The survey of more than 230 mining industry leaders asked respondents to give their views on different aspects of how the innovation ecosystem worked in the mining industry and what steps could be taken to move it to a level enjoyed by benchmark industries such as the semiconductor, automotive and telecommunications sectors.
The survey, which led to the recently released Innovation State of Play 2014 Report, was completed by senior mining executives across six continents. Respondents included chiefs of strategy, operations, technology and executive officers of mining companies and mining suppliers.
The survey conducted by consultancy VCI with the support of the University of Western Australia’s Energy and Minerals Institute, indicated that the best method was for suppliers and customers to focus on value delivery, not just cost.
Easy to say, but there is a general squeeze across pretty much the whole mining sector and that penny-pinching is suppressing supplier innovation.
Which is a quandary. It is that very supplier innovation that can lead to the breakthroughs that will reduce miners’ costs.
VCI founding partner Dr Graeme Stanway said he believed the time for innovation was not far off.
He said he believed companies have gone through the first and second rounds of cutting projects and staff so there would not be too much ground to be gained there.
That leaves innovation as the way forward.
What that innovation will be exactly is hard to say, but on trend it seems likely to be in the areas of automation, using data better and in better extractive technologies.
Stanway said there was often a disconnect between innovation and business strategies within companies that hurt their long-term profitability at the expense of short-term outcomes.
“The consequence is that the core process in mining is often much like it was 30 years ago, except that everything is bigger,” he said.
“Service companies have not significantly changed this, opting to develop products that fit into existing mining systems and struggling to articulate or sell large-scale platform changes.”
Stanway said while mining companies owned 90% of the mineral real estate, they controlled only 10% of the intellectual property.
IP typically resided with the suppliers and a successful business model moved the relationship between customer and supplier from purely transactional to value-based.
The IP that does reside with the miners is often found in their production data, which they are often loath to share.
Gold Fields head of engineering and projects Paul Lucey told MiningNews.net that the miner was prepared to share such data with suppliers – with suitable confidentiality protections in place – to help them find solutions to Gold Fields’ problems.
A key missing component the research identified was the cultivation of strategic partnerships, such as those common in the car industry.
A network of strategic partnerships around mining companies would allow risk-sharing and crate value-based relationships with a commitment to shared outcomes.
Instead, miners want to control any solutions their suppliers may come up with and try and ensure they do not get shared with their competitors.
Stanway said investors were looking for a structured approach to innovation as a predictor of longer term success.
He said there should be collaboration – three to four non-competitive suppliers working together.
For Stanway the key for miners moving forward is to get improvements right across the process chain.
This means improving operations from exploration to better delineate the resource through to the drilling and blasting to properly fragment the material and separate waste from ore. Get that fragmentation right and the loading becomes easier – and the processing too.
“Certainly Rio Tinto really centralised a lot of that [process chain] behaviour,” Stanway said.
“I wonder if they hadn’t done that would others have been pushing at it so quickly after.
“If anything it would have been better if it had of been done a few years earlier.”
Processing is an interesting area and one ripe for innovation – particularly in terms of comminution.
According to the State of Play report, miners are facing restrictions on energy yet the industry is still using “antiquated equipment like the ball mill that is only 3% efficient”
Stanway said anything to reduce energy consumption and waste management would be a boon for the industry.
“Anything that reduces energy consumption will be needed.”
EZONE UWA director Dr Peter Lilly said the survey also showed companies leading the field in innovation were those that got in first – providing they got it right.
“The survey shows it’s actually less risky to be an early mover than to wait, as long as a structured framework for implementation is in place,” Lilly said.
“To wait may seem less risky but by then the market is often too crowded.
“Conservative followers also tend to have an unsupportive environment for innovation implementation leading to poor outcomes.”
Mining companies operating in Africa was an example, where early movers were enjoying the rewards while latecomers were often struggling because they did not understand the local conditions.
Lilly said one of the key benefits of the study was it allowed both large and small companies to benchmark themselves against their peers, particularly important if companies were implementing or planning significant change management programs.
He said Australia’s mining innovation ecosystem was showing clear signs of distress as companies and governments took a more defensive position in the face of tougher global economic conditions.
“I think we are on the cusp of a downhill slide,” Lilly said.
“For 20 to 25 years Australia has been at the forefront of mining innovation, for example, through the cooperative research centre program.
“In the 1990s we had four or five CRCs in the minerals space. Today only one remains and government support is uncertain.”
Lilly said the mining equipment and technology services sector generated $90 billion in gross revenue annually, with more than $15 billion of products and services exported to every corner of the globe and $4 billion spent on research and development.
“Australia has been a global leader for innovation in the mining sector but there is cause for concern,” he said.
“We have seen the US lose ground and the rise of Canada and Chile for example.
“The mining innovation ecosystem in Australia definitely requires serous rehabilitation to reverse the current declines in research and development activity.”