{"id":19799,"date":"2016-11-18T17:14:30","date_gmt":"2016-11-18T22:14:30","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/automation-and-asteroids-how-rio-tinto-is-changing-the-future-of-mining\/"},"modified":"2016-11-18T17:14:30","modified_gmt":"2016-11-18T22:14:30","slug":"automation-and-asteroids-how-rio-tinto-is-changing-the-future-of-mining","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/automation-and-asteroids-how-rio-tinto-is-changing-the-future-of-mining\/","title":{"rendered":"Automation and Asteroids: How Rio Tinto is Changing the Future of Mining"},"content":{"rendered":"

With increasing urbanization and economic growth in developing markets, as well as the need to upgrade infrastructure in established markets, demand for minerals has never been greater. Unfortunately, most low-cost, easy-to-access (so-called \u2018Tier 1\u2019) mineral deposits have been depleted, so producing metals like iron ore has never been more difficult or dangerous.[1]<\/a><\/p>\n

Physical challenges aside, the economics of mineral extraction are equally daunting. In commodity industries, the price of goods is set by the balance of supply and demand. Oscillating periods of over- or under- supply drive multi-year price cycles. Iron ore, for example, cost $180 USD\/ton in 2011 when producers struggled to satiate Chinese demand for steel, but has since dropped to $50 USD\/ton. In this environment, the key to capturing enduring value is to be the producer with the lowest marginal cost of production, so each ton of ore has the highest possible gross margin.<\/p>\n

How can miners achieve this? The key is productivity<\/strong>, and the lifeblood of productivity in mining is technology<\/strong>. Technology minimizes the variable cost per unit of production (mainly labor and energy), and removes bottlenecks in production to maximize throughput (and therefore maximizes the denominator over which fixed costs are unitized).<\/p>\n

Across the mining industry, Rio Tinto is leading the charge in innovating its operating model through automation, big data analytics and machine learning. <\/strong>Rio is the world\u2019s second largest mining company, operating in 40 countries and six continents, and one of the largest companies on both the LSE and ASX stock exchanges. Their digital transformation began in the mid-late 2000s near the peak of a global commodities boom, when Rio\u2019s constraint on production was its ability to hire qualified employees to operate in very remote locations. For example, it was an industry norm for truck drivers to earn over $250,000 per year, and mines were staffed by a largely fly-in-fly-out workforce that lived in purpose-built camps for shifts 1-2 weeks in length.<\/p>\n

In response to these pressures, Rio announced its plan for the<\/strong> \u2018Mine of the FutureTM<\/sup>\u2019. <\/strong>In 2008, it began trials of<\/strong> autonomous vehicles<\/strong>.[2]<\/a> In 2010, Rio commissioned its Operations Centre <\/strong>in Perth to centrally manage its Western Australian operations. Today, more than 400 operators track 3D visualizations of every piece of capital equipment covering 15 mins, 31 pits, four ports and 1,600 km of rail networks. Real-time big data analytics<\/strong> track productivity and safety of infrastructure that rivals the scale of many small countries. In many ways, Rio is a case study of what multinational companies can accomplish through an \u2018Internet-of-Things\u2019 network<\/strong>. By 2015, Rio had launched fully<\/strong> autonomous trucks<\/strong> in four of its iron ore mines, with plans to expand these machines to all open-cut mines.[3]<\/a> In the past five years, Rio has also launched autonomous drills<\/strong> and applied neural network machine learning<\/strong> to optimize the flotation processes that extract refined minerals from ore.[4]<\/a><\/p>\n

The benefits of autonomous and data-enabled operations are obvious<\/strong>. Most important is safety<\/strong>: robots don\u2019t get fatigued, their attention span does not vary, and their loss from industrial accidents (like falling rocks or explosions) pales in comparison to the loss of human life. Other benefits include lower operating costs<\/strong>\u2014there are now fewer truck drivers on $250,000 per year\u2014and increased throughput<\/strong> from less down-time due to shift changes, and less inter-operator variability. Greater use of remote sensors further provides rich data<\/strong> that machine learning algorithms can mine for continuous improvement. Collectively, this has added billions in productivity improvements<\/strong>.[5]<\/a><\/p>\n

While further innovation is underway, the journey toward automation is not without its pitfalls<\/strong>. For example, Rio has spent over $500m to deliver autonomous trains over the past four years, but failed to deliver the project on schedule due to ongoing difficulties (despite the promise of an extra two hours\/day of productive time, a prize with an NPV of billions).[6]<\/a> Furthermore, the company has faced significant resistance from unions, as jobs shift from highly-unionized frontline work to non-unionized knowledge and supervisory roles like analysts, programmers and robotics engineers.[7]<\/a><\/p>\n

The end game for Rio Tinto, and the mining industry generally, is end-to-end automation from \u2018pit-to-port\u2019<\/strong>. Much in the same way that wars can now be fought with autonomous drones supervised from thousands of kilometers away, mining is moving towards 24\/7 robotic operations with human supervisors located in the safety of developed cities.[8]<\/a> This not only removes the threat of injury and death <\/strong>(present in mining since time immemorial), but creates the potential to extract minerals from the ocean floor or below the Siberian permafrost<\/strong> in the near-to-medium term. In the long-term, the digital innovation born from skills shortages in the Western Australian labor market enables mineral extraction from asteroids<\/strong>, removing the trade-off between economic development and environmental damage. (785 words).<\/p>\n

[1]<\/a> Economist.com, \u201cThe lore of ore\u201d, http:\/\/www.economist.com\/node\/21564559<\/a>, accessed November 2016<\/p>\n

[2]<\/a> Cecilia Jamasmie, \u201cThe Mine of the Future Might be a Thing of the Past,\u201d Mining.com, January 2010, http:\/\/www.mining.com\/the-mine-of-the-future-might-be-a-thing-of-the-past\/<\/a>, accessed November 2016<\/p>\n

[3]<\/a> Andrew Topf, \u201cTwo Aussie mines start moving all their iron ore with driverless trucks,\u201d Mining.com, October 2015, http:\/\/www.mining.com\/two-aussie-mines-start-moving-all-their-iron-ore-with-driverless-trucks\/<\/a>, accessed November 2016<\/p>\n

[4]<\/a> Rio Tinto, \u201cThe Mine of the Future\u201d, 2014, http:\/\/www.riotinto.com\/documents\/Mine_of_The_Future_Brochure.pdf<\/a>, accessed November 2016<\/p>\n

[5]<\/a> Tess Ingram, \u201cThe Pilbara’s productivity push: drilling down to the small stuff,\u201d Australian Financial Review, September 2016, http:\/\/www.afr.com\/business\/mining\/the-pilbaras-productivity-push-drilling-down-to-the-small-stuff-20160912-greo6p<\/a>, accessed November 2016<\/p>\n

[6]<\/a> Dave Stringer, \u201cCreating the World’s Biggest Robots Proves Challenging for Miners,\u201d Bloomberg News, June 2016, http:\/\/www.bloomberg.com\/news\/articles\/2016-06-17\/world-s-biggest-robots-delay-dims-zeal-to-automate-mine-trains<\/a>, accessed November 2016<\/p>\n

[7]<\/a> Andrew Duffy, \u201cUnions vs Rio: The Automation Battle,\u201d Australian Mining, March 2012, https:\/\/www.australianmining.com.au\/features\/unions-vs-rio-the-automation-battle\/<\/a>, accessed November 2016<\/p>\n

[8]<\/a> Kathryn Diss, \u201cDriverless trucks move all iron ore at Rio Tinto’s Pilbara mines, in world first,\u201d Australian Broadcasting Corporation, October 2015, http:\/\/www.abc.net.au\/news\/2015-10-18\/rio-tinto-opens-worlds-first-automated-mine\/6863814<\/a>, accessed November 2016<\/p>\n","protected":false},"excerpt":{"rendered":"

When you can remotely operate an autonomous mine from pit-to-port, the sky is no longer the limit<\/p>\n","protected":false},"author":2252,"featured_media":19800,"comment_status":"open","ping_status":"closed","template":"","categories":[471,5],"class_list":["post-19799","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-automation","category-mining"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nAutomation and Asteroids: How Rio Tinto is Changing the Future of Mining - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/automation-and-asteroids-how-rio-tinto-is-changing-the-future-of-mining\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Automation and Asteroids: How Rio Tinto is Changing the Future of Mining - 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