The Future is Here: Mining 4.0By Cinthya Alaniz Salazar | Thu, 08/26/2021 - 19:00
Irrespective of the challenges and resistance it has been met with, Mining 4.0 is here and if Mexico intends to benefit from an industry that represents 8.2 percent of its industrial GDP, the sector requires technology analysis and change management to expand its productive capabilities to access a growing global market demand before it gets left behind.
Mexico’s mining sector has been historically characterized by tradition which has been hard to shake; however, in recognition of the competitive advantage it has given other new market actors, the domestic sector has started to adopt technologies proven to work. Furthermore, the arrival of the COVID-19 pandemic came to underline the importance of technology implementation and promotion by strengthening the companies that had already initiated technological applications and wiping out companies that had failed to adapt. Beyond optimizing productive capacity and increasing efficiency, thus far, technological investments have made important advancements in improving worker safety and reducing the sectors ecological impact to the benefit of the environment and surround communities. This progress is aligned with improving the industry’s public perception which has long been considered dangerous and detrimental to the environment, nevertheless, the industry has failed at communicating this to the public. “Mining in Mexico has evolved. We are increasingly productive, safe and responsible. However, only our suppliers and we know this; we have to communicate it better,” said Carlos Silva, CEO of Santacruz Silver. Going forward, increased technological innovation and automation offers to improve cost efficiency, productivity and safety.
Digital solutions that have been found to reduce production costs have been increasingly adapted throughout the value chain and stand to improve operation efficiency by 70 percent. However as indicated by Salvador García, COO of Starcore International Mines Limited, this transition should not be done haphazardly. “For mining companies to make a successful transition to Mining 4.0, they must first be convinced that change is necessary and secondly they must ensure that the new equipment is suitable for their projects,” he said. One of the most promising technologies available include advanced predictive maintenance (Pdm), which conducts asset analysis and anticipates problems before they manifest, potentially helping mining companies reduce spending by 14 percent, representing US$8 million in operations savings according to a PwC study.
Remote access technologies, which have been especially crucial during the pandemic, can keep workers out of harm's way, help access remote and or dangerous locations, and reduce their environmental footprint. Yet, despite the promising potential of these technologies, Rafael Zenha, Sandvik Vice President of Sales for Latin America and the Caribbean warns about attempting to transition too quickly saying, “they forget that it takes time. It is vital to carry out technical studies to understand a company's needs, equipment and risks, as well as the possible impact of new technologies.” Overall, “through Mining 4.0, mining companies will be able to speed up production, reduce downtime and boost employee safety – three pillars that have challenged mining operations for years,” said Mining Global. Fortifying these pillars and expanding digital applications positions Mexico to take full advantage of burgeoning global demand of non-ferrous metals.
As solar energy technology displaces coal as the cheapest energy source and world governments ramp up their energy transition efforts to meet net zero commitments under the 2015 Paris Climate agreement, demand for integral components, like non-ferrous metals aluminum, copper and zinc are expected to double by 2040, reports Wood Mackenzie. As a top global producer of copper and zinc, Mexico has the important task of capitalizing from the large reserves of green metals it holds, whist ensuring its production remains responsible.
This news comes as a reprieve for a sector this underpinned by cyclical demand and bruised from the economic downturn brought upon by the arrival of COVID-19. However, before this the sector can attempt to meet market demand it must first address a range of hurdles including the fear of job atomization, investment, and policy.
The most prominent source of digitalization resistance comes from concerned workers who fear that the incorporation of new technologies will hurt employment. Alfredo Bertrand, General Director, Mexico of Epiroc recognized this. “The principal fear is that the machines will replace the people”; however, he continues, “what is actually taking place is the fundamental change in the required preparation of the workers. Though they will require different skills, it will not reduce the number of people.”
Nevertheless, this is still perceived as a problem and not at all unfounded. For instance, the OECD estimates that 14 percent of jobs are at risk following the implementation of automation technologies. In fact, this has already been predicted by Anthony Fraser, Chief Marketing Officer of RPM Global, who previously told MBN, “The mining of the future will have fewer people. Technology is going to continue to get increasingly stronger and to do that we will need data and connectivity of systems on an enterprise level. In 20 to 30 years, with mines in the middle of nowhere, automation might be the only option left.”
There is no putting the genie back in the bottle however, Mining 4.0 is here and as indicated by Hugo Barrientos, Digital Transformation Manager, “all technological change must be accompanied by a training plan, where company staff understand the role, scope, need and benefits that the new technology brings.”
Furthermore, widespread market uncertainty procured by the political landscape of President López Obrador has tarnished the country’s attractiveness as an investment destination for mining. According to Grupo Mexico, investment in the sector fell by 36 percent between 2018 and 2019; meanwhile, in 2020 the sector only managed to attract US$2.5 billion in investment, the lowest level in 13 years. Respectively, exploration investment has dropped off an estimated 68 percent since 2012, and stands at its lowest investment levels despite the six multimillion-dollar projects expected to start this year. Such a drastic contraction in exploration investment is related to the elimination of the deductibility of preoperative and exploration expenses made in the 2014 tax reform. Addressing both of these issues requires the federal government to establish long-term public polices needed to create market certainty, and promote fiscal and regulatory competitiveness. “The sector constantly faces new challenges, which prevent it from growing. If the government believed in us, we could achieve our goals more easily and quickly,” said Silva.
In conclusion, “Mining companies always fear drastic changes. Therefore, we always seek to build trust in these changes and technologies first. Once we do, we implement them,” said Bertrand. In order to get here however, mining companies need to make an honest assessment of what is needed and communicate this with their staff in order to ensure a successful transition into Mining 4.0.