PMF panel discusses innovation in mine development

In this eighth and final installment of reports from the Progressive Mine Forum hosted by The Northern Miner in Toronto in October, we present an edited transcript of a roundtable discussion between six mining industry veterans on the topic of innovation in mine development.

The roundtable participants were: Subo Chatterjee, vice-president of consulting and business transformation leader at PwC Canada; Ewan Downie, president and CEO of Premier Gold Mines (TSX: PG; US-OTC: PIRGF); Matt Manson, president and CEO of Stornoway Diamond (TSX: SWY; US-OTC: SWYDF); John Mullally, director of government relations & energy at Goldcorp (TSX: G; NYSE: GG); Walter Siggelkow, president and founder of Hard-Line Solutions; and Gordon Stothart, executive vice-president and chief operating officer of Iamgold (TSX: IMG; NYSE: IAG). Northern Miner editor-in-chief John Cumming served as moderator.

TNM: Let’s begin with Gord. Over your 30-year career in mining, what changes have you seen in mine development?

Gordon Stothart: A lot of it comes from automating physical tasks on the engineering side — taking away the physical side. I’m enough of a dinosaur that I did dump designs and road designs with French curves and compasses.

The mechanical piece of design has changed drastically. The equipment certainly is starting to change, but it takes a long time. I saw my first movie on automated trucks in 1984 and we’re still trying to get automated trucks into open-pit mines. So it doesn’t always move quickly.

A lot of the change occurs in the communication and economic theories that we can apply to the mines.

But at the end of the day, we still blow it up and move it to produce metal.

TNM: Matt, could you compare building Diavik and those other diamond mines in the Territories two decades ago with Stornoway’s recent experience building the Renard diamond mine in Quebec?

Matt Manson: I’d echo the sentiment of Gord in that mine development over the past 20 years hasn’t changed as much as you think it might. The big difference between building Diavik and building Renard was the management of it: Diavik was EPCM and Stornoway was self-managed.

We have to remember that mining is a non-innovative business because it’s capital intensive. We raise all the money upfront to build these mines and we try hard not to screw it up.

The people who are giving you the money to do that are inherently risk-averse.

To Renard, we’re bringing in waste-ore sorting, and that’s an innovation that is quite current and topical. We’re doing that because we have a specific issue in our process plant that we’re addressing.

It looks great, as we’re doing all the data. It’s going to work and it’s modestly priced, and there’s a great fallback position if we don’t get the results we want.

It’s a no-brainer to do it, but when I talk to investors, the first question I get is: “What other company does that?”

When you get that kind of a question from an investor, that is the risk aversion of the mining and financing community against innovation. That holds us back, for sure.

TNM: Turning to John, Goldcorp is quite aggressive in describing the changing future of energy in mining and the company has planned its Borden gold mine in Ontario to be an all-electric mine when it is built. Could you describe Goldcorp’s overall concept of energy use going forward and Borden as a case study?

John Mallally: I don’t think we’re immune to what Matt was mentioning in terms of the capital raised and the sunk capital, and Probe Mines (the previous owner of Borden before its acquisition by Goldcorp) was already $400 million along.

But Borden was really seen as a greenfield project and an opportunity to take a new look and have a clean slate.

From my perspective on some of the risks and challenges, we’re starting to see them addressed now. We’re nearing the end of advanced exploration.

Other issues revolve around social acceptability and attracting top talent, as well. Turning the page in terms of the reputation of the mining industry has been interesting.

Regulators — you might be surprised — are really excited about these new technologies, as there are implications when it comes to operating electric vehicles in the underground mine.

We’ve seen a lot of original equipment manufacturers and vendors and other partners coming on, including First Nations communities.

We were faced with those same significant challenges, in particular the capital raised and the risk aversion because of that.

But we’ve taken these strides and are halfway through. We haven’t entirely proven out the concept of an all-battery electric vehicle mine, but are enough along to start to point the way to some of the benefits. It’s been an interesting journey so far.

In terms of results, there’s work to be done, but we’re starting to see some of the payoff.

