Special Report on

Mining Innovation

Contents

Introduction to the Special Report on Mining Innovation 3

by Rick Moignard

Technological Change is Coming to Mining 4

by Michael MacFarlane

Uncertain Times 6
by Lisa Rivard

Taking The Lid Off 9

by Lisa Rivard

Dundees Real-time Data Innovations Are As Good As Gold 12

by Eric Reguly

Case Study: Controlling Costs and Increasing Productivity 15

by Robert W. Selzler

Introduction to the Special

Report on Mining Innovation
by Rick Moignard

The last several years have been

challenging for the mining industry. From
a time of low prices and low demand, to a
spike in both demand and price, we have
now reached a period where prices are
still high in a historical context. However,
costs have risen to the point where
operating margins are squeezed and now
many projects have low returns and some
are no longer viable. Shareholders are in
an uproar, CEOs have been replaced and
an industry is facing a new challenge,
How do I drive productivity, reduce
costs and increase the sustainability of
my operations?
Innovative mining companies realize
that the short term answers of the past,
furloughing workers, shuttering mines
and stopping all spending, are not the
answers for the future. They are looking
towards lessons learnt in other industries
which faced these same issues 20 years
ago. They are looking to technology
innovation that goes beyond a simple
tool that optimizes a single silo within
the mining operation, to operational
technology that optimizes the complete
mining value chain.
This Special Report on Mining Innovation
echoes the call made by such mining
CEOs including Anglo Americans Mark
Cutifani, that technological solutions have

Rick Moignard, CEO, Dassault Systmes GEOVIA.

an important role to play in helping mining

companies realize these objectives.
We hope you find some inspiration and ideas
in this Report to help you achieve your goals
and address your challenges.
Rick Moignard

CEO, Dassault Systmes GEOVIA

Special Report on Mining Innovation 3

Technological Change is Coming

to Mining
by Michael MacFarlane, former Executive Vice President, Strategy and
Business Planning, AngloGold Ashanti

The downturn in both demand and price

for mining commodities exposed the
mining strategy of production-at-anycost. Throughout most of 2012 and 2013,
commodity prices continued to fall while
mining costs continued to increase at a
double-digit rate. By early 2013, margins
diminished Return on Capital Employed
(ROCE) and Free Cash Flow (FCF) dropped.
A course correction in the mining industrys
cost structure was urgently required.
Six things companies are doing to address
investor concerns:
1. Stop mergers and acquisitions that
destroy value.
2. Bring more discipline to the capital
allocations process and ensure they
add value.
3. Increase ROCE and fix underperforming
assets.
4. Sell marginal assets to increase margins.
5. Grow FCF now to support an increasing
dividend.
6. Bring immediate fiscal discipline and
cost control to operations.
While there has been a sharp downturn
in investment in the mining industry, it
is clear that capital projects are not going
away; however, the entire capital allocation
process needs to be improved significantly.
The focus must be on introducing proven
existing technology from other industries

Michael MacFarlane, former Executive Vice President, Strategy

and Business Planning, AngloGold Ashanti.

combined with the development of new

technologies. The impetus should be on
improving the planning by eliminating much
of the guess work in decision making. At
the same time, they need to improve the
speed and quality of the capital allocation by
automating the process.
The mining industry is starting to look to
other industries for new solutions. There
is interest in the Manufacturing industrys

Special Report on Mining Innovation 4

Technological Change is Coming

to Mining

commonplace approach of managing

process information in real-time. All of
the necessary technology for the mining
industry to adopt the Lean Manufacturing
concepts built on real-time data collection
and variances management, already exists.
While this approach is in its early days for
the mining industry, the introduction of this
technology means a step change to asset
performance is possible. With the current
mining strategy now focused on fewer, yet
larger, low cost operations, getting the most
out of each operation is essential.
Moving forward, the mining industry will
be increasingly focused on integrating all
activities across the value stream including
the continued introduction and development
of Integrated Remote Operations Centers
(IROCs). With real-time data now available,
the entire value stream can be fully
optimized and managed in a similar fashion
to the manufacturing industry.
IROCs are transforming the way the mining
industry generates value for shareholders.
Initially IROCs looked to be a technology
story; however, upon deeper analysis,
change is seen in all aspects of the
operations. New roles within the operations
have been developed with new knowledge,
skill and experience requirements. This

