Recent advances in underground mining technology
Keep up-to-date with the latest trends in mining technology
Australian underground mines are at the leading edge of performance. But it’s a fast-moving industry, and significant changes have taken place in recent years.
The industry has invested heavily in the development and implementation of new mining technologies, with a focus on digitization and automation. This has led to significant improvements to mechanized underground mining productivity.
This whitepaper focuses on the four key mechanised mining activities: jumbo development, long-hole drilling, LHDs, and decline trucking. It contains a detailed productivity and cost analysis plus descriptions of recent adaptations to mining systems and practices. The analysis looks at productivity data from two distinct periods, 2000–04 and 2015–19, drawn from AMC’s unique SmartData™ system, the world’s most comprehensive mining knowledgebase.
Download your free copy
Russia is the world’s third largest nickel producer, while its copper mine production was estimated at 820 thousand metric tons in 2021, making it the eighth-largest producer of copper worldwide. As sanctions against Russia start to bite, the impacts on the global commodity markets have been far-reaching, with soaring prices of several metals including copper and nickel, due to global supply concerns. Ukraine, by extension, is seeing huge disruption in the export of its substantial coal, iron ore, and uranium products.
So, what are the likely long-term consequences of the invasion of Ukraine on global production – and prices? “Governments around the world are concerned about this in a similar way to the concerns about gas and oil,” says Mark Chesher, Executive Leader Business Development, AMC Consultants. “Fundamentally, many people would like to stop the consumption of Russian products and exports. But in reality, that’s going to be a very difficult thing to do, without having major impacts on the rest of the world.”
Russia, says Chesher, is largely self-sufficient in “many of their products, or outputs” and, consequently, is “not reliant on too much coming into the country. Its copper output has been relatively low – eighth in the world – but it currently has some of the largest new copper projects coming online. It’s going to be interesting to see how this unfolds,” he says.
Chesher believes the war will contribute to a short-term deficit in copper supply in the near term. As for nickel, Norilsk is one of the major mining houses in the world with approximately 10% of the world’s nickel supply. “Supply contracts take a long time to work through the system. But if the sanctions are applied strictly, it will bite hard in the metals market across the world,” he says.
Russian nickel projects are also well-developed for growth, says Rob Chesher, BD Technical Manager, of AMC. “We talk a lot about ‘prospectivity’: projects that are being developed further into the future, but currently in the study or early study phase. There are many targets following these trends throughout Eastern Siberia. Taking those out of play for the major explorers will only exacerbate the problem.”
The race for new exploration
It’s a concern for Rob Chesher and his colleagues that there remains a shortfall in fundamental exploration for new deposits elsewhere in the world to compensate for the impact of unprecedented major geopolitical upheaval. “There’s been a significant gap for the last decade, and now it’s widening, not narrowing,” he says.
Will mining regions worldwide benefit from the fallout of the Ukraine invasion, with production being ramped up elsewhere? “People often say, ‘this is the time for Africa to shine,’” says Mark Chesher, “but we’ve also seen that in the past three or four cycles. We have observed increased production in Zambia and the Democratic Republic of the Congo throughout the Copper Belt, and I think that will continue to push up. But it is also seen as a higher political risk investment.”
Central Asia is also emerging. Kazakhstan has significant copper production and abundant reserves of other minerals – primarily zinc. “There’s a lot of prospectivity in that part of the world. And they’re relatively under explored, says Mark Chesher. “It could really push the case for more investment in the Central Asian area.”
Pakistan could be a key producer through the recent announcement of a partnership between Barrick and the federal and state Pakistan governments. This further highlights the development potential in former Soviet ‘Stan’ countries in the region. “We have many Russian speakers across our offices, so we’re pivoting now to use that expertise in Central Asia,” he says.
Southeast Asia is also seeing significant projects along the Pacific Rim. “The Philippines is a very important area for the future that that will see significantly more production. Indonesia remains important as well,” says Rob Chesher, although this is caveated by more prohibitive legislation and political challenges that can mean it takes longer for projects to gestate.
