Are mining companies closing the digital disconnect?

EY | October 2, 2017 | 12:00 am

The current digital disruption that is sweeping across the world and upending industries has resulted in a digital disconnect – a gap between the potential from digital transformation and the poor track record of successful implementations – in the mining and metals sector. This disconnect is not because of a lack of engagement from the sector, but is rather due to unsuccessful implementations, perceptions of high costs relating to IT spend and a disconnect with current operating models.

As productivity remains the number one operational risk in the mining sector, digital transformation in the sector will be a critical enabler to addressing the industry’s productivity and margin challenges. Mining companies will be able to better manage variability and improve productivity by merging digital with a manufacturing mindset, which focuses on productivity across the end-to-end value chain.

Closing the digital disconnect will position mines to be fit for purpose for the future, ensuring practical and sustainable solutions.
However, many mining companies are yet to seize the advantages of digital. The current rate of digital progress is out of sync with their scale of opportunity. EY’s global report, The digital disconnect: problem or pathway? found that 31% of 700 global respondents in the sector say digital is high on the agenda for their organisation, while 15% say it is not on their agenda at all.

An example of one of the many ways digital can transform operations can be found in a South African mine. This operation has overcome its numerous structural challenges through the use of digital radio technology to monitor slope failures. The technology used by the mine has advanced to a point where it tells the mine’s operators where and sometimes when the slope failures are likely to occur, allowing for evacuations to take place.

A second example is a mine that used digital technology to track equipment and employees through the entire operation. It allowed them to optimise the utilisation of equipment, reduce stoppages, minimise bottlenecks and improve asset productivity and utilisation.

These mines show the potential that can be reached in terms of both productivity and safety. A pragmatic digital strategy starts with clarity of purpose and understanding where it will create value, supported by an over-arching, integrated 3-5 year roadmap of digital initiatives that are margin accretive. Key is understanding what that requires in terms of governance, leadership, culture, capacity, capability, and digital process maturity.

Other examples where mining and metals companies seized digital opportunities include:

  1. Optimising production plans and productivity rates across any operation and managing variability under any conditions. Combining detailed ore body data with digitised equipment performance and maintenance data, in a real-time environment, allowed scenario analysis of alternative operating plans, and the ability to refine these plans for variability.
  2. Enhancing asset availability and reliability. A move to digitally enabled predictive maintenance allows for the extension of maintenance windows, reduced component and labour costs, and the minimisation of costly breakdown events. Further, once the effective maintenance practices are standardised, the introduction of robotic process automation (RPA) and schedule optimisation tools is possible.
  3. Understanding true end-to-end capability and systems bottlenecks, and supporting loss elimination, is fundamental to a manufacturing excellence mindset.
  4. Increasing agility and responsiveness to changes in market factors, such as freight rates and customers’ buying behaviour trends. This would optimise shipping and scheduling to reduce demurrage, maximise port utilisation and also enable miners to capture spot markets and price premiums via sales contracted at different points of the value chain (e.g., on the water sales).

The mining and metals industry plays an important role in South Africa’s economy. Digital enables mining companies to increase productivity and also solve safety problems. It is less about when to go digital, more about how to successfully operate in a digital world. Mining companies that will win in the digital age are those that use digital to solve business problems.