TNM: Subo, your specialty is advising on procurement and supply chain management. Could you give us your latest insights on these topics in relation to mine development, and what is PwC’s “Procurement 4.0” system?

Subo Chatterjee: When we talk about innovation … that has sort of been the trend or messaging from 2014 all the way to 2020.

We recently did a survey of companies globally — including 2,200 mining companies — and asked questions about their adoption rates for new technologies.

What we noticed was that 9% of companies had adopted a long-term strategy for innovation. And at the other end of the spectrum, 20% of companies were more opportunistic, with no long-term vision and only going after a few areas.

We took a step back to look at what investment really was happening and put them into four clusters.

The first was around automation and robotics, and that was where the biggest investment was happening.

The second was what we call the digitally enabled workforce. How do you empower your employees to drive forward more productively?

The third was around integrated enterprises. With all the data you’ve created, how does it feed back into your systems? Do you have integration between your field workers and your corporate data centres?

The fourth is about advanced analytics, which links to our conversations earlier today on big data.

What we noticed is that it was the first two areas where we saw investment and focus, while the last two areas is where there wasn’t a whole lot of focus.

The other aspect was the investment by the mining industry in innovation versus other industries. Certainly the trend since 2014 is more research and development (R&D) in mining compared to other industries on a relative basis but not an absolute one. The trend is upward, but there’s some catching up to do.

TNM: Ewan, asking you a similar question posed to Gord and Matt, comparing today to your Wolfden days, are you running Premier any differently from an innovation perspective?

Ewan Downie: Not really. As a new producer we actually view the future of our mines being exploration, so there’s a big exploration focus.

Some of the innovations I’ve seen since I’ve been in this industry are the automation underground. That’s pretty important for safety. Underground mines aren’t the safest places to be working.

For instance at our Mercedes mine, years ago going underground with the guys driving the scoops, if there was a groundfall they would be covered, [but now] at Mercedes, the trucks sit tens of metres away from the operator working. I think it’s pretty important to see that.

Some of Goldcorp’s work at the Musselwhite mine in remote northern Ontario is actually done with employees working from pods in Thunder Bay.

The automation of machinery in mining has been really impressive over the last decade or so.

In running our company, it’s changing our people that has been one of the biggest challenges. To facilitate being an explorer with almost all geologists to being mainly mining engineers has been a big change.

TNM: Following up on autonomous machinery and remote operations, Walt, could you give us a rundown on the state of the art in these areas?

Walter Siggelkow: The equipment that actually runs at Musselwhite is our equipment. The guys at surface run the machines underground and now they run it out of the Thunder Bay office.

Looking at the long-term, what does that give the people that work in the mines? Well if you take a person out of the underground, they’re safer. It is a very harsh environment underground. We have to work there but if we can get the guys out, then don’t put them underground to start with.

When you take and you move some operations — not all — to a major centre, now you have your workers who can go home at night and spend their time with their families, changing the typical culture of living in a camp.

These sorts of technologies are really moving ahead, and they’re available for many companies around the world. There are big players and there are smaller players like ourselves who specialize in retro-fitting equipment.

I always say to my people as we work on a project that there are a lot of discussions these days about capital. Our job, first of all, is that I want to get some money from the mine. Our job as a supplier is to sell to you guys, but I need to make you guys money.

So that’s the first thing we have to look at. Do we add to the bottom line? How do we put black on that balance sheet?

TNM: How do you foster an “innovation culture” in a mining company? I saw an example of that culture take root at Iamgold’s mine in Suriname with Gord last month where there was an existing workforce that became far more productive. How much is it about getting the right people, and how much is it a matter of training?

Gordon Stothart: Carrying forward with your comments on what we were able to do in Suriname at our Rosebel mine, it was a case of “necessity was the mother of invention.” That place was closing quickly.

The challenge was obvious, and the team that really took that challenge by the teeth brought in whatever they could to the table to point it in the right direction.

What’s quite interesting is that you’d think you’d get cost-cutting fatigue or product-improvement fatigue after going at this pretty hard for a few years.

