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ISSUE 01/2021

Four trends for mining’s future success

PRACTICAL APPLICATIONS OF DIGITALISATION RESILIENT AND RESOURCEFUL MINING’S RESPONSE TO COVID-19?

IS THIS THE ERA OF SMART MINES MINING AND TUNNELLING IN FINLAND


We always communicate with Normet to make the process more efficient and cost-effective and to get higher productivity and lower operating costs.

MARCUS PROPERZI Operations Manager / Jetcrete

OUR VISION OUR MISSION The fast growing and innovative technology company with a passion to offer continuous improvement to our underground mining and tunnelling partners’ processes for increased safety productivity and sustainability. Normet’s mission is to improve underground mining and tunnelling processes with knowledge and technology to benefit our clients and society. NORMET HAS A BROAD UNDERGROUND OFFERING

Equipment for concrete spraying and transport, explosives charging, scaling, lifting, installation works, and logistics.

Construction chemicals for sprayed concrete, admixtures for all types of concrete, injection systems for groundwater control and ground improvement, reinforcement systems for high deformation conditions, spray applied waterproofing systems and needed chemicals for TBM technology covering hard rock, EPB, open face and slurry type machines

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The new generation energy absorbing rock bolting system; the D-Bolt® system specially designed for efficient and reliable rock reinforcement, in both squeezing and burst-prone strata conditions

Normet has delivered over 11,000 built-for-purpose underground machines which are supported with Normet services. Normet currently employs over 1,000 business professionals and net sales in 2016 was over 200 million euro.

Normet is a Finnish based company that operates globally with over 43 locations in 28 countries worldwide.


17 Four trends for tomorrow’s success

02 Updates

The latest news from the mining and tunnelling sector

Today mining represents nearly 12 per cent of the world GDP, measured by revenues and products sold. The world has always needed mining and still does.

06 Analysis: Modernising core technologies

Paul Klein, partner, consulting, and Roland Labuhn, digital and analytics lead at Deloitte discuss the challenges that mining companies face in their digital transformations

Editorial Mark Venables – Editor in Chief mark.venables@cavendishgroup.co.uk Ben Avison – Group Editorial Director ben.avison@cavendishgroup.co.uk Chairman Koos Tesselaar CEO Matthew Astill

09 Analysis: Through-cycle investment in mining

As the COVID-19 crisis affects the mediumterm pricing outlook in many commodities and puts pressure on planned investments, mining CFOs have a unique opportunity (and imperative) to review their capitalexpansion strategies as Sigurd Mareels, Anna Moore, and Gregory Vainberg of McKinsey explains.

Four trends for mining’s future success

PRACTICAL APPLICATIONS OF DIGITALISATION

Second Floor Front 116-118 Chancery Lane London WC1A 1PP Tel: +44 (0) 203 675 9530

According to McKinsey’s report, Mine 20202, the Top 40 mining companies are so far weathering the COVID-19 storm mostly unscathed, and certainly better than many other sectors.

29 The era of Smart Mines

12 Mining and tunnelling in Finland

Finland is one of the most attractive locations for global mining investments. In the recent Fraser Institute’s 2019 Annual Survey of Mining Companies, Finland came second, right behind Western Australia.

IS THIS THE ERA OF SMART MINES MINING AND TUNNELLING IN FINLAND

Cavendish Group

23 Resilient and Resourceful

Beyond the impact on global health, COVID-19 has shown its potential to create devastating social, economic, and political challenges that will have lasting repercussions.

ISSUE 01/2021

MINING’S RESPONSE TO COVID-19?

According to World Economic Forum, digitalisation in the mining, minerals, and metals industries has the potential to deliver over $425 billion in shareholder, customer, and environmental value by 2025. Mo Ahmed, global segment solutions metals at Schneider Electrics explains

26 Mining and COVID-19?

Managing Director Adam Soroka

RESILIENT AND RESOURCEFUL

21 Practical applications of digitalisation

The use of technology in industrial mining has been developing since its inception.

15 Seven ways the mining sector can prepare for the coming economic era Mining is facing a raft of transformational pressures. Jordy Lee Senior Research Associate, Colorado School of Mines, University of Denver reveals seven ways the sector can respond - and strengthen its role in the new global economy in the process.

31 Zero is the only number

Underground mining has always been associated with higher risks that are different from those in other sectors.

Mining and Tunnelling Technology 01


News

Blockchain can trace carbon emissions for mining

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he World Economic Forum’s Mining and Metals Blockchain Initiative (MMBI), released a proof of concept that uses distributed ledger technology to track embedded greenhouse gas emissions. A collaboration between seven leading industry players and the World Economic Forum, the initiative has hit an important stage of development following its launch in October 2019. The successful completion of the proof of concept, named the COT, a Carbon Tracing Platform will be critical in helping to ensure traceability of emissions from mine to the final product. With a focus on end-to-end traceability, the COT platform uses distributed ledger technology to track CO2 emissions. The founding members of the MMBI – Anglo American, Antofagasta Minerals, Eurasian Resources Group, Glencore, Klöckner & Co, Minsur, and Tata Steel joined forces in October 2019 to design and explore blockchain solutions to accelerate responsible sourcing in the industry. By pooling resources and costs, the mining and metals companies aim to accelerate future

02 Mining and Tunnelling Technology

adoption of a solution for supply chain visibility and ESG requirements. Developed in collaboration with industry experts, supported by the Dutch blockchain champion Kryha and Consortium Advisor Susan Joseph, it not only tests the technological feasibility of the solution, but also explores the complexities of the supply chain dynamics and sets requirements for future data utilization. In doing so, the proof of concept responds to demands from stakeholders to create “mine to market” visibility and accountability. “There is an increasing demand for metals and minerals, and an increasing demand for sustainable and responsible and traceable supply chains,” said Jörgen Sandström, Head of Mining and Metals Industry, World Economic Forum. “There is a potential to create a full value chain view with downstream visibility, and in partnering with regulators and aligning our work with robust ESG standards, sustainability certification schemes and assurance frameworks.” This work lays the foundation for the next phase of the development and reinforces comprehensive

feedback sessions with stakeholders. It also supports the MMBI vision to enable emissions traceability throughout complex supply chains and to create “mine to market” visibility and accountability. “The distributed nature of blockchain technology enables cross-enterprise collaboration and makes it the ultimate networked technology, Nadia Hewett, Blockchain Project Lead, World Economic Forum, said. “This opens exciting new possibilities that organizations otherwise would not have the capability to deliver on their own.” Peter Whitcutt, Marketing CEO of Anglo American explained that they are committed to solving the physical challenges of mining and creating value for all stakeholders as defined in our sustainable mining plan. “By leveraging cross-industry collaboration and the increasingly important role played by technology innovation, MMBI’s Proof of Concept can help to unlock the potential of blockchain to support a greater level of reporting transparency and drive responsible sourcing,” he said.


News

MacKellar Group adds to T 264 fleet in Australia

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our Liebherr T 264 off-highway haul trucks will be added to Dawson Mine in Australia for customer MacKellar Mining. MacKellar Group has purchased four additional Liebherr T 264 240 t / 265 ton off-highway haul trucks, adding to the fleet of five commissioned in early 2020. All nine of the T 264 fleet will work at Anglo American’s Dawson open cut metallurgical coal mine in Central Queensland, Australia. The four new T 264, manufactured in Liebherr Newport News, Co. facility in Virginia USA, will complete pre-assembly in Mackay before travelling inland to Dawson Mine for final commissioning. The trucks will join the working fleet in early 2021. MacKellar Group is a mining and civil earthmoving company, founded in

Australia in 1966. Mackellar Group chose to continue with the T 264 trucks for their 240-tonne fleet, stating “the T 264 provides efficient productivity for our clients by offering a true 240 metric tonne payload, and superior speed on grade. The many operator comforts also makes the trucks well accepted on site.” The fleet of trucks at Dawson mine are supported by Liebherr-Australia’s Mackay branch and on site-Liebherr technicians, another area that assisted the purchase of the additional four units. “Liebherr-Australia’s support has been excellent, starting from the beginning with the provision of professional operator training, through to support from their experienced technicians,” concluded MacKellar Group. Mining and Tunnelling Technology 03


News

Normet SmartDrive performing remarkably inside the Finnish bedrock

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ormet’s new battery electric sprayer, the Spraymec 8100 VC SmartDrive performing remarkably inside the Finnish bedrock. The Blominmäki project is one of the biggest underground civil engineering construction projects up to date in Finland. It aims to construct a new wastewater treatment plant to serve more than 400,000 people and five cities and replace the old treatment plant in Suomenoja. The excavation project consists of circa 1,000,000 cubic meter caverns for water treatment processes, and 19 kilometres of water tunnels between the seacoast and the new plant. Normet’s battery electric sprayer, the Spraymec 8100 VC SmartDrive, was taking part in spraying the permanent sprayed concrete lining at one of the Blominmäki sites. The sprayer proved its worth in providing efficient, silent, and clean application process with low operating costs. “Air quality is extremely important when working underground” Pasi Hartikainen, who has been operating the Spraymec 8100 SmartDrive in Blominmäki, said. “It is one of the main benefits of having battery electric equipment that there are no diesel emissions”, Pasi describes his impressions on working with the new sprayer. In addition to battery electric drive, the new flag ship sprayer is equipped with automated boom control system SmartSpray, and concrete layer thickness optimization system SmartScan. “We have very demanding clients, and they will check through every layer of sprayed concrete,” Mikko Piirainen, Construction Manager for tunnelling contractor Kalliorakennus-Yhtiöt Oy, who’s sprayer fleet consists solely of Normet offering, added. “In the future, SmartScan will have a remarkable role in terms of providing best quality. Using SmartScan ensures the layer thickness is sufficient, and that there is no need to come back and spray again.”, Mikko adds.

