Digitalization of the urban industry

2024

Russia developed and began to use a tomograph with AI to search for minerals

In September 2024, it became known that scientists at Tomsk Polytechnic University (TPU) developed and put into operation an innovative mesotomograph with artificial intelligence for the study of rocks. The new device was installed at the Geosphere research center of Gazprom Neft in Tyumen, which will significantly speed up the process of finding and developing mineral deposits. Read more here.

Russia has developed the world's first neutron analyzer that determines the composition of rocks in a record 30 minutes

In August 2024, the world's first neutron analyzer was presented in Russia, capable of determining the composition of rocks. The development belongs to the National Research Nuclear University MEPhI. This device opens up new opportunities for the mining, oil and metallurgical industries, as well as for scientific research, allowing rapid and accurate analysis of the chemical composition of samples. Read more here

Metallurgists were the first in the industry of the Russian Federation to approve the regulations for the development of import-substituting software

Russian metallurgical companies were the first in the country's industry to approve development regulations software for import substitution. This became known in August 2024. The interaction agreement signed by the participants of the Industrial Competence Center (ICC) "" Metallurgy defines the procedure for creating a domestic one, ON necessary to ensure independence from foreign technologies.

As he writes, ComNews the agreement provides that the anchor customers of the ICC undertake to develop software at the expense of their own funds or government grants, while co-customers will participate in testing, supplementing the terms of reference and providing expert assessments. The Director General, Severstal Alexander Shevelev who heads the ITC "Metallurgy," stressed that this document will become a guide for other industries, providing support from the Ministry of Industry and Trade and the Ministry of Digital Development, Communications and Mass Media.

Metallurgists were the first in Russia to approve regulations for the development of import-substituting software in industry

The main projects provided for by the agreement are divided into three categories. The first category includes production management systems, for the development of which more than ₽7,8 billion have been allocated, including a state grant of ₽0,5 billion. The second category is related to asset management systems, where Severstal has already invested ₽0,5 billion. The third category covers supply chain management systems with a total investment of ₽1,5 billion, of which ₽0,6 billion was provided by the state.

Particular attention is paid to the creation of cross-industry solutions in software development. As the representative of the press service of Severstal noted, many of the systems under development can be implemented not only in metallurgy, but also in industries such as mining, petrochemistry, mechanical engineering and the agricultural sector. This makes the projects of the ITC "Metallurgy" especially valuable for the country's economy.^[1]

The main difficulties of the digital transformation of mining and metallurgical companies are named

As of the beginning of 2024, one of the key obstacles to the digital transformation of mining and metallurgical enterprises in Russia is the increase in the complexity of the solutions being implemented. In addition, market participants complain about the excessive bureaucratization of processes. This is stated in the report of the company "Yakov and Partners," published in April 2024. Specialists of the Zyfra Group of Companies took part in the preparation of the document.

The presented results are based on interviews with top managers of the industry, as well as on data obtained as part of a survey of 130 respondents from 50 companies representing more than half of the market volume of the mining and metallurgical industry in Russia. On average, every second enterprise in the Russian Federation in this area achieves the planned goals of digitalization. At the same time, the authors of the study note a double difference in the success of IT projects of experienced digitalizers and newcomers.

Almost half of respondents cite the exhaustion of effects from short-term initiatives in major production alterations as one of the key reasons for plan failure. As measures to improve efficiency, the transition to long-term planning of the effects of digitalization and the inclusion of auxiliary functions in the implementation perimeter are highlighted. For example, foreign companies receive 60-75% of the effect from projects in the field of supply chain management, repairs, corporate and commercial functions, and in production they introduce technologies with long payback periods. Experts also recommend that Russian companies pay attention to increasing organizational flexibility - this process will require restructuring internal operations.

43% of mining and metallurgical companies in Russia indicated an increase in the complexity of the solutions used as one of the main problems of digital transformation. For comparison, on a global scale, about 41% of respondents declare this. The lack of competencies and bureaucratization is indicated by 40% and 39% of Russian enterprises, respectively, against 33% and 31% abroad. The lack of investment was reported by 33% of Russian and foreign market participants. At the same time, only 24% of Russian companies complained about the lack of initiatives in the field of digital transformation, while in other countries this problem affects 41% of players.

