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Analysis

Cyberattacks: A Growing Concern in the Mining Industry

Mon, 10/22/2018 - 13:27

Cybersecurity is a growing concern among miners as machines and devices increasingly communicate with each other. According to Softpedia, 22 mining companies, including Rio Tinto, BHP Billiton and Fortescue Metals Group, reported 17 major cyber-attacks between 2010 and 2016. Industries increasingly rely on technology and automated equipment and these tools are now considered a necessity as the market-driven global economy continuously demands efficiency and improved quality. While technology facilitates the use and manipulation of data to reduce costs and improve operations, it also means that companies have the added responsibility of taking care of sensitive information. According to Trend Micro’s Forward-Looking Threat Research (FTR) Team, cyber attacks have a deep impact on daily business operations by causing operational shutdowns, equipment damage and reputation damage, among other events.
The FTR team further explains that cybercriminals are much more sophisticated in their technical ability and are no longer just after money and financial information. “They are increasingly aware of the value of stolen sensitive data,” the report says. Attacks can also include a wide range of players from hacktivists, to nation-states, business competitors and even criminal syndicates.
The study shows that the mining industry is particularly at risk as commodity trading is becoming increasingly relevant in international markets, economic development relies on access to natural resources and countries need to benefit from their own mineral deposits. It also shares that there is no clear information on the amount of cyber attacks in the industry as companies are not required to publicly disclose that they were attacked.
A PROMISING SOLUTION
But the creation of cryptocurrencies through blockchain could provide a solution and the mining industry is quickly becoming one of its earliest adopters. According to Shabir Ahmed, Mining Industry Adviser at SAP Africa in his report, Leveraging Blockchain to Revolutionize the Mining Industry, the industry discovered blockchain, which was introduced in 2008 through the release of bitcoins, had the potential to be used outside financial services and government. Investopedia explains that it works as a digital ledger that distributes information through a synchronized network in multiple sites or institutions. These transactions can have administrators that are automatically notified when a change is made or a new movement occurs without the need for a third party.
Blockchains may be the underlying technology of cryptocurrencies but Ahmed explains that it has many benefits to offer the mining industry, such as the automated registration of mineral rights and the implementation of a cargo hire process that works in an “Uber-like” manner. It can also encrypt data being generated by IoT and automatically execute contracts for the procurement of everyday components such as tires and diesel.
FOMENTING TRANSPARENCY
While blockchain can greatly protect companies from cyberattacks and facilitate processes, it has the added bonus of improving the transparency of the industry. This is a particular priority as consumers and countries are starting to create requirements for companies not only to disclose the source of their materials but are also increasingly demanding ethical supply chains.
Companies such as Samsung and Apple have declared their commitment to using ethically-sourced minerals, for example. The Apple Supplier Code of Conduct lays out the protections it demands for its suppliers’ employees, including adequate living conditions, fair working hours and standards ensuring workplace safety. While this may be bad news for mines that lack adequate regulation, operators such as Avino Silver & Gold that can meet these requirements are getting the opportunity to sign contracts of exclusivity with technology companies like Samsung. “As ethical funds own part of Samsung’s stock, they were worried about assuring an ethical source to avoid a boycott,” said David Wolfin, President and CEO of Avino Silver & Gold. “Samsung chose our company because it wanted to partner with a small company that was well established with projects in expansion.”
INNOVATION IN MINING
Considering the obligations that mining companies have to meet in the 21st century, De Beers Group, a company that provides one-third of the global supply of diamonds, has decided to lead the way by developing the first blockchain platform of the diamond industry called Tracr.
After months of research and development, the company finally announced in May 2018 that it had successfully tracked 100 high-value diamonds from production to retail and expects to open the platform to the public later in the year. “When fully operational, Tracr will provide consumers with confidence that registered diamonds are natural and conflict-free, improve visibility and trust within the industry and enhance efficiencies across the diamond value chain,” the company reported on its website. Another case of mineral tracing is Gemfields’ partnership with Gübelin Gem Lab to place nanoparticles in all Kagem Mine emeralds to improve levels of transparency.
If proven successful, the use of blockchain could easily spread to other segments of the mining industry and additional initiatives have already been put in place for the gold market. The London Bullion Market Association (LBMA), which oversees the world’s largest spot gold market, announced in January 2018 that it seeks blockchain proposals to prevent finance terrorism, money laundering and avoid conflict minerals. “Blockchain cannot be ignored,” says Sakhila Mirza, Executive Board Director of the LBMA. “Let us understand how it can help us today and address the risks that impact the precious metals market.”
BLOCKCHAIN IN MEXICAN MINING
In its 2017 annual report, Fresnillo, the biggest producer of silver in the world and the largest producer of gold in Mexico, stated that cybersecurity is one of the Top 10 risks the company faces. “As a mining company, we may be under threat of cyberattacks from a broad set of attacker groups, from hacktivists and hostile regimes to organized criminals,” It added: “Certain groups may also attempt to exploit vulnerabilities, created by the industry’s heavy reliance on operational automated systems and IT.”
Although the incorporation of blockchain is a sign of openness in the industry to using new tools, the mining sector still has a long way to go, according to Bruno Juanes, Chief Innovation Officer at Deloitte Consulting Group. “The marriage between mining and technology companies is in its infancy,” he says.
José Antonio Berlanga, General Manager Mexico of metals streaming company Mercuria, believes blockchain has already permeated certain aspects of mining well but it will take time for it to trickle down the value chain. “The diamond industry is already incorporating blockchain technology but for concentrate it is not the ideal time yet as it is a business that requires face-to-face interaction,” he says. “For this reason, blockchain will not have an immediate impact on the mining industry but who knows how much it will grow in the next five years. It could be used as a complement to our services.”
But as technology continues to permeate mine operations, a whole new universe of possibilities will become available for the industry. “Blockchain, an important new development, could allow tokens for underground gold to be created to serve as currency, bypassing the need to mine it at all,” says Philip Hopwood, Global Mining Leader at Deloitte. “And virtual mining and simplified supply chains could derive from this. The pace of technological innovation just continues to pick up.”