04 Mining and Tunnelling Technology

Epiroc wins large mining equipment and service order from Codelco in Chile

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odelco has ordered underground loaders, face drill rigs, rock bolting rigs and mine trucks, as well as several years of technical support and training, for use at the Chuquicamata underground mine project. Codelco, the world’s largest copper producer, opened the Chuquicamata underground mine in 2019. The company is transforming the century-old Chuquicamata copper and gold mine from being the world’s largest open-pit mine into a hightechnological underground operation. The transformation will extend the useful mine life by 40 years, according to Codelco. “We are proud to be a key partner of Codelco as it significantly extends the life of the Chuquicamata mine in the most productive, efficient and safe manner possible,” says Helena Hedblom, Epiroc’s President and CEO.


News

“Epiroc was chosen because it complied with all the technical, safety and performance requirements that Codelco demanded for the Chuquicamata Underground Mine Project, while being the supplier that provided the best economic proposal for all its equipment as a whole,” Juan Mariscal, sourcing category manager at Codelco, said. The order includes multiple units of the Scooptram ST1030 and ST18 loader, the Boomer S2 face drilling rig, the Boltec M bolting machine, and the Minetruck MT65, the highest payload capacity underground truck in the world. The machines will be equipped with 6th Sense solutions for automation, connectivity, and information management. The solutions include Epiroc’s Rig Control System, RCS, which makes the equipment ready for automation and remote control, and Epiroc’s Certiq system, which allows for intelligent monitoring of machine performance and productivity in realtime. Delivery of the equipment will take place later this year.

Next generation mining truck advances efficiency and productivity for lower costs

The Next Generation Cat 785 mining truck enhances operator safety and performance, provides more intuitive and predictable operation, delivers faster and easier access to data, and streamlines maintenance—to boost efficiency and lower costs. Leveraging the Next Generation concept, the new 150-ton class mining truck features an expandable technology platform, so it is future-ready. “The 785 was Caterpillar’s first large mining truck, introduced in 1985. It’s fitting that the first Next Generation Cat mining truck is the new 785—designed to enable mining operations to optimize productivity today and tomorrow,” David Rea, general manager of Cat Large Mining Trucks, said. “Cat Next Generation mining trucks feature a flexible technology platform and optional configurations that help each mining operation meet their goals.” Productive hauling begins with the operator, who sits in the new state-of-the-art cab, designed for efficiency, and equipped with features that automate functions. The Next Generation 785 offers a new integrated speed coaching feature to give feedback on how to operate the truck most productively. Truck responsiveness and controllability are enhanced through multiple upgrades such as the anti-lock brake system, dynamic stability control, enhanced traction control, machine speed limiting, hill start assist with anti-rollback, and cruise control. Additionally, new Auto Hoist control reduces dumping time and unburdens the operator. The improved payload monitoring system offers more accurate measurement and dipper counts as well as enhanced overload detection and carryback calculation and reporting—to inform operators and production managers. The 360-degree surround view camera delivers a full view of the working area to the operator. Inside the cab, guidance information, machine data and electronics controls are consolidated into two touch screens that eliminate clutter and promote efficiency. The spacious new cab features a walk-through sliding center console, increased legroom, and new cab air filtration system for operator comfort. The new deluxe seat boasts leather upholstery, air-adjustable bolsters, and lumbar support, heated and cooled cushions, dynamic dampening, and a 30-degree recline with thigh tilt and extension, so it comfortably accommodates operators of all sizes. The Next Gen 785 is powered by the proven Cat 3512E engine offering selectable power options, allowing operations to match the speed of the fleet or to speed up cycle times. Two tire options, 33R51 and 36R51 are available, to enable mines to optimize payload capacity. The larger tires allow a nominal payload of 142 tonnes (157 tons). The truck is available in multiple emissions configurations to meet different regulatory requirements around the world. The optional Tier 4 Final/Stage V emissions configuration has shown fuel efficiency improvements of as much as nine per cent. Advanced electronic powertrain controls deliver faster cycle times and acceleration, less spillage and reduced road maintenance in addition to improved engine and drivetrain life. Mining and Tunnelling Technology 05


Analysis

Modernizing core technologies: Considerations around cloud, cyber, and revitalising the core Paul Klein, partner, consulting, and Roland Labuhn, digital and analytics lead at Deloitte discuss the challenges that mining companies face in their digital transformations Over the years, most mining companies have made significant investments in a range of back-end technology systems. In embracing a digital future, however, miners will likely need to modernise many of these legacy systems and migrate to a digital core—raising a range of considerations around moving to the cloud, adopting sound cyber risk strategies, and choosing the best approach for modernising their core systems. The digital era has presented mining companies with a significant opportunity to innovate, reduce costs, enhance productivity, improve safety performance, and realise operational efficiency improvements. Unlocking these benefits, however, might be easier said than done—especially given the industry’s ongoing reliance on legacy back-end technology systems. “Mining industry digital investments to date have demonstrated the potential but have often been constrained by legacy system and data challenges,” Paul Klein, partner, consulting, Deloitte Australia, says. “Businesses aren’t expected to be able to realize the full potential of the intelligent mine without modernising their digital core.”

Core modernisation: The carrot and the stick 06 Mining and Tunnelling Technology

As Deloitte noted in Tech Trends 2019, “Core modernisation seeks to solve the riddle of how companies with significant investments in legacy systems can extract more value from these systems by making them a foundation for new disruptive innovations. Beyond just re-platforming legacy systems, core modernisation involves creating a roadmap for building a next-generation enterprise resource planning (ERP) core that incorporates—rather than merely enabling—digital, cloud, and other macro forces.” If these gains represent the carrot, the danger of ongoing reliance on legacy solutions that are


Analysis

losing technological relevance and service support is the stick. As major ERP providers roll out next-generation platforms designed to enable realtime transactional processing and data analysis, mining companies are facing an imminent need to update their ERP systems and make choices on whether to host their data on premises or in the cloud. Whether they are pursuing enterprise wide transformation or making incremental improvements, these are approaches mining companies should take into account when considering core modernisation: ■■ Replatform: Upgrade platforms through technical upgrades, software updates, and migration to modern operating environments (such as cloud platforms, in-memory databases, and virtualised environments). ■■ Revitalise: Layer on new capabilities to enhance stable underlying core processes and data. This could include enhancing usability with digital solutions that improve employee engagement, adopting visualisation

suites to fuel data analysis, or introducing cognitive techniques to strengthen reporting and support predictive and prescriptive analytics. ■■ Remediate: Address internal complexities of existing core implementations. This could involve reconciling master data to simplify business processes and introduce single views of key data, integrating disparate systems to streamline data sharing with external partners, or rationalising custom extensions and bespoke solutions to simplify system maintenance. ■■ Replace: Introduce new systems for parts of the core. This may mean adopting new products from existing vendors or revisiting build versus buy decisions as new entrants roll out new solutions. Ideally, organisations will use these pivots to revisit their needs and build new capabilities rather than replicating the work habits associated with their old systems. Mining and Tunnelling Technology 07


Analysis

■■ Retrench: Do nothing—which can be strategic if it is an intentional choice. Good enough may be more than enough for non-differentiated parts of the business. The key here is to weigh the risks and inform stakeholders before taking this route.

Cloud first “There’s an implicit assumption that companies have a choice about whether or not to transition to the cloud,” Rakesh Surana, mining & metals leader, Deloitte India, says. “Miners may not realise that some of their systems and data are already in the cloud. Major ERP vendors have adopted ‘cloud first’ strategies. One of the business implications of many cloud solutions is there are little to no customisations. You implement what you get, and you gain the advantage of frequent upgrades. Business users should quickly adopt standard ‘core’ ERPs. Original equipment manufacturers (OEMs) that generate real-time data from embedded sensors aggregate and share that data in the cloud. Even supervisory control and data acquisition (SCADA) system vendors are communicating over the cloud.” Achieving cyber maturity As a growing volume of data transitions to the cloud, miners should take steps to enhance their cyber risk strategies. Even absent cloud considerations, modernising the core can introduce new cyber risks. Too often, non-standard, and aging assets are not properly maintained, and legacy platforms can persist without appropriate protections, introducing potential threats. Upgrading these systems presents opportunities to take stock of existing vulnerabilities and craft more robust cyber risk strategies— not only for miners’ back-office IT systems, but also for operational technology (OT), such as SCADA systems, and programmable logic controllers (PLCs). Admittedly, this is no small task. While OT systems were developed by engineers with safety and reliability in mind, security was rarely embedded into most of them—as they were not originally designed to be connected. Today, however, as operational processes become more automated and more operational equipment and OT are connected to communications networks, facilities such as mine sites, mineral processing plants, and remote operations centres are becoming vulnerable to cyberattacks. These vulnerabilities span not just the SCADA systems and PLCs mentioned above, but also potentially electrical infrastructure, integration with supply chain partners, and more. This is putting engineers under greater pressure to protect OT in the same way information technology (IT) is protected—creating challenges to harmonise the traditionally disparate IT and OT organisations and cultures. As the pace of technology innovation accelerates, and the intelligent mine is expected to become a reality, mining companies will likely need back-end systems capable of supporting their transformational opportunities. 08 Mining and Tunnelling Technology

