The COVID-19 crisis has forced the mining industry to change how it operates. And in many cases, the changes could shape what mining looks like in the future. Ben Creagh discusses what’s different with PwC Australia.
“Good luck and good management, sometimes, go hand-in-hand.”
This is how PwC Australian mining leader Chris Dodd sums up the impact of the COVID-19 pandemic on the Australian mining industry and its response.
Dodd is reluctant to say the industry’s leaders should pat themselves on the back for how the crisis has been managed, but he believes there is much to be thankful for.
His first point, that mining has been lucky, stems from it being deemed essential, unlike so many other industries in Australia that were shut down by COVID-19.
A sector like oil and gas, on the other hand, has not only managed the impact of the pandemic, but also a historic price crash caused by a disagreement between the world’s major oil producing countries.
However, mining deserves credit. Australian companies have still needed to contend with some notable challenges, not the least the restrictions on worker mobility as state borders closed.
Australia’s fly-in, fly-out (FIFO) model has been put to the test as interstate travel almost completely vanished.
The infrastructure and technologies that drive mining companies, from their corporate offices to activities on-site, have also been put under unprecedented pressure.
“When you think through risk management and disaster recovery plans, all of the ‘black swan’ type events are thought about,” Dodd tells Australian Mining.
“But it’s almost hard to think, what if travel stopped immediately and no human could leave their house?
“So, it was actually a different calamity to grapple with for the fact that it was also business as usual at the same time. It was harder to contemplate and wasn’t quite how they had trained for the event.”
Now, several months since the realities of the pandemic hit, Dodd and PwC Australia global consulting mining leader, Franz Wentzel, believe there should be optimism about how the industry can emerge from the crisis.
They say the industry has developed in a positive way from a technology, workforce and supply chain perspective that can benefit its future.
Technology trade offs
COVID-19 is shifting how technology projects in mining are executed, in some ways accelerating the industry’s digital transformation.
Wentzel says mining companies are using COVID-19 as an opportunity to invest in technology projects despite the economic pressures created by the pandemic.
“Technology transformation, major or moderate, was already on their radar and they are maintaining their investment,” Wentzel says.
“Obviously, there’s a laser-like focus on the costs associated with it because they want to accelerate the value they get out of it.
“It is all about the pace and impact they can do this in at a well thought out capital investment level.”
Mining companies have accelerated the use of technology by quickly pushing through the often-complex design and scope phases that had previously slowed digital projects.
Wentzel says many companies have taken advantage of technology already available to them and quickly operationalised it in many cases.
“We traditionally have capital projects with feasibility studies and an investment evaluation phase, a lot of that process has been fast tracked where they could be tested and implemented in a more agile way instead of trying to design the perfect solution on paper,” Wentzel says.
“By necessity they have adapted to what they have, and it has actually proven to work quite well. It is an interesting mind shift where the whole governance and evaluation has formed part of the business as usual requirements – they have trusted the process and made it work.”
Cyber security has become a key consideration for mining companies as reliance on technology and automation has expanded. How cyber protection is applied, however, has not always protected each of the digital blind spots that hackers attack.
In PwC’s Global Mine 2020 (an annual report that reviews the top 40 largest global mining organisations), it warns that cyber security has been falling as a key threat among mining CEOs over the past three years.
This is despite the fact that the number of reported cyber breaches among mining companies increased four-fold, prompting PwC to highlight reasons why they should increase their focus.
Firstly, companies have inadvertently created multiple new entry points for hackers as they have increased their use of automated or connected operational technologies (OT).
The motives for OT attacks have also become increasingly diverse and include politically or ideologically motivated reasons.
“Cyber security has been a bolt-on part of digital transformation, so the business becomes digitised with all the back-office systems first and they then overlay the security over that,” Wentzel says.
“A fundamental shift in their thinking is needed. Cyber security should be at the heart of their digital strategy and architecture because there are so many entry points. Cyber security is definitely something they can’t be complacent about. They need to be much more vigilant.”