The complexity of the digitalization process of mining and metallurgical enterprises in Russia is associated, among other things, with a lack of qualified specialists and increased competition with technology companies. Compared to the beginning of 2023, there are aggravated problems with the search for project managers, developers and IT architects. In the medium term, the priority of Russian players remains the digitalization of production, while companies have become "more ambitious to look at the entire range of digital solutions," while the focus is shifting to industrial safety and geology.

In the field under consideration, technologies of generative artificial intelligence are being introduced. But as of the beginning of 2024, such tools are used primarily to solve problems of systematization, synthesis and analytics of big data. Experts note that expectations from the technology may be overestimated, but "this does not mean that it should be ignored."

{{quote 'In the practice of digitalization, we notice that the technology determining the further development of the industry is MES (production process management system) of the mining enterprise. Most of the major players are already successfully using basic communication, dispatching, and APCS services. The next step is to master more intelligent scenarios: planning, tracing, geometallurgy, metal balance and others, - says Sergey Emelchenkov, General Director of Zyfra Group of Companies^[2] }}

A quarter of representatives of mining and metallurgical companies in Russia count on world leadership in the figure

A quarter of representatives of mining and metallurgical companies in Russia are counting on world leadership in the figure. At the same time, confidence in the success of digitalization based on Russian technologies is growing: the share of respondents planning to increase the effect of the "figure" in the coming years has grown almost 4 times. Representatives of Yakov and Partners and Zyfra Group of Companies shared such data with TAdviser on April 23, 2024 based on the results of the study.

In general, every second player in Russia expects an increase in the effects of the "figure" in production, which indicates the adaptation of the overall digital solutions market to the current geopolitical situation.

Despite the remaining restrictions, the number of respondents who noted the strengthening of the technological gap has decreased, while the number of those who expect Russia to become world leaders in terms of "figure" has increased quite significantly.

On average, every second respondent achieves the planned goals of digitalization, while the authors of the study note a twofold difference in the success of IT projects of experienced digitalizers and newcomers.

The main problem areas that the respondents identified: increased complexity of decisions, lack of competencies, bureaucracy. The greatest lag of Russian players from foreign benchmarks is observed in the field of bureaucratization. At the same time, only a quarter of Russian experts complained about the lack of initiatives, while in other countries this problem affects 41% of players.

Almost half of respondents note the exhaustion of effects from short-term initiatives in major production alterations as one of the key reasons for plan failure. A number of opportunities to improve efficiency lie in the transition to long-term planning of the effects of digitalization and the inclusion of auxiliary functions in the implementation perimeter. Thus, foreign companies receive 60-75% of the effect from projects in the field of supply chain management, repairs, corporate and commercial functions, and in production they introduce technologies with long payback periods. Russian players also need to pay attention to increasing organizational flexibility, which requires restructuring internal processes, as well as attracting digital competencies, the deficit of which has only increased over the past year, "said Nikita Natrusov, partner of Yakov and Partners.

In the practice of digitalization, we notice that the MES of the mining enterprise becomes the defining technology for the further development of the industry. Most of the major players are already successfully using basic communication, dispatching, and APCS services. The next step is mastering more intelligent scenarios: planning, tracing, geometallurgy, metal balance and others. And this requires the organization of transparent end-to-end processes through all redistributions. This is where the additional effects that can be obtained through digitalization are hidden. We are actively working on such solutions that will connect all GOK management processes into a single system. Our actions in this direction are supported by the opinion of the industry reflected in the results of the study, - said Sergey Emelchenkov, General Director of Zyfra Group.

The complexity of the digitalization process, including many, is associated with personnel hunger and increased competition with technology companies. Compared to last year, respondents note aggravated problems with the search for project managers, developers and IT architects.

In the medium term, the priority of Russian players remains the digitalization of production, while companies began to look more ambitiously at the entire range of digital solutions, and the focus began to shift to industrial safety and geology. Despite the trend of generative AI, so far only the tasks of systematization, synthesis and analytics of big data are assigned to it. According to the interviewed experts, there is a feeling that expectations from the technology are overestimated, but this does not mean that it must be ignored, while some companies have undertaken the goal of launching up to 15 pilots to study the effects and acceleration of cultural transformation in the company.