Making modernization work ■■ Create a business case. Cost avoidance is rarely incentive enough to modernise core systems. Instead, mining companies should consider framing the business case in terms of lost business opportunities, lack of agility, and business risk. Even then, it is important to be realistic when projecting the extent of hidden complexity—and the budget required to resolve this complexity. ■■ Automate and accelerate. Without a proper approach, transitioning to a new ERP platform can introduce significant implementation risk. To avoid missed project milestones and budget overruns, companies should work with system integrators that offer proven business transformation accelerators. Optimally, this should include: roadmaps for developing a project charter, resourcing plans, and project plans; process flows that take end-to-end process design considerations into account; modules preconfigured to the metals and mining industry; and full reporting, data migration, testing, and training templates. ■■ Honour your legacy, but do not be constrained by it. Modernising the core typically has everything to do with legacy. That legacy is entangled in a history of investment decisions, long hours, and careers across the organisation. A portion of most companies’ workforce job history (and job security) is embedded in the existing footprint. As such, decisions concerning the core can be fraught with emotional and political baggage. When reimagining core systems, companies should respect their technology heritage without becoming beholden to it. Sidestep subjective debates by focusing on fact-based, data-driven discussions about pressing business needs. ■■ Back to standard. Respecting the legacy without being beholden to it can create a golden opportunity to migrate to a modern, simplified, standardised digital core, adopting best practices and moving any critical customisations or extension sets to cloud-based development platforms. Keeping the core clean and standard can significantly reduce the cost of ownership and improves the sustainability of the core. ■■ Conduct a cyber risk maturity assessment. To pinpoint where to focus improvement efforts, mining companies should assess the maturity of both their corporate and operational cyber risk controls. This typically means recording assets and facilities and ranking them in terms of criticality, identifying their exploitable vulnerabilities, and assessing the maturity of the controls environment to proactively manage these threats. ■■ Build a unified cyber risk program. To address cyber risk across both business functions and operations, mining companies should adopt a systematic approach. The aim is to create an environment that is secure, vigilant, and resilient. Being secure is about protecting critical assets and infrastructure from breaches or compromises by adopting effective automated controls and monitoring. Being vigilant involves continuous monitoring to detect if systems have been compromised. And being resilient is about putting plans and procedures in place to identify a cyberattack, contain or neutralise it, and rapidly restore normal operations.


Analysis

Through-cycle investment in mining Mining is notoriously cyclical, with volatile equity prices and investment patterns as a result. As the COVID-19 crisis affects the medium-term pricing outlook in many commodities and puts pressure on planned investments, mining CFOs have a unique opportunity (and imperative) to review their capital-expansion strategies as Sigurd Mareels, Anna Moore, and Gregory Vainberg of McKinsey explain.

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yclical commodities pricing has historically driven financing challenges for mining companies: volatile valuations, reflected in an average 1.4 times price-to-book ratio, compared with 2.5 times for the S&P 500 and 1.7 times for the FTSE 100, as well as cyclical capital expansion, reflected in “peaky” expansion cycles, which are 73 per cent correlated with commodities prices.

What: The challenge of investment in mining Commodity prices are notoriously cyclical, mining has seen five cycles since 2000. Going forward, we can expect to see similar cyclicity and greater volatility within cycles, as declining ore grades and deteriorating mine conditions cause operating costs to rise and the cost curve to steepen. Cyclicity creates related challenges for mining companies when it comes to financing: volatile valuations and cyclical capital expansion.

Volatile valuations Historically, mining valuations have been closely correlated with spot prices. This is true even compared with other capital-intensive industries. Mining market capitalisations are 93 per cent correlated with commodity prices, compared with 84 per cent in oil and gas, 64 per cent in steel, and 60 per cent in pulp and paper. We also see a consistent gap between industry-wide enterprise value when calculated using discounted cash flows (reflecting intrinsic performance) versus when calculated using market capitalisation (reflecting investor confidence)—on average, 1.4 times higher since 2008. This is also reflected in low price-to-book ratios for mining relative to other industries: 1.4 times median ratio for mining companies from 2008 to 2018, compared with 2.5 times for the S&P 500 and 1.7 times for the FTSE 100. Mining’s volatile valuations reduce the financial attractiveness of public equity for miners, contributing to volatile investment cycles.

Cyclical capital expansion Perhaps because of the strong correlation between prices and valuations, mining companies

tend to go through highly peaky capital-expansion cycles, as the ability to raise funds is correlated to price levels. The correlation between price and investment spend is high—73 per cent over the past decade—and is expected to continue going forward, based on anticipated capital-expenditureexpansion plans. As a result, many companies fail to capitalise on high pricing when it occurs because they have underinvested in the downcycle. This is especially true for junior mines and exploration projects. In the downcycle, by contrast, companies may find themselves overextended because of excessive expansion programs at the top of the cycle. This is a strategic challenge as much as a financing one, though financing can help increase the strategic ‘degrees of freedom’ for mining companies.

Why now? Mining industry outlook and context The mining industry’s current context creates a need and an opportunity to address the sector’s financing challenges. Prices have sharply declined since January 2020 in many commodities, including thermal coal, zinc, steel, copper, aluminium, lead, nickel, iron ore, and metallurgical coal. We are already seeing an increase in debt, auguring a return to the industry’s boom-and-bust financing cycle. Without structural change, the downturn that the COVID-19 crisis looks poised to precipitate would mean another cycle of capital flight, overextended balance sheets, and falling valuations. How to address: Taking a disciplined approach to capital planning and using the full range of financial levers Mining and Tunnelling Technology 09


Analysis

Leading companies have a clear perspective on use of cash and capital returns through the cycle, including risk-based views on the sources and uses of cash. They evaluate where they are in the cycle against their longterm capital-expansion plans to develop through-cycle-financing plans: ■■ Take a disciplined approach to capital planning, saving more during the upcycle and continuing to buy during the downcycle: □□ Review the traditional spending cycles. Price cycles suggest that it is more relevant for miners to save during upcycles and invest during downcycles. □□ Benchmark the level of investment needed. McKinsey research on the impact of big moves on economic profit suggests that leaders spend 1.7 times more than the industry median (measured by annual capital expenditure to revenue). □□ Dynamically reallocate resources. We find that businesses that reallocate substantially see outsize, and more sustainable, performance relative to peers. Our research suggests the bar is reallocating at least 50 per cent of capital expenditure among businesses over a decade, supported by assessing businesses’ performance at the cell level. □□ Debias the process. Adopt organizational, analytical, and debate countermeasures intended to counter the most common cognitive biases. ■■ Use the full range of financial levers, including the following, to manage capital and returns through the cycle: □□ Equity. For most majors, this means issuing stock when net asset values fall below market valuation. Specialist-mining private equity can also be an attractive alternative for juniors that struggle to raise on public markets. □□ Corporate debt. Take on debt when the company can handle interest payments, either in a period of sustained moderate-tohigh pricing (though avoiding expansion during fly-up periods in which oversupply is likely) or in a period of low interest rates. □□ Alternative financing and debt-like instruments. Use all no-core debt levers, such as streaming and net smelter returns and net profits interest. These alternative financing means allow companies to provide a variable payout to the lender, depending on the financial performance of the company and spot prices. □□ Asset- or project-linked financing. Take advantage of low valuations or opportunistic access to the right strategic partners to fund green- or brownfield projects when traditional structures are less available or attractive. □□ Sale of no-core assets (for example, tolling, joint ventures, and rental agreements). Protect the balance sheet and drive clearer valuations by selling a portion of the value of an existing or new asset in exchange for financing or by converting capital expenditures to operating expenditures when possible. □□ Cash management. Optimise net working capital and operational cash flow to direct a greater share of cash to high-value projects. Free cash flow for the industry has declined 25 per cent since the 2015 price crash, suggesting that it may be time to review cash management again. ■■ Develop a target financing portfolio. Companies are increasingly adopting target asset portfolios, but few take a similarly rigorous 10 Mining and Tunnelling Technology

approach to financing. Establishing top-down goals that go beyond deleveraging can help companies take a longer-term view of financing and evaluate options more thoughtfully. This can include clear guidelines for which financing structures are preferred under different market conditions (and at what scale), as well as target through-cycle financial-health metrics and guidelines for when these may be breached (for example, net-debt-to-EBITDA14 targets). While through-cycle-mining returns are attractive, investors have historically been


Analysis

discouraged by near-term fluctuations in commodity prices. This, in turn, has driven volatile valuations, capital expansion, and balance sheets. The current environment—rising prices propelling investment—creates a window of opportunity for mining companies to address these challenges through disciplined capital planning and use of an extended range of financial levers. While capturing the opportunity requires work, organizations that take up the challenge and succeed in changing their investment strategies might just beat the cycle.

About the authors Sigurd Mareels is a senior partner at McKinsey’s Brussels Innovation Center, Anna Moore is an associate partner in the London office, and Gregory Vainberg is a senior partner in the Montreal office.

Mining and Tunnelling Technology 11


Regional Report: Finland

Finland the world’s second most attractive location for global mining investments Finland is one of the most attractive locations for global mining investments. In the recent Fraser Institute’s 2019 Annual Survey of Mining Companies, Finland came second, right behind Western Australia. Fraser Institute’s annual survey evaluates the attractiveness of different countries and locations for mining investments based on the mineral potential and political factors. Finishing 17th in last year’s survey, Finland returned to the top, being the most attractive country in Europe. In terms of the operating environment, Finland was the best in the world. This was due to Finland’s comprehensive geological datasets, high-quality infrastructure, straightforward laws, and the transparency of the Finnish social system. The geological data produced by the Geological Survey of Finland (GTK) is among the best in the world. “Alongside our stable and good operating environment, comprehensive and continuously updated digital geological datasets have a significant impact on investment decisions”, Niina Ahtonen, head of Information Solutions at GTK, says. The survey shows that traditional mining countries and their most critical regions in terms of mining operations are the most attractive locations for investments. In addition to Finland, the top positions were held by significant mining locations in the USA and Australia.