transformation goes beyond the traditional

boundaries of the company and reaches out
into the external environment. IROCs enable
the sharing of information with related and
supporting businesses, enabling the building
of new ecosystems around operations to
support a step-change in the operations
overall performance.
Some of the most compelling innovation
is happening in smaller mining companies.
The Taking the Lid Off initiative by
Dundee Precious Metals Inc. at their
Chelopech mine in Bulgaria applied realtime monitoring of production processes
to enable faster decision making in light of
changing conditions.
All mining companies, regardless of
size, need to be ready to adopt more
manufacturing-style process control.
However, the mining industry should
focus on eliminating waste as opposed to
cost-cutting for the sake of cost-cutting.
Exclusive focus on cost-cutting will erode
an operations production ability, in the
long run. Instead, mining companies must
improve efficiencies and strengthen business
processes by implementing production
management systems, which will provide a
holistic view of operations.

Special Report on Mining Innovation 5

Uncertain Times
Mine owners focus on technology to control costs
by Lisa Rivard, Compass Magazine, Autumn 2013

Todays economic environment has fundamentally altered commodity demand and

prices, making it more difficult for mining companies to predict future patterns.
Although long-term demand for natural resources, particularly by industrializing
nations, is expected to rise, short-term pressures are forcing companies to examine
their operations.

At the Miitel Underground Nickel Mine in Kambalda, Western Australia, Mincor Resources uses 3D modeling software to find better and more
efficient ways of mining to reduce cost (Watch a video case study of Mincor Resources: www.geovia.com/mincor).

During the mining boom of recent years,

mining companies focused on getting as
much material out of the ground as quickly
as possible; closely monitoring costs and

overall productivity was not a priority. The

result: the mining industry benefited from
rising output, but didnt reap the marginal
profit growth that should have come with it.

Special Report on Mining Innovation 6

Uncertain Times

Mining was a low-growth business for

much of the 20th century, so we were
caught off-guard by the pace of Chinas
early 21st-century urbanization and
industrialization, Andrew Mackenzie,
CEO of global resources company BHP
Billiton, said in a June 2013 speech to the
Melbourne Mining Club. Demand was met
in part by higher cost much higher cost
operations. And many invested poorly
to the detriment of their owners. Finding
five dollars of savings per metric ton did
not seem as pressing when prices were
skyrocketing. But it really matters now.
With the low hanging fruit of the easiestto-mine deposits gone, companies are
forced to enter more remote and costlyto-develop regions. Labor issues, favorable
political environments, financing, and
monitoring and safety challenges all
become more difficult and expensive in farflung locations.

The call to action to invest in new technologies is not falling on deaf ears. In
recent times, mining companies have been
making money no matter what they do, but
thats quickly changing, said Chris Holmes,
Head - International at IDC Manufacturing
Insights, a global research and consulting
firm. A fundamental rethink is happening
on the way these organizations are run.
There is a focus on productivity and
efficiency that leads to a discussion on
technology, including project management
and supply chain solutions to complex
communication and simulation tools.

We must be able to set up mines and

logistic systems in ways that we are able
to react to changes in demand and reduce
risks and uncertainty.
Dr. Jrg Benndorf,
Assistant Professor of Resource Engineering,
Department of Geosciences and Engineering,
Tu Delft University

TAPPING TECHNOLOGY
In its recent Tracking the Trends 2013
assessment of the mining industry, global
consulting firm Deloitte reported that
costs are reaching unsustainable highs,
and unless companies improve operational
efficiency, proactively control maintenance
costs and invest in cost-reducing
technologies the trend is likely to continue.
The tough conditions and challenges faced
in many mining operations mandate a
level of analytical capability that many
companies lack, the Deloitte report stated.
Significant rewards will be available to
companies that invest today.

Mark Cutifani, CEO of British multinational

mining company Anglo American, advises
the mining industry to look to other
industries, such as petroleum, aviation
and manufacturing, for technologies that
have been used to address these needs,
including design, mapping, modeling
and simulation solutions. Cutifani told
shareholders at his companys April 2013
annual general meeting that while many
things have been achieved, we cannot
continue to do business as usual. Our share
price is languishing compared to our peers,
and we are not being rewarded for the

Special Report on Mining Innovation 7

Uncertain Times

potential we have embedded in the asset

portfolio.