Another problem remains that, while commodities may be in rich supply in these regions, ease of access to them is another matter entirely. Mineral deposits are often found in the middle of a rain forest, up a mountain, or in areas only accessible by river transport. “There’s a world picture emerging where the risks to successful development are increasing, where deposits are located deeper, where the metallurgy required is getting more difficult and where a full spectrum of ESG (environmental, social, governance) issues and risks must be identified and managed through the design phase for a project to proceed. These can often be the deciding factors and make the geology and mining technical risks pale by comparison,” says Mark Chesher.
That’s the case in South America, where the big producers are still Chile, Brazil, and Peru. “What we’re likely to see is an increase in brownfield expansion. Large greenfield projects take 10-15 years for development and can take up to 25 years to get into production,” says Mark Chesher. “So, there’s going to be two speeds here. One is finding metal that is for the long term, and the other is to satisfy this immediate gap. That’s likely to drive existing open pit operations to bigger pits or to transitioning underground in order to increase or extend production from existing operations.”
Due diligence, price fluctuations and ranking risk
With geopolitical events exacerbating the price increase in minerals, the mining sector must learn to mitigate against this, says Mark Chesher. “Everybody has to do better due diligence and have a higher focus on the risks to achieving particular project success. We’ll end up ranking new production in terms of not only cost of production, but risks across the whole project. That way, you evaluate the trade-off between risk and margin in producing the metal from different parts of the world and under a wide range of risk factors.”
Price increases will “become entrenched,” says Mark Chesher. “That will help to give investors the confidence to put more money into these projects, so that they can assess the risk and then mitigate those risks through dialogue with governments, local authorities, and local people to get them on board for these projects to proceed for everyone’s benefit.”
Aside from the large-scale geopolitical risks that garner global optics, there are also plenty of localised ones too, such as those seen in South America with issues concerning water supply. “The local people are interested in project plans and how operators are going to utilise local resources,” says Rob Chesher. “It may be that you can develop a project, but you are going to have to put in additional money and infrastructure to ensure that the interests of the locals are taken into consideration.”
While the current shortage in supply is accelerating commodity prices, those prices also need to give sufficient return to investors to drive investment. “We had seen manufactured goods prices consistently falling in real terms for 10 to 20 years – and in response there’s been a major drive for efficiency gains that has caused a flatlining of salaries, while input product and input prices have been relatively flat or falling. I suspect we’ll see a reversal of that as inflation starts to take hold,” says Rob Chesher.
That being said, good companies in this sector are fundamentally value driven. “It’s a big deal,” says Rob Chesher. “You’ve got to understand what your values are. Well-managed companies that have got strong values can take on difficult projects, provided they stay true to their values and address the concerns of locals correctly and in good faith. A value proposition that places value and generated wealth in correct proportions for all stakeholders is what you’re looking for. You’re not after a bonanza or, conversely, giving it all away. But somewhere in the middle is a project that’s good for everybody.”
Mitigating the squeeze on margins
With the cost of production starting to rise significantly, how much is this surge threatening to keep driving up prices? “There are two parts to it,” says Rob Chesher. “In the copper industry, the price is currently US$4.10 a pound – it’s double what it was a year or so ago. So, if your cost of production goes up significantly, the margins are probably not too bad – there’s a bit more margin available for new projects to pay back capital cost. So, things are alright. But in that same two-year period, the price of gold has gone nowhere. If you happen to be in a sector of the industry that has not seen any increase in price, then you’re in trouble because the production costs have started to go up already.”
This is, of course, starting to squeeze margins. And many factors driving costs are not always directly related to the product being mined. The cost of producing copper involves labour, transport, and power costs, for example. “There is a lot of energy involved and if those cost items are not offset by the increase in commodity prices, it’s going to be an issue, says Rob Chesher. “The fuel bill for a low-grade gold miner in Western Australia is through the roof at the moment and yet his commodity price is not moving at all.”
The drivers of the price of a commodity are not the same as for base metals, which is being driven by supply and demand in the electric vehicle battery market. “We have a division in AMC that looks after operational improvement – the focus is not just reducing an operator’s cash cost position but improving their productivity and bringing the net unit cost down so that they improve their margins,” says Mark Chesher. The demand for investigations has been increasing significantly over the last six months, he says. “We’re receiving queries almost daily. The boardrooms of these companies are looking for reduced costs and improved productivity.”