But actually every success energized us a little bit more, and a little bit more. That’s a piece of it — necessity — but another piece of it is just some vision. And it’s not necessarily executives providing that vision, but asking for the local managers and workforce to provide their own vision and working with them to crystallize that and take it forward.

You have to think about where you want to be. Our mines are changing from short-life mines to longer-life ones. I don’t want to be in a meeting 15 years from now — if they still let me hang around and do that — and looking at what today is current technology, and saying: “This is the way we do things and this is the way we’ve always done things.”

You can’t allow that to happen. You have to get involved with the teams in creating a vision to move it forward.

TNM: Matt, you built up a mine workforce from almost zero at Renard. Your thoughts?

Matt Manson: If you look at our business, all the things that were innovative were problem-solving. We were the first mine in Canada to use liquid natural gas (LNG) for power, because we were sufficiently remote that we didn’t have a power line and it’s expensive to bring one in, but we’re not so remote that we don’t have a road. There’s a liquefaction terminal in Montreal so we can have trucks going up and down every day. We have Caterpillar LNG gen sets rather than Caterpillar diesel gen sets.

That solved an infrastructure problem, and everybody in our stakeholder group was quite happy to see that happen, and it reduced our greenhouse gas emissions. But it wasn’t done for efficiency or cost reasons, it was done for problem-solving.

It’s important to have a motivated team, because it’s often a bottom-up thing, innovation in mining. That wasn’t my idea to do LNG, that was a bunch of engineers who came up with a clever idea knowing there was a gas terminal in Montreal.

So it’s bottom-up and a freedom to come up with clever ideas and some endorsement, and support for that.

 

TNM: How do you reward great ideas from your workforce? Do they get a cut of the money savings? What is the incentive to innovate from the individual worker’s perspective?

Matt Manson: We bonus people at bonus time because we value clever ideas and we want to reflect that.

Subo Chatterjee: I want to build on that point. One of our clients last year was struggling with knowledge retention because their retirement rate is pretty high. You have to then ask what are the age groups and what is the impact over the next 10 years.

We noticed that 40% of the Canadian workforce are the baby boomers. The retirement rate will double in the next 10 years for most companies. And 35% is Gen Y, which is 35 years old and less.

So the challenge is that you have two ends of the spectrum: the baby boomers have all the operational knowledge, and the younger generation has the technology side of things.

For most companies, your challenge is going to be that as you have innovation coming in, your adoption rate for your experienced staff is going to be lower than for the younger ones.

How do you have the younger people train the baby boomers with the new technology while retaining your operational knowledge?

One of our clients has adopted “cross-learning,” where they have younger people training older people on teleremote operations, while learning about day-to-day operations from the older people.

The other aspect is the pace of technological change. What’s true today may not even exist 10 years from now. Training people on a specific technology may not be the solution — it’s more about what we call “digital IQ.” Are you instilling the values of innovation and reacting to change every couple of years?

John Mullally: I was thinking about the top-down approach, and our management has a pretty simple approach to innovation, and the first part is just: “Let’s do it.” The other part is challenging others. We have the history of the Goldcorp Challenge in 2000, and more recently we have started the Disrupt Mining event.

Then there’s the partnering aspect. Sitting next to Walter here, and meeting other suppliers today, we know what Goldcorp can do and set out that vision, but we know there are a lot of other actors in that space. We need to know what we’re good at and find others to collaborate with.

TNM: Starting at the ’Miner 21 years ago, one of the first innovation stories I wrote was about Noranda and its Magnola project in Asbestos, Que., where a Noranda-led consortium was going to take asbestos tailings and make magnesium metal from the tailings. They spent a billion dollars on it, and they were using hydrofluoric acid, which ate through everything. It worked beautifully at the bench scale, but when they scaled it up to a commercial level, it was a total failure and almost wrecked the company, and arguably prevented Noranda from becoming a super-major like a BHP or Rio Tinto. Now it’s a shell of itself — they got rid of their research department in Quebec when Xtrata took over. My question is: When do you get too far ahead on the innovation curve as a company? What is the sweet spot?