Towards a diesel-free mine Agnico Eagle Finland’s’ Kittilä mine is strongly committed to zero emissions and the introduction of new technologies. The European Union-funded SIMS project and the related field tests of Epiroc’s battery-powered mining machines turned the eyes of the entire mining world to Kittilä. Now, the mine’s first own battery-powered rigs, two Boltec E Battery bolting units, have started in production. 12 Mining and Tunnelling Technology

It takes courage to be at the forefront of development, but the benefits to be achieved - an improved working environment and a reduced carbon footprint - are considered worthy at the Kittilä mine. “As a whole industry we should strive towards zero emissions, and we are doing a lot for this here in Kittilä,” Tommi Kankkunen, general manager of the Kittilä mine, says. “The benefits with the battery equipment are obvious. First, of course, the reduction of fossil fuels and the reduction of our carbon footprint. But also, the major advancements we have made on safety and health of employees.”

SIMS project Testing of Epiroc’s new generation battery-powered mining equipment in a real mining environment was a part of the European Union-funded SIMS project. The project took place between 2017 and 2020, with the objective of creating smart and environmentally friendly systems for the mining industry. The project involved several mining companies, equipment, and system manufacturers, as well as universities. The test environment for Epiroc’s battery-operated mining equipment was provided by Agnico Eagle Finland’s Kittilä mine. “SIMS was great” André Van Wageningen, manager of technology & development at the Kittilä mine, adds. “It helped us to collaborate with universities and other companies in the mining industry to expand our knowledge and develop new technologies.” Battery-driven rock bolting rigs After the tests, the mine has now purchased its first battery-powered rigs. According to the investment plan, Boltec E rock bolting rigs were selected as the first batterypowered units. The important drivers behind the decision were sustainability of the rigs and the opportunity to create a better work environment. The first bolting rig arrived at the Kittilä mine early November. Another similar bolting unit joined the club a couple of weeks later. According to Jari Kolehmainen, production


Regional Report: Finland

manager, the first messages are incredibly positive. “The performance of the machines is at least at the same level as that of diesel machines,” he explains. “Productivity has improved with the development of equipment.” Battery-powered machines have many advantages The entire staff of the Kittilä mine is looking forward to taking the new technology forward. Operators’ well-being at work has clearly improved as exhaust fumes, heat, vibration, and noise have decreased. For example, a rock bolting rig is moved several times during a shift, and in the past, it has always meant starting diesel engines and blowing up an exhaust cloud. In terms of maintenance, the equipment lacks a large component (diesel engine), and as a result, oil and filter changes are omitted. Also, for fire safety, battery-powered machines mark a step forward in the absence of hot surfaces of the diesel engine and moving oils. Air quality improves piece by piece when diesel engine equipment is replaced by battery-powered equipment. “Especially on the loading and haulage side, the change in air quality is clear,” Kolehmainen continues. “In the future, we want to reduce our carbon footprint and move towards zeroemission technology, as well as move forward in well-being

at work. The SIMS project showed that battery technology has made great leaps forward”. According to Kolehmainen, a diesel-free mine sounds very possible even in the near future. Changes to mine infrastructure Kolehmainen is satisfied with the air quality of the battery-powered equipment The mine’s infrastructure has been affected by battery-powered equipment in such a way that the design of its electricity network takes the electrification of the entire equipment into account. Battery-powered machines also require a battery replacement location. Preparing for battery-powered machines is simple and besides above, no other special requirements were needed. Kittilä mine wants to profile itself also towards the introduction of other new technologies in addition to battery-powered equipment. A remote-control room has been completed for the mining office, from which several machines are controlled simultaneously. Since the beginning of October, it has been a permanent turn for two people to operate mining machines remotely. The mine passionately believes that investing in new technologies will bring long-term benefits. The Kittilä mine has also aroused great interest internationally, and a long list of requests for visits awaits a post-pandemic period. The Kittilä mine is positive about the collaboration and is open about its experiences. The introduction of new technologies requires transparency and cooperation. “The mining industry needs pioneers like Agnico Eagle to help drive improvements that will benefit the industry globally,” Peter Bray, global product manager at Epiroc’s Underground division. concludes.

Mining and Tunnelling Technology 14


Future of Mining

Seven ways the mining sector can prepare for the coming economic era The mining and metals sector is facing a raft of transformational pressures that present the industry with a unique set of challenges and opportunities. Jordy Lee Senior Research Associate, Colorado School of Mines, University of Denver reveals seven ways the sector can respond - and strengthen its role in the new global economy in the process. The mining and metals industry is facing an unprecedented paradigm shift as it begins to implement new technologies while also managing climate and social challenges. Through raising awareness of these issues, and by focusing on new digital solutions, growing material demand, and investor pressures, the industry can strengthen its foundational role in a rapidly evolving global economy. Considering the COVID-19 pandemic, and to successfully implement this approach, there are seven key areas through which the mining industry needs to grow and remain focused.

1. BUILDING ON ESG STANDARDS Greater transparency and fostering of environmental, social and governance (ESG) principles have become necessary for mining and metals firms to successfully operate in the global marketplace. Awareness of these principles has come a long way since the world’s largest mining companies created the International Council on Mining and Metals (ICMM) to help the industry maintain its social license to operate (SLO). ESG reporting has developed through a galaxy of different methods and frameworks, all looking to help the industry relay key metrics. The concept of an SLO has evolved beyond local approval and cooperation; the multinational nature of extraction, transportation, and production means that firms must now abide by global standards. 15 Mining and Tunnelling Technology

2. RAMPING UP DATA ANALYTICS, AI, AND INNOVATION The mining industry is often seen as relatively dated, but the implementation of new technologies can create exciting advances. The use of automated trucks, LHDs (load, haul, dump), and drilling machines are not necessarily new, but companies have shown increased interest as the technology becomes more familiar, and the competitive advantages become clear. The advent of COVID-19 has also accelerated the adoption of automated mining equipment, as companies have begun to investigate maintaining production levels in the face of the pandemic and declining ore grades. With an increasing number of trucks, LHD equipment and machinery now outfitted with sensors and tracking equipment, the general digitalization and evaluation of mining data has become the technical foundation for more complex applications. Using gathered data, general mine efficiency will increase and benefit operational models, risk


Future of Mining

4. SUPPLY CHAIN SECURITY AND GEOPOLITICS COVID-19 has forced many countries to realize the full extent of their reliance on metal and mineral imports, and this has changed the way that some of them look at mining and metals projects. Critical mineral strategies and building up local industry have always been important subjects for those involved with industrial policy, but shortages, economic crises and the fragility of supply chains have brought many of these issues into the mainstream.

5. MINING, METALS, AND THE ENERGY TRANSITION Increasing demand for energy and low-carbon technologies will boost mineral and metal demand, and the sector needs to be prepared to meet these needs. Models examining future energy demand and composition through the year 2040 show renewables as the fastest-growing energy source. Three of the most common renewable energy technologies – electric vehicles, solar photovoltaics, and wind turbines – all have significant and diverse material needs. An unprepared extractive industry could struggle to meet rapid increases in demand – and possibly slow the integration of renewable technology. It is therefore important to remember that the key factors limiting mineral extraction are not physical limitations, but rather social, environmental, and economic challenges.

6. MINING ASSETS AND CLIMATE RISK

assessment, mining planning, the integration of new technologies, and virtually every aspect of mining and metals processes.

3. CHANGE FROM WITHIN: A NEW WORKFORCE New technologies require an adapted workforce to operate increasingly complex machinery and evaluate data. Finding the best people to fill these roles might be relatively difficult for the mining and metals industry, as they have often struggled to replace their ageing workforce and will now have to compete with disruptive technology firms. Negative public perception and concerns about the industry’s future are especially prominent during mining’s bust cycles, and with COVID-19 slowing down the global economy, only a few commodities – such as gold and iron – are seeing positive price changes. With the pandemic also potentially fuelling the adoption of renewable technologies, and these technologies becoming much more material-intensive than our current energy system, the mining industry needs to consider its approach towards building an interdisciplinary, technical workforce.

As the world transitions towards a low-carbon economy and the effects of global warming become more pronounced, mining assets need to be viewed in the context of climate risk. Falling ore grades pushing mining projects into more remote locations, water stress in active mining regions and natural disasters can all create new challenges for the mining and metals industry as it recovers from COVID-19, and as it faces the impending increase in mineral demand from industrialization and renewable technologies. The mining and metals industry is also a natural target for emission-reduction efforts and legislation; projects can be inhibited by carbon taxes, required supply chain restructuring, and a lack of lending from investors looking to minimize their own climate risk. Many of the world’s largest investment management companies have already announced their aversion to high-carbon projects, and this trend is likely to continue.

