In the natural world, ecosystems develop when a range of different organisms depend on each other to survive in a mostly independent system. Ecosystems vary across the world, yet fundamentally, savannahs, rainforests, deserts and the deep sea all function as separate systems, with transition zones in between. Certain organisms move across ecosystems; this adaptability tends to contribute to the longevity of their species. Global industries are themselves ecosystems, operating and services companies rely on each other for mutual survival in a competitive environment, with some entities moving across ecosystems. While mining is characterised by long-asset lives and large capital requirements, the mining ecosystem is fast-changing, dynamic and unpredictable.
Shooting for the stars
Developing industrial capabilities in space has always been a question of technological capability rather than ambition. The technical requirements of operating even simple machinery remotely, across great distance and in hostile and difficult environments, has constrained humanity’s space ambitions. However, given that 30% of miners believe that other industries are driving innovation in mining, it is unsurprising that the convergence of these two separate ecosystems in mining and space is set to significantly accelerate the capabilities of both industries.
Mining is a global leader in autonomous equipment (a top innovation priority among 48% of miners) especially within challenging and uncertain environments, often controlling said equipment from remotely across great distances. The development of these capabilities has been driven by industry needs: safety, efficiency, and access to skills. These needs drove rapid operational technology development in bulk mining, with the rest of the industry close behind. As countries with rich natural resources look to diversify their economies, the application of mining capabilities to space technology presents a compelling opportunity. For example, Australia is developing a government space agency and partnering with another historically strong mining country in South Africa to develop the Square Kilometre Array, the world’s largest and most capable radio telescope.
Conversely, the space industry enjoys significant capital availability and massive value upside. If the technology can be effectively transferred into space, mining can benefit reciprocally from technology advancement in that industry as well as the development of a nascent space mining industry.
The mining industry has often borrowed technology from other sectors and applied it to the unique mining operating environment. The space industry presents an opportunity to do the reverse; to build a space technology ecosystem out of an established mining technology ecosystem. Could Toronto or Perth steal the crown from Houston to become the next hub of space operations, travel and industry?
Rise of the start-ups
Globally, start-ups are increasing in number and scaling quickly across every industry, leaving significant change in their wake. However, the hype around start-ups is yet to fundamentally transform mining. The high-capital nature of the industry, combined with the importance of physical assets and a relatively smaller number of customers in the market, means that start-ups can struggle to scale as effectively in mining as in other industries, particularly those that are capital light and consumer oriented. How long will this remain the case?
Our data shows that innovation is increasingly being driven by smaller start-ups as opposed to large services and mining companies – start-ups are now the second highest drivers of innovation in mining. The fast pace of technology development, the transparency and availability of data, and the increasing reach of venture capital are allowing start-ups to scale. Businesses such as HiSeis, BMT, Corescan, Incomplii and InDiMin are offering compelling services in direct competition with much larger services companies.
“No one has an authority over good or new ideas and most of the start-ups that are coming into the industry are generally taking an idea from somewhere else and trying to crack it into this different domain space.”Services Company Executive
The prominence of start-ups in the mining ecosystem raises two questions. For miners, how do they get closer to start-ups and benefit from their innovation potential, without necessarily resorting to acquisition and integration? Acquisition can work; however, it can dampen innovative cultures and may undermine the value of an ambitious start-up.
For services companies, how do they leverage their existing balance sheet, good reputation and deep knowledge of the industry to compete against more agile start-up competitors? Strategically-minded services companies see disruption ahead of time, acquire and integrate start-ups effectively across their service offerings. By investing heavily in their customer relationships by becoming an innovation partner to services companies, the most effective services companies become indispensable to miners.
“Services companies are becoming a much more obvious channel or destination for start-ups with good ideas, because they realise, they will never get to market unless they get access to a channel”Services Company Executive
Setting up or acquiring other businesses that operate separately and potentially compete with the old business model gives services companies a stake in the future without transforming their legacy business. In fact, it may ultimately be the only way to deal with potential disruption. Industries outside of mining have become comfortable with this, from social media with rival platforms (e.g. Facebook, Instagram and WhatsApp) to banking and fintech disruptors. When will we see it in mining?
Consumer is king
While mining is the source of materials for every supply chain globally, it has historically maintained its distance from everyday consumers. However, through a shift in consumer preferences which increasingly prefer sustainable supply chain practices and increasing transparency enabled by widespread consumer communications technology, this distance is diminishing rapidly.
Consumers are increasingly looking to purchasing pressure to agitate for change through economic forces. Industries such as the automotive, consumer technology, food and construction industries, whose markets tend to comprise of individual consumers rather than other businesses, are capturing premiums where they can market the sustainable provenance of their goods. These industries are consequently willing to pay a premium for demonstrable provenance for minerals. Already, almost 60% of miners see transparency and provenance as a value driver for mining companies in the near future. The ethical value premium is likely to be temporal; demonstrating sustainable provenance will increasingly simply be a condition of doing business.
Aided by significant advancements in communications and transparency technologies (such as blockchain), the provenance shift has already begun. ‘Green’ aluminium (smelted using renewable energy) enjoys a sustainability premium in the market. Recent computer models released by Apple proudly promote their 100% recycled aluminium content. Volkswagen is investing heavily in sustainably sourced lithium and recycling processes to reduce waste. Several interviewees recalled the interest that institutional investors are paying to other sustainable commodities, including ethically sourced cobalt, tantalum and gold.
Conversely, the actions of mining customers are also increasingly important due to the increased accountability for Scope 3 emissions. Thus, customer integration is key for accountability and transparency both up and down the value chain.
The great economic dispersion
Traditionally, mine sites were a hub of economic activity, drawing people in to work and fuelling the development of local communities. The operations themselves were labour-intensive and the complexity and scale of operations eventually often led to the outsourcing of work to services companies who operated and employed locally. The growth in local populations due to this work often led to the development of mining towns and regions, sustained through mining and related employment opportunities. The symbiotic nature of the mine site and communities, as well as the economic development the industry drove, encouraged strong local support for mining.
Globalisation of trade, accelerated by technology developments, have eroded much of the local hub of activity. The rise of automation is removing the need for some local workers to operate equipment, and those that are required can increasingly work off-site through remote operating centres. Globalisation and technology is also enabling more knowledge and services work to be performed anywhere globally, with this trend increasing given improving output quality in lower-cost countries. The adoption of virtual design and construction methods that are more precise than traditional construction, coupled with advances in manufacturing methods and modularisation, is driving the trend towards infrastructure being built off-site and only arriving on-site for assembly. This is likely to accelerate, as digital infrastructure develops – already digital technology is a prioritised innovation focus in over 80% of business in the mining industry.
The culmination of these forces is a significant dispersion of work around the globe and a decline in local economic activity. Operating models are becoming more globalised, driving specialisation and supply chain dispersion. As this occurs, the economic benefits of mine sites is increasingly flowing to concentrated hubs of skills globally, rather than to the local community, which still contends with the local environmental footprint of the site. The decline in economic development outcomes erodes community support for mining operations, which is seen as the second highest cause of poor perceptions of the industry. Miners may need to undertake a more sophisticated approach to local economic development to reduce risk exposure and maintain community support for operations.
As the covid-19 pandemic continues to evolve and businesses respond to the dynamic environment, we at State of Play want to provide as much valuable data back to the industry as possible to help guide the response. We are now moving toward a monthly cadence for our surveys, with some different questions and some that remain constant to track change over time. Even if you completed the survey previously, please complete it again here and share.
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