Traditionally, there has been a widespread sentiment across the world that the mining industry has lagged behind other industries in being innovative and in adopting new mining methods, technologies and processes. Although miners are risk takers by nature, historically it seems that they often have not wanted to assume risks associated with innovation, although of course there have always been exceptions to this rule.
However, in recent times, things have begun to change as miners are experiencing increased pressures to change their ways of mining metals and minerals as part of developing more sustainable business models for the future. Indeed, what started as an increased focus on sustainability has now morphed into full blown scrutiny as far as a company’s Environmental, Social and Governance (ESG) policies and initiatives are concerned. Meeting stakeholders’ expectations, while continuing to deploy conventional technologies and processes, is simply no longer possible. Therefore, out of necessity, innovation and automation will have to play a key part in a miner’s long-term planning to ensure the business’ viability beyond the next few quarters.
The list of stakeholders exerting pressure on miners is not a short one. We have observed increased institutional shareholder activism, which involves carefully selecting investment choices based on a company’s ESG score and sustainability reports, knowing full well that high scores and earnest efforts in running a sustainable operation often point to a well-run and successful business.
UN Principles for Responsible Investment Representative of this change in investor attitude are the UN Principles for Responsible Investment, launched in April of 2006.1 What started with a few hundred signatories has grown since to over 3,000, including investment managers, asset owners and financial service providers who all voluntarily committed to responsible investments to enhance returns and better manage risk by incorporating ESG issues into their investment decisions. As a result, public issuers are expected to appropriately disclose ESG issues and to proactively deploy solutions to deal with matters such as carbon emissions, energy usage, tailings management, water scarcity, labor relations and Health & Safety.
Investor Mining and Tailings Safety Initiative A recent example of shareholder activism is the action taken by the Church of England Pensions Board and the Swedish National Pension Funds' Council on Ethics in response to the tailings dam failure in Brumadinho, Brazil on 25 January 2019 which killed over 250 people and caused widespread environmental pollution. Both entities initiated the Investor Mining and Tailings Safety Initiative, asking 727 publicly-listed mining companies for detailed public disclosures on their tailings storage facilities while demanding increased transparency and disclosure on how this substantial risk to the public is being managed.
Institutional shareholder action Major asset managers, such as New York based BlackRock with about $7 trillion under management, are voting against management of energy companies for “lack of progress” on climate concerns during the 2020 proxy season. Others, such as Norway’s $1 trillion wealth fund, have shed holdings in miners that own coal assets, as the fund is doubling down on its climate action by making deeper cuts to its fossil fuel exposure.
Government initiatives We also see governments around the world exerting pressure and changing their energy policies. Germany, the EU’s economic powerhouse, finally announced its planned exit out of coal energy by 2038. In response to the ongoing COVID-19 pandemic, many governments are crafting economic recovery aid packages with a focus on stimulus spending to further a green and climate focused recovery. Meanwhile the European Union announced its intention to use the COVID-19 crisis and associated economic relief packages to meet its ambitions to be a net-zero economy by 2050.
Standing behind and pressuring governments are the future generations of voters and investors demanding climate action. What started in 2018 with teenage Swedish climate activist Greta Thunberg as a single voice, has grown into “Fridays for Future”, a global climate movement of young people protesting and demanding climate action from their governments.
Meanwhile local communities and host governments are expecting miners to be good corporate citizens, respecting the environment and the wellbeing of nearby communities and the local workforce. A company’s social license to operate (SLO) is quickly jeopardized if these expectations are not met.
Insurer initiatives Even insurers are paying closer attention to ESG policies, with some taking decisive action in what companies they are willing to insure going forward. In the past two and a half years, seventeen insurers have restricted insurance services to coal projects. A dozen insurers have adopted policies to stop all direct insurance coverage to new coal projects – among them are Allianz, AXA, Generali, QBE, Zurich, SCOR, Munich Re and Swiss Re. Liability underwriters are starting to pay closer attention to ESG policies, realizing that companies with solid ESG scores and strategies are less likely to produce losses and are therefore more desirable candidates to insure.
Many miners have now listened and responded to the call for action. Blue chip companies such as BHP, Rio Tinto and Anglo American are offloading all or parts of their coal assets, while several large miners made public pledges to heavily invest in new technologies to cut greenhouse gas emissions along their value chain.