OPTIMIZING STRATEGIES
From site modeling and supply chain
optimization to automation of mine
operations, maintenance monitoring and
strategic planning, the opportunities for
gaining efficiencies and reducing costs
are numerous.
We must be able to set up mines and
logistic systems in ways that we are
able to react to changes in demand and
reduce risks and uncertainty, says Dr.
Jrg Benndorf, assistant professor of
resource engineering in the Department
of Geosciences and Engineering at the
Netherlands TU Delft University. Setting
up mining projects takes 10 15 years
with billions invested. You cant just
react to the market; you need the proper
strategies to justify the investment and
implement projects successfully.
Some mining companies are turning to
experts from other industries to lead the
charge. A couple of natural resources
companies have brought in supply chain
managers with retail and consumer goods
backgrounds to implement some of the
latest supply chain process thinking and
supporting technologies, IDCs Holmes
said. And thats a trend I think well
see continue.
Cutifani encourages the mining industry
to develop an operating and project-

delivery model that takes inspiration from

beyond the mining industry, to support
the implementation of the plans and
disciplines necessary to improve our ability
to execute our strategy. In doing so, we
will also establish the underlying processes
necessary to improve our competitive
operating position, to improve margins and
to increase capital returns.

TACKLING CHANGE
The road ahead isnt necessarily an easy
one for the mining industry. The biggest
challenge, Holmes and Benndorf agree, will
be tackling change.
Mining is a very conservative industry,
and implementing change usually takes a
while, Benndorf notes. The right driver
has been missing because mining has
been such a lucrative business. But now
were being forced to look at cutting costs.
Smarter ways of doing maintenance, mine
planning and implementing production
become more appealing to companies and
they are more willing to change in this
situation, but it requires a commitment
from the top.Holmes believes a change
in culture is a prerequisite for technology
adoption. We need to start talking
about lean techniques in mining as other
industries do, he urged. Its important
for mining organizations to look at other
industries to see how theyve embarked on
that journey. We need a very fundamental
change in thinking and a cultural change
that is organized from the top down so that
things get implemented.

Special Report on Mining Innovation 8

Taking The Lid Off

Technology enables transformation in the mining industry
by Lisa Rivard,
Rivard Compass Magazine, Autumn 2013

The mining industry has some catching up to do, according to Rick Howes, CEO of
Dundee Precious Metals. He says that compared to other industries, mining is
decades behind in technology adoption. But he thinks mining companies can take
control of their operations with a better set of tools and processes.
The days of simply increasing mine
production to raise revenues are quickly
drawing to a close, said Rick Howes, CEO
of Canada-based Dundee Precious Metals.
Howes believes minings credibility in
delivering the business results stakeholders
expect is suffering, and technology may be
integral to the industry achieving
future success.
With costs climbing and the industry hit by
a downturn in cyclical metal prices, Howes
said mining companies must focus on
operational performance and project delivery
through attention to detail. We have to
deliver the kind of value our stakeholders
from stockholders to employees to the
communities in which we operate expect,
he said. Mining has an image and credibility
problem that requires new and innovative
thinking on how we manage the entire
mining asset lifecycle.
When the 33-year industry veteran became
COO and Executive VP a Dundee, one of
his first challenges was to revitalize the
companys Chelopech mine in Bulgaria.
Under Howes direction, Dundee undertook a
transformation, called Taking the Lid Off to
operational performance excellence.
We coined the phrase Taking the Lid Off

Rick Howes, CEO of Dundee Precious Metals.

because an underground mine is a dark hole,

Howes explained. No one really knows
whats happening in real-time because you
cant see it. We need to be able to visualize
the mine all the time.

OPERATIONAL EXCELLENCE WITH

TECHNOLOGY
My vision is for Dundee Precious Metals
to be a leading company an innovator,

Special Report on Mining Innovation 9

Taking The Lid Off

Howes said. The challenge, of course, is to

be good at what we do.
Howes recalled that he became interested
in what technology could do to improve
the industrys performance when he was
just a young engineer. The industry hasnt
evolved as well as it could have, but Im very
optimistic that with the right companies
working with mining in the future, we can
significantly change the way this industry
works, he said.
Operational performance excellence relies
on the innovative use of technology, Howes
stressed. Taking the Lid Off involves trying
to get real-time production management
in an underground mine using the latest
technologies available, including low-cost
off-the-shelf Wi-Fi networks, inexpensive
wireless RFID tagging for vehicle and
personnel location tracking, and software
systems for mapping, modeling, estimation,
design, scheduling, simulation and mine
production management reporting tools,
he explained. Thats how to fundamentally
change the way our operations are
managed.
Howes explained that small mistakes or
miscalculations can have a big impact on
project results. A 20% overestimation of
grades might result in a more than 20% drop
in net return on investment, he said. These
kinds of miscalculations are widespread
in the industry. It has a lot to do with the
level of experience and the tools being used
to evaluate and put together our mining
projects. We need a much better set of tools

and processes. However, the necessary

technology pieces are not all completely
developed, Howes said. It takes strong
partnerships with technology providers
to develop software and get the pieces
integrated to deliver results, he explained.

CALCULATED RISKS
At Dundees Chelopech mine, the company
set out to double production and reduce
costs by 44%. With the technology the
company has adopted, Howes said, it is able
to continually visualize the mine in 3D.

When you have a vision and you bring

the right technology partners in, you can
change the way the business functions.
Rick Howes,
CEO of Dundee Precious Metals

Taking the Lid Off is all about planning

and executing that plan, and being able
to track our progress in real-time, he
explained. By monitoring and intervening
where we need to in order to course-correct
from a production point of view, we can
eliminate a lot of waste seen in todays
underground mine projects.
Weve achieved the performance targets
we set when we took ownership of the
mine back in 2003, Howes said. Weve
quadrupled production from about 500,000
tonnes a year to nearly 2 million. Were

Special Report on Mining Innovation 10

Taking The Lid Off

still working on the final stages of our

implementation, but the key measure of
success is that we didnt add any new
mobile mining equipment to go from 1
million to 2 million it was purely a result
of operational improvements.

COLLABORATIVE SPIRIT
Chelopech is one example of a very
aggressive mining project that has been
successful. When you have a vision and you
bring the right technology partners in, you
can change the way the business functions,
Howes said. Its not easy, but the potential
is here now with the technological advances
such as those used in other industries.

Technology tools will not only educate

stakeholders on how mining projects are
responsibly developed and operated, Howes
said. They also provide management with a
high degree of confidence that mine designs
will successfully achieve the results desired
before huge investments are made.
Howes said he believes the mining
industry must innovate, become creative
and transform its approach. He advised
companies to be willing to partner with
technology vendors and take some risks
on ideas that havent been tested or
implemented before. No company has all the
pieces, he stressed. A collaborative spirit
was the key to our success at Chelopech.

Special Report on Mining Innovation 11

Dundees Real-time Data

Innovations Are As Good As Gold
by Eric Reguly, The Globe and Mail, December 1, 2013

Special Report on Mining Innovation 12

Dundees Real-time Data

Innovations Are As Good As Gold

Special Report on Mining Innovation 13

Dundees Real-time Data

Innovations Are As Good As Gold

Special Report on Mining Innovation 14

Case Study: Controlling Costs and

Increasing Productivity
by Robert W. Selzler

With climbing industry costs and cyclical

commodity prices, mining companies must
focus on operational performance and project
delivery with close attention to detail.
Dundee Precious Metals (DPM) is an innovator
in the mining sector. They leverage technology
and automate processes to increase productivity
in their mining operations; optimizing the
value potential of their assets while delivering
predictable results.
Their Taking the Lid Off project, designed
to bring visibility into the darkness of the
underground mine, transformed the operational
performance excellence of their Chelopech mine
in Bulgaria with a goal to double production
while reducing costs. DPM wanted to plan,
execute and track their progress in real-time.
Relying purely on operational improvements,
DPM partnered with innovative technology

vendors to improve processes and systems,

and to better manage shift time without
adding new mobile mining equipment.
A long time user of GEOVIA GEMS
geology and mine planning software, DPM
turned to GEOVIA InSite mine production
management software solution and by
working in partnership with Dassault
Systmes GEOVIA and other technology
providers, they created complete 3D visibility
into their underground mine.
Through this use of multiple technologies and
changing internal processes, DPM was able
to quadruple production from about 500,000
tonnes a year to nearly two million, and
achieved a 44% improvement in unit cost.
Watch a video case study on the Chelopech mine
to learn more (www.geovia.com/dpm2).

Taking the Lid Off at Dundee Precious Metals Chelopech Mine.

Special Report on Mining Innovation 15

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