creates a “pull” from the business that helps digital efforts expand and grow organically, funded by the value created as that growth progresses. With Agile practices, miners can develop an innovation mindset that favors experimentation, and embraces the pursuit of the right answers—and innovative approaches—through frequent and fast-paced “failures”7 that quickly lead to results.
Reimagine processes with artificial intelligence (AI). Some miners8 are applying AI to change internal processes. This can include setting up in-house AI capabilities to help test use cases,9 predict where to find new deposits,10 improve cost competitiveness, strengthen development capabilities, increase productivity,11 mitigate cybersecurity threats12 and provide real-time visibility of operations.13 Looking ahead, AI has great potential in a number of areas of interest to miners, including autonomous or driverless vehicles,14 enabling machines to “learn” from experience, and natural language processing that can help bridge the gap between humans and computers.
The stakes are getting higher
The use of digital technology to transform mining companies is becoming more and more important—especially for diversified miners. Accenture’s analysis found that revenues for diversified miners and focused miners have contracted at almost the same rate (1.5 percent and 1.7 percent CAGR from 2008 to 2016, respectively). At the same time, diversified miners have seen profitability (measured by EBITDA) fall by 4.8 percent CAGR, compared to 2.7 percent for focused miners. Going forward, focused miners are expected to see EBITDA growth of 3.2 percent CAGR from 2017 to 2019, but diversified miners will probably see a declining rate of 2.6 percent, due to lower commodity prices.
At the same time, things are not getting easier. The Accenture analysis found that even though miners are successfully executing the strategies they designed two to three years ago, they now face increased risks in the form of increasing geopolitical threats and shareholder activism.15
Overall, these challenges mean that mining companies will need to draw on digital technology’s potential to drive greater efficiency and enable the transformation of the business. Indeed, Accenture’s analysis indicates that diversified miners could improve that EBITDA picture by $38 billion in the next 3 years by leveraging digital technology. And that could be just a start—according to a study by the World Economic Forum in collaboration with Accenture, digital transformation could unlock US$190 billion in value for the industry over the next 10 years.16 Clearly, efforts to accelerate and expand digital initiatives today are likely to have a big payoff in the years to come.
Figure 1: Financial Performance of Miners 2008 to 2019
1 Accenture Research conducted secondary research and financial analysis for the top 12 miners by market capitalization.
2 Alexandra Posadzki. “Mining firm uses crowdsourcing to identify potential gold deposits; $1 million in prizes could lead to new technologies to unearth minerals,” Waterloo Region Record, March 3, 2016. Factiva, Inc. All Rights Reserved.
3 “South32 Plugs into GE Data Platform,” Engineering and Mining Journal, May 1, 2017. Factiva, Inc. All Rights Reserved.
4 Marianne Kobak McKown. “GBC, Barrick, Cisco form partnership to educate, grow the workforce,” Elko Daily Free Press, April 21, 2017. Factiva, Inc. All Rights Reserved.
5 Beyer, Mark. "Resources innovation hub opens," BusinessNews Western Australia (Oct 6, 2016) https://www.businessnews.com.au/article/Resources-innovation-hub-opens (accessed Aug 22, 2017).
6 “GE Introduces the Digital Mine to Boost Efficiency and Drive Improved Safety and Productivity,” M2 Presswire, September 28, 2016. Factiva, Inc. All Rights Reserved.
7 “Barrick Gold Corp Operations and Technical Update – Final,” CQ FD Disclosure, February 22, 2017. Factiva, Inc. All Rights Reserved.
8 Luis Nonito Pasuelo. "Aziana to sell Madagascar bauxite project," SNL Metals & Mining Daily: East Edition, March 24, 2015. Factiva, Inc. All Rights Reserved.
9 "Sumitomo Metal Mining/ Sets up ICT Promotion Room," Japan Metal Daily, December 2, 2016. Factiva, Inc. All Rights Reserved.
10 "Press Release: Excellon Resumes Drilling at La Platosa," Dow Jones Institutional News, August 17, 2016. Factiva, Inc. All Rights Reserved.
11 "Interview: Uncertainty growing for resource commodities: Rio Tinto CEO," Nikkei Report, December 4, 2016. Factiva, Inc. All Rights Reserved.
12 "How artificial intelligence is taking on ransomware" News24.com (Jun 28, 2017) http://www.news24.com/World/News/how-artificial-intelligence-is-taking-on-ransomware-20170628-2 (accessed Aug 21, 2017).
13 "Roy Hill deploys Ajilon's business analytics platform," MarketLine News and Comment, January 26, 2017. Factiva, Inc. All Rights Reserved.
14 Miller, Glenn. "AI, Machine Learning, NLP, and Deep Learning?" (Mar 1, 2017) https://chatbotslife.com/ai-machine-learning-nlp-and-deep-learning-a4ae68ed221 (accessed Aug 22, 2017).
15 "The pressure continues: Lazy capital no more". White & Case LLP (May 26, 2017) https://www.lexology.com/library/detail.aspx?g=c97c1c3c-6765-46bd-a161-96bda82f15ba (accessed Aug 22, 2017).
16 “Digital Transformation Initiative: Mining and Metals Industry," World Economic Forum, January 2017, http://reports.weforum.org/digital-transformation/mining-and-metals-digital-transformation-and-the-industrys-new-normal/ (accessed Aug 22, 2017).