Select pledges to date While some pledges only address Scope 1 and 2 emissions - those directly generated by a company or indirectly stemming from the power that miners buy - others are including even Scope 3 emissions, caused when a company’s product is being used:
To date, these pledges are mostly made by large miners who are undoubtedly receiving more stakeholder attention and scrutiny than their smaller counterparts.
Other response options In order to achieve emission and other ESG-related goals, miners are utilizing options such as renewable energy, automation/electrification of mobile equipment and hydrogen fuel technology to replace diesel fuel. Some technologies are proprietary and developed in-house, while other solutions are provided by outside engineering firms or technology providers. OEMs such as Sandvik, CAT and ABB, are also pushing innovation of new technologies within the equipment they sell to the industry.
Voluntary disclosure developments In addition to making climate related pledges, many organizations are also supporting the need for appropriate disclosure and have voluntarily joined the Task Force on Climate-Related Financial Disclosures (TCFD). This was established in December 2015, with the goal of developing a set of voluntary climate-related financial risk disclosures; these can be adopted by companies so that those public issuers can inform investors (and other members of the public) about the risks they face in relation to climate change. Self-regulation Miners are also looking to self-regulate and to improve sustainability efforts beyond what is mandated by governments or investors. A good example is the International Council on Mining & Metals (“ICMM”) which is an international organization dedicated to a safe, fair and sustainable mining and metals industry. The ICMM consist of 27 mining and metals companies and 38 regional and commodities associations, attempting to strengthen environmental and social performance8. The organization is supporting innovation in the sector, pushing for change in the way companies design, build and operate mines to reduce waste, minimize carbon emissions, improve worker safety and contribute to the development of local communities. A recent applaudable initiative of the ICMM is the Global Tailings Review, which is meant to establish an international standard for the safer management of tailings storage facilities. ICMM members include (but are not limited to): Alocoa, Barrick Gold, BHP, Codelco, Freeport-McMoRan, Glencore, Newmont, RioTinto, Teck and Vale.
It is probably safe to say that most ongoing innovation and automation efforts take place within larger producers who have the financial whereabouts to experiment with innovative processes and technologies, as innovation takes time, requires money and carries risk.
However, regardless of size, innovation can take place across the industry, as the following example will illustrate. Torex Gold is an intermediate gold producer, based in Canada and with operations in Mexico. The company is a fantastic example of how ingenuity and perseverance can lead to truly meaningful innovation without spending tens or hundreds of millions of dollars in R&D.
Muckahi underground mining system: the two-way traffic challenge Torex’ impressive home-grown innovation is the Muckahi underground mining system, developed by Fred Stanford, Torex’s former CEO and President, now Executive Chair of the Board and an industrial engineer by trade. The system is currently being tested at Torex’ ELD Mine in Mexico.
Muckahi came to life about 30 years ago, when Stanford was a mine manager, running a complicated underground mine in Sudbury, 7,000 feet deep. He quickly understood that mining is a material handling business, a logistics business, conducted on a single-lane road. To Stanford, this inefficient way to run the business underground did not make much sense and at first it became a hobby, trying to figure out a way to allow two-lane traffic in tunnels less than half the size.
Changing the processes Muckahi is not representative of ground-breaking, complicated new technology but more a clever change in processes, using some pieces of equipment that have already been in existence but were modified to fit this system. Muckahi convinces through its simplicity and hard numbers, showing substantial reductions in:
Monorail system copes with steeper inclines The system is deploying twin roof mounted monorails, continuously and efficiently transporting personnel and supplies in two-lane traffic in much smaller tunnels. The system can cope with a 30-degree incline where conventional mines would require no more than 7 degrees, as rubber tires of haul trucks would start spinning at an incline beyond 7 degrees. Allowing for steeper ramps, Muckahi cuts down the length of ramps used in conventional mines to a quarter of the length previously required. In addition, the system utilizes continuous conveyor transport of broken rock directly from the stope to surface, increasing mining rates.
Electrification benefits The complete electrification of the mine is also possible, as the conveyors can be directly connected to the grid. Electrification has the added benefit of the mine requiring materially less ventilation as there are no hazardous diesel fumes previously associated with a haul truck fleet. Less ventilation translates into cutting costs and improving the air quality and work environment underground. Lastly, the mono-rail system allows for full automation of the transport process.