Gordon Stothart: We call it the “bleeding edge.” You need to be innovative but you need to recognize when you’re going down a rabbit hole and pull your head up.

You need to have enough of a relationship with your shareholders and your board and the people who run the company that you can say: “Yeah, you’re going to make some mistakes along the way.” Not necessarily disastrous mistakes, but it’s risk versus reward.

Are you risking the whole company on an innovative idea? If you’re going down that road, you’re spending a lot of time thinking before you start doing, because it starts to get really expensive once you start doing.

TNM: Let’s take questions from the floor and online viewers. Alistair asks: “Should mining companies be obligated to contribute to a common R&D organization to advance mining technology?” We do have talk these days of encouraging “innovation clusters” across the country.

John Mullally: I don’t know about “obligated,” but going back to partnering: we need to understand where the sweet spot is for companies, and where there may be a broader group, a bigger community that may be able to add a lot of value.

Plus, there is the aspect of not necessarily competing on every aspect of the business. Do we need to compete on battery electric vehicles, for example, when there are so many health and safety aspects when you’re able to remove diesel from the underground environment and improve the operating conditions?

Do we need to be competing on tailings management? Tailings management could be outsourced and taken away from every operator. To me, if we had one consortium that was looking at ways of doing that — sort of a service model — why wouldn’t that be a good thing?

Walter Siggelkow: Innovation is driven by need, and you can’t force people to pay for something they don’t want. They need to need it.

As a supplier, I’d prefer to leave my money in my hands, and I’ll go out and build stuff, and if I build a good thing, I’ll go out and sell it to people.

There shouldn’t be an obligation to force mining companies to pay more taxes — which is what this really would be — to give to what someone decides is a good opportunity.

We make our own opportunities, and if it’s a good product, you guys will buy it.

Ewan Downie: Competition is good, too. If there is a common organization and they have a monopoly on that technology, it will probably drive the cost up. And as a mining company, you’re always looking at ways to bring costs down.

So that would be a bit of a mistake and a lot of the innovation comes from different groups with different ideas.

TNM: Another question from the crowd: “How would you build less invasive mines?” For example: less water usage, lowered noise, less dust, et cetera.

Matt Manson: We have that now. We’re all moving down a path of less invasive mining and smaller footprints. Whether that’s a formalized code from a regulatory authority that’s uniform or we’re all responding to our own regulatory agencies, we’re all trying to behave in a socially responsible, conscientious manner. That’s a long-term evolution in our business, and that will continue.

Gordon Stothart: We’re trying to bond together and work as an industry to come up with solutions. And it’s not just for altruistic, pure environmental reasons, or even social reasons.

There are plenty of economic reasons to have a smaller footprint. You spend all your money from day one separating ore from waste until you get that piece of metal, and each step is more and more expansive. So the more surgical you can be at the start helps.

The flipside is that as metals become scarcer, prices go up and cut-off grades go down, and you start to look at larger excavations. There’s a bit of a conundrum at work there.

TNM: Goldcorp CEO David Garofalo speaking at our Canadian Mining Symposium in London last May was quite adamant that water use would be the number-one issue in terms of social acceptance of a mining project. We see it all the time in Latin America where, if agriculture conflicts with mining, agriculture usually wins the day.

John Mullally: Even in Ontario, water is one of the primary concerns when you’re trying to develop a mine. One of the biggest things that we need to be up to speed with is what’s socially acceptable, and what are the alternatives.

You see development times being 15 to 20 years from when a prospect is found to when a mine comes into operation. We really need to take a look at how to make that more efficient and take those projects through the social acceptability part.

TNM: To Gord’s point about the falling cut-off grades over time: What is the practical lower limit for cut-off grades for a commercial mine, and what trend are we likely to see in the future?

Matt Manson: In this question, we’re not all created equal — and this is where everybody has to be a geologist — because some mineral settings lend themselves to going into the sub-1-gram-gold material, and some deposits are more binary like a volcanogenic massive sulphide deposit or a kimberlite.

