ROI on Mining Technology: Tactical View vs Strategic Vision
For the C-Level management in any organisation, Return on Investment (ROI), is a critical element in their business thinking and planning. There are as many different views on this, as there are people asked. In the mining field, the majority of organisations focus on a tactical view of ROI as it drives their current production or maintenance targets, having a direct impact on the bottom line of the company.
You might be wondering the difference is between a tactical vs strategic view of ROI?
A tactical view on ROI focuses on the short-term return for the business on an immediate action or campaign. For example, it may be focused on the current, three-month production plan, as this will drive short term revenue for the business.
A strategic view on ROI considers the long-term value, the actions or campaign offers to the customer base and is one of many actions required to realise the vision, and the benefit that provides, over a short-term win. It is possible for a tactical action to have a positive outcome in the short-term, only to have a neutral or negative outcome on the long-term profitability of the organisation.
Over recent years, there has been significant advances in technology in all industries and the mining sector has been no exception. Do mining Executives spend more on new fixed and mobile equipment to protect against the downtime from operational failures, or do they invest in technology to maximise the lifespan of the existing assets, minimising the total cost of ownership?
The answer is in reality, both, but not in equal proportions.
In the area of mine safety, the World Economic Forum predicts that the move to automation and other technologies within the global mining industry, could prevent more than 50,000 injuries, and in turn save up to 1,000 lives over the next decade.
You may be surprised to know that, with all the talk and press associated with autonomous cars by Google, Tesla and others, Rio Tinto have been using autonomous trucks on their mines since 2008. Using Komatsu trucks, which run 24/7, data indicates that these fleets outperform manned operations by approximately 14% and have reduced Rio Tinto’s operational budget by around 13%.
Caterpillar also has a large investment in this space and believe that their technology can reduce operational costs by as much as 30% and reduce safety incidents by up to 90%.
While the initial investment in the technology was significant and may not have been seen as a prudent tactical decision at the time, the long-term benefits are now being realised and are a demonstration of ambitious strategic planning by the organisations that has provided a significant ROI.
BHP, Australia’s largest miner has also heavily invested in autonomous technology, driving down operational costs and subsequently increasing profitability. Another example of a strategic investment by BHP is the current expansion of the use of drone technology to complement the existing array of mineral and equipment inspection processes.
The three key technologies that will impact the mining space in the next decade are further system automation that increases operational efficiencies through the capture and processing of data and artificial intelligence; new technologies that improve the discovery and qualification of mineral deposits; and real-time or near real-time systems that provide data analysis to increase an assets performance and efficiency.
In any business, ROI will always be a mix between tactical and strategic views. All organisations must consider both their short and the long-term expenditure and revenue targets when making investment decisions. It can be short-sighted to plan for the future when the immediate quarter, or annual targets are not being achieved through a lack of attention. It is a balancing act.
The use of data is becoming a critical aspect of business decision making, for both tactical and strategic investments. Technology companies are spending vast amounts on big data. In the mining industry, the machines that perform the operational activities are being fitted with intelligent systems to monitor all aspects of a machines health and performance. This data can be used to make tactical decisions on maintenance activities which enhance the operational effectiveness of the machine and provide a better capital ROI.
In the early 2000’s it was said that the company with the most data wins. The use of smart technology has opened the world to the use and value of data. Google, Apple and other technology companies use large arrays of data for live map information in mapping applications, utilising smart phone data without users even knowing it.
Mining companies are more frequently turning to data analytics to improve their short and long-term decision making. The use of smart systems and equipment will allow operators to identify potential failures with equipment before they become total failures, using data and artificial intelligence to maximise the operational availability of the equipment and improve the ROI.
Up until recently, most companies made investment decisions based on the tactical return on investments, however, this is changing. The big miners, BHP, Rio Tinto, FMG are turning to technology for strategic investment decisions and the subsequent long-term ROI. The smaller operators are now starting to explore the same opportunities to drive ROI.
In the future, virtual reality (VR) and augmented reality (AR) will play an increasing role in the way mining operations are run, reducing the need for manned facilities. Artificial intelligence will improve decision making using big data to identify and predict patterns in real-time.
When it comes to integrating new technologies into mining operations, although the initial cost of implementation can be high, the long-term financial return can far outweigh the initial investment. Sources predict that using smart sensors on mine sites could equate to savings exceeding USD $34 billion over the next 5 years. Sensor use will improve equipment utilisation, reduce equipment failures or downtime, and even facilitate predictive maintenance.
The use of technology is clear, to improve both the short-term tactical ROI and long-term strategic vision within the Mining sector. Balancing these competing priorities will only increase and improve as technology matures, providing opportunities to further enhance operational activities, improve workplace safety and maximise capital investment.