Mining Outsourcing Trends in 2016

February 2, 2016
|By Gretel Digo

The mining industry in 2015 looked like it had a tough time recovering from the slump after the recession, but mining veterans are optimistic for the future. They say that both low and peak periods are simply longer, but the bad times are bound to end. However, it can take some time for the industry to adjust to present challenges: record low commodity prices, declining demand, increasing shareholder expectations and difficulty finding financing. As for this year, analysts expect technology and innovation to be at the forefront of business strategy. For service providers and businesses that are considering outsourcing, here are the major forecasts for the mining sector in 2016: 

  1. Focus on productivity and analytics.

    2. Like other industries, analytics is expected to underpin all aspects of mining operations in 2016. As industry growth remains flat, companies are all about becoming leaner, more innovative and more productive. Analytics play a major role in boosting productivity. The industry has yet to adopt analytics tools en masse, but data generated at mining sites across the globe is steadily increasing. In 2016, mining companies that depend on automated processes and machinery sensors are likely to invest in analytics tools to make sense of information and turn it into value for the firm. Among other benefits, analytics tools can potentially help mining companies better respond to changing commodity demand and pricing, reduce maintenance and energy costs, and improve employee safety. 

    Service providers that focus on analytics services for the mining sector will continue to be in demand next year and beyond. Major business process outsourcing providers say that analytics for the mining sector is one of their fastest growing business areas. Most outsourcing companies that serve the mining sector still provide back office services like HR, payroll and ERP management, but they are seeing a lot of growth in analytics and mine design optimization. For example, a service provider used analytics tools to help an Australian iron ore mining firm to identify the cause of failure of an entire fleet of dumping equipment. With analytics, miners can also view the health of their assets in real time. They can use data to predict equipment failure points, frequency of maintenance, and energy demands.

  2. Focus on agility and responsiveness.

    3. Amid the protracted market slump, the mining sector is under immense pressure to change how they do business. The business model is already changing, and analysts predict the more companies will shift focus from volume of production to value and return on investment in 2016. During the mining supercycle when it seemed that commodity prices would never stop rising, many mining companies expanded aggressively and neglected operational efficiency. Today, these companies are fixing these problems. They are struggling to become more agile and more responsive to fluctuating price and demand. 

    The key is to be able to respond fast enough to changes across the organization, from the way the mine is designed to the scheduling of daily activities. For example, when prices makes one mineral a better option than the other, companies should have the processes and technology to take immediate action. However, mining companies tend to have fixed designs, cutoff grades and processes that prevent them from taking advantage of these opportunities.

    Outsourcing technology, process, design and consulting to specialists is one way for mining firms to become more agile in 2016. This includes smaller or second-tier mining companies, which can be quicker to respond than larger firms. For a small investment, a mining company can use data analytics to identify a key challenge and its causes. There’s still a lot of work to be done to improve a company’s responsiveness, but it can be done with help from external specialists.

  3. Radical innovation.

    4. Once considered a fad, innovation is now a must for the mining sector. Technology is evolving so rapidly that those who fail to embrace it will be left behind. In 2016, the industry will witness more companies adopting innovative technologies to drive competitiveness and cope with challenges. Some large firms have already implemented radical new technologies that are changing the landscape. Rio Tinto has its enhanced drill system that relies on geolocation, autonomous rail system and underwater robotic mining prototype. Other companies are at the early stages of adoption, mainly prioritizing the optimization of existing processes to discover deposits and reduce costs more effectively.

    Professional services firms expect these technologies to change the mining industry in the coming years: machine learning, networks, wearable tech and genomics. The adoption of these game-changing technologies tends to be slow, but picks up dramatically after many years. 

    Machine learning. Autonomous vehicles are already showing how mining operations can be taken to the next level. As machines become smarter, they will be able to perform more complicated tasks like hazardous processing, which will reduce labor costs and improve productivity.

    Networks. PCs, mobile devices and smart electronics that are connected to the internet generate data that can be used and exploited by the industry. Gartner predicts that the Internet of Things (IoT) will generate $1.9 trillion in terms of global incremental gross domestic product (GDP) by 2020.

    Wearable tech. Wearable technology is coming to the mining industry. Wearable hats, watches, etc. can have huge benefits to miners and workers by monitoring vital signs and overall health. For example, watches that track a truck driver’s fatigue/drowsiness levels can help companies prevent accidents.

    Genomics. Genomics mining solutions like bacteria that extract minerals and enzymes that clean contaminated sites are already being used by some companies to improve mine drainage and rehabilitate polluted sites. 

    3D Printing. In contrast to the above technologies, the industry has more readily adopted 3D printing at the production level. Remote mining sites can now manufacture critical parts as needed, reducing inventory costs, maintenance costs and delays.

    Modular design. Modular design is another trend that is widely adopted in the industry. Instead of implementing large expansion projects, miners can reduce exploration costs by using automated and modular designs to gradually increase their capacity. Service providers offering modular components (such as parts that can be used on different types of mining tracks) will be in demand.

  4. Attracting top talent.

    5. Like previous years, mining companies are expected to continue to invest in the acquisition of talent in 2016. A recent study revealed that the most innovative companies are those that invest in the skills, technologies and processes required to be more efficient and competitive. These companies spend on training and tools to nurture their existing talent and use incentives to reward progress. Mining companies are expected to evaluate their leadership structure and determine whether forward-thinking leaders should be sourced externally or from within. Mining firms that struggle to fill skilled and leadership positions will look to outsourcing providers for help. 

  5. Energy cost reduction.

    6. According to the same study, energy can account for up to 30 percent of a mining company’s total operating costs. With the surplus of oil and current low prices, it is the perfect time to control energy costs for miners. In 2016, mining companies will seek outside help to evaluate their energy portfolio, optimize supply and demand, and tap new fuel sources. 

  6. Back office outsourcing remains a need.

    7. In 2016, back office outsourcing in the mining sector will remain popular as a cost-effective alternative to performing support functions in house. An external specialist can easily perform human resources, payroll, IT and finance services for mining firms at a lower rate. By outsourcing back office services, miners can improve productivity and collaboration among suppliers. For example, outsourced service centers allow companies to consolidate information and identify improvements across the organization by providing a holistic view of key performance indicators like employee satisfaction and total operational costs.

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