Digitization in Mining Can Unlock Value Where Few are Looking

The mining industry has a huge nugget of gold sitting in plain sight, but only the world’s most innovative companies have begun to figure out how to harvest it. As the rest of the industry catches up, thought leaders will quickly realize that democratized knowledge is the key to more profitable mining projects.

Capital expenditure towards mine development tends to represent the greatest risk that mining companies can manage. Despite the industry's best efforts, mine development projects come in late and over budget by an average of 43%. These overruns have a doubly negative effect on the net present value of a given project, because they increase real costs as well as delay future positive cash flows.

Every year software gets exponentially cheaper and more powerful. Many factors contribute to this, from exponential advancements in computation and memory, to the commoditization of novel software architectures over time.

To date the mining industry has largely missed out on these benefits due to the habit of only acquiring software that is bundled with point solution hardware. What they end up with is legacy applications built on outdated architectures that are locked down and inflexible. This habit dramatically inflates integration costs and gives many in the industry the wrong impression in terms of what is possible let alone economical.

Vandrico’s hypothesis is that we can enable mining companies to accelerate development to peak production by democratizing knowledge across their operations with modern software. That is, to provide relevant information to anyone tasked with making decisions in a way that is actionable and provides necessary context.

Knowledge vs Risk in Development

When a mine development plan is created it is always done so with limited knowledge. The primary focus tends to be the geology itself, and it can only be known to a degree of certainty and resolution until it is mined. In other words, the majority of the decisions in any given mine development project are being made when those making the decisions have access to the least amount of critical information.

While speaking to Ian Berdusco, a Mine Planner at Goldcorp, he shared with us his perspective on probability based decisions:

“You cannot know every possible outcome from the decisions that go into your mine development plan. Instead of a decision being “right” or “wrong,” a decision can be thought of as having “a chance of succeeding” or “a chance of failing.” I would argue that the greater the amount of information combined with the ease of interpreting this information, the better the outcomes of decision making. This scenario is true not only for when making a decision involving geology risk, but at every other point along the capital expenditure phase.”

In other words, efficient learning during development projects gives mines a competitive advantage in decision making. And better decision making will enable projects to complete within budget and on-time.

Whereas production optimization is a better understood analytical challenge, the development environment tends to feel more nebulous. A key difference is that production environments have substantial amounts of historical data upon which most trending analyses are based, unlike the development environment which is temporary and ever-changing. Good decision-making in development is heavily reliant on experienced people. This is in part because of the historical lack of actionable data during the development phase.

Digitization as a Scalable Learning Strategy

Fortunately the ongoing digitization of mines is creating new data points which can be leveraged if correlated promptly and presented with intuitive context to support front line decision makers.

Democratization of operations data means bringing the data to those affected and responsible for making timely decisions with specific domain knowledge. Doing this will enable a scalable learning strategy that provides a foundation for new knowledge creation organization wide.

To achieve this, mines will need to adjust their procurement habits and favor software that is openly integratable and flexible over software that is inflexible, locked-down and traditionally bundled with point-solution hardware products. System integration doesn't have to be so time and cost intensive.

More specifically, they will benefit from investing in software with modern web architectures that can provide consistency in context and data integrity, easy integration, customizable views and flexible access organization wide for ultimate transparency.

The outcome will be a shared contextual truth in the form of a digital historic mine record that your organization can build new knowledge from.

At least this is what we believe, what do you think?

Special thank you to these industry friends for sharing their ideas and contributing to a series of articles we are developing about the benefits of digitization in resource extraction: