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Michael MacFarlane3DEXPERIENCE FORUM
November 11, 2014
The Future of Mining
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Overview1. Many industries are in the network ERA and this is the future for mining2. Kuhn Paradigm Cycle is always in play3. The prevailing mining paradigm for both open pit and underground mining based on:
1. Cheap labour2. Cheap power3. Shallow high grade pits 4. Shallow underground mines … no longer holding up
4. The capital investment equation is breaking down and to encourage long term investment in the mining industry we need to be improving one or more of following commercial drivers:
1. Improved labour productivity2. Reduced energy intensity3. Increased mining intensity, and4. Low capital intensity
5. New mining models are emerging based on new technology
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Evolution of Underground Mining
Manual Era
Effic
iency
Impr
oved
Saf
ety,
Pr
oduc
tion
& C
ost
Mechanized Era Automation Era
1900 2014
• Separation of people and machines; people serve the system
• Behaviour dominant• Bigger is better running out of
steam.• Automating from a mechanization
platform requires robotics … technology not ready
• Thinking dominant• Decision speed• Access to people• Collaboration• Innovation
With the separation of people from machines the
behavioural framing is no longer relevant
Future
Three aspects of work1. Decision making2. Physical work3. Technology
Network Era
We are trying to automate by extending the thinking from mechanization rather than focus on controlling the environment and thinking from the future
Organizing People
Managing Maintenance
Managing Logistics
Managing Decisions
Margin Generation
• Labour intensive, handheld tools and low productivity …
• More people is better • People used tools
• Machine energy displacing human energy and on scale … bigger is better ; people serve the machine
• Move to bulk mining methods
Source, MDM Mining Consultants, 2013
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Theory of Paradigm Change
1. Accepted Business
Model
2. Model Drift
3. Model Crisis
4. Model Revolution
5.Paradigm Change The Kuhn
Cycle
1. Accepted Business Model – The industry has a technical and economic-based model of understanding (a paradigm) that works
2. Model Drift – The model of understanding starts to drift due to accumulation of anomalies that the models cannot explain
3. Model Crisis - The Model Drift becomes so excessive, the model is broken. It can no longer be used to reliably guide problem-solving. Attempts to patch the model up to make it work fails
4. Model Revolution – New models emerge attempting to explain new reality
5. Paradigm Change – A single new paradigm emerges and the field changes from the old to the new paradigm. When this step ends the new paradigm becomes the new accepted business model
Source, Kuhn Paradigm Shifts
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Early Days of Open Pit Mining
Mechanization was having a big impact on mine productivity and profitability
It all started small but BIGGER was on its way
Source: MDM Mining Consultants Library
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Open Pit Mining and Economies of Scale
Bigger was better - drove massive economies of scale thinking ….
… and open pit mining went really big!
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Open Pit Mining on a Massive Scale
Economies of scale limits are being tested with 1mtpd operation with 400 t trucks ….
…. and the model looks to be breaking down.
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Open Pit Mining Looks Different Now
People are beginning to think differently ….
… but is this the right technology model with which to go forward?
•Bigger is better is reaching its limit•Complexity and size of operations are now outside the capability of people•Capital cost to build mines is killing many projects•Solving geological complexity in the mill is a big part of the problem now.•Pits are getting deeper•Head grades are falling•Energy costs are going up quickly
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A Natural Progression
Grasberg is an example of the natural progression of many open pit operations …
… and maintaining current production rates will be a major challenge
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Costs are Going UpSurface Mine CapexUnderground Mine Opex
Surface Mine OpexBeneficiation Capex
Underground Mine CapexBeneficiation Opex
170
160
150
140
130
120
110
1002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: www.infomine.com/costmine/indicess
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Grades are Going Down
Source: Walters et al, 2013
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All Models Eventually Break Down
Time
Impr
ovem
ent Rising labour
costs & bigger is better
Low margin
Big volume
Bigger is better
Rising labour & power cost
Bigger has reached barriers
Big volume low margin high capital and risk
In and out of profitability
Economic model breakdown and a new paradigm emerges
New ERA of mechanization
Cheap labour
Cheap power
Law of diminishing returns is always in play
Source: MDM Mining Consultants 2014
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Mechanization Would Transform Underground Mining Too
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The Beginning of Mechanization Underground
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1974 - Drill Jumbos introduced to mechanized cut & fill mining
Large hole blasting introduced
1978 - First electric scooptram used on 6400 level. #3 shaft mine production curtailed.
