The last two years have seen fairly steady price increases in both ferrous and nonferrous base metals prices. Given the prices of the rarer precious metals and most minor metals, combined with growing optimism around the rest of the precious metals sector, LNS Research sees the mining industry finally looking to invest in Digital Transformation.
The trend has caught the attention of many tech vendors in this sector. A little over two years ago LNS introduced the idea of "Mining Operations Management: The Other MOM." That work described how traditional ERP vendors, automation, and mining technical systems companies were beginning to incorporate the Manufacturing Operations Management (MOM) ideas of ISA-95 into mining operations software. At that time, the mining industry was nearly at the bottom vis-à-vis prices for the last 10-15 years. So, while the vendor community was gearing up to help companies weather tough times, few miners had much to invest. Finally, with prices largely up across almost all non-coal sectors, the mining operations market is starting to take off.
User Group Season Upon Us with Mining Front and Center
Industrial software companies cluster user group meetings in Spring and Fall. So far this season LNS analysts have attended the Honeywell Users Group (HUG) meeting, two Schneider Electric events, Emerson Exchange, and Inforum's event. OSIsoft Users Group, Rockwell's Automation Fair, and GE Minds & Machines are on the horizon. We've also had briefings with SAP and Siemens in the last couple of months. Nearly all of these events and meetings have had (or will have) presentations from mining companies on how they are making operations management a core element of their Digital Transformation story. The software vendor community is a key enabler of this effort and the term "MOM" is beginning to catch on. In fact, Schneider Electric is rebranding their Ampla solution in mining to just that; MOM.
The vendor community might be paying particular attention to mining right now simply because miners are spending money. A better question, however, is “WHY are miners focusing on operations now that their economic environment is improving?" LNS Research survey data tells us that the focus on operations has been building over the last two years as mining companies have increased their awareness of topics like the Industrial Internet of Things (IIoT), Machine Learning and Advanced Analytics. They have also become more attuned to the advantages of moving certain computing tasks to the Cloud. Today, more than three times as many mining companies have an awareness of IIoT with plans to leverage it than two years ago; twice as many are moving applications to the Cloud.
As an asset-intensive industry, maintenance, repair and operations (MRO) costs can be as much as 50% of operational expenses in some mining operations. As a result, it has always focused heavily on preventive and predictive maintenance (PM/PdM). Since the most common demonstration of the value proposition for analytics, IIoT and Big Data is predictive maintenance, the close link between Operations Management and Asset Performance Management in mining is a given. What has changed is that technology has made information accessible that was previously either too difficult or too expensive to obtain. In the mining boom of a decade ago the focus was on production – as much as possible to drive astronomical profits, striking while the iron was hot. When the subsequent crash occurred, the focus was on driving costs to the absolute minimum; for many mines, the target was simply break-even just to continue operations.
With new tools like augmented reality and virtual reality (AR/VR) to visualize data, better data, and finally machine learning and analytics that enable "what if" analysis, miners now realize they can make better-informed operating decisions. Knowing the potential impact of a 5% reduction in truckloads from a maintenance cost versus revenue loss perspective means a company can make a well-informed decision instead of one based on theory that's nothing more than a bet.
Today's better modeling capabilities also allow far better stockpile management, particularly when it comes to blending to customer specifications. Previous stockpile models were cone-shaped and had a number of layers to reflect the different grades of ore that might end up in a pile. In reality, how the pile was dispersed was far more complex; as material was added at the top it would cascade down the side, and as it was removed there would be additional mixing. Similarly, models for heap leaching, the process to extract precious metals, were very simple -- yes, information was real-time, but mediocre at best. Today the Cloud delivers much more computing power at a reasonable cost. Modeling tools based on artificial intelligence, machine learning and other new technologies, combined with ever-increasing amounts of data thanks to IIoT-enabled sensors (many of them wireless) make accurate predictive models possible and affordable.
It is often said that the greatest barrier to using technology is a lack of trust. In mining that is very true. When technology failed to provide correct answers that experience said were appropriate many managers came to mistrust that technology and instead relied on experience. Furthermore, more accurate predictive capability was available but it was expensive, difficult to support at remote mines, and required experts to tune and maintain. Today's technology has changed that equation. As it demonstrates that it can provide accurate, consistent and affordable insight, more miners are beginning to trust it and invest in it. And that's the real story about why the vendor community is "hot on mining."