The future is full of change for the mining sector, according to Deloitte’s Tracking the Trends 2018 report, which shows miners are overcoming innovation barriers, embracing digitisation and paving the way for the workforce of the future. 

Mining executives are predicting the disruptors of the future, among them the growing demand for lithium for electric vehicles and the potential for mining asteroids for rare metals.

Now in its 10th year, the report has followed the mining sector as commodity prices have reached both record highs and lows.

This year’s report identifies strategies companies can take to smooth out the recovery from low commodity prices and explores the potential industry disruptors on the horizon.

“To thrive in the mining industry’s historical boom and bust cycle and capitalise on new opportunities, companies must rethink the traditional mining model,” Deloitte National Mining Leader Ian Sanders said.

“Profound change takes time. To change for the better and pave new paths for the future, the mining industry must focus on driving ongoing investments in innovation and digitisation, inspiring their approach to the workforce of the future, manifesting in their commitment to strengthen government and community relations and guiding their efforts to repair their public image.”

Data and the Internet of Things

Once measured by how well companies extracted resources, the industry’s value proposition may be shifting to how well a company acts on information to optimise production, reduce costs, increase efficiency and improve safety, according to the report.

Data – and the ability to organise, manage and process it – is rapidly becoming a competitive differentiator and may even spur new business models.

MathWorks Australia Country Manager Stephane Marouani said in the last two years in particular, mining companies had become more interested in utilising data to predict the

future of operations, instead of just financial forecasting.

“One of the hot topics in the mining industry – and for good reason, because there is a lot of money behind it – is what we call predictive maintenance, where you collect the data and you model and simulate the equipment and use it to predict when a failure is going to occur, rather than having regular maintenance of your equipment,” he said.

Getting data directly from the equipment is becoming more frequent through the use of sensors and internal software that can communicate directly with a site’s communication platform.

Mr Marouani said miners were starting to combine engineering data with business data to predict future events, rather than relying on just one data stream.

Innovation

Mining executives understand innovation is necessary for the industry to transform and are more inclined to take risks and jump on board than ever before, according to the report.

Innovation was not always in the technological arena, but included the adoption of more innovative approaches to engaging with stakeholders, re-envisioning the future of work and identifying the commodities that would be in greatest demand going forward.

“Despite the imperative, however, industry players cannot yet be considered truly mature innovators,” the report said.

“Deloitte research across Canada, Australia, Africa and Latin America shows the sector still lacks systemic consistency and strategic focus when it comes to innovation.

“Part of the reason is because mining companies continue to face a number of organisational barriers to innovation.”

These barriers included taking on new risks that may impact on cash flow or output, large upfront costs and concern around intellectual property through a distrust of collaborations.

The report pointed to a need for a new vision for the future if transformation was to occur.

However, Mr Marouani said miners were less driven by output and cost “in the traditional manufacturing way” and more driven by innovation than previously.

“Traditionally, miners will spend a lot of money when prices and production are up and start reducing their workforce when the price is low,” he said.

“But in the last few years we have seen miners realise they could smooth out that production flow and cost by using technology and innovation.”

Future of work

As the digital mine becomes a reality, the nature of work is poised to change dramatically at both the minesite and in the back office.

Repetitive human activities are heading towards full automation by equipment to reduce labour intensity and enhance safety.

Mr Marouani said this meant while some roles would be lost, such as truck drivers, we could expect to see the growth of engineering positions.

“There will be an increased demand for data scientists and engineers to maintain the systems and analyse the data,” he said.

“The workforce will need to change from these traditional blue collar and white collar repetitive tasks.”

Mr Sanders said in the quest for this scarce digital talent, including experts in robotics and mechatronics, mining companies would be battling more attractive industries and might face the need to re-brand to raise their appeal among the millennial talent joining the workforce.

“Companies need to realise they will not be able to recreate previous career paths as we head into the future,” he said.

“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.”

Changing shareholder expectations

Deloitte found shareholders were either making it clear they expected a return of value as corporate fortunes rose, or they were becoming more vocal by engaging in activism in a bid to influence operational decisions.

A recent Harvard Business review article pointed out the maximisation of shareholder value only became a goal for shareholders and boards fairly recently.

“The concept arises from the ‘agency theory’, which posits that shareholders own the company and their primary objective is to maximise their own economic returns,” the Deloitte report said.

“The issue with this assumption is shareholders have no legal duty to protect or serve the companies they invest in.

This gives certain types of shareholders the power to force the change of a company’s board or management, only to sell out as soon as the share price rises.”

Deloitte UK Mining Leader Tim Biggs warned miners to avoid shifting corporate direction to meet shareholder demand for short-term returns that could result in a poor long-term outlook.

Water management

As ore grades decline, more water is needed to extract the same amount of ore.

This means with each passing year, water has become an increasingly critical issue for the mining sector.

“Mining companies understand how much water they use. Yet this understanding does not always translate into action,” Deloitte Peru Mining Leader Karla Velásquez said.

“To address community concerns around resource competition, it’s time for miners to improve their water management by rethinking their production processes and partnering with technology companies to implement real–time water monitoring solutions.”

The report explained water scarcity was not the only issue mining companies faced, with some regions experiencing floods, ice melt and severe storms that had the potential to create excess water, thereby increasing the risk of effluent leakage.

Deloitte called on mining companies to find more innovative ways to reduce, reuse and recycle water in water–scarce regions, contain and treat wastewater to prevent spillage or contamination of downstream water flows and monitor their water usage and purity.

Commodities of the future

To assess which commodities to invest in and which to divest, miners need to keep their fingers on the pulse of fluctuating consumer demands, global demographics and economic shifts and the effects of environmental change, according to the report.

Deloitte’s high-performing commodity predictions for 2018 included the following.

Lithium: “Most analysts predict global demand for lithium will double or even triple by 2030,” the report said. “The key now will be meeting that demand. “The anticipation of the exponential growth of electric vehicles has seen lithium prices rise more than 70 per cent between November 2016 and November 2017.”

Graphite: “Like lithium, its demand is linked to battery power and storage, driving analysts to predict demand for battery-grade graphite will triple by 2020,” the report said.

Cobalt: “For its part, cobalt – yet another integral component of battery technology – is facing a global supply deficit that may grow from 803 tonnes in 2018 to 4844 tonnes in 2020,” the report said.

Nickel and copper: EVs are expected to contain four times as much copper as combustion–powered engines, driving analysts to predict the market will slip from a surplus into a deficit of 130 kilotonnes by 2018,” the report said. “In addition, demand for nickel sulphides (battery–grade nickel) is expected to increase 50 per cent to 3 million tonnes by 2030.”