Climate and broader environmental, social, and governance (ESG) factors are just two drivers likely to define the mine of the future. But rather than this pushing costs up and hitting profitability, the opposite may prove true.
In this insight, we take a closer look at what the modular mine of tomorrow – one that’s suited to smaller projects, and can be prefabricated, with elements designed for multiple reassembly many times for multiple projects – might entail. We also examine why this innovative mining model could help you manage a range of risks facing mining companies, including supply chain, people, and political risks, as well as those relating to ESG and climate.
Opportunity risk is about the possibility a better opening could come along after you’ve made an irreversible decision. Today, mines are typically very large scale and take significant time and capital investments to construct and exploit, so committing to a large mining project with a long life and demanding equipment with years’ worth of lead times could be deemed an irreversible business investment decision.
With a modular mine, process plants can be pre-designed, pre-packaged, and pre-assembled before shipping. Modular mines could afford a more experimental and agile approach, moving quickly and cost-effectively to potentially better opportunities as they emerge; retreating more easily from projects should a more attractive prospect come along and then redeploying equipment at this more appealing alternative project.
You could also use modular mining innovations to potentially exploit exploration projects your mining company has already pursued but deemed too small to take forward. You may have a significant number of known deposits – with existing data on location, size, and grade already determined – but which didn’t have a big enough life of mine to justify. Applying the modular mining approach could allow you to make good on your initial investment, exploiting these deposits and moving on quickly to the next opportunity as appropriate without the high upfront capital costs.
Permitting a mine can be the most challenging and complex step in the mining process, with permits for even geologically exceptional deposits being denied for environmental concerns, local oppositions, or political reasons. Indeed, once a local or national population objects to a potential mining project, governments can follow where popular opinion leads.
Smaller, modular mines will generally mean a smaller footprint and less impact, less dust, less blasting, and less waste material. This could reduce opposition on environmental grounds and therefore local opposition that could trigger political roadblocks.
Mining innovation will also see the mine of the future become increasingly smart around the wider processes and substances it uses, which may also curtail political opposition. In terms of tailings (materials left over after the process of separating-out the mined commodity), methods such as dry stacking (where tailings are compacted in a mound and reclaimed with native soil and vegetation) can dramatically cut waste and associated environmental risks. In the near future, we may also expect to see tailings reused for other purposes more routinely, helping to eliminate the associated risks.
The scale and agility of modular mines also mitigates sovereign risk. If, for example, a new government in a jurisdiction sought to nationalize a mine, your losses would be smaller than under a typical large-scale mining project. You could also more quickly redeploy your investment elsewhere, recouping lost revenues more rapidly.
More generally, modular mining approaches could reduce revenue volatility.
Let’s say you establish a pipeline of ten permitted mines; you could move between projects, tooling and retooling operations as the prices of commodities rises and falls, ultimately smoothing revenue streams.
Some mining companies may assume meeting ESG and other sustainability metrics – either set by regulators or due to stakeholder expectations – means mining in the future will involve higher costs of doing business. Moves by the likes of Rio Tinto, which is making around $7.5 billion of direct investments to lower emissions between 2022 and 2030, may suggest the mining sector’s participation in the transition to a low-carbon economy will inevitably come at a cost.
However, we would suggest that rather than responding to climate and ESG obligations driving costs, with appropriate mining innovation, it may actually reduce expenses.
Where mines are smaller and underground, there is less cost associated with dealing with tailings. Tailings also pose an environmental risk, and can negatively impact soil and water quality, potentially leading to legal action and fines. Smaller mines mean smaller tailings facilities, lowering environmental and liability risks.
Also, smaller, modular, underground mines will have shorter lifespans and minimized impact on the environment when it comes to closure could be planned in. You could, for example, plan to replace the paste fill in underground stopes, reclaim the land, and replace damaged flora and fauna, with all equipment and facilities being reused. This would also reduce the carbon emissions entailed in building project-specific machinery.
Much of mining today relies on having the right people and talent in place in specific and sometimes inhospitable environments, constraining the jurisdictions you can operate in most efficiently. Mining innovations in the near future could help overcome these people risks.
Currently the majority of the worlds mines are open-pit, with trolley lines or in-pit crushing machines being a rarity, even with the technology for these already available.
Underground mines of tomorrow could either use semi or fully autonomous fleets, or a conveyor decline, reducing the requirements for ventilation volumes and fans, consequently both reducing the energy demand, and reliance on flying in workers and the number of specialists on-site.
Delivering mining projects can entail complex, global supply chains, including those around getting the right equipment where it needs to be and to specification.
Modular mining equipment can be assembled and tested in more stable factory conditions, compared to when it is on-site in the middle of a remote rainforest, for example.
Equipment can also be designed to fit into standardized shipping containers, reducing the need for specialist supply solutions, potentially lowering risk and cost. In terms of maintenance, we might expect modular mining replacement parts to be bought off-the-shelf, cutting lead time and supply chain complications.
Many of the climate, ESG, political, economic, and financial metrics that will drive, and potentially mandate, the modular mine of the future are already moving towards more agile, sustainable mining approaches. This is especially true for less-abundant minerals and metals, such as lithium.
The reduced barriers to entry inherent in modular mining approaches could attract disruptors to the mining sector, new entrants unencumbered by any attachment – financial or cultural – to legacy approaches to mining.
To ready your mining company for a modular future, and one defined by growing obligations on climate and wider ESG, you should take time now to interrogate the risk management advantages and how your hitherto unexploited explorations could hold the key to the future resilience of your mining business.
For smarter ways to manage the risks and opportunities of innovation in the mining sector, get in touch.