The study is based on a series of interviews with top managers of the industry, as well as on the results obtained as part of a survey of 130 respondents from 50 companies representing more than half of the market volume of the mining and metallurgical industry in Russia, conducted with the information support of the publication "Metal Supply and Sales."

More information about the findings of the study can be found at the link.

Main trends in IT development in mining industry named

The multidisciplinary technology group Reksoft summed up the results of 2023 and outlined the main trends in the development of IT in the mining industry for 2024. In addition to the general goals of import substitution, the focus of Russian companies engaged in mining is on the creation of a single digital platform as of January 2024. Along with the integration of dispatching and planning solutions, technologies in the field of industrial security are being introduced and IT products are being adapted for export to friendly markets in Russia.

Despite the difficulties associated with the impossibility of full use of Western software, Russian companies continue to implement the previously planned plans for the digitalization of production. The resulting incentives for transformation and the transition to new software create opportunities for the introduction of unified digital platforms in industry. This approach in the future will solve the issue of data fragmentation, lead to optimization of labor costs, will ensure the possibility of conducting general analytics, which is necessary for the development of enterprises as a whole.

As of January 2024, there are about a thousand mining enterprises in Russia. According to our estimates, approximately 10-20% of them may be interested in creating a comprehensive industry platform. We are talking not only about large enterprises, where the level of automation is quite high, but also about medium-sized enterprises that face the need to update their infrastructure, "said Dmitry Karamyshev, director of the mining solutions department of the Reksoft group.

Russian production companies have accepted the import substitution challenge, especially since almost all enterprises have serious experience in digitalizing production, as well as an understanding of managerial and organizational changes related to automation. However, the transition from Western solutions to Russian analogues requires adaptation and customization of domestic solutions for specific customer processes. In 2024, the process of switching enterprises to Russian software products will continue. Customers demonstrate a high interest in software development that would be 100% in line with the expectations of Russian mining companies.

A study conducted by Reksoft in 2023 showed that at least 39% of industrial enterprises are ready to invest in the development of Russian software to support all business processes and technological chains. At the same time, 16% of them already in 2023 conducted joint development with IT companies.

The benefit of such cooperation is clear. The adoption of digital products in mining is paying off quickly for businesses through the "big number effect." The introduction of some solutions, such as fuel control, can pay off in three months due to a significant share of such expenses in the balance sheet of companies. In our experience, on average, the return on investment in the acquisition of digital solutions ranges from a year to two, - said Konstantin Belykh, technical director of the mining solutions department of the Reksoft group.

The ability to obtain software adapted to the specific tasks of the enterprise has also become a driver for the emergence of new expectations from mining companies. Industry representatives identified those segments in which there was a lack of solutions suitable for Russian business:

• Integrated dispatching and planning systems (according to statistics, only 60-70% of mining plans are followed, and the implementation of such systems will help improve production efficiency).
• Introduction of artificial intelligence and advanced analytics technologies in areas such as geological data analysis and assessment of their reserves, unmanned transport, analysis of large amounts of ore mining and processing data, predictive diagnostics of the state of mining equipment, optimization of transportation and logistics.
• Collision prevention and active safety systems for vehicles.

Systems for monitoring the wakefulness of drivers, preventing collisions with pedestrians and controlling the blind spots of large-sized equipment are widespread. For this, artificial intelligence and detection tools are widely used. For example, some enterprises already trust such systems to urgently use the brakes of cars. This suggests that confidence in the technology is growing, "said Vladimir Lebedev, head of the mining solutions department at Reksoft.

Mine to Mill is becoming more and more popular. Customers in the field of mining minerals are striving to implement comprehensive development strategies. However, for their implementation and planning, end-to-end means of data collection and decision-making, transparency of processes at all levels are required. For 2024, many mining companies are faced with the task of creating solutions with open interfaces and the possibility of continuous development of IT systems.

The 2023 trend will continue, which is to strengthen cooperation with friendly companies from the Middle East, Latin America and partly Asia. It is these countries that make up 47% of the global market and working with them today is an important element of a successful business development strategy. Therefore, representatives of the IT-Business in the automation of mining industries are actively working to establish stable work in regions open for export.

