Last updateWed, 25 Nov 2020 4pm

Mining: Are We There Yet?

In the U.S., mining is largely about oil and gas. However, said Glen Ives of Deloitte at VMA’s 2016 Market Outlook Workshop, “We’re talking about the ‘real’ mining–digging things up. And the story this year is that, at least commodity prices are pretty steady. Miners are not so convinced the world is going to end, and they’re giving some thought about looking into the future. That’s good news for valve manufacturers, because now there is some thought about replacing some old kit, and dusting off some expansion plans.”

But Ives said that this isn’t going to happen in the next 12 months. “It’s all about going lean. In the past, they instituted small measures like inflating the tires a bit more, but the new wave of going lean sees miners finding new productivity gains through investment in innovations. They are also taking ideas from other industries by developing energy efficiency programs, by standardizing the products used in each mine (like having the same kind of valves in all mines) and developing collaborative ecosystems with other miners and with suppliers.” Mining companies’ ruthless efforts in reducing costs over the past few years is translating into enterprise-level productivity improvements.

mining 2The challenge is figuring out how to sustain cost take-outs and drive ongoing productivity improvements. One way is to make better use energy. Ives pointed out that miners are now reconsidering the best time to do things like crush rock. “There is no reason to do it during the peak hours for energy use. And can you sell the energy you produce? How can you integrate solar and wind power?”

Efficiency can also be improved by having replacement parts like valves manufactured on site. “3D printing is moving ahead, not fast, but I see mines in remote areas with barrels of material and 3D printers,” said Ives. “And when something breaks down they will print the replacement on site. Valve manufacturers of course will still have to get paid, but not as much for the actual manufacturing as the technology that goes into it.”

There are many other digital and physical technologies available to the industry, but Ives says it is crucial to integrate them and to embrace what he called “Industry 4.0.”

Industry 4.0

According to Ives, there have been four industrial revolutions: power generation, industrialization, electronic automation and now, smart automation. An example in mining of the technologies within Industry 4.0 is wearables. “Miners are wearing vests that provide their location and vital signs,” said Ives. “People can actually fall asleep driving these big trucks and you can see from their vitals that they are falling asleep and send a loud message to him. It also allows the mining company to know exactly where everybody is. One of the biggest costs underground is ventilation, so you only need to ventilate the bits of the mine where people actually are as opposed to where they could be.”

mining 3

Other examples include augmented reality, which is like 3D virtual reality. This can be used for repairing something. Other potentials for industry 4.0 are in predictive maintenance, including valves. “A valve is meant to work for a predicted lifespan,” said Ives. “With Industry 4.0 you can monitor the condition of every valve and know exactly where every one is.

"Equipment tracking generally is very important in mining. You have to know where the equipment is so that if you have to blast you can get things out of the way and reduce downtime.” Remote monitoring, leak detection and personnel safety are also improved with Industry 4.0. “You can actually virtually operate trucks and the mines themselves, so it’s easier to control breaks and the health and awareness of personnel.”


“The only certainty about China,” said Ives, “Is that the communist party will do whatever it needs to do to stay in power. That means continuing to provide economic growth for the people. That’s why they won’t shut down the steel plants. But there are structural weaknesses which are beginning to appear in its economy. However, there is a silver lining because there is the likelihood of an increase in Chinese overseas investments in natural resources.”

Ives recommended that miners and others pay attention the potential impacts of plans from the Asia infrastructure Investment Bank (AIIB) including the One Belt, One Road Program and the Megacity project. “China does matter. It is huge and it is going to require commodities which means demand is going to continue to rise.”

Other Factors Affecting Mining

The shifting global energy mix. Increasing environmental concerns and the use of alternative power sources is causing a shift in the global energy consumption patterns:

  • 3% decrease in china’s consumption of thermal coal in 2014
  • 25% percentage of global energy consumption in natural gas by 2040, surpassing coal
  • 60% rise in install capacity for nuclear power by 2040
  • 12% expected percentage of increase in power generation via renewables between 2012 and 2040

Resistance to new mines. Nobody wants a mine in their back yard, and it’s getting increasingly difficult to get permits. There are more than $20 million in losses per week due to delayed production in projects caused by community opposition.

Tax Revisions. Mining companies are under increasing scrutiny for their tax affairs. According to James Ferguson at Deloitte UK, this will impel miners to base future investments on three main factors – a country’s geology, its political stability and its tax policy.

The Capital Crisis. Banks are not interested in lending to mining companies because of their rising debt burdens and poor financial performance, so miners are forced to seek alternative financing, even when the terms are not in their favor. As funding dries up, miners are being driven out of the industry, and it seems that no one knows how to solve the financing problem. Deloitte’s Tim Biggs asked, “What happens when large miners run out of cash reserves?”

Miners are taking an expanded view of corporate and personal welfare. They continue to refine safety programs and increase the use of technology to implement safety programs focused on zero fatalities and the definition of safety has been expanded to encompass mental health. But beyond physical health, Ives stressed that miners need to be prepared to tackle the mounting threat of cyber attacks

Looking Ahead

Similar to the current situation with oil production, commodity production continues (and even increases) during the down cycle to reduce unit costs or to generate cash flow to pay off debt. But the low price means that there is a decline in exploration and project pipelines which could ultimately lead to future supply shortages. “To stay afloat in the current supply-demand paradox, miners need to be able to slow production over the short-term while maintaining the long-term pipeline,” said Ives.

Kate Kunkel is senior editor of VALVE Magazine.

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