So it’s not every sector of the mining industry that is able to expand with a lower cut-off into the lower-grade material. It’s the gold guys that probably have this option.

Gordon Stothart: At what price of gold? There will be a lower limit for any given time space, but into the future, it’s harder to figure out where it goes. Innovation and technology will allow you to mine it that much more cheaply. Supply and demand will drive the price to wherever it goes, depending on the availability.

I’m not a geologist, so don’t shoot me in the head for this, but as for the “easier deposits” in “more comfortable” jurisdictions, we’re now mining those or have already mined through them. The next suite of deposits could either be more challenging in terms of location, grade or other technical aspects, and more challenging from the explorationist side in being able to find it. It’s an ongoing march.

Sometimes you see these incredible technologies appear. When heap leaching in gold mining and solvent-extraction electrowinning in the copper business came in, they completely changed the whole suite of what was mineable.

The counter to that is the number of oxide copper deposits in the world is somewhat limited, and probably most of them have been discovered now. So as that goes away, you have to find something else.

Processing really is an important piece of the technology. On the pure mining side, you’re going to asymptotically approach productivities that are hard to go beyond.

TNM: Another future trend in mine development that Barrick Gold president Kelvin Dushnisky and David Garofalo both emphasized in our London symposium was the increased use of joint ventures in developing mining camps, because today they have too much overcapacity in terms of duplicate mills and infrastructure and such. What is the future of this kind of partnership model?

Gordon Stothart: It’s interesting, because our CEO Steve Letwin opened the program this morning and he comes from an oil and gas background, and it confounds the heck out of him to look at these clusters of mines in elephant country and they all get set up as separate little self-sufficient operations.

In the oil business you’d form a consortium around that, and go for the economies of scale around it. It’s not a model that is used very often in the mining business. That’s somewhat distinct from joint ventures, but there’s a bit of overlap.

And it’s true of any sort of innovation, where we need to intentionally look outside of where mining is. When I look at automated trucks, I’m not really interested in investing in truck automation any more. With the automation of driverless vehicles, there’s a much bigger industry out there that’s going to solve all of those problems for us in the next three or four years. Why would we invest a cent of that for trucks?

John Mullally: Before the Chilean project with Teck became NuevoUnion, it was El Morro and it went to the Supreme Court in Chile, and we just walked away from the project knowing: why would we ever build two tailings facilities, two desalination plants and two milling complexes within however many kilometres apart from each other?

That was really the imperative there. You wouldn’t see a Sudbury model where you have two different facilities right next door to each other, building the same infrastructure and taking up twice the footprint and twice the water. Especially on the water front in Chile, with their massive shortages.

So that was something we recognized and didn’t even challenge the Supreme Court decision, and walked away at that point.

Subo Chatterjee: This is a trend we’re seeing across industries, and supply chain and warehousing is one area where there is potential to have companies collaborate.

The key question where some industries get stuck is that when there is an increased demand and there is a shortage of supply, who gets the supply? Because if your operations are at risk, how do you have balanced commitment of supply? There are also issues of intellectual property and contractual obligations.

But it is being discussed, and the rail industry is making progress, and oil and gas has made progress. We haven’t seen that in mining yet, but these are topics of discussion. It is not a trend, at least for the next year or so.

TNM: Another question from the floor: What do you think is required for changing the mindset of mining investors such that unproven technologies are funded and embraced?

Ewan Downie: I don’t know if that’s possible. We’re seeing more passive investors investing in our sector rather than active investors, so I don’t think a lot of those investors care about what innovations are going on. They buy a basket of stocks and whatever happens, happens.

Gordon Stothart: Some of it goes back to vision. You need to sell the vision of why you’re doing it. It’s challenging. In quarterly reports and so on, the feedback on innovation is lost a little bit.

As an industry, we’ve moved from a model where Inco had a research facility, Falconbridge had a research facility and Noranda had one, and so did Cominco, Teck and so on.

Most of those big companies have since moved offshore, and all of those facilities have gone away. We’re right in the midst of trying to reinvent how we do technology as a mining industry in this country. It’s challenging and it’s a tough sell for investors.