Russia and the bloc of developing countries are undergoing a new round of rapprochement in all spheres of the economy, including the IT industry. Separately, against this background, there is cooperation in the field of automation of the mining industry. The share of Russian production in the global structure is 9.7%. Only the United States and China are ahead. Due to the rather high degree of development of IT solutions at domestic mining enterprises, Russian IT companies have a unique experience in industry automation and an understanding of the best international practices. At the same time, Russian vendors, unlike Western ones, are ready to offer a very deep degree of customization of their solutions to the requirements of local customers, said Dmitry Karamyshev, director of the mining solutions department of the Reksoft group.

2023

39% of mining enterprises are ready to become a co-investor in industrial software projects

Analysts of the company "Reksoft" on September 14, 2023 presented the results of a survey on the readiness of mining enterprises to develop industrial solutions. More than 100 representatives of IT and business divisions of large mining enterprises of the country took part in the survey.

The study showed that 54% of enterprises have plans to fully replace Western software solutions on the horizon for 3-5 years. At the same time, 39% of respondents reported on the potential readiness of their companies to become a co-investor in a project to create industrial software, of which 16% are already working with an IT partner within the framework of a joint venture. The optimal and achievable payback period depends heavily on the solution class and investment volume and is identified by companies in the range of 3 to 5 years.

Also, companies are wondering about the possibility of bringing the created product to market. 23% of the survey participants announced the readiness of the enterprise to independently distribute its solution, 4% talk about the need to share this task with an IT partner, 36% suggest a purely internal use of the solution within the framework of its structure.

When choosing an IT partner to create an industrial solution, companies primarily name the presence of a local team with industry expertise, experience in developing and implementing such solutions, 24-hour technical support and readiness for the development and customization of the future product. Also an important requirement is the Russian jurisdiction of the partner and the absence of sanctions factors.

We see a trend in the industry towards creating our own industrial solutions. However, the possibility of their further distribution raises a number of questions for enterprises. They are primarily related to the need for a deep understanding of the market, the presence of marketing and commercial expertise for the sale of software, as well as the need to organize support for future customers. said Yuri Voevodko, Product Portfolio Development Director, Mining Solutions Department, Reksoft.

63% of mining and metallurgical industry representatives expect significant cost reduction over 5 years thanks to IT projects

On April 13, 2023, the Trust Technologies company presented an Overview of the State of Digitalization of the Mining and Metallurgical Industry in Russia, which highlighted the results of a survey of market representatives.

Key findings:

• 67% of respondents noted that in 2022 they faced difficulties in planning and implementing IT projects due to the restriction of access to foreign solutions;
• the most priority technologies for implementation by representatives industries were:, artificial intelligence analytics, big data advanced and (analytics 93 machine learning %).
• 63% of respondents believe that on the horizon of 5 years, digital projects will have a significant impact on cost reduction;
• 50% argue that digitalization will positively affect the increase in production, and 34% that the effect will be insignificant;

In the industry mining , IT costs almost doubled between 2019 and 2021. By, to data Rosstat the costs of introducing and using digital technologies carried out by metal ore mining companies showed an increase from 4.2 billion in 2019 to 7.4 billion. rub Among coal mining industries, the level of spending on digital technologies in 2021 is only 15% higher than in 2019.

Despite the stable growth of investments in the figure in previous years, about half of representatives of mining and metallurgical companies indicate a decrease in the volume of investments in IT in 2022. At the same time, about 40% of company representatives expect a potential increase in investments in digitalization in the next few years, and only 25% predict a reduction in IT technology costs.

According to the results of the study, the most priority technologies for companies were identified according to respondents. The three leaders included: AI, big data analytics, advanced analytics and machine learning (93%), the Internet of Things, next-generation networks and geo-positioning systems (60%), specialized mobile devices for employees, mobile business applications (53%).

For April 2023, there are a number of significant challenges facing the industry. However, companies in the mining and metallurgical sector have accumulated a significant number of developments and tested technological pilots in previous years, which are already being transferred to work. Thus, with a competent redistribution of resources (both money and equipment), teams and prioritization of projects, companies can neutralize the risks of technological lag from the global IT trends in the industry, "said Andrei Zaytsev, director of technology practice at Technology Trust.