Making the miner the center of the production process When asked about automation of the mine, Stanford confessed: “I am actually not a technology guy. I am not a fan at all of automating our workers out of existence. I prefer to make the miner the center of the production process again. They are the ones making the decisions and there is a lot of dignity in that. The joy of work has been making a decision and when the technology does it all, you may as well hire robots.”
Stanford further astutely noted that: “You can automate yourself out of your social license, especially in areas where labor does not have another choice.” Stanford’s initial hobby turned into an actual mining solution approximately five years ago, after figuring out a critical piece of the system that was previously unsolved. Stanford approached his Board of Directors to ask for support in implementing Muckahi; although it would mean taking a chance, the Board gave the green light to proceed. It was then determined to identify key risks of the technology first. According to Stanford, it was agreed that “If there is a risk of failure, fail early and fail cheap! We took the highest risk piece and we built it first. We used off the shelf gear as much as we could.”
Approaching MedaTech In order to refine the design for the Muckahi system and its various components, Stanford first approached a major engineering company, which did not yield the hoped-for results. He then connected with Robert Rennie, President of MedaTech, a smaller boutique style engineering firm located in Collingwood, Ontario, specializing in underground mining and drilling equipment. MedaTech is a unique technology supplier, working with miners and OEMs alike, developing solutions for the mining industry while also addressing ESG concerns. Due to its size, MedaTech has the advantage of being agile and quick to develop bespoke solutions compared to its larger competitors. Unlike some of the larger engineering firms, MedaTech did not ask to own any Intellectual Property connected with the development of Muckahi. It was and is a pay-as-you-go arrangement which is working for both parties involved.
“MedaTech was really willing to be an extension of us” Stanford explained. “They designed the initial drilling machine and a service platform with a stabilization system attached to the roof, able to function on a 30 degree down ramp.” After that, Torex and MedaTech moved on to design equipment with lower associated risk. At present, Muckahi is now very much a working model of a mining method while the design of additional auxiliary equipment remains ongoing. According to Stanford: “It has been fun to make mining an exercise of simplicity. We designed Muckahi not for commercial sale but to give ourselves a technical advantage to go with our social advantages to create a commercial advantage.”
A real solution to the operational process challenge When Muckahi was first conceived, ESG and sustainability efforts did not receive the same level of attention as today; however, mineworker Health & Safety (especially underground) was always a focus for the industry. Breathing diesel fumes, even if diluted with ventilation, is less than ideal; using an electric method instead would provide additional health benefits to the workers underground.
Muckahi is a real solution to an operational process problem designed by someone who knows underground mining in an out and who deeply cares about his workforce. The result is good for the environment, the business, and good for the people within the business.
In contrast to Torex, an intermediate gold producer, stand the innovation efforts of Denver-based Newmont Corporation, the world’s leading gold company and a producer of copper, silver, zinc and lead with assets in North America, South America, Australia and Africa.
ESG credentials Over the years, the company has been repeatedly and widely recognized by several independent organizations for its principled ESG practices, including strong climate governance and financial planning in response to climate related impacts.
With size comes responsibility, together with an awareness that a company is constantly judged and assessed by outside stakeholders. Rock-solid ESG practices are therefore not a nice-to-have, but essential for the survival and success of the business in the long-term. Recently, Newmont was ranked 13th overall in 3BL Media’s (formerly Corporate Responsibility Magazine’s) 100 Best Corporate Citizens list for 202010, moving up from 20th on last year’s list. Newmont was the sole mining company in the top 20 and one of only two miners to make the 21st annual list. “Consistently strong ESG performance is inextricably linked to delivering superior business results and is a key measure of how well our business is managed overall,” said Tom Palmer, President and Chief Executive Officer. “This recognition is yet another indicator of how deeply sustainability and strong, transparent governance is integrated into our culture.”11
2019 sustainability report: “Beyond the Mine” Innovation and the adoption of new technologies to further sustainability goals is part of how Newmont does business and is further explained in the company’s 2019 Sustainability Report, fittingly titled “Beyond the Mine”, recognizing that the impact of mining reaches further than the mine itself. 12 For example:
The role of the Chief Technology Operator: integrating technical talent into a single team At the helm of all things technology stands Dean Gehring, Newmont’s Executive Vice President and Chief Technology Officer.