7. MINING AND METALS INVESTMENTS AND COVID-19 The pandemic has wreaked havoc on the mining and metals industry, but also presents an opportunity for companies to re-evaluate their strategies and build back better. There is no denying that the pandemic has stalled necessary expansion projects, and hindered efforts to achieve long-term development goals, but it is important to maximize the opportunity to reset. From an economic perspective, investment in mining operations was not particularly strong even before the crash. Exploration budgets are expected to stay low, as companies brace for volatility. Revenue over the last few years may have generally increased thanks to operational improvements, and merger and acquisition activity has shown healthy signs, but share prices have not reflected these strengths. When combined with the energy transition, supply chain concerns, technical innovations and the other trends shaping the mining industry, companies should internalize their needs and think about what the future of mining really looks like for themselves. Mining and Tunnelling Technology 16


Future of Mining

Four trends for tomorrow’s success Mining is an ancient and global industry with origins that date back to the foundations of civilization and an impact on many major economies throughout history. Even today mining represents nearly 12 per cent of the world GDP, measured by revenues and products sold. The world has always needed mining and still does. 17 Mining and Tunnelling Technology


Future of Mining

Mining is now faced with many significant challenges, many of which we have never seen. Growing global populations and economies mean increasing demand for minerals, and that trend will only continue upward. Yet, mineral extraction and processing are becoming increasingly difficult, and the depletion of the earth’s resources and the impact on fragile environments is a growing social concern. Like many industries with big challenges to future growth, change is being driven in mining by technology, innovations, better processes, social demands, and even new opportunities. As we dust off our crystal ball and examine what the future holds for the mining industry, four paths may hold the key to tomorrow successes.

Digital transformation to the smart mine Those that are sceptical or even resist the notion of digitalisation in mining often get it wrong. They assume that digitalisation means doing things differently, creating upheaval and disruption. However, true digital transformation, while certainly disruptive, is mainly about doing things better. Digitalisation is the catalyst that helps mining operations become smarter by leveraging digital tools and processes that make operations instrumented, interconnected and intelligent. For example, correcting issues with mineral processing has always been more reactive than proactive. With dynamic information early on through interconnected digital systems and software, quick course corrections can be made before problems surface. Advanced digital process and control systems enable continuous monitoring and virtual simulations, among other cutting-edge capabilities. “Digital transformation can enable a zero entry, fully automated and integrated mine. Mines will be designed differently for automation from inception with methods tailored and scaled to the orebody and variation in execution reduced by automation. Best of all, we will be able to fully harness the flow of information,” Gavin Yeates, mining futurist and industry consultant, says. “Digital transformation can help eliminate fatalities and injuries from high energy environments. It can also result in a step change in capital intensity and operating costs, new reserves from ore bodies that could not previously be mined, and lower environmental footprint through selective mining and operations scaled to the orebody.” In the future, the digital mine will leverage many of today’s emerging and evolving digital technologies. Industrial internet of things (IIoT) is a digital technology that can be particularly transformative for mining. Strategically placed sensors connected to the internet can enable mines to collect huge amounts of data in real time. Best of all, the data from IIoT sensors is highly actionable, helping managers to make smart decisions that can improve efficiency, increase safety, cut costs and more. Using IIoT and data analytics, managers can boost the efficiency of haulage operations, determining optimum load time and frequency that can help maximize fuel consumption, cut down on vehicle maintenance and even haul distance. Every mining operation involves numerous vital decisions every day. Artificial intelligence (AI) technology offers decision-making and problem-solving support based on massive amounts of data from

numerous mining and work equipment, as well as databases. Best of all, AI leverages superior computer processing power and a level of inter-connectivity with many different mining systems, IIoT sensors, robotics, and data sources for a holistic view of operations in real time. That offers decision-makers the information they need to make well-informed choices for safer and more productive mining operations. While each of these digital technologies offers mining operations unique capabilities and advantages, it is their interconnectivity that can allow mines to operate at new performance levels. With true digital transformation, IIoT, data analytics, cloud platforms, blockchain, AI and a host of digital innovations all work together to make mining operations smarter than ever.

Mining technology and tools with robots, machines, and drones While digital transformation focuses on making mines smarter, new technologies and tools on the hardware, transportation, and equipment side bring unprecedented brains and brawn to all major operations. Best of all, these new technologies can connect seamlessly with digital transformation efforts, integrating data analytics, AI, and machine learning with a smart mine’s unified systems. Drone technology is already being used throughout the mining industry to help increase safety by going in areas that may be hazardous to humans, along with many other applications. For example, Freeport McMoRan is using drones to help create steeper slope angles to decrease stripping ratios and waste rock before extracting ore. Drone analysis of mine slopes avoids the dangerous prospect of sending a geologist or geotechnical engineer into highly dangerous situations. Other drone uses for mines have included inspecting various areas of the mind unsafe for human inspections, clearing blast areas, leveraging 3D imaging, and scanning, and streaming live video and real-time data feeds. Electric and autonomous vehicles and equipment will continue to impact the mining industry. According to a recent industry report, electrification and automation will be a $15 billion market by 2028. Fuels savings, increased efficiencies, and greater productivity continue to drive innovations forward in this area. Already mines are seeing a 30 percent increase in productivity from autonomous haulage systems alone. Electrification can help cut operational expenditure related to ventilation and cooling of machines by as much as 20 to 25 percent, respectively. Mining companies like Rio Tinto and BHP Billiton

Mining and Tunnelling Technology 18


Future of Mining

are currently using driverless haulers and automated drill extractors to move metals with proven results in efficiency and productivity. Robotics and automation in mining is a particularly exciting proposition since it connects directly to innovation with AI and machine learning technology. In a recent poll conducted by Mining IQ, 77 percent of mining professionals view automation as a top priority. Fully 40 percent say automation is “more important than ever.” Robotics can be particularly advantageous in replacing traditional shovel and extraction processes used by humans. The concept of a continuous robotic mining system will evolve as technology replaces manual processes and computer-controlled and powerful machines extract the most minerals in the shortest amount of time. “Smart” automated conveyor systems are already being used for speedy material transport. Like drones, mine robots can also be used to replace humans in performing radiological, inspection, and survey tasks, especially in small areas or an inhospitable environment, such as abandoned mines. Soon, abandoned mines with previously inaccessible minerals can be reopened with robots successfully doing extraction that just was not possible before. “Automation at new scales – much smaller than today’s – will allow us to operate swarms of small and low-cost autonomous equipment in mines designed only for machinery, thus allowing new deposits to be mined,” Yeates adds. “Hydro-metallurgical techniques and nanotechnology will get us closer to in situ mining, a much smaller environmental footprint, and lower energy, capital and operating costs.”

Sustainability and environmentalism drive future trends Environment accords, like the Paris Climate Agreement, along with an increasingly global awareness of the value of our natural resources is putting more and more pressure on mining companies to address sustainability. Fortunately, many of the technological innovations we have already discussed reduce fuel consumption, emissions, waste, and water use in mining operations. Even the rehabilitation of mining sites through new biological and chemical solutions for environmentally friendly waste management and acid mine drainage can allow ecosystems to recover. But being green is not just a piecemeal effort for the industry or a trendy marketing campaign. Going forward, the onus will be on mining operations to change their entire business model and adhere to the concept of Corporate Social Responsibility (CSR). “What I’m most excited about for the future is the prospect of mining companies embracing the role of being a responsible steward of the environment,” Dr Priscilla P Nelson, dept. head and professor, department of mining engineering, Colorado School of Mines, adds. “We have to find a way of participating in the circular economy and identifying creative solutions for reducing raw materials in mining operations by reusing resources and recycling water and materials. This could change the public perception of mining and put the whole industry in a more positive light.” Today’s shift toward CSR sets the stage for concepts like green mines or zero-waste mining to become increasingly popular. The 19 Mining and Tunnelling Technology

goal of greening mining is to reduce the environmental impact of mineral and metal extraction and processing, with a focus on new technologies, smarter mining operations and processes, and sustainability best practices. The good news for mining companies is that “going green” can have its financial benefits. The Green Mining Initiative cites one project in Ontario, Canada that resulted in a 40 per cent reduction of energy consumption with an annual savings of up to $4 million. “Tailings are going to be an issue with lower grades of ore,” says Dr. Nelson. “If you go from an ore that has ten percent of the metal mines are looking for to one-tenth of a percent, that means that tailings are going to increase by a factor of ten, which is pretty significant. This will drive mines to use more advanced technology, like spectroscopy, to decide what to take out of a mine and what to leave down there. The retooling of processing to be more flexible with different grade of ore will also be needed.”

New frontiers of deep sea, space, and rediscovery As the industry looks further into the future for tomorrow’s opportunities, several key areas emerge as the front runners. In Twenty Thousand Leagues Under the Sea, Jules Verne predicted the future when he described mining operation on the ocean floor. Now that vision is starting to come true. Deep sea mining is a relatively new concept in mining, and undersea technologies are just beginning to scratch the surface of what is possible.


Future of Mining

The prospect for significant extraction opportunities lies right on sea floors, especially considering that we have only explored five per cent of the deep ocean. The deep sea has created formation with highly valued metals that can be mined. Polymetallic modules — softballsized formations that litter the seabed — are rich sources of nickel, cobalt, copper, and magnesium. Polymetallic sulphides form when hot water from the earth’s crust meets cold water, resulting in smokestack formations rich in iron, silver, and gold. Underwater crust formations and mountains (mostly in the Pacific) are rich in rare earth metals, like cobalt, vanadium, molybdenum, platinum, and tellurium. Space mining might seem like something out of science fiction, but it is a future frontier that may not be too far off. Some experts contend that asteroid mining may be a reality by 2025. Why asteroids and not Mars first? Beside containing valuable minerals like platinum and palladium, reaching an asteroid that is near to earth requires far less energy than reaching a far-away planet like Mars. NASA and advocates of space mining have noodled on the many ways that asteroids could be mined, with most ideas focused on launching an interconnected army of robotic devices and crewless

mining spaceships to extract minerals and send them back to earth. Some say that human could soon follow, but the low surface gravity of asteroids offers some serious obstacles. Even though Mars is a much further destination, the red planet is estimated to be rich in ore and other valuable minerals. Also, if colonization is the end goal, mining activities on a planet like Mars may allow colonies to be self-sustainable. NASA continues to tap into fresh minds in academia in brainstorming new mining robotics designed for celestial surfaces like Mars.

