Why the Mining Industry Needs to Manage Its Assets Better [opinion]

Mining companies have worried about maintaining their tools, equipment, facilities, and other assets as long as mining has existed. But where we used to make repairs and improvements reactively, responding to equipment failures and problems as they arose, we now have a host of new tools to manage asset health, helping increase the efficiency and effectiveness of our systems. (We’ll be talking about these new tools in depth at our Strategic Asset Management through Asset Health session at Ventyx World Asia Pacific.) These tools have appeared just when the mining industry needed them most.

Once synonymous with riches, mining today is just the latest once-impregnable industry to be shaken by the realities of doing business in a globalized, connected world. Costs of extraction, production and transportation are up, prices are soft, demand is fickle and stock values have swooned. Industry analysts see the current challenges as structural, not just cyclical. “The mining industry is facing a confidence crisis,” says PwC Global Mining Leader Tim Goldsmith. What’s happening right now in mining “is not a pendulum swing, it’s a seismic shift,” says Deloitte in its Tracking the Trends 2014 report.

Most industry experts agree that the time-honored historic solution – hurriedly finding more stuff to mine – won’t work anymore. As with most industries, today in mining it’s all about increasing the productivity of existing assets and boosting efficiency to reduce operating costs: the dreaded imperative to “do more with less”.

This once-chilling maxim is actually good news: Being forced to do more with less offers mining an opportunity to leap into a new age of innovation that promises even richer levels of success and prosperity. Leveraging existing and emerging technologies, there’s a way to turn “do more with less” from an empty – and dispiriting slogan – into a real-world mining business strategy.

Story continues after the jump.

Let’s start with the industry’s biggest cost, maintenance, which accounts for 30 percent to 50 percent of total operating expenses, according to Global Mining (I’ve seen mines where maintenance ran as high as 70 percent). How do the vast majority of mining companies currently try to hold down the cost of maintenance? By using a time-honored array of disparate, siloed operational systems that generate tons of data that’s rarely integrated, analyzed and refined into actionable intelligence to answer Maintenance Question No. 1: What’s the business cost/benefit of fixing or replacing an asset now, or waiting until later?

That question is getting potentially easier to answer as more and more data flows from connected devices reporting to operational systems in real time – the Internet of Things. The potential to answer becomes the answer by combining data from these operational systems with information technology’s business intelligence, analytics and financial information. Take a haul truck: combining operational technology (OT) data beaming from that truck’s connected sensors with information technology (IT) can answer such fundamental, business-critical questions as, “What’s the economic impact of one cylinder on that truck not working?” “Would it cost more to fix it or replace it?” “Should we fix or replace it now, or wait?” “What does this flow of information say about our entire maintenance strategy?”

Mining hands used to the old way of doing things may snort at the concept of integrating OT with IT. In many companies, the operations folks and the IT folks don’t even like each other because they’re in a constant struggle for ownership, which is obviously self-destructive. One sterling exception is Cliffs Natural Resources, the international mining company, that has a staff position called “senior director of IT/OT.” Cliffs is currently piloting integrated IT/OT for predictive maintenance on its haul trucks, with hopes of extending the solution to such other key assets as conveyers, shovels, drills, crushers and sag mills. “It’s pretty simple,” says John Tish, Cliffs IT/OT guru. “Commodity prices are going down and expenses are going up. The only way we can remain successful and competitive is by bringing together in real time vast amounts of analyzed, asset-related data to reduce our operational and maintenance costs while providing greater reliability and production output.”

With the rise of the Internet of Things, IT/OT integration is moving swiftly ahead in many industries as a way to, yes, do more with less. Will mining embrace it as well? That’s a crucial question, since mining has historically been a late mover. As Mark Cutifani, chief executive of Anglo American, told The Australian newspaper not long ago, “[Mining] is some 20 to 30 years behind other more progressive sectors in terms of business practices.” My view: mining doesn’t have a choice. The industry must evolve permanently from a focus on getting more out of the ground to a focus on efficiency, ROI and maximizing the health and productivity of existing assets. Miners who don’t embrace the benefits of IT/OT integration may not be around very long.

Shawn Lyndon is Senior Vice President and General Manager of Asset Health Solutions at Ventyx, an ABB company.

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