Global Trends and Drivers: Mining and Processing 2011 A confluence of diverse trends and drivers in the 2010/11 period intensifies a shift towards a new sustainable model for the mining and processing sector worldwide. An exploration of primary trends and drivers impacting on strategic decisions within key industries provides an insight into the challenges, opportunities, and potential outcomes of this shift. An initial overview of the landscape is provided by the following graphic:
Specific components may be broken down and developed:
Political Government intervention crystallises as a key risk factor in the growth strategies of global businesses. Flux and revision to taxation, royalty, and permitting policy is apparent in key mining domains across S.America, Asia, and Australia. At its simplest, commentary characterises the revisions to reflect post-crash governments seeking to alleviate deficit concerns and access the large profits of the sector through part-nationalisation1. Adding complexity, the trend is proposed by some to reflect responses to depletion of natural resource assets strategic to the state, paired with reaction to societal responses to the impacts of mining. The controversial Australian Mineral Resource Rent Tax (MRRT) focussed on iron ore and coal scheduled for introduction in 2012 presents an example. In introduction, the tax was proposed ‘to deliver a better return for the Australian people for the resources they own and which can only be dug up once’2. Competing views from sections of the industry criticise the apparent function of the tax to disincentivise investment in the sector by businesses outside dominant leaders3. The trend presents shifting sands upon which long-term strategy in the mining sector may be founded.
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A further significant driver is the state spending programme for connecting infrastructure. In Russia, an inability for state funding of new infrastructure to adequately match output from new mining facilities demonstrates the critical need to align mining and infrastructure. Projects in Vietnam, the Philippines, and Indonesia present examples of the mining operation bearing the costs of infrastructure works4.
Economic The historic cyclical character of the mining sector is intensified by recent patterns in the global economy: ‘Volatility seems a mild word to apply to what’s been happening in the mining sector over the past year. After reaching record highs in March 2008, metals prices collapsed in response to the global financial crisis, losing 41% of their value by mid-2009. Caught by surprise, many mining companies pushed cost management to the top of the corporate agenda and began cutting down across the board – shedding non-core (and, in some cases, high-quality) assets, halting production, scaling back workforces and putting deals on hold. Just when much of the industry had settled in for a long flat stretch; commodity prices began to rebound. Bolstered by re-emerging demand from China and growth markets like India, along with government stimulus packages and an ongoing need to invest in infrastructure, the industry recovered much of its losses’5 Matching activity to broad economic cycles and patterns of commodity price fluctuation continues to challenge fine tuning of supply from large-scale operations with limited agility. A key area of impact is the pattern of merger and acquisition, which was stifled by valuation concerns and the price of capital across 2009, but emerges as a key trend in 2011 as business seek to access new reserves and secure commodities6. A broader trend emerging from the economic crisis is the massive investment made by China in acquiring global commodities; significantly strengthening a controlling position over supply and demand across the sector7.
Social Social trends impact the mining and processing sector in a number of key areas. Overview estimates place growth in global demand for virgin materials at ~3.5% a year over the last century. Despite the emergence of resource depletion concerns in policy and media, the net population growth and economic advance of the developing world is expected to steepen the trend8. The trend underpins predictions of growth for the sector. Heightened regulation, more vocal investor activism, and changing consumer expectations have elevated the importance of corporate social responsibility in the business strategy. The implication is seen by some to require businesses to work harder
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in ‘earning a social license to operate’ through efforts to green and socialize mining projects9. Finally, skills shortages challenge growth in both traditional and non-traditional mining operations across the globe. Particular attention is paid to the aging workforce; a South African survey of mining professionals placed the average age between 50-55, and the US Society of Mining Engineers found 58% of industry members to be over 50 in 2005 10. The shortage intensifies the talent market as the bargaining power of skilled, mobile personnel continues to grow.