MINING IMAGESBig Mobile Equipment Began to Emerge & Change the Industry
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An Industry Fully Transformed
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Technology has Allowed us to Drill Faster …M
eter
s per
day
Year
Drift/Tunnel advance rates in mining
0
5
10
15
20
25
30
1940 1960 1980 2000 2020
Series1
...but it has not resulted in increased
meters developed per day
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“We” Handed our R&D over to the OEMS
OEMs are doing our R&D:
Our cycle has been fragmented into more and smaller process steps, each with $1m piece of equipment
Productivity has dropped
Future looks like more of the same
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MINING IMAGESMines Getting Deeper & Driving Towards a Continuous Operation with Automation
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The Push to Go Deeper & Test the Limits
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Depth Began to Constrain the Mine DesignsStage 1: Few constraints on stopesize & sequence
Stage 2: Depth began to constrain both stope size & sequence
Stage 3: Depth is now the central design consideration
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It’s High Grade Creighton is Chasing
Slide 22
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The Investment Cycle is Being Challenged
Extending ~100’/yr VerticallyExtending ~200’/yr Laterally
=========Adds ~ 2-5% to costs/yr
Shaft Bottom
Mined Zones
Future Mining
Lateral Extent
Depth
Current Mining
The increasing distance from hoisting horizons to the new mining areas is adding to operating costs
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Signs that #3 is Happening
1. Accepted Business Model
2. Model Drift
3. Model Crisis
4. Model Revolution
5.Paradigm Change The Kuhn
CycleCommercial drivers:1. Labour Productivity 2. Energy Intensity3. Mining Intensity4. Capital IntensityThe investment cycle is being interrupted
Capital cost is killing many projects
400t trucks ETF trucks???
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1
2
4
56
One Hundred Years of Mining Technology Evolution
3
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The Mining Industry is ChangingCentral monitoring centers are at the heart of the paradigm change
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A Structured Approach is Emerging
Mining has historically used a decentralized and highly unstructured approach …
… and this is part of the new mining paradigmSource: Anglo America Investor briefing, July 2013 Source: BHP Investor briefing: iron Ore, Oct 2014
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Technology Allowing Large Complex Operations to Manage Across a Larger Value Stream
Source: BHP Investor briefing: iron Ore, Oct 2014
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New Technology & Focus on Brownfield Expansion is Causing Emerging New Thinking
Source: BHP Investor briefing: iron Ore, Oct 2014
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A New Trend is Emerging
Technology development:Is the industry taking the right approach?
Are we betting on the right technology?
Is system(s) thinking being employed?
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Think Big - Test Small - Scale FastThe key to successful innovation is testing small and thinking end-to-end ….
… and these machines are big – expensive and point solutions!
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Where is Underground Mining Heading?
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Technology Development Managed at theExecutive Level Again
Source: BHP Investor briefing: iron Ore, Oct 2014
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ParametricDesigns
Agile Value Chain
Continuous Automated OperationsSmallData
Real-time Digital Mine
Increase Flow
Synchronize & Integrate
Optimize
Innovation Technology Collaboration
Strategic Alliances
Decision speed
Predictive
Enabling Technology
Technology Roadmap
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Signs that #4 is Happening
The KuhnCycle
1. Accepted Business Model
2. Model Drift
3. Model Crisis
4. Model Revolution
5.Paradigm Change
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Evolution of Underground Mining
Manual Era
Effic
iency
Impr
oved
Saf
ety,
Pr
oduc
tion
& C
ost
Mechanized Era Automation Era
1900 2014
• Thinking dominant• Decision speed• Access to people• Collaboration• Innovation
With the separation of people from machines the behavioural framing is no longer relevant.
Future
Three aspects of work1. Decision making2. Physical work3. Technology
Network Era
We are trying to automate by extending the thinking from mechanization rather than focus on controlling the environment and thinking from the future.
Organizing People
Managing Maintenance
Managing Logistics
Managing Decisions
Margin Generation