Gehring’s global team is approximately 700 people strong and encompasses a broader functional scope than his title would suggest. It includes mining engineers, geologist and geotechnical engineers, metallurgists and a corporate technology group, as well as assets management and operational support hubs where real-time online monitoring of all of Newmont’s fixed and mobile assets takes place. Obviously, operational technology and innovation form part of the mix, as does supply chain and IT. According to Gehring: “You will be hard-pressed to find any company that has put all of these technical groups together this way.”
It is this level of integrated technical services that allows proper connectivity across the company. The deployment of innovative technologies in one part of the world is being evaluated overall to see if it can be utilized elsewhere within the portfolio.
Weathering COVID-19 and working from home The extent of integration across functions has also enabled Newmont to successfully weather the storm caused by the ongoing COVID-19 pandemic and opened management’s eyes as to the needed size and location of a specialized and technical workforce. Across the industry, miners always struggled to hire subject matter experts who are willing to live and work in remote parts of the world; a solution to this conundrum is the consolidation of fewer individuals servicing multiple assets across the globe. In order to successfully consolidate, a company requires consistency across systems; that consistency, such as a standardized IT platform, is present at Newmont, allowing employees who suddenly had to work from home to do so without missing a beat.
Gehring called it a “paradigm shifting moment” changing his own traditional views of how work can be performed in the mining industry. The concept of working remotely and working from home did not sit well with him initially. However, Newmont has now successfully worked this way for the last few months. “We do not have to have as many people at the sites as we thought we needed. Today, they are not there, and we are still getting the work done. It saves money but also allows us to attract a different more diverse workforce.” Battling cyber risk The high level of integration at Newmont is also helpful when battling emerging cyber risks which are the unavoidable result of increased automation levels. Most technologies are being supported by IT infrastructure and networks which are growing in size and complexity, thereby increasing the potential for Cyber-attacks, breaches and leaks. In order to mitigate the company’s growing Cyber risk, various functional teams support each other. For example, the team looking after operational technology (such as automated haul trucks) will connect with the Chief Information Officer who leads IT, providing operational technology support. “We recognize that the systems we are building today rely so heavily on IT backbones and infrastructure, you have to have the subject matter expertise of an IT department supporting operational technology in the field. This level of functional integration really supports cyber security efforts” Gehring said.
Combining internal R&D with Third-Party innovation For innovative technologies and processes, Newmont relies on a mixture of internal R&D combined with outside third-party innovations.
Newmont itself holds over 67 patents, mostly in the processing space, far exceeding other gold miners. It has always been part of the company’s DNA to invent where it makes sense and to research and develop proprietary processes and equipment where there is a void. Newmont does avoid innovating for innovation’s sake; if an off-the-shelf solution is available, the company will utilize it first. Historically, Newmont has done more R&D in the metallurgical space as it is easier to find vendors or Original Equipment Manufacturers who drive innovation in the mining equipment space.
Innovation: fast follower or leading edge? Gehring is often asked to describe Newmont’s innovation posture or philosophy. Is Newmont a fast follower or leading edge? The answer is that it depends on the specific matter on hand. “We look at innovation as being new to Newmont. If something is new to Newmont, we approach it with an innovation lens, mainly to make sure that we are capturing the change management required to ensure successful implementation and rapid replication.”
As pointed out earlier, Newmont’s approach to innovation is deep-rooted and not a recent phenomenon that tends to yield to stakeholder pressures. Gehring recalls his first encounter with Newmont in 1989 when he was a summer intern student at the company’s Nevada operations. His job was to be an ore control technician, using software to delineate the ore zones for the shovel operators; that software was developed by Newmont itself. At that time, in the later 80s and early 90s, Newmont had developed some of the most sophisticated mine planning software in the world because there were no vendors that had an equivalent product. “30 years ago, the problems we were trying to solve for back then were different than the problems we are trying to solve for today. While they may contain similar elements, such as improving safety or productivity, we keep recognizing that there are other elements to the problems we are trying to solve. We are now trying to solve greenhouse gas emissions. We are trying to solve overall energy consumption.”
Innovation: internal processes When asked what recent innovation or automation effort he is most proud of, Gehring warned that the answer may be disappointing as it does not involve a flashy piece of technology. Some of the most effective innovations that Newmont is currently deploying are centered around how to innovate internal processes. He commented:
“Most people think of innovation as something technology related. Innovation is not limited to technology. You can innovate in how you work together and how a company solves problems. Every company struggles with replicating best practices across its portfolio of sites. Innovating in that space is huge value to a company, improving productivity and safety, as well as lowering risk.” The “Idea Market Place” It has become a continuous goal to identify and replicate best practices within the company. To that end, Newmont developed the “Idea Market Place”, an online platform where ideas are captured and made visible.