Rethinking exploration investment and productivity
On the question of exploration, while nonferrous exploration budgets are globally down at the moment, will more money now start flowing into the resourcing side of things? And an increase in exploration?
“It has to,” says Mark Chesher. “Everything is pointing to an increase in the gap between supply and demand. As a society for the last 30 or 40 years, we’ve been used to inflation being driven by demand. But this is now a supply-driven problem. We have to see more exploration – there’s no doubt. The exploration dollars being spent are not resulting in the same levels of finding new metal or new prospects. In general terms, the easy stuff has already been discovered. So, not only are we spending less money, we’re less successful in finding projects with the money we do spend. There needs to be a rethink in how we go about exploration”.
“Those exploration dollars are largely being spent in areas of the world classed as “non-risky environments,” says Mark Chesher. “A really nice objective for a company board is to say, ‘We want to find a project in a tier one country where there’s low risk, and great returns.’ However, it’s not as easy to do that anymore.” This, he says, will drive the industry towards parts of the world which have a history of being ‘riskier’. Countries such as Iran, Zambia, Zimbabwe, Tanzania, and the DRC.
Rob Chesher continued “We need to have some fundamental change in the environment of those countries to make sure it’s a jurisdiction we can work in readily. The mining industry is good at that – we’ve always had to deal with deposits that are in difficult places, but it comes back to the values again. We need to be operating in an ethical fashion and abiding by the international principles that are in operation and working with the governments and local populations to make sure that the production benefits everybody.”
This kind of approach has also seen something of a mining renaissance in countries such as USA and Canada as operators can demonstrate ethical practices and solid ESG credentials. “In the US, for the last 15 years, mining has been really frowned upon – from a political point of view everybody has really enjoyed bashing the miners,” says Rob Chesher.
“But areas that have historically provided a lot of the metals are now demonstrating that they can be mined ethically. So, we’re likely to see big projects in Southwest US, where there are a number of copper projects rolling that we’re involved with. There are plenty of studies going on in Alaska and Canada too. As the need becomes more imperative, there’s the opportunity for somebody to seek a breakthrough in overall risk management.”
ESG to remain front and centre
ESG has been an omnipresent, transformative factor in mining in recent years, but many are concerned there is a chance that, given the pressures the industry is currently facing, it may again be nudged out of the limelight. Might we see long-term, considerate planning get short-circuited or mindful ESG principles railroaded in order to get project timelines compressed and online quicker?
“It’s a key issue for us,” says Mark Chesher. “We have our internal AMC values around being professional and producing the best possible outcomes for a project and not just selecting options that make the most money. That’s important – to make sure our projects are satisfying stakeholder requirements. But there’s also been a shift in the last 10 years or so where shareholders and the groups that represent them have become more vocal in in the way they analyse projects and motivate boards that act on their behalf to improve conditions as well as produce an attractive economic outcome.”
Another critical challenge facing project developers in the forthcoming months and years involves changing the supply mix of energy required. “We can’t just flick a switch and turn on green energy immediately. It’s about finding a balance that shifts over time to the desired endpoint,” says Mark Chesher. “We’ve got to look to our governments to take leadership on difficult things such as transitioning away from coal-fired generation of power.”
There are also, says Rob Chesher, professional international organisations that AMC belongs to that represent industry professionals, develop guidelines and recording codes, as well as helping investors. “Having that collective support from the industry, at a professional level, just helps us to improve the way companies look at these projects, and to improve their own ESG performance”.
Regardless of the challenges ahead, the mining industry will continue to adapt to changing environments, as it has for centuries past. Mark Chesher believes that, for AMC, “It’s important to try and use our independence to help guide the industry as much as possible to meet the community expectations, obligations and guidelines wherever we operate.”
Being a consultant-owned company is a strength, he says, and means AMC is independent in thought. “There have been occasions where we have walked away from projects if we believed a company was not abiding by the values we hold, or if those values have been compromised.”
With the commodities market – and the mining sector generally – facing such unprecedented challenge, this kind of integrity cannot be underestimated.