the future of mining
TRANSCRIPT
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1
The future of mining
DIEGO ARECESVP Mining, Minerals & Metals Solutions
September 18 2013, Arequipa, PERU
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● Introduction● About Schneider Electric and Mining, Minerals and
Metals in Schneider Electric● The 10 Global Market Trends and their Implications● Possibilities (or Options) for Mining Companies:
The Mining Business of Tomorrow● Technology for the next “Industrial Revolution” in
Mining● Conclusion
The future of mining
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3NOW!
Schneider Electric at a glanceThe global specialist in energy management
billion € of sales in 2012
NorthAmerica
25% AsiaPacific
27%Rest of World18%
WesternEurope
30%
28 30044 200
42 600
22 000
employees in 100+ countries
of sales devoted to R&D
Large company
of sales in new economiesBalanced Geographies FY 2012 sales
Year-end 2012 employees
Diversified end markets FY 2012 Sales(billion €)
Residential 9%
Utilities & Infrastructure 25%
Industrial & machines 22%
Data centres 15%
Non-residential buildings 29%
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The Future of MiningKey Trends in Global Mining
● Focus is on the most important trends in the mining industry
● Trends create major structural changes and are
reshaping the industry
● Changes generate implications or challenges● Companies acting on challenges will grow market
share in the future
Market Trends
Mining Business
Implications (Challenges)
Possibilities
(Options)Solutions
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1. The Impact of China2. Market Fundamentals Remain Unchanged3. Scarcity of Natural Resources4. The Renewed Role of Governments5. Talent Availability6. Sustainable Development: People’s Safety7. Sustainable Development: Environment8. Commodity Business Volatility9. New Technologies10.Globalization
tren
ds
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The Impact of China
●China has been the world’s economic growth engine for the last 20 years• Size and speed will be unparalleled
• Growth is slowing to single digits, causing an expected market reaction
tren
d
Source: IMF
Real G
DP
Grow
th
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The Impact of Chinatr
end
Source: Raw Materials Group, Stockholm 2011
Chinese Iron Ore Imports
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The Impact of Chinatr
end
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The Impact of China
• Growth has generated Chinese expansion abroad:• Mining Chinese FDI increased considerably
• Chinese supply chain and sourcing are required
tren
d
Source: Raw Materials Group, Stockholm 2011
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The Impact of Chinatr
end
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Implications to Miningtr
end
• Short term demand , prices and profits decrease
• Increased relevance of China > Customers, Suppliers, Partners, Colleagues
• Need to source alternate markets
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Market Fundamentals Remain Unchanged
● Mining market fundamentals remain unchanged● Population Growth
● Urbanisation
● Industrialisation
● Scarcity of resources●Sustainable development at center stage
● Commodities used as financial instruments will decrease
tren
d
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Market Fundamentals Remain Unchangedtr
end
126 Years Coal Reserves
770 QBTU by 2035 (40% increase vs. 2012)
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Market Fundamentals Remain Unchangedtr
end
9B people by 2050 (30% increase versus 2012)
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Implications to Miningtr
end
● Long term demand and price increase, associated to
productivity increase
● Source customers, suppliers and partners in even newereconomies
● Globalisation
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Scarcity of Natural Resources
● Natural resources are scarce● Usage is exceeding regenerative capacity
● 68 billion tonnes of raw materials used worldwide (2009 )
● 1/3 increase since 2000, double end 1970s
● Per capita raw material consumption is x4 in industrialised nations than in less developed countries
tren
d
Baeconomics, 02/2012
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Scarcity of Natural Resources
●Reserves data are dynamic:● Additional deposits have
developed● Existing exploited deposits are
being thoroughly explored● New technology or
economic variables improve economic feasibility
● Despite the depletion by mining, reserves data are
increasing
tren
d
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Scarcity of Natural Resourcestr
end
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Scarcity of Natural Resourcestr
end
Source: Australian Venture Consultants, 02/2011
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Scarcity of Natural Resourcestr
end
Silver
Manganese
CopperIron
Gold
Aluminium
Nickel
Manganese
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Implications to Miningtr
end
• Long term commodity prices will increase
• Finding new mineral resources will be more expensive
• New mine sites will be located in more remote and
riskier places
• Exploration and production > challenging geographies and environments
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The renewed role of Governments
●Political and economical reasons are driving
Governments to be much more involved in the mining business
tren
d
Source: The Economist and Financial Times
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• To benefit from mining activity• Direct Participation
• Ownership (w & wo operation)
• Indirect Participation
• Taxes
• Investment
• To regulate the mining business• Sustainable development
• Land distribution/ownership
• Exploration/exploitation permits
• Foreign participation
• New codes and laws
The renewed role of Governmentstr
end
Source: PricewaterhouseCoopers; 15th CEO Survey, 2012
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Implications to Miningtr
end
• Impacts the risk and costs of capital projects
• Directly increases the cost of doing business
• Bribery and corruption can take centre stage
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Talent Availability
● Talent availability remains one of the major risks for mining businesses
● Skilled worker shortages are a result of:● Benefits generated by mining businesses
● Remote locations
● Aging workforce
● Lack of interest from Generation Y
● Overloaded supply chains will further be outsourced
● New skills required to meet globalisation and new technologies
tren
d
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Source: PricewaterhouseCoopers; 15th CEO Survey, 2012
Talent Availabilitytr
end
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Talent Availabilitytr
end
Source: University of Queensland, Australia, 2007
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Talent Availabilitytr
end
Source: PricewaterhouseCoopers; 15th CEO Survey, 2012
http://www.pwc.com/gx/en/ceo-survey/pdf/15th-global-pwc-ceo-survey.pdf
Read the PricewaterhouseCooper’s Annual Global CEO Report for more insights from leading miners on Talent Availability
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Source: PricewaterhouseCoopers; 15th CEO Survey, 2012
Talent Availabilitytr
end
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Implications to Miningtr
end
● More expensive projects● Delay (or even cancellation) of new projects
● Higher operational costs
● Safety impact● Decreased productivity and quality
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Sustainable DevelopmentPeople’s Safety
●Sustainable Development has taken center stage:Economy, Environment and Society
● Communities, Governments, Shareholders and
Customers require mining companies to comply with (implicit and non-implicit) sustainable development:● Costs of non compliance are increasing● Mining licenses and customers are being lost, as is shareholder trust● Affects talent recruitment
● Mining companies are required to obtain the “social license” to operate:● Companies provide social dividends for employee health and safety, the
environment and host community
tren
d
https://www.globalreporting.org
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Sustainable Development: People’s Safetytr
end
Reference: ArcelorMittal
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Sustainable DevelopmentPeople’s Safety
● Mining employs 1% of the global labor force, and
generates 8% of the fatal accidents (Source: International Labor
Organization)
● Approximately 12,000 people die per year in Mining accidents
● Lack of information makes it hard to evaluate improvements
● Global Reporting Initiative delivering a sustainable development reporting framework
tren
d
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Sustainable DevelopmentPeople’s Safety
● China accounts for 40% of global coal output, and
responsible for 80% of global mining deaths yearly● China: over 3,000 people die from
mining accidents yearly
● South Africa: fatalities decreased by 2.4% to 128 in 2010
● Australia: fatalities decreased 63% to 6 in 2009-2010
● USA: mine deaths increased by 115% in 2010 to 77
tren
d
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● Not complying with sustainable development regulations
has a major impact , well beyond costs.
Sustainable Development People’s Safetytr
end
Marikana (South Africa)August 16, 2012
Reference: Financial Times
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● Not complying with sustainable development regulations
has a major impact , well beyond costs.
Sustainable Development People’s Safetytr
end
Reference: Financial Times
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Implications to Miningtr
end
● Operational cost increase
● Cost of accidents or safety breaches well beyond the cost of the instance itself, but may severely impact
production and share value● People’s safety will impact the social license to
operate
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Sustainable Development: Environment
● Environment
protection impacts the whole community in a direct and indirect way● Government, communities,
shareholders and customers are forcing commitment to sustainable development
tren
d
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Sustainable Development: Environment
● The next 10 years environmental sustainable development will shift: ● Understanding and setting standards to
implementing standards
● Reposition to a proactive positive impact● From large companies to the whole industry
● Mining companies, government and
communities all responsible
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d
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Implications to Miningtr
end
● Mining project costs will substantially increase● Impact will affect new investments● Early development of government and community
partnerships● Adoption and compliance to global reporting standards
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Commodity Business Volatility
● Mining has become a volatile business● Prices, shares, currencies
● Commodity prices are influenced by several factors● Business environment
● Geopolitical: Natural and human created
● Economical: Supply and demand
● Commodities used as financial instruments (ETF)
● No evidence that speculation fueled the spike in commodity prices and volatility. Demand-supply shock did
●Currency exchanges fluctuation
tren
d
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22 Years 10 Years
10 Years
Commodity Business Volatilitytr
end
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Commodity Business Volatilitytr
end
Source: Reserve Bank of Australia, June 2011
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Commodity Business Volatilitytr
end
Prices of commodities with not well developed financial markets increased as well
Two commodities with large derivatives markets. Supply of natural gas increased
Correlation between on-index and off index commodities
Inventories
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Implications to Miningtr
end
● Impact the timing and decision process for capital investment
● Demand instability will affect planning and
increase costs● Increases risk
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New Technologies
● Recent growth was a result of surge for
commodity demandand prices
● Growth coincided with a
decrease in
productivity and
investment in R&D
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d
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New Technologies
● The industry spends
less than 1% of
revenues on R&D● Average of the world’s
1,400 most important companies spend is
approximately 8%
tren
d
Source: elsevier, R&D prospects in the Mining and Minerals Industry
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New Technologiestr
end
Source: economics of industrial research and innovation, EU, 2011
1.31 -7.91
1.15 1.03
The 2011 EU Industrial R&D Investment Scoreboard: 1 400 World Companies
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New Technologies
● Major challenge: new technologies enhance productivity
● Technological advances from other industrial segments
may be applied to mining
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d
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New Technologies
● Analytics● Operation Optimisation and Business Decision
● Neuronal Technology● Process Optimisation
● Ergonomics and Human Machine Interface● Remote Monitoring and Management, Driverless trucks
● Image processing and 3D modeling● Geology
● Geographical Positioning● People location; Collision avoidance
● New Water Technologies● Use of saline water in mineral processing
tren
d
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New Technologies
● Major areas of innovation● Exploration
● Mining
● Mineral Processing
● Metal Production
● Sustainable Development
● Type of Innovation● Continuous Improvement
● Competitive Innovation
● Step Change Innovation
tren
d
Source: CSIRO, Jonathan Law, 2012
Source: CMIC, 2012
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● Step Change Innovation
tren
d
Source: CSIRO, Jonathan Law, 2012
New Technologies
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Implications to Miningtr
end
● Match productivity improvement with the right new technologies
● Drive the right IP strategy to achieve competitive advantage
● Partnerships with suppliers, researchers and educational institutions
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Globalisation
● Globalised economy: money, goods, data,
and people now cross borders● The Mining Industry is global:● Mine Location, Headquarter, Engineering House,
Supply Chain involved in CAPEX project, workforce, customers: all in different countries
● Operations through acquisitions
● Suppliers and Customers
tren
d
● Countries see Mining as an opportunity for economic development
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Globalisation
● It is all about information flow
●Mergers and Acquisitions● Large companies wanting to become bigger
● Companies from emerging economies breaking into developed economies
● Acquisitions create value, enable diversification and identify new growth opportunities
●Partnerships● Access capital and new markets
● Access new technologies and competencies
● Streamline operations and asset portfolios
● Address financing needs
tren
d
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Globalisationtr
end
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Globalisationtr
end
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Globalisationtr
end
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Globalisationtr
end
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Implications to Miningtr
end
● Consolidate > maximise productivity● Standardise to minimise costs● Integrate multiple operations
● Assimilate cultures and behaviors● Adapt to different legal and financial environments
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The mining (business) of the future will be defined by the possibilities (or options) the mining companies will consider to face thechallenges posed by the market trends …
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Market Trends
Mining Business
Implications (Challenges)
Possibilities
(Options)Solutions
Possibilities and Solutions
1. The Impact of China2. Market Fundamentals
Remain Unchanged3. Scarcity of Natural
Resources4. The Renewed Role of
Governments5. Talent Availability6. Sustainable Development:
People’s Safety7. Sustainable Development:
Environment8. Commodity Business
Volatility9. New Technologies10.Globalization
• Short term demand, prices and profits decrease. Long term increase.
• Increased relevance of China • Finding new mineral resources
will be more expensive. New mine sites will be located in more remote and riskier places
• More expensive capital projects• Higher operational costs• Decreased safety, productivity
and quality due to the lack of talents
• Complex decision taken due to market volatility. Increased risk.
• Demand instability will affect planning and increase costs
• Global integrated operations.• Diversity
The Mining Business of Tomorrow
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● From “don’t do evil” to an overall proactive positive impact
● From corporate social responsibility to creating shared value
● “Partnership” creation with government and communities to obtain the social license
Possibilities
Source: Michael Porter, 2012
Sustainable Development as the business driver
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● Creating an innovative culture● Protecting IP and use to gain
competitive advantage● Partnering with the supply
chain, researchers and educational institutions to create step change innovation
PossibilitiesProductivity increase through R&D and adaption new technologies
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● Being better rather than bigger● Diversify exposure: customers,
geographies, commodities● Excellence in capital allocation
and capital project execution● Include proactive sustainable
development in ROI analysis● Control costs and excesses
PossibilitiesAvoid exposure to volatility through disciplined capital allocation, cost management and value creation
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The Mine of tomorrow
A Sustainable Mine
• Safe• Environmental Friendly• With a license to operate• Where shared value is created for communities, governments and customers
Productive, Efficient & Flexible
• Best rather than biggest• Supply chain optimization to deliver the right volume at the right quality and cost
• Optimization of the production resources (capital, people, assets, raw material, energy, etc.)