Technological The advent of autonomous mining draws closer through innovation driven by initiatives such as the Rio Tinto Centre for Mine Automation which aims to realise its vision for a fully autonomous, remotely operated mine11. In part, the trend reflects trajectory of innovation that has brought automation, robotics, and informatics to commercial deployment; automated drilling rigs, robotic shovels, and unmanned vehicles included. Trends in the operating environment – tightening regulation, market forces, social awareness, and resource depletion – have bolstered pursuit of automation12. The trend is deeper than deployment of innovative technology components; the fuller vision of automation including smart mine systems applying informatics and system linkage for greater control and predictability in the mining process as a whole. The reality includes pilot programmes of a Rio Tinto and Komatsu partnership which seeks to seize the lead in a race to establish a propriety automated system13. More recently, a consortium led by AngloGold Ashanti initiated a programme seeking to introduce automated, blast-free, continuous gold mining at depths 5 km underground14. These steps employing ‘horizon-three’ technology to realise ‘a new mining paradigm’ are considered a direct response to the sustainability of current models, and the cost escalation at remote sites. Entirely automated mines appear to carry implications for the shape and skills-base of the workforce; potentially removing personnel from the face and assigning to systems management and maintenance. Visions include: ‘horizon-three technology will result in mine workers being removed from the high-risk deep-level areas, ultra-deep resources being profitably accessed, and a competitive advantage opened up in deep mining’ – AngloGold Ashanti project commentary ‘humans will no longer need to be hands-on as all this equipment will be autonomous - able to make decisions on what to do based on their environment and interaction with other machines’ – Rio Tinto, Komatsu programme commentary
Environmental Depletion of virgin metal stocks paired with failures in recovery of in-use materials has lead scientists to flag Copper, Zinc, Platinum, Gallium, Indium, and Hafnium as increasingly ‘endangered species’ under current practice. Imbalance in the rate of
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extraction versus recycling is seen to drive new design decisions into the manufacturing process, together with extension and development of the recycling programme15. Businesses such as Umicore represent this shift in action with development of closedloop recycling of the Platinum Group Metal (PGM) catalysts used in chemical, petroleum, and pharmaceutical industries. Encroaching shortage, the high value of the commodity, and industry alignment has underpinned a closed-loop recycling process that maximises the capture and recirculation of used resources16. Moves to close open-loops in key metal life cycles follow economics of the proposition; with innovative recovery systems validated by sufficiently stressed resources. The hike in demand for Lithium by the automotive battery industry presents a focus of pre-emptive action in that quarter of the supply chain17. Closing loops with less captive applications distributed across consumers is a fundamental challenge. As with oil, intensified exploration paired with novel extraction capability has lead to commentators to reconsider the extent of depletion of virgin metals and the nearness of ‘peak metal’. Economic and political forces continue to open ‘new fronts’; examples including ArcelorMittal/Nunavut’s move to increase their stake in Baffinland Iron Mines Corporation18 and the strong growth of African mining sector19. More radical responses include an emphasis on underground mining of metals, facilitated by technological advance: ‘The new trend is towards discovery of buried deposits, some very high grade. So there is enormous potential for buried mineralisation around existing open-pit mines. And this will be a fertile avenue for copper exploration for many decades to come’ - Tom Albanese (CEO, Rio Tinto Group)20 In addition, a trend towards ‘extreme mining’ includes the emergence of an ocean-floor mining industry focussed on exploitation of ‘massive’ metal sulphide deposits that have formed at deep-sea hydrothermal vents21.
Legal Beyond the manifestation of aforementioned political strategies in legal and regulatory instruments such as taxation and permitting, a key legal trend is the changing role for mining regulators precipitated by mining accidents. Accidents at Upper Big Branch in the US, San Jose in Chile, Pike River in New Zealand, compounded by the notoriety of Chinese mine safety are predicted to drive an amplification of the role and visibility of inspectors and regulators in mining projects 22. Commentary signals greater powers for the regulator to influence decisions, hold companies to account for violations, and ultimately take greater control of operations. Currently, the US, Chile, Columbia, and China are pursuing significant review programmes centred on mining safety23. Taken as a whole, companies face increasingly complex risks and challenges when seeking to secure permits, attain compliance, and report performance across different
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jurisdictions whilst seeking to mitigate the cost of litigation undertaken by affected communities and stakeholders.