The future of mining looks bright There is no doubt the mining industry faces some significant challenges. The increasing demand for minerals and metals coupled with the pressure to increase output cost-effectively puts many mining operations in a tough spot. Fortunately, digital transformation and new technologies offer mining companies golden opportunities to become more efficient, boost production, and cut costs while making the work environment safer. And, although the push for sustainability and environmentalism may have headwinds, mining operations are becoming increasingly green and also benefiting from the push for materials to build electric cars and renewable fuel sources of energy. Finally, future opportunities for mining in the deep sea, space, and abandoned mines mean the industry has more frontiers to conquer. Mining and Tunnelling Technology 20


Digitalisation

Practical applications of digitalisation in mining, minerals, and metals business According to World Economic Forum, digitalisation in the mining, minerals, and metals industries has the potential to deliver over $425 billion in shareholder, customer, and environmental value by 2025. Mo Ahmed, global segment solutions metals at Schneider Electrics explains Much of this value will come in the form of operational effectiveness, increased productivity, faster decision-making, and enhanced safety. However, cashing in on the digitalization opportunity will require strategic planning, strong partnerships, the realignment of the employee culture, and appropriate digitalisation technologies. Companies are looking to modernise operations to remain competitive. These operators are faced with the issue of working within silos. Many workers are in separate departments working on spreadsheets, highly customised applications, and out-of-date solutions with no real ability to share the data they produce. Such a siloed mode of operation leads to inefficiencies that propagate mistakes and that prevent streamlining of processes. The challenge is how to best get started down the digitalisation path. Today, open architectures are accessible to enable digitalisation by providing tightly coupled linkages with a cybersecure

21 Mining and Tunnelling Technology

envelope across the smart device, edge control, and apps and analytics layers of mining, minerals, and metals enterprises. This approach increases field to enterprise transparency and enhances value chain visibility and efficiency all along the asset life cycle. The nature of digitalisation is evolution and not revolution. Embracing a gradual, scalable approach, enables the measured introduction of modernisation in the form of production, maintenance, operator enablement, and workforce building blocks. These days, competitive advantages in the mining, minerals, and metals industries rely heavily on an ability to gain holistic insight of operations, an Integrated Operations Management approach, from design to maintenance.

Digitalisation life cycle impact 1 Efficiency starts in the design phase Such a holistic view, enabled by an open architecture, provides new linkages and deeper integrations across core power and process systems. On the design and engineering front, for instance, hybrid DCS (HDCS) and PLC’s can integrate seamlessly with configuration, analytics and digital optimization technologies that would have been impossible or extraordinarily complex to implement in the recent past. Engineers can now configure and operate an entire automation system based on the distributed control system, with gains such as engineering time and cost reduction, minimized downtime, new testing capabilities, scalability, or rich access to asset information. Also consider the example of digital twin. According to Gartner, 50 per cent of large industries will use digital twins by 2021. These software simulation tools provide mining, minerals, and metals operators with virtual models for both the engineering and design phases of a project and for refinement of operations. A digital twin’s power is that it allows engineers to observe the physical asset’s behaviour without spending money to build it, and then improves the overall design by iterating through different operating conditions. 2. Drive production management efficiencies Improving productivity across the value chain is critical for maintaining competitiveness. This can be achieved by addressing in an integrated way, different aspects that impact production activity – from planning, when a Unified Supply Chain Management help achieving agile and collaborative decisions between multiple sites in the value chain network for better scheduling; to execution by enabling process stabilisation and optimisation and providing operator support in helping to drive machine productivity closer to process limits. Continuous operations are the key to solving many production issues and to improve. MMG, a mining


Digitalisation

company that operates globally, has emerged as a reference in delay accounting, the measure of lost time when operating assets or processing. By using a standard approach MMG has increased asset utilisation by at least 10 per cent across multiple global sites. EcoStruxure Advisors, are a specialised suite of smart manufacturing apps and digital services that also provide collect, measure, and analyse cloud-based and plant-wide data and recommend cost effective actions to take for continuous improvement. Some of these advisors use machine learning techniques to better tune mining, minerals, and metals processing plants. Specific plant parameters are set such as speed, and how much chemical is added, for example, to achieve an optimal operating point. 3. Tighter management of energy to reduce costs and guarantee uptime, while fostering sustainable operation Despite efforts, overall energy usage is rising. Demand for electrical energy in the copper industry, for instance, is forecast to grow at four per cent (CAGR) through 2026. Better control of these costs using digital solutions in now possible. Energy is one of the top five expenses for Saint-Gobain. They have saved millions of dollars in energy costs working out their energy planning and improving stages using cloud-based energy management tools like EcoStruxure Resource Advisor. By being focused on buying energy smarter and using it efficiently, and centralising energy procurement, resources are also freed up to deliver leading-edge, sustainable solutions. Through use of digitised technologies, plant operators can now track, and control energy use based on the time of day, and trim consumption when grid-wide use and prices peak. During execution, in many remote sites, microgrids are beginning to play a more important role in maintaining business continuity. The newest generation of microgrids has become much smarter due to the integration of digitalised, predictive technologies. Cloud-based solutions like EcoStruxure Microgrid Advisor, for example, serve multiple roles such as providing a Human Machine Interface (HMI) for site managers, processing demand / response requests, optimizing output decisions based on energy tariff rates and weather forecast predictions, and factoring in user / customer constraints. As a result, energy bills can be minimized, and carbon footprint decreased. 4. Digitalised asset management to efficiently extend asset life Within the mining, minerals, and metals industry, 40 per cent of OPEX is generated through maintenance activities. In fact, most asset maintenance costs will far exceed capital costs over the life of the asset. In some mining operations, more than 60 per cent the total site workforce is exclusively dedicated to maintenance.

During planning, comprehensive Enterprise Asset Performance Management (APM) improves asset performance by integrating risk and asset criticality into an overall asset performance management strategy. The software generates optimised maintenance and spare parts strategies by first looking at the company’s business strategy and objectives, and then prioritising actions down to an individual asset level to maximise return on asset investment, establishing recommendations to choose from reactive, preventive, or predictive maintenance. Good example on preventive maintenance is EcoStruxure Asset Advisor, cloud-based maintenance solution that brings a proactive approach to managing power assets, addressing issues before they become critical incidents. During execution, augmented reality is beginning to change the way maintenance in remote sites is being performed. It provides maintenance technicians with tablet-driven graphical views of the inside of machines, without ever having to open a panel, which greatly enhances worker safety. Instant access to real-time information speed ups identification of the issue and visually displays the proper procedures for applying a fix. This helps to reduce the human error commonly associated with traditional maintenance procedures.

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Mine 2020

Resilient and Resourceful According to McKinsey’s report, Mine 2020, the Top 40 mining companies are so far weathering the COVID-19 storm mostly unscathed, and certainly better than many other sectors. This is a remarkable feat, given that global growth is expected to decline in 2020, something that is only happened twice in modern times: in 1944, during World War II, and in 2009, during the global financial crisis. The ability of the Top 40 to ‘resource the future’ continues to be relevant in the current environment as many governments will appreciate mining for being a bedrock of economic recovery out of this crisis. Our forecast for 2020 suggests the Top 40 miners will take a modest hit to EBITDA of approximately six per cent. Capital expenditure will also slow, freeing up cash flows, and giving miners the capacity to pay dividends should they choose to do so. 23 Mining and Tunnelling Technology

We do not expect many mega-deals to take place in 2020 due to increased economic uncertainty and practical constraints of site visits and inspections. However, the current conditions provide opportunities for the Top 40 to capitalise on smaller acquisitions in their local markets. Gold deals are not likely to recur to the same size or quantum as in recent years. Although mining has been able to keep operating through the COVID-19 crisis, companies have also had to adapt and evolve. Some changes have been for the better, such as remote workforce planning and greater use of automation. Many of these adaptations may become permanent. In an uncertain


Analysis

environment, miners have focussed intensely on controlling the things they can control, and it is serving them well. But the Top 40 are not immune from the social and economic shocks ahead, and they cannot afford to let their guard down. COVID-19 is challenging long-held assumptions about the unassailable wisdom of ultra-lean principles and global supply chains. Miners may need to think about de-risking critical supply chains and investing more in local communities. A shift towards localisation in supply chains and in deals, as well as different forms of community engagement, may turn out to be enduring consequences of the pandemic. The Top 40 also need to keep on top of the mega-trends that existed pre-COVID, particularly ESG (environmental, social and governance) reporting and cybersecurity. We analysed how the Top 40 are performing on ESG disclosure and found that a few companies are doing most of the heavy lifting, while the rest lag. But ‘brand mining’ is a collective brand, and every miner needs to play its part. On the cyber front, the Top 40 have some work to do. At a time when mining companies are becoming more vulnerable to cyberattack as they use more automation and digital technologies, CEOs are expressing less concern about such issues. In some respects, the mining sector is well-situated in the wake of COVID-19. For example, despite recent uncertainty regarding Brazil’s ability to continue mining, iron ore prices have risen, potentially limiting the total impact on the sector. Mining companies have strong finances and are mostly still operational, albeit with increased levels of precautionary controls. But the longer-term impacts remain uncertain, and ongoing disruption is likely. Top 40 miners should take advantage of their current position of financial stability to revisit their strategies. Doing so will ensure their businesses can enhance their resilience over the long term and meet the demands of the global economy to maximise the opportunities to resource the post COVID-19 future.

