Barrick taps Cisco for digital reinvention

When it introduced its Mine of the Future program in 2008, Rio Tinto (NYSE: RIO) introduced automated machinery, remote operations centres and data analytics into an industry that has a reputation for resisting innovation rather than embracing it.

Since then, other miners have looked to improve their operations with similar technological leaps, but their reforms have stopped short of comprehensive.

Barrick Gold (TSX: ABX; NYSE: ABX) aims to take that further, with a deeper transformation that would embed new technology and analytics capabilities across the whole business — from mining and processing to environmental monitoring, and even encompassing stakeholder relations and permitting.

“It’s not that we’re just going to digitize. We actually want to reinvent, rethink and reengineer the processes, so that we think about them fundamentally differently,” said Michelle Ash, Barrick’s senior vice-president of transformation and innovation.

Barrick’s leadership says that the time is right for mining to “reinvent” the mining business with the help of new technology.

“There have been huge advances in the technology and it’s much cheaper than it used to be,” Ash said in a November interview. “In some respects, I feel a bit sorry for the Rios and the BHPs that led the way a decade ago, because they spent a lot of money for nowhere near the advances we’re getting now.”

Barrick announced in September that it is teaming up with tech giant Cisco Systems (NASDAQ: CSCO) to digitize its business — which includes using advanced sensing and monitoring technology, automated equipment and analytics based on collecting real-time data.

“Harnessing the potential of digital technology will unlock value across our business, helping us grow our free cash flow per share,” Barrick’s executive chairman John Thornton said in a release. “In doing so, we will make ourselves into a leading twenty-first century company — enhancing productivity and efficiency at our mines, and improving decision-making and performance across every area of our business.”

Alex Smith, an account manager at Cisco Canada who works with Barrick, says that while Cisco has worked with mining companies for many years, the company’s partnership with Barrick represents a new relationship between the service provider and a miner.

“This is the first time we’ve looked holistically at and partnered with a mining company in this way instead of just transactionally selling them point solutions to solve a point need.”

Cisco will bring several areas of expertise to the partnership.

It will connect all the elements and equipment at Cortez through wired and wireless technology, and provide Barrick with access to other technology experts through its vast network of partners.

Cisco will also bring its experience helping cities and countries such as France, Germany, the U.K., India and Mexico, with their larger digital transformations.

“We thought if they can help transform a country, how much easier would it be to transform a business or an industry?” Ash says.

The process starts by identifying business outcomes rather than focusing on technology.

“It’s not about, ‘Hey, there’s a shiny technology out there, we could save money if we used it,’” Smith says. “You start with what the outcome is and the vision that you’re looking for, and you work backwards from there. That’s really a big part of the methodology.”

The process begins with a series of workshops that get all the departments — from exploration to the processing plant — together to share information, Smith says.

“Instead of looking at things within their own silos, the workshops get them, sometimes for the first time, looking at the entire value chain together and seeing where those connection points are,” Smith says. “Maybe someone can improve a process in mining that is going to dramatically improve how things are done in the processing plant.”

One of Barrick’s objectives with digitization is to make decisions driven by data, Smith says.

“There have been so many times that [Barrick] found decisions weren’t ideal — but they don’t find out until six months later, after spending a lot of money,” Smith says. “So they feel that having access to much better data in real time can lead to much better decision-making.”

The digitization plan is part of Barrick’s Best-in-Class program, which has already seen results from optimization, implementing “step changes” and through selective innovation, such as using cyanide-free processing at the company’s Goldstrike operation in Nevada.

Barrick aims to cut all-in sustaining costs to below US$700 per oz. by 2019. The company’s costs in 2015 averaged US$831 per oz., and for 2016, it expects to achieve US$740 to US$775 per ounce.

The company has already slashed its workforce and sold off operations over several years to restore its balance sheet and increase its cash flow. Last year alone, Barrick cut more than US$3 billion in debt, and targets another US$2 billion this year.

Another aspect of digitization is a much more agile approach to innovation than is normally the case in the mining sector. Borrowing from the software development industry, Barrick will use a phased, proof-of-concept approach that will ensure innovations that succeed will receive more funding and can be quickly implemented, and those that do not deliver are either dropped or altered within six weeks to avoid sinking too much capital into any ideas that could fail.