Mining Man. 2011. ‘Mining 2011 Outlook and Hot Topics’. www.miningman.com/Blog/January2011/Mining-2011-Outlook-and-Hot-Topics 2 The Australian. 2010. ‘Full statement and detail of new mining tax’. www.theaustralian.com.au/politics/fullstatement-and-detail-of-new-mining-tax/story-e6frgczf-1225887000521 3 Mining Weekly. Swanepoel. 2010. ‘Forrest says Australia’s MRRT is unconstitutional’. www.miningweekly.com/article/forrest-says-australias-mrrt-is-unconstitutional-2010-11-08 4 Deloitte. Energy and Resources. 2010. ‘Tracking the trends 2010: A look at 10 of the top issues mining companies will face’. www.deloitte.com/view/en_CA/ca/industries/energyandresources/21920becfde75210VgnVCM100000ba42f0 0aRCRD.htm 5 Deloitte. Energy and Resources. 2010. ‘Tracking the trends 2010: A look at 10 of the top issues mining companies will face’. www.deloitte.com/view/en_CA/ca/industries/energyandresources/21920becfde75210VgnVCM100000ba42f0 0aRCRD.htm 6 Deloitte. 2011. ‘Tracking the trends 2011’. www.deloitte.com/assets/DcomCanada/Local%20Assets/Documents/EandR/Mining/ca_en_energy_Tracking_the_trends_2011_113010.pdf 7 Global Intelligence. 2010. ‘Tidal Wave of M&A Activity Expected from China in 2010 and Beyond’. www.globalintelligence.com/insights-analysis/bulletins/tidal-wave-of-m-a-activity-expected-from-china-in8 Mining Weekly. Swanepoel. 2010. ‘Technology seen as key to future of mining – Albanese’. www.miningweekly.com/article/technology-seen-as-key-to-future-of-mining-as-sector-faces-lower-gradesalbanese-2010-11-03 9 Deloitte. Energy and Resources. 2010. ‘Tracking the trends 2010: A look at 10 of the top issues mining companies will face’. www.deloitte.com/view/en_CA/ca/industries/energyandresources/21920becfde75210VgnVCM100000ba42f0 0aRCRD.htm 10 Mining Weekly. 2010. ‘Mining Skills Shortage to be More Acute by 2020’. www.miningweekly.com/article/skills-shortage-to-be-more-acute-by-2020-2010-03-12 11 Rio Tinto Centre for Mine Automation: www.acfr.usyd.edu.au/rtcma/ 12 Mining Man. 2008. ‘The Future of Mining – Robotics and Automation’. www.miningman.com/Blog/August2010/The-Future-of-Mining---Robotics-and-Automation 13 The Australian. Trounson. 2008. ‘Rio to trial automated mining’. www.theaustralian.com.au/business/mining-energy/rio-to-trial-automated-mining/story-e6frg9df1111115351260 14 Mining Weekly. Creamer. 2011. ‘AngloGold broaching non-blast automation to mine deep gold’. www.miningweekly.com/article/blast-free-continuous-automated-mining-on-way-to-unlock-100m-anglogoldoz-2011-01-26 15 Chemical & Engineering News. Ritter. 2009. ‘Future of Metals’. http://pubs.acs.org/cen/science/87/8723sci1.html 16 www.umicore.com 17 Cleantech Group. Sibley. 2009. ‘New business opportunities opening with lithium battery recycling’. http://cleantech.com/news/5068/recycling-tied-lithium-battery 18 NYTimes. DealBook. 2011. ‘ArcelorMittal and Its Partner Add to Stake in Baffinland’. http://dealbook.nytimes.com/2011/02/07/arcelormittal-and-nunavut-add-to-baffinland-stake/ 19 Independent Online. 2011. Africa's share of mine deals triples. www.iol.co.za/business/international/africas-share-of-mine-deals-triples-1.1023853 20 Mining Weekly. Swanepoel. 2010. ‘Technology seen as key to future of mining – Albanese’. www.miningweekly.com/article/technology-seen-as-key-to-future-of-mining-as-sector-faces-lower-gradesalbanese-2010-11-03 21 Marine Policy. Woods Hole Oceanographic Institution. 2010. ‘Deep-sea mining of sea-floor massive sulphides’. www.whoi.edu/fileserver.do?id=61724&pt=2&p=68128 22 Mining Man. 2011. ‘Mining 2011 Outlook and Hot Topics’. www.miningman.com/Blog/January2011/Mining-2011-Outlook-and-Hot-Topics 23 Obama launches sweeping mine safety review: www.msnbc.msn.com/id/36556146/ns/politicswhite_house/ - Colombia calls for mine safety review: www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=119362&sn=Detail - Chile's President Pinera promises mine safety review: www.bbc.co.uk/news/world-latin-america-11543473 1
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