Newmont does not blindly adopt innovation or automation but is taking a very disciplined approach as to what technologies should be developed in-house or brought in from the outside. Any new technology adopted is subject to change management procedures and embedded across the organization in a consistent way with various technical functions supporting each other in the process. In closing, Gehring perfectly summarized Newmont’s attitude towards innovation: “Don’t employ innovation to fix underlying foundational issues that need to be solved first. We want to sweat the assets first and then we put technology on top to make it better. That is why we are focusing on best practices, to get everyone to a high level of performance. It will take innovation and creativity to do that.”
There is no denying it that change is occurring in the mining industry with many producers of varying sizes adopting automation and new innovative technologies. Cynics may claim that any changes are purely driven by bottom line, profit driven thinking. Even so, does the motivation for positive change truly matter? Should we not focus on the results instead?
Innovation and risk go hand-in-hand Embracing innovation will always carry a risk; not only the risk that a new technology or process may not produce the desired results, but also the increased risk of cyber vulnerability that goes hand-in-hand with increased automation and technological advances. Globally, cyber-attacks are on the rise, although to date such attacks on the mining industry have been relatively rare. Regardless, the increased risk of Cyber-attacks is hardly an excuse to forego much needed innovation, but this very real risk needs to be taken into account when exploring and implementing new technologies.
Towards fully automated mines? Currently, we are living through unprecedented times, with a global pandemic that is impacting the mining sector, albeit to a lesser degree than other sectors of the economy. While some producers have escaped government mandated mine shut-downs, others had to put their assets on care and maintenance for several weeks. Will this pandemic change our attitude towards automation further? Are we looking into a future where mines are fully automated with skeleton staff, nearly immune to a pandemic outbreak but with greater unemployment of local communities who used to make a living at the nearby mine?
Ignoring the issue is not an option If operators want to cut energy requirements and resultant emissions, if they want to leave a positive legacy in the communities they operate in, things must change, and new processes and technologies will have to be developed and adopted. Innovation is therefore key. Those who deny that fact, ignoring the demands of the general stakeholder base, will most likely experience detrimental impacts to their business in the long run, jeopardizing investor support and access to financing, as well as risking their social licenses in the communities in which they operate. Innovation doesn’t have to be costly The outside pressures miners face will vary based on a company’s size. Large producers with strong balance sheets will be expected to take more decisive action compared to smaller single-asset producers with limited working capital. However, innovation does not always have to involve expensive new technologies. Every organization can do its part by rethinking processes to improve its environmental and societal footprint.
In the end, nobody knows what the future holds but it is safe to say that the mining sector will undergo lasting changes with greater adoption of innovation, automation and new technologies to meet sustainability goals dictated by stakeholders and a planet in need of a human attitude change.
Katrin Hayduk is Senior Vice President and Mining Leader – Canada, Willis Towers Watson Toronto. Kat.Hayduk@willistowerswatson.com
1 https://www.unpri.org/pri 2 https://www.mining.com/bhp-earmarks-400-million-to-reduce-emissions-from-its-mines-products/ 3 https://www.nsenergybusiness.com/news/rio-tinto-net-zero-2050/ 4 https://www.reuters.com/article/us-vale-sa-emissions/brazil-miner-vale-to-spend-2-billion-to-cut-carbon-emissions-33-by-2030-idUSKBN22P0 5 https://www.glencore.com/media-and-insights/news/glencores-commitment-to-the-transition-to-a-low-carbon-economy 6 https://www.mining.com/fortescue-metals-targets-zero-emissions-by-2040/ 7 https://uk.reuters.com/article/us-teck-resources-climate/canadas-teck-resources-targets-to-be-carbon-neutral-by-2050-idUKKBN1ZX23W 8 https://www.icmm.com/en-gb/about-us 9 https://im-mining.com/2020/02/20/torexs-stanford-looks-forward-to-big-year-with-advancement-of-muckahi-mining-system/ 10 https://100best.3blmedia.com/ 11 https://www2.deloitte.com/content/dam/insights/us/articles/5065_Global-resources-study/DI_Global-resources-study.pdf
12 https://www.newmont.com/sustainability/sustainability-reporting/