• Flexibility to adapt to the volatile business environment
Where Value is Created
• Business value creation for shareholders• Not just dug out• Longer value chain
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The Mine of tomorrow
A Sustainable Mine
Productive, Efficient & Flexible
Where Value is Created
1.- Business Fundamentals
2.- Increased investment in R&D
3.- Investment in “new” technologies
4.- Partnerships with suppliers and research organizations
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The Mine of tomorrow
A Sustainable Mine
Productive, Efficient & Flexible
Where Value is Created
1.- Business Fundamentals
2.- Increased investment in R&D
3.- Investment in “new” technologies
4.- Partnerships with suppliers and research organizations
The next industrial revolution in Mining
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The Mine of tomorrow
•Exploration•Mining•Mineral Processing
•Metal Production•Safety•Environment (water,
energy, etc.)
•Tailings
1.- Business Fundamentals
2.- Increased investment in R&D
3.- Investment in “new” technologies
4.- Partnerships with suppliers and research organizations
Areas for “new” technologies and innovation
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● Finding New World-class Deposits in an Increasingly Challenging Exploration Environment
● Water Issues ● Automation and Process Control ● Reducing Energy Intensity ● Integration of Environmental Issues in Design and Engineering ● Mineralogy and Processing ● Open Pit Slope Stability ● Underground Mine Stability ● Low-capital-low-operating cost Leaching Solutions ● Tailings Management ● Management and Leadership Issues ● Accelerated Technology Adoption
Areas for “new” technologies and innovation
The Western Australian Minerals Industry An Assessment of Knowledge and Technology Needs and Local Research CapabilityAustralia Venture Consultants – February 2011
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Status of technology use in Mining
Adapting from other industries
Adapting from consumer markets
From own innovation in
Mining
�
�
�Continuous
Improvement
Competitive Innovation
Step Change Innovation
�
�
�The Mine of the
Future
R&D prospects in mining and minerals industriesDimitrios Filippou, Michael KingJune 2011
In general, Ok in large companies and mature countries
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McKinsey’s twelve potentially economically disruptive technologies
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“New” Technologies in Mining: Overview
● Analytics and Neuronal Technology● Non Linear Optimization● Supply Chain Optimization and Business
Decision● Process Optimization
● Ergonomics and Human Machine Interface● Remote Monitoring and Management● Driverless trucks● Mobility
● Image processing and 3D modeling● Geology● Mine Planning● New Mining Techniques (Underground, In
Situ, Subsea, etc.)
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“New” Technologies in Mining: Overview
● Geographical Positioning● People location● Collision avoidance● Remote equipment location and
maintenance
● Augmented and Virtual Reality● Information Wealth
● Video Analytics● Detecting, recognizing and tracking
objects in motion● Image processing
● New Water Technologies● Use of saline water in mineral processing
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Schneider Electric and New Technologies in MiningMine Planning, Supply Chain Simulation and Optimization
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Schneider Electric and New Technologies in MiningProduction Energy Optimization: Understanding Energy in the Context of the production process
EnergyProcess
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Schneider Electric and New Technologies in MiningWeather Management Systems
Historical and Future Radar Animation
Most Accurate Forecasts
Alerting for Lightning and Severe Weather
Location-Specific Monitoring
● Schneider Electric is the World’s largest business-to-business weather services provider.
● Weather information in Mining is key due to: ● Safety
● Lightning, barometric pressure underground, etc.
● OPEX Optimization● Mine Planning (ports, trucks,
etc.).
● CAPEX Optimization● Historical weather patterns allow
to properly size infrastructure required (e.g.: water treatment)
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Schneider Electric and New Technologies in MiningWater Management Solutions
● Water Quality● Leak Detection in Pipelines● Pump and Reservoir Optimization● Pressure Optimization● Production and Reservoir
Optimization● Solution for Desalination Plants● Telemetry and Remote SCADA
Solutions
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Conclusion• Mining business is not getting easier any time soon
• Major market trends are creating structural changes that are
generating major challenges to mining companies
• The way mining companies face the market challenges will define the mine (mining business) of the future.
• Schneider Electric’s view about the Mine of Tomorrow:• Sustainable (Safety; Environment Protection; License to Operate; creation of shared value)
• Productive, efficient, flexible (adaptable to the volume the market wants at the right cost and quality)
• Where value is created
• This is why we are very optimistic about the Mining Business
• More investment in R&D and the use of existing and new technologywill generate the next industrial revolution in mining which
will enable the Mine of Tomorrow
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80Schneider Electric – PlantStruxure NOW! – Diego Areces NOW!
Thanks!