Fluctuating commodity prices, high upfront investment costs, long development periods, the high variability due to the uniqueness of each deposit, and the imperfection and uncertainty of information about mineral reserves even after mining commences, have always been challenges for the mining industry. However, in addition to those inherent challenges, today’s new deposits have increasingly complex geological formations, are at greater depths or in climatically and/or geographically partly inaccessible and remote areas. With regard to socio-economic conditions, mining today is confronted with increased requirements. The technological transformation in mining also brings with it changing demands on the employees and an increased need for qualification. In this context of profound changes in the socio-economic context, available technology and the imperative of increasing productivity, it seems an immense task to define a clear course for the future considering that the future itself is uncertain. The greater uncertainty relates to potential disruption of mining from outside the industry in terms of what can be expected from outside the sector. This article introduces the concept of High Performance Mining, which can complement the international discussion meaningfully. High Performance Mining offers a suitable concept to make the challenges of the international mining industry in their complexity tangible. Furthermore, it can provide guidance on how mining companies can secure their competitiveness in the future.
Fluctuating commodity prices, high upfront investment costs, long development periods, the high variability due to the uniqueness of each deposit, and the imperfection and uncertainty of information about mineral reserves even after mining commences, have always been challenges for the mining industry. However, in addition to those inherent challenges, today’s new deposits have increasingly complex geological formations, are at greater depths or in climatically and/or geographically partly inaccessible and remote areas. With regard to socio-economic conditions, mining today is confronted with increased requirements for a social license to operate, including rising stakeholder expectations, stricter legal frameworks and environmental requirements. In addition, the larger population is often critical towards mining. The nearly instantaneous dissemination of negative information via social media can affect share prices quite immediately. At present, the technological transformation in mining also brings with it changing demands on the employees and an increased need for qualification.
In this context of profound changes in the socio-economic context, available technology and the imperative of increasing productivity, it seems an immense task to define a clear course for the future considering that the future itself is uncertain. There remains uncertainty with regard to the shifts in future demand for raw materials driven by technological developments. However, the greater uncertainty relates to potential disruption of mining from outside the industry in terms of what can be expected from outside the sector to fill the demand for metals in the upcoming decades1.
1 For a deeper discussion on what the future may hold, please also view the subsequent interview with George Hemingway in this issue (see page 366 to 373)
It is therefore not surprising that the international discussion and the majority of publications of large consulting firms focus primarily on the necessity of cost savings and long-term productivity increases, often in conjunction with the potential of an increasing digitalization of mining machinery and processes. Both offer orientation and tangible solutions. Both, however, leave fundamental parameters of how mining is conducted untouched. In this article, we would like to argue that both the discussion on digitization as a panacea and the plea for productivity increases and cost savings are insufficient to capture the full picture of transformation the global mining industry is facing. Therefore, we would like to introduce the concept of High Performance Mining, which in our opinion can complement the international discussion meaningfully. We would like to argue that High Performance Mining offers a suitable concept to make the challenges of the international mining industry in their complexity tangible. Furthermore, it can provide guidance on how mining companies can secure their competitiveness in the future.
There is a growing consensus that short- to medium-term cost-cutting programs have been successful to a point but have reached a sealing. Cost cutting became a necessary imperative for short-term productivity increases after high capital expenditures led to rapid declines in productivity. High capex was a result of the last high-price commodity cycle where output was maximized at any cost. Consequently, it is undisputed now that a sustainable increase in productivity must be approached in a multidimensional fashion.
Similarly, it is becoming clear that digital transformation can only be embedded in a company’s overall strategy, with the support of top management and a certain agility to test new technologies at a low level. To digitize existing processes unquestioningly and to name digitization officers who create complex roadmaps without working directly in the mining operation with the employees is common, but the digitization must first be made understandable as a tool, not as a solution.
In our opinion, however, what is not sufficiently taken into consideration in the current discussion is the complex interaction of the three equally important dimensions of people, technology and the environment as the context of modern mining in connection with the question of how companies in the mining industry will secure their competitiveness and what the really decisive competitive advantages will be in the future. High Performance Mining is therefore about the question of how mining companies best position themselves for the future in order to remain competitive and ensure sustainable value creation.
An important reference point for a definition of High Performance Mining is the empirically validated and leading definition of High Performance Organization (HPO), coined by André de Waal. According to de Waal, a High Performance Organization “is an organization that achieves financial and non-financial results that are exceedingly better than those of its peer group over a period of time of five years or more, by focusing in a disciplined way on that which really matters to the organization” (1). De Waal has identified five factors that measurably contribute to the transformation of companies into high performance organizations:
- continuous improvement and renewal;
- openness and action orientation;
- management quality;
- employee quality; and
- long-term orientation.
To what extent can this definition of de Waal with the five factors enrich and expand the discussion in international mining? An in-depth discussion of this question would go beyond the scope of this article, but we would like to highlight a few points and encourage further discussion.
Long-term orientation or: The imperative of the Social License to Operate
A long-term orientation in which sustainability takes precedence over short-term profit is practically the definition of what a Social License to Operate means and what stakeholders expect. The implications and risks for companies that underestimate this dimension are largely undisputed today. In addition, de Waal’s long-term orientation means that a company attaches importance to building good long-term relationships with all stakeholder groups, including society as a whole and contributes actively to finding solutions to adress global societal challenges. This, too, is a central component of the sustainable safeguarding of a Social License to Operate. This makes it clear that the concept of Social License should not be demanded by local communities alone, but should also be an inherent part of the corporate culture and self-concept of a mining company in order to differentiate itself as a high performer.