Taking lessons from the lockdown An event without precedent in living memory, the COVID-19 pandemic is challenging several long-held truths about mining. Many miners, some for the first time, are experiencing the downside of global supply chains, ultra-lean operations, and specialisation. But the pandemic is also highlighting the sector’s resilience and the role that miners play in supporting communities and the broader economy. Although the crisis is far from over, miners are already applying the valuable lessons they have learnt. In most countries, mining has drawn on its powerful entrenched safety culture to quickly implement controls to contain the spread of the virus and continue to operate. As a result, compared to many other industries, mining has managed to weather the first phase of the crisis relatively unscathed. But that does not mean mining companies will be immune from the economic, social, and business shocks ahead. The post–COVID-19 environment will require everyone to operate differently. Mining and Tunnelling Technology 25


Mine 2020

De-risk critical supply chains Global supply chains have proven highly effective in driving down the cost of mining, as has a focus on hyper-efficiency, lean principles and just-in-time techniques. But the pandemic has exposed the vulnerabilities of this model. When borders closed and factories went into lockdown, those miners reliant on transient workforces, minimal inventories and low diversification struggled the most. At least for their most critical supply chains, the Top 40 may need to consider an alternative approach: improved inventory management combined with globally diversified or locally sourced and financially viable resources. This would not only de-risk mining companies against a similarly disruptive event but also help develop and build resilience in local communities. Many are already doing it; Anglo American, Nornickel and BHP, among others, have announced initiatives to increase support for their domestic suppliers as a result of the pandemic.

Reconsider the benefits of diversification Demand fluctuations are not new to mining. But miners that operate in one geography and rely on a single market or a single product offering are more likely to be impacted by events such as the COVID-19 pandemic. Although some miners have simplified their portfolio to focus on efficiencies, it is essential to strike a balance between a streamlined business and a diversified business. In the context of large markets, such as China and India, driving worldwide commodity growth, miners need to ask how they can diversify their customer base and fortify demand.

Build resilient communities Mining’s social licence to operate has never been more critical than it is today as companies increasingly look to local communities for skills, resources, and supplies. Within weeks of the onset of the pandemic, large miners implemented concrete steps to build resilience through training, infrastructure, and assistance. The

majority of the Top 40 each contributed between $20m and $140m in direct support, and many continued to pay staff who were unable to work. It is likely that miners will need to boost investment in local communities for some time as the full impact of COVID-19 continues to play out. According to the International Labour Organisation, the crisis is expected to wipe out 6.7 per cent of working hours globally in the second quarter of 2020 — equivalent to 195 million full-time workers. Even mature, shockabsorbent mining businesses cannot endure such an impact in isolation. But this once-in-a-generation disruption also presents miners an opportunity to remind stakeholders of the integral part that they play in their local communities. For example, during the early stages of the global outbreak, the Minerals Council of South Africa and member companies acted decisively to support employee education and health worker readiness, and secure the supply of masks, sanitisers, temperature monitors and influenza vaccinations. In Peru, miners stepped up to help local communities with essential medical equipment and logistics. And in India, companies have repurposed their medical facilities to treat COVID-19 patients.

Automation can help in a crisis 24 Mining and Tunnelling Technology


Analysis

The global pandemic has shown that automation and digital operations can do more than reduce costs and drive efficiencies. Miners operating remotely or autonomously have found that technology also helps to manage the risks and impacts of COVID-19. They can better support remote workforces, reduce on-site presence, and monitor and control operations from outside the mine site setting. While recovery from COVID-19 will certainly involve the use of more technology, miners must also strike a balance between accelerating its implementation and supporting local employment to avoid putting further strain on job-affected communities.

What the pandemic can teach us The Top 40 have shown they can innovate, adapt, and respond to this crisis along with the best. Now is a good time to assess which of those tactics were effective and should be codified to help

miners prepare for future disruptive events. Miners may also find useful lessons that they can incorporate as standard practice. These include reduced office footprints, an increased local workforce, relocation of non-critical roles from sites, reassessment of investment criteria, redesigned rosters and shift patterns and working groups, as well as priorities towards the large and positive impact mining can have in communities. For example, Rio Tinto has realised unexpected efficiency gains by using alternative workforce delivery models, including remote working and roster changes. The revelation that they can significantly reduce travel time while keeping up production will likely see them making these changes permanent. By leveraging these kinds of positive pandemic experiences, miners will not only enable a faster recovery but also set mining up for a brighter future. Mining and Tunnelling Technology 25


Pandemic response

How has the mining industry responded to COVID-19? The COVID-19 pandemic is undoubtedly the defining global health crisis of our time, with governments and health services alike racing to slow the spread of the virus. But beyond the impact on global health, COVID-19 has shown its potential to create devastating social, economic, and political challenges that will have lasting repercussions.

26 Mining and Tunnelling Technology


Pandemic response

The mining industry’s response has been swift and aligned, and has been driven by two key priorities. Firstly, protecting the health and safety of employees and local communities; and secondly, laying the groundwork to support the longerterm economic recovery which includes supporting livelihoods, protecting severely disrupted supply chains, and helping to build long-term community resilience to any future crises. What this response has made immediately clear is that companies, governments, and communities must work in collaboration to aid recovery efforts. Working independently will only hinder the ability to recover and rebuild. Collaboration has been the cornerstone of the International Council on Mining and Metals (ICMM) members’ response to the pandemic. In practice this has meant regularly convening ICMM’s 27 member companies and 35 national and commodity association members to share guidance and information to accelerate learning. Through these conversations we have seen key themes emerge; health and safety as a fundamental shared value, the importance of communicating mining’s role and the shared commitment all companies must build forward better.

Health and safety – a fundamental shared value Some criticism has been levelled at the mining industry for being focused on keeping operations open in some countries, despite the perceived risk to the health and safety of communities and workers. Health and safety is a fundamental shared value for the mining industry, and one which is at the centre of every responsible mining company’s business strategy. This has meant ICMM members are well placed to draw on their existing breath of expertise in managing other health crises – for example Ebola, TB, and malaria. They also have the knowledge to efficiently and effectively implement the vital protocols and measures needed to continue to operate safely. These measures include temperature screening at site, COVID-19 testing, and increased hygiene measures such as social distancing and reduced shift sizes. Companies have placed restrictions on work-related travel and have set up hotlines operating 24/7 that provide medical and wellbeing advice, including signposted access to mental health services, for employees and those in the local community. ICMM companies operate in more than 50 countries. Each country has responded differently to the pandemic and in many countries the response differs across states and regions. Our members are therefore working closely with health authorities to ensure all sites are adhering to national and local guidance. Continuing to share learnings from different responses and knowledge of specific health protocols will be critical to help flatten the curve and ensure workers and communities are kept safe.

plays in socio-economic development. Not only do local mining operations provide jobs and security to communities, but they also support livelihoods by supplying the vital goods and services needed in some of the most remote regions on earth. Due to the complex nature of mining operations and the remote locations in which they are often located, the mining industry has a relationship with and special commitment to local communities that is like no other sector. The teams at site are therefore in a unique position to listen to concerns and adapt quickly where needed. This has been shown by companies providing for example food parcels, medical assistance, medical supplies (ventilators, PPE, and medicine), educational materials, basic infrastructure (sanitation facilities, drinking water and roads) and information about COVID-19. In some cases where local government is at full capacity, this support has been invaluable. While the sector may not have got it right every time, COVID-19 has undoubtably led to the refocusing and reframing of relationships with local community groups. This is one positive to emerge from the crisis, and something we must learn from and continue to encourage as we move from the response to the recovery phase. A shared commitment This has been a steep learning curve for all of us – governments, business, and individuals – and I think the mining industry has shown adaptability, resilience, and compassion through its response to the pandemic. ICMM was founded on a fundamental set of principles that promote sustainable economic growth, the building of resilient and inclusive communities and developing the innovations needed to urgently address climate change. These shared commitments give me optimism that the mining industry can and will support long-term recovery, helping communities to recover and rebuild. There will be continued demand for the metals and minerals needed to support a greener and more sustainable future. As our members continue to meet that demand, we will also continue to help protect workers and safeguard livelihoods, and help communities recover and build resilience towards a better future.

Communicating mining’s role A key insight that has arisen from ICMM’s conversations is the importance for communities, NGOs and civil society to have a greater understanding of the mining sector and the critical role it Mining and Tunnelling Technology 27


Smart Mines

The era of Smart Mines: Technology Trends in Mining The use of technology in industrial mining has been developing since its inception: dynamite helped clear tunnels and reach greater depths at a much faster rate than could be done with a pick and hammer; the industrial revolution catalysed the mechanisation of equipment; and electric conveyor belts made it easier to load and haul materials. The Baker McKenzie Mining & Metals Forecast 2020 Industry Trends highlights some of these developments.