“Rather than building something in the back room and then taking it to the site once it’s nice and perfect in 12 months, or two years’ time, we’re in real time building it on the site with people, and every six weeks they get what’s called a ‘minimum viable product,’”Ash says.

Because employees on-site can test and give feedback on products (i.e., like an app), the company can quickly and cost-effectively deliver useful products.

Cortez pilot site

While Barrick has big ambitions for its digitization initiative, it will start small, with its Cortez mine in Nevada serving as a pilot site.

Half of Barrick’s US$100-million digitization budget for 2016 and 2017 is earmarked for the underground mine, where Wi-Fi is already being installed. This connectivity will allow the implementation of a teleremote system and equipment. A remote operations centre will lower the number of personnel working underground and the time equipment sits idle, as operators will no longer have to journey underground.

Ash says that “rather than losing an hour and a half of time every shift — so three hours a day — we’ll operate that machinery much closer to 24 hours a day.”

The partners also plan to automate the processing plant, replace the current paper-based maintenance system with a digital one, and consolidate the information that is now collected from 150 different systems and data sources into one data-management platform.

Lastly, drawing from the manufacturing sector, the companies will implement a short-interval control system underground to track performance against plan, drive improvements and address problems as they arise.

Using Cortez as a pilot site will allow Barrick to see, test and validate the potential of digitizing processes before rolling them out across the company, Smith says.

“Instead of doing a number of different pilots and spreading them around the world, Barrick feels strongly that there’s potential for the one plus one to equal three,” he says.

“The more things they do together at one site to find synergies as they digitize, and get data from various processes that didn’t have anything to do with each other before, there are new insights they’ll get by doing it all in one place.”

The payoffs from implementing analytics can be both unpredictable and extremely valuable. After implementing a predictive maintenance program at their site, one Cisco client found that there were vehicles at the operation that idled for up to several hours a day. Once they addressed the issue by turning off idling engines, the company found that the investment was paid for solely by fuel reductions.

“It’s not something they were expecting to find, but it popped out at them and it was a huge return on investment,” Smith notes.

Digitization also opens up possibilities for more hidden savings and insights through data “mashups” that weren’t possible before, says Douglas Bellin, senior manager of global private sector Industries at Cisco.

“Once you have this ability, you think in completely different ways,” Bellin says. “And once you see the data in these new ways and in these new formats, you’re looking at the next level of improvement — and the next level and the next level. It’s an ongoing thing, and when you look across the continuum of the value chain, that changes the business model quite a bit as well.”

The partners plan to establish an enterprise-wide analytics system. They are also looking at the potential for digital technology to streamline permitting and improve transparency.

Culture clash

One of the reasons often cited for the lack of innovation in the mining industry is its culture, which tends to be conservative, preferring tried and true methods to applying new ideas and technologies from other industries.

The cultural shift won’t be an easy one, Ash concedes, but it’s essential to Barrick’s reinvention — which it hopes will become a blueprint for other miners to follow.

“We’re going to have to work with people and make sure that we’ve got the right reinforcing systems, performance metrics, incentive schemes and leadership behaviour,” Ash says. “There are a number of things that we’re going to have to do to transform our culture and align it with the culture that we want to create.”

On some levels, the industry’s resistance to new technologies and approaches is already changing, largely because of demographic changes in the workforce, Cisco’s Bellin says.

“Part of it owes to younger workers coming in and wondering why their phones won’t work in the mine,” he says. “Technology is being absorbed by more and more people as part of their day in, day out. So they’re starting to ask the question, ‘Why can’t I do that in my business as well?’ and I think that is a big, big change right there.”

Other aspects of mining culture may be a little tougher to change.

The industry’s culture of self-reliance in solving problems and a lack of communication across departments in mining companies is one of them, Barrick’s Ash says.

“We create a lot of silos traditionally in this industry, so this issue of collaboration and using the ideas and skills of a greater group of people is quite radical.”

Digitization will also require more transparency. People at all levels of the company will have to adjust to the idea of mine site data being available instantly to Barrick’s leadership, and water-quality data transmitted in real-time on Barrick’s website for regulators, community members or anyone else to see, Ash notes.

“The industry’s going to have to get used to a radical transparency and be comfortable with that, and focus on solutions.”