The services boom

March 23, 2016

There are still profits to be extracted from mining in Australia, as long as we are willing to make some smart, clear-eyed choices.

services boom

Australia’s mining industry stands at a crossroads. This presents new opportunities for the industry, says one of the experts in the field: Dan Sullivan, CEO of METS Ignited, the new government-backed body charged with building the fortunes of one of the nation’s most important revenue earners – the mining equipment, technology and services industry (METS).

“Mining has to improve its productivity. The industry’s boom years are over,” says Sullivan. “But we have to make a choice about how we are going to do that. Either we find new reserves of high-grade ore or we invest in innovations that will make existing mines more productive.”

Sullivan says that if the first course of action is chosen, it will inevitably take the industry overseas. “In Australia, the easy-to-find resources have largely been discovered. If we want high-grade ores, we’ll have to go deep underground or to other mineral rich countries in Asia like Laos.” However, when mining companies go overseas they have to deal with issues of sovereignty and politics over which they have little control.

The alternative is to become much more efficient at locating, extracting and processing ores in Australia – but to do that the industry must innovate. Hence the creation of METS Ignited, one of six Industry Growth Centres set up by the Australian Government to improve the nation’s industrial competitiveness.

The six Growth Centres are dedicated to food and agri-business; medical technologies and pharmaceuticals; oil, gas and energy resources; advanced manufacturing; cybersecurity and METS.

These Growth Centres are charged with facilitating better links between scientists and researchers; to harmonise regulations that control industry; to make better use of human capital – the workforce and management of companies; and to get better access to global supply chains. “These centres are led by industry, but are government-funded,” adds Sullivan, who served as Australia’s Consul-General in Lima and who worked for the Australian Trade Commission in Chile where he led a team that worked on developing business opportunities for Australia.

Launched in October 2015, METS Ignited is preparing a 10-year strategic plan to promote Australian mining innovation and support stronger collaboration between companies and research organisations. The plan should also ensure that Australian mining technology companies – the firms that build the sensors, drill heads, pipes, trucks and other machines that make mining possible – hold a strong position in global supply chains.

“The mining industry is on the cusp of a transformation, and where there is change there is opportunity,” says Sullivan.

services boom

During the early years of the 21st century, the Australian mining industry – fuelled by demands from China for our ore and minerals – went through an extraordinary boom.

It was “one of the largest shocks to the Australian economy in generations”, says Peter Tulip, senior research manager at the Reserve Bank of Australia.

Average incomes across the country rose substantially, while the boom triggered a large appreciation of the Australian dollar.

More importantly, Australia’s deposits of iron, gold and copper were aggressively mined.

The output of these mines has declined significantly since the boom, and operators now have to use 70% more energy because they have to dig deeper to access deposits.

Despite the extra effort, mine output has continued to decline. In 2000, goldmines produced 3 g of gold for each tonne of basic ore. By 2010, they produced under 2 g. “Productivity was already declining at the turn of the century,” says Sullivan. “The boom just masked it.”

Today Australia, which depends heavily on its mineral wealth, is expending more and more energy to dig up less and less iron, gold and other ores and minerals. Given the massive importance of mining to the Australian economy, this is cause for concern. The problem is that more than 80% of Australia’s mineral production comes from mines that are more than 30 years old, says Professor Richard Hillis, CEO of the Deep Exploration Technologies CRC (DET CRC). “We haven’t found new mines to develop – which is why we’re mining our old ones so severely.”

The situation is summed up by Elizabeth Lewis-Gray, Chair of METS Ignited: “The mining industry is facing challenges – deeper mines, lower grades, community opposition and more remote operations.” At the same time, there has been a relentless drive to cut costs.

“These challenges require solutions,” adds Lewis-Gray, who is also co-founder and chair of Gekko Systems, which specialises in designing and manufacturing mineral processing equipment.

One approach is to focus on exports of Australian mining technology, says Lewis-Gray. At present, this market is worth about $15 billion. The aim of the METS Growth Centre is to double the exports so they reach about $30 billion by 2030. “This is one of the reasons for branding the centre with a new METS Ignited Australia,” says Lewis-Gray.

What is needed, says Sullivan, are more sensors in mines, and more data, robotics and analysis of the total operation of finding, extracting, transporting and processing of minerals.

But this will require considerable investment. “The good news,” says Sullivan, “is that much technology already exists in other industries. If you look at the manufacturing or aerospace industries, materials and activities are sensed and analysed to maximise activity. The mining industry is just beginning to implement this sort of technology.”

services boom

Australia is ranked highly for its research in mining technology. Consider the example of the work of Hillis with DET CRC. It devised a system to simplify the lengthy process involved in cutting a rock core and sending it for analysis to an assay laboratory.

DET CRC’s researchers developed sensors that lie behind the drill bit and can analyse, in real time, the material that is being dug up, and assess if it contains worthwhile amounts of gold or copper. “It means you can stop drilling immediately if you find a deposit is worthless, without having to wait months for the assay report,” says Hillis. This is impressive, and gives an indication of the innovative quality of Australian R&D in mining technology.

Less auspicious, however, is Australia’s reputation for commercialisation. This a key factor to improve the industry focus and commercial rate of Australian mining innovation.

Sullivan points to the example of the Anglo-American mining corporation, which is holding open forums with NASA experts and advisers in advanced manufacturing and other industries to stimulate ideas. “A mine operating in a remote desert has a lot to learn from a NASA program placing robot vehicles on Mars,” he says.

Many mining innovations have already made it, of course. Caterpillar trucks are fitted with sensors that can tell when a driver is fatigued. Other devices can monitor tyre pressure, and can tell when a bucket is unbalanced because it has a huge rock inside it.

But not enough care is taken to study the data to create patterns revealing routes to further innovations. “The data is not being pooled and so cannot be optimised,” says Sullivan.

“It’s not rocket science. It’s really just a matter of getting the mining industry to aggregate the data it acquires so it can learn and go on to develop new products that will improve efficiency and cut costs.”

METS Ignited’s main challenge is finding a way to change the mining industry’s perception of itself as ‘a fast follower’; an industry that lets others experiment and take the risks before it then adopts the successful outcomes.

Such an approach means that, at its heart, the industry is reluctant to innovate. The function of METS Ignited is therefore going to involve helping the Australian mining sector make choices that will put it on the road to success.

“It’s a challenge, but it is certainly an achievable one,” says Sullivan.

– Robin McKie


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