Matt Manson: Investors are moving away from being a fund manager that’s interested in a specific sector and a specific team, and a specific long-term vision.

It’s become a short-term vision. It’s exchange-traded funds driven, and has become much more passive. For investors, it’s about the next quarterly report. That’s the mark.

It’s not how clever and forward-thinking the management team is. Unfortunately, that’s the way it has been going.

Gordon Stothart: Earlier, we spoke about “needs-driven” so that if the demands come from either the technical aspects of the deposit itself or the regulatory space, or the social space, where you’re trying to open up operations, you just have to get better at it. At some point in time, the investor community will follow it.

There is a segment of the investor community that is focused on ethical investments and is driving in those directions. It will take some learning, but it can get there.

John Mullally: Up till now, we don’t really see any evidence of this. There is no data to work with. So that’s what we’re trying to do when we go out and work with a Glencore for battery electric vehicles or with vendors and consortiums: develop evidence, and then these things can be linked to productivity.

But right now, we’re still in pilot mode to develop this evidence to link to quarterly results and see that they’re driving results.

Subo Chatterjee: We do analysis of failed projects in relation to innovation and what we noticed is that most companies invest in a vision. They do pilots and then jump to transformation. What they’re missing is their bottom-up capability, and building it up within their organization.

They’ve invested in all this technology and all these assets, but what they haven’t done is build their workforce to deal with that level of change.

That’s where a lot of the transformations fail because a lot of their workforce is not ready for that. If you build up the innovation story in a gradual approach as a confidence-building exercise, if might help, and that may apply to investors, too.

Gordon Stothart: Then you get Goldcorp with Probe and the “clean slate” idea. Our next project Côté is like that in the same way: a clean slate. You don’t have a lot of the other inertia to change.

It’s really tough to gradually change a mining operation because of all the aforementioned reasons: you make big investments that are very expensive, and to incrementally change them is a challenge.

Walter Siggelkow: On the technology provider end of it, we don’t believe it’s the mine’s business to go out and try to convince shareholders to buy into unknown, unproven technologies.

At some point in time the vendors have to go out and put our money where our mouth is. And we have to invest our own money and build products that actually make money for the mine.

If you sell something to a mine, it needs to make money. It needs to put black on the balance sheet.

And investors are going to invest in the mine that makes money. That’s return on investment.

As an innovation-driven company, 30% of our revenues go right back into R&D every year.

So if I want to sell to the mine next year, well, I better have something to sell them that’s going to make them money.

John Mullally: That’s why Walter’s Hard-Line won northern Ontario’s Entrepreneur of the Year Award. A shout-out to Walter.

TNM: Let’s wrap up by asking each of you our poll question: Who is the biggest driver of innovation today in mine development? Is it mining companies, mining suppliers, government research institutes or universities and colleges? Our poll respondents gave us a tie, saying the answer is mining companies and mining suppliers.

Subo Chatterjee: It’s all of the above.

Matt Manson: Mining suppliers.

Gordon Stothart: Mining suppliers. And mining companies right behind that.

Walter Siggelkow: [Mining suppliers] to an extent. At the end of the day, we need these minerals. We need to mine them, and we need to mine them safely, and cheaper and faster. We need to make better use of these orebodies, anything to lower the cut-off point so we can take out more of the minerals.

Everything drives the innovation, but money drives it at the end of the day.

John Mullally: The biggest factor would be people’s values. If you think about who we are trying to attract at a remote site, people have different values and make different choices. They don’t want to come work at these remote sites. Or the regulators themselves, if they see things differently and they don’t want to move forward, there are tremendous barriers that can be put up. The changing role of First Nations and indigenous communities around the mine site play a part. If it’s not acceptable in their view, there’s not much that a mining company can really do to gain that acceptability.

So it’s really the shift in values and we’re seeing that everywhere, domestically and internationally

 

View the entire panel session on The Northern Miner’s YouTube channel:

https://youtu.be/xkQ0ho0rUfo?t=58m35s