As we are now in the era of the fourth industrial revolution, digitalisation is providing the latest significant technological advancement for the mining sector. The deployment of advanced data analytics and artificial intelligence (AI), the use of 3D modelling techniques, wearables, drones and automated equipment, and increased connectivity through the Internet of Things (IoT) are key drivers of this digital revolution. Continued scrutiny of safety, regulatory compliance and environmental concerns has meant an increasing drive to optimise equipment and systems and to be proactive, not reactive, to mitigate operational and legal risks. There is also a huge focus on driving operational efficiencies and competitiveness through the effective deployment of technology.

Prospecting and exploration At the prospecting and exploration stage, the use of 3D modelling, AI and drones is on the rise. 3D modelling techniques use software to create schematics for underground areas ahead of the construction of new mines. This can expand the area covered by exploration work by allowing the imaging of areas that would otherwise be difficult, or impossible, to access. Modelling also offers significant opportunities for worker safety by giving users a greater degree of information about a mine and its safety, and by reducing the degree to which humans are required to investigate potentially dangerous or uncharted underground areas. AI offers key advantages by helping mining companies organize, understand, and make optimal decisions on the vast amounts of data they collect. Precision is key at the 29 Mining and Tunnelling Technology

prospecting and exploration stage, when digging in the wrong location can be a very costly mistake. AI can help companies accurately discover deposits. Companies can reduce initial investment costs by increasing their strike rate, which should in turn result in better returns. Drone technology has seen rapid improvement in recent years. The use of drones can drive impressive reductions in labour costs and improvements in data collection. For example, one drone can now carry out the same aerial surveying work that was previously done by a helicopter crew. Improved AI technology built into a drone enables the drone to better understand the environment and terrain it is aerially surveying and help companies make better decisions on where exploration should be targeted.

Development and production Digital technology is also having a significant impact on development and production. For example, automation technology — together with improvements in AI — can vastly improve operational and cost efficiencies, particularly with the use of autonomous vehicles, drillers, and haulage systems. Self-driving trucks can navigate through narrow tunnels without a human driver. Autonomous haulage systems (AHS) can safely move and transport far more materials than a human workforce could, resulting in increased productivity gains and safety. In 2019, a global mining company launched the world’s first automated heavyhaul rail network capable of moving approximately one million tons of iron ore a day. In addition, certain heavy equipment


Smart Mines

manufacturers have found that organisations using AHS technology have reported productivity gains of more than 20 per cent since implementing their AHS technology. Automation introduces obvious advantages at an operational, production and staffing level in an industry where labour costs are high. The removal of workers from dangerous working conditions also increases the health and safety of mining operations. AI is also being employed to improve operational efficiency, safety, and production workflow, such as predicting the distributions of minerals more effectively to increase mining efficiency. Connected and smart devices are being deployed in a range of scenarios. For example, real-time data from smart sensors attached to mining equipment and systems can help optimize equipment performance and enable preventative maintenance before equipment fails, saving time and money and

reducing health and safety risks. Just as the IoT is making our homes smart, new mines are being constructed with the IoT in mind and the creation of one of the world’s first intelligent mines is due to start production in 2021. This mine will implement systems connecting all components of the mining value chain, which is expected to enable the mining operator to analyse vast quantities of data in real time and make optimal decisions to generate efficiencies across its production and operations. In addition to automation and AI, wearables are being used to provide real-time data on the locations of workers, help track workers’ fitness for work and monitor health and safety risks. Virtual and simulated reality and digital twins are being used by mining companies to run advanced simulations, enable enhanced monitoring of equipment and operations, and increase precision in mining operations. VR/AR (virtual reality/

augmented reality) can be used to provide immersive training for employees, allowing employees to prepare for difficult events in a safe environment. It also offers great potential for forensics and incident investigations.

The legal seam With the increased deployment of 5G technology, mining’s digital disruption continues, with the promise of ever-smarter mines. Nevertheless, with this new technology come some new legal and regulatory challenges. The use of AI and automated technologies creates questions regarding the responsible use of technology and sustainability. Data maximisation strategies trigger many questions, for example, “What rights do the mine operator and mining equipment manufacturer have in data that is generated by the licensed technology or collected by such technology at the mine site?” The mine operator will want to safeguard data that it believes reveals confidential information about the productivity of the mine site, while the mining equipment manufacturer will want to use data to improve and develop new products and services. In addition, with countries enacting data protection laws with ever- expanding definitions of personal data, any such data usage rights will need to be balanced against any potential personal privacy rights that mine workers may have in such data. Moreover, the increased use of digital technology across a mining company’s infrastructure and supply chain means that the parties should evaluate the appropriate contractual responsibilities in the event of a cyberattack. The use of sophisticated AI also raises unique product liability issues if the technology contributes to personal injury or property damage, even if the technology is “properly” functioning in accordance with its specifications. Additionally, the implementation of such technology at a mine site may require that the parties share certain intellectual property. This may raise questions about what rights each party should have in new technological developments that arise out of the transaction. Ultimately, when embracing digital technology, mining companies and mining equipment manufacturers may need to revaluate how contracting for digital technology differs from traditional equipment services and supply contracts to build a framework for a successful relationship. Mining and Tunnelling Technology 30


Safety

Zero is the only number Underground mining has always been associated with higher risks that are different from those in other sectors.

Let us dive deep into some interesting statistics taken from different industries and find out if this is the case. The number of fatalities in the trucking industry, for instance, grew 6.6 per cent from last year taking the number from a mind-boggling 786 in 2016 to 840 in 2017. Trucking as a profession had a fatal injury rate of 26.8 deaths per 100,000 full-time equivalent workers, compared with 3.5 per 100,000 full-time equivalent workers for all professions. The fishing industry had a fatal injury rate of 99.8 per 100,000 full-time equivalent workers, the highest rate of any occupation. “Zero” is the only acceptable number when it comes to fatalities, but it is also important to see that number in a wider context. This includes having policies, training, and engineering controls in place to address the major causes of fatalities and injuries. Focusing our attention back to the underground mining industry, some hazards, such as ground instability, are inherent in the underground environment, while others may arise due to the complexity of mining processes and activities. If these risks are not managed properly, they can result in fatalities and serious injuries. According to International Council on Mining & Metals (ICMM), the highest number of fatalities in 2018 was attributed to mobile equipment and transportation, overtaking the fall of ground category that had consistently been the number one killer in past years. With advances in technology, some of these risks can be mitigated. The advent of Artificial Intelligence, Machine Learning, and Autonomy provides an opportunity to manufacture 31 Mining and Tunnelling Technology

smarter machines that can improve safety by reducing exposure of workers to hazardous conditions. Major mining equipment manufacturers are excited and have started embracing these technologies with a strong emphasis on improving safety and productivity. Mining companies are adopting these technologies at a slow pace, but as is always the case, there are a few early adopters that set the benchmark for the industry. MacLean Engineering is one such company that quickly focused its efforts towards building a team of engineers dedicated to conceptualizing, designing, and implementing these technologies in the underground mining context. To illustrate an example, the MacLean Vehicle Monitoring System enables operators to monitor the health of critical systems and provides diagnostics delivering significant benefits to productivity, operating costs, and safety. Another example is the role MacLean Bolters have played in Ontario’s improved fall-ofground safety over the past three decades. With the first MacLean bolter entering the market in 1984, and over 500 units sold globally, the company has been able to replicate the Ontario experience in other hard rock mining jurisdictions, with the appropriate training program and safety culture backdrop. The key innovation with the MacLean bolter was in fact not one, single feature, but instead a series of design elements that work together to deliver accuracy, speed, versatility, and, most importantly, a safer application environment for operators. Last but not least, MacLean has been working on its fleet electrification program for the past three years and we are now able to offer mining companies the option to reduce their carbon footprint by switching to battery powered fleets with zero emissions, low noise and low heat operations. Workplace health and safety are also big benefits. These are exciting times for the mining industry, and the onus is on the mining fraternity (equipment suppliers and mining companies) to make the best use of the technologies available and provide a safer underground environment to the workers.


FOR TOUGH JOBS ABOUT OUR EXPERTISE

We understand that development cycle time and production effectiveness are important to you. We work with you to optimise these. We believe that Total Value of Ownership/Partnership is a very important metric.

Normet brings process expertise to bear which has been amassed over thousands of mines and projects all over (and under) the globe. This broad perspective means that we’ve seen, and learned, a lot about what should and should not be done to achieve the optimum results. We improve underground mining and tunnelling processes with knowledge and technology. We translate process expertise into actions and results which you can measure financially. ABOUT OUR PROCESSES

Normet is virtually exclusively focused on the disciplines of underground mining,

tunnelling and civil construction. We live in your world on a day-to-day basis. We

come from the industries; we speak your

language; we understand your objectives. We understand HSQE, engineering, development, production cost/

productivity drivers and management. Your challenge is our challenge.

Normet, more importantly, has a wealth of expertise and experience (over 55 years) in your pertinent, specialized processes such as Ground Support, Explosives Charging, Equipment Life Cycle management, TBM operations and other innovative applications. This boils down to understanding your processes in which our technologies are employed, and improving the overall processes to your benefit. ABOUT OUR PEOPLE AND ORGANIZATION

Normet is both local and truly global with respect to our customers’ operations; we operate in all relevant markets around the world, from 43 locations, interacting directly with our customers. Over our lifetime, we have delivered over 11,000 built-for-purpose underground machines. We also service machines and support the rest of our offering with our range of Normet services. For many processes, we are a “one stop shop”. We nurture inspiration in our employees and they have a passion for doing “big” things for Normet and for the industries we serve. We travel; we go to your project wherever it may be; we go underground; we get our hands dirty. We spend the time with our customers and we invite our customers to be an integral part of our Research and Development processes.

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