The human factor – quality of management and -employees
Secondly, de Waal emphasizes the importance of both management and employee quality. This underlines how important the human dimension is for above-average performance. This ranges from excellent education and training, the recruitment of a qualified and diverse workforce to the necessity of further training and long-term employee retention, the promotion of personal responsibility, to communication and culture within the company. In addition to the quality and level of training of the employees, management also plays a decisive role in how this dimension is lived day-to-day in the company. A good team is more important than its well-developed corporate strategy. De Waal states that “a team of good people can achieve anything, while a company with a clear and well-defined strategy, but without the right people to implement it, will inevitably run out of steam”. The decline in mining productivity since the turn of the millennium has also been attributed to increasing complexity and the associated responsibilities of employees who have not received appropriate training. In the meantime, the “human factor” has been given greater consideration, but we believe that it has not yet been sufficiently taken into account in the overall assessment of long-term competitiveness.
Technology alone does not produce high performers
Third, de Waal’s empirical research confirms that technology alone is no guarantee of improved performance. In fact, the availability of technology today is largely given, so the challenge lies in the intelligent selection and application of the technology (Figure 1). This includes the right timing and appropriate inclusion and training of employees to ensure successful implementation and adoption of new processes and technologies. Before integrating new technologies, the operation must have a clear vision where and how technology can generate the greatest value in the company. At the same time, of course, digitization offers enormous potential for increasing productivity by reducing variability during the production process through real-time data. Furthermore, digitization makes opportunities for new business models in raw material extraction conceivable and bears the potential for significant value creation (2).
Innovation – Above all the question of corporate culture
Continuous improvement and renewal as well as openness and action orientation are decisive for how innovation is promoted and implemented in the company. The mining industry generally referred to as “slow to innovate”. Therefore, a change in corporate culture and in particular the dissolution of “silos”, i. e. departments that act largely in isolation, seem to be decisive for the implementation of successful innovations. At the same time, an industry that is already exposed to high risks and a high degree of volatility and variability understandably finds it harder than other industries to test new technologies and question existing paradigms. Therefore, it seems important for the mining industry to promote collaborations, both between departments and with universities, research institutions, technology providers and, where appropriate, other mining companies (Figure 2).
This implies mostly a change in the corporate culture and self-image of an industry that until not so long ago had few incentive or need to open up – whether in terms of innovation or collaboration. In this respect, the demands on the industry have changed dramatically in a relatively short period of time requiring major adjustments.
What the future holds
The characteristics of high performance organizations outlined above were loosely built upon de Waal’s concept of HPO and were discussed in the context of international mining. In addition to that, we would like to expand the discussion by another dimension: future orientation. George Hemingway from Stratalis Group has largely contributed to the current discussion of how companies can face uncertainty and potential disruption by other industries. If Apple intends to only use recycled material “one day” the thought about who could become a mineral and metal producer in the future should not be pushed to the sidelines. It is important to note here that in order to remain competitive in the future, mining companies should take trends outside the raw materials industry seriously. They should not be afraid to question how the business model of a “raw materials supplier” could change in times of 3D printing and micro-robots. Read more about this dimension in an interview with George Hemingway, one of the mining industry’s leading future-thinkers (see page 366 to 373).
At its core, High Performance Mining is about the discussion of where the greatest potential for future value creation – and not just savings – lies, in all three dimensions: people, technology and the environment (Figure 3). Secondly, it includes the question how mining companies can best position themselves today to remain competitive in the future. The preliminary conclusions can be summarized as follows:
- High Performance Mining considers improving productivity and efficiency of mining facilities and integrating new technologies in conjunction with future value creation for the company, but goes beyond the technical dimension.
- High Performance Mining is about a comprehensive consideration of the interrelation of social, technological and the environmental dimensions. With respect to the environmental and social factors, High Performance Mining places particular emphasis on the Social License to Operate for the competitiveness and above-average performance of mining operations in the future.
- High Performance Mining also includes the discussion of how value creation in mining will shift in the future, also beyond digitization, and what the decisive competitive advantages will be, especially when the adoption of new technologies may create less differentiation in the methodological-technical area between mining companies.
- High Performance Mining encourages a stronger focus on the question how mining companies can best prepare for the future and remain agile to prepare for disruptions from inside or outside the industry.
Outlook: A platform for the discussion of High Performance Mining
In December 2018, the Institute for Advanced Mining Technologies (AMT) at RWTH Aachen University hosted the first “International Conference on High Performance Mining”. Several international mining companies, together with technology suppliers, presented best practice examples of measurable productivity increases in international mines and, at the same time, discussed the three dimensions of people, technology and the environment in the context of future-oriented modern high-performance mining. The next event will take place on 17th to 18th November 2020 at RWTH Aachen University and offers guests from industry, research and the public sector an international platform to discuss the conditions for the mining of the future and to offer insight into how High Performance Mining is already being implemented.
(1) de Waal, A. (2018): „Success factors of high performance organization transformations“, Measuring Business Excellence, https://doi.org/10.1108/MBE-08-2018-0055