Technology has augmented the role of mining employees over the past decade.
Now, COVID-19 has highlighted an inevitability for further changes as the mobility of workforces has been compromised.
Mining companies emphasise that existing employees will be retrained, or skills rebranded as automation and other digital opportunities are implemented.
COVID-19 shapes as an instigator of further changes to how employees work after it placed pressure on FIFO models, particularly in Western Australia (WA).
In early April, the WA Government formally placed a hard border closure on the state to protect communities from COVID-19.
Australia’s leading iron ore miners – Rio Tinto, BHP and Fortescue Metals Group – then introduced measures for their Pilbara operations in tune with government requirements.
“COVID-19 has put a lot of emphasis on and created a challenge on the FIFO workforce and that model that has been created over the last 20 to 30 years,” Wentzel says.
“They can’t do that anymore or they can, but it will come back to how they fundamentally change their operating model to allow for people who, say, live on the Sunshine Coast and fly over to the Pilbara every second week.
“How do they enable those people to do that work remotely, relocate or become more self-sustaining through these technologies? It will cause a shift in the type of people companies attract and the way they work.”
When restrictions eased in late May, the iron ore giants gradually returned to their usual FIFO schedules, but Dodd expects these companies and others will consider reshaping their workforces at remote sites.
“It could go back to the old way when we had mining villages and communities near mines right throughout the country, before FIFO took a lot of that away,” Dodd says.
“The value proposition has shifted. We might find the attractiveness of building mining towns becomes different again. People might like the idea of being close to work and being with their families, especially as we all consider the likelihood of something like this happening again.”
Supply chain shapes up
A modern focus to turn supply chain relationships into stronger partnerships and less of a transactional function has come to the fore during the pandemic.
Mining companies have taken the opportunity to work with their supply chain to protect the communities in which they operate from COVID-19’s potential impact.
BHP, for example, set up the $50 million Vital Resources Fund and accelerated payments to suppliers to support the businesses and communities it works with.
“There has been a significant opportunity for mining in their communities and many companies have jumped on it well through the crisis,” Wentzel says.
“They have helped set up COVID-19 testing centres, some health care facilities or moved PPE equipment through the existing supply chain they have in their natural way of doing business.
“That is a link where I see they can capitalise on their brand and that social licence to operate.”
PwC expects the role of the supply chain to become even more critical after work programs were suspended or deferred due to travel restrictions.
Resources companies have been forced to delay construction, shutdowns and routine maintenance activities across their sites.
By the time these projects are able to ramp up again, Wentzel anticipates that mining companies will be competing for labour among their peers and other industries.
“I expect there’s going to be a point in time when there will be a shortage of specific skills to cover the backlog of major overhaul, refurbishment or maintenance work that has been pushed out due to the lack of movement,” Wentzel says.
“Now that will affect mining but also oil and gas, utility transmission and distribution and local council projects – they will all have a competing demand for skills.”
The road out
As the mining industry navigates a COVID-19 impacted environment, it does so in a position that leaves most industries envious.
PwC’s Global Mine 2020 reported that the world’s top 40 mining companies have weathered the COVID-19 storm and emerged in relatively sound financial shape, particularly compared with other sectors, thanks to strong balance sheets and liquidity at the end of 2019. The report also acknowledges that the industry has adapted and evolved while managing the crisis.
“There will be some strong learnings out of this, such as the ability to use technology differently,” Dodd says. “We have seen executive teams (remotely) get together for 30 minutes every morning to work out the decisions they need to make that day.
“Some of these things would have been two- or three-month initiatives, but now you are getting decisions made in a short period of time. They might just now need to keep some extra capacity available if these events happen again.”
As more of these initiatives are successfully implemented, mining may indeed see its COVID-19 legacy become a permanent way of working in the future.
For more details and insight, please visit https://www.pwc.com.au/globalmine to download the report.
This article will also appear in the July issue of Australian Mining.