The majority of respondents (63%) believe that on the horizon of 5 years, digital projects will have a significant impact on reducing costs. At the same time, speaking of the volume of production, 50% argue that digitalization will positively affect the increase in volume, and 34% declare that the effect will be insignificant. When assessing the positive impact of technologies on the environment and the field of labor protection, 56% of respondents say that the effect will be significant

The overwhelming majority of respondents noted that the greatest difficulties in the implementation of import substitution in their companies arise in connection with the replacement of hardware solutions with domestic analogues. At the same time, the most common difficulties associated with the transition to Russian software are:

• incompatibility of Russian software/equipment with the existing IT infrastructure in the company (81%);
• the need for additional costs for the import substitution project (63%);
• limited choice of solutions in the market for migration (63%).

According to the survey results, 67% of respondents noted that in 2022 they faced difficulties in planning and implementing IT projects due to the restriction of access to foreign solutions. Industry representatives identified five types of technologies that are most difficult to replace with a proposal that exists in the domestic market:

• robotics and automation;
• internet of things;
• AI, advanced analytics and machine learning;
• Cloud storage and data processing
• quantum computing.

2019: Major trends facing mining companies. Deloitte Score

The Deloitte Network's "Mining Sector in 2019" report, published in January 2019, looks at the underlying trends facing mining companies when operating in a market under constant transformative influence from the fourth industrial revolution.

"The mining sector appears to be on the cusp of unprecedented growth over the past decade. However, during this time, the market situation has changed significantly, - comments Filip Hopvud, head of the International Group for the Provision of Services to Enterprises of the Mining and Metallurgical Sector. - The phenomena of destabilization and volatility have already returned to normal, and we do not have time to adapt to such a rapidly changing environment. Under the new reality, mining companies will not be able to obtain skilled professionals, investment, or local support if they concentrate solely on demonstrating the current benefits they already provide to communities on the ground. They should take another step and articulate their values clearly by developing differentiated business models that ensure benefits are created in the long term. "

Production Strategy Review

Previously, strategic planning in mining companies was aimed at ensuring maximum ore production at the lowest cost. The result has been a drive to build ever-larger mines in pursuit of high returns, bolstered by the expectation of a steady rise in commodity prices. However, even though this bubble has long since burst, many companies in the sector still feel its impact.

The report also looks at the following trends:

The emerging outlook for data analytics and artificial intelligence. Mining companies invest in data analysis and artificial intelligence (AI) technologies to leverage the data they generate to improve the efficiency of planning and decision-making processes across the value chain. This can help improve safety and productivity, reduce costs and improve employee engagement. By analyzing the areas of improvement of their data analysis systems and AI, mining companies are exploring global trends in other industries and new uses of these technologies in order to determine the optimal areas for their investments.

Risk management in the digital age. The usual landscape of risks has expanded, and traditional approaches have ceased to work. Boards, investors and local communities expect mining companies to develop more forward-looking approaches to risk management, aimed not just at analyzing existing, but at predicting new risks. This will be possible thanks to analytics, as well as a number of AI and cognitive analysis tools that have now become available to mining companies.

Digitalization of the supply chain. "The mining sector is in the earliest stages of a digital supply network (DSN). Companies that can find a solution and build fully interconnected supply chains (from quarry to port) will not only eliminate the disparity of their operational processes, but will also provide the necessary level of transparency for a more efficient use of assets, increased operational efficiency and productivity, which will ultimately contribute to significant monetary savings.

A course towards stable benefits for the company and society. Today, organizations in all industries are evaluated based on indicators that go far beyond financial results. The basis for the assessment is more often the relations of companies with their employees, customers, local population and regulators, as well as their impact on society as a whole. Mining sector participants are no exception. They should stop considering CSR initiatives only as a price to pay for compliance and listen more closely to stakeholders. It is necessary to understand the real needs of these parties, and then change their operational processes accordingly.

Analysis of relationships between water and energy use. Water resources quickly came to one of the first places on the agenda of mining companies, because establishing a stable water supply is one of the most difficult tasks for them. In the case of integrated energy and water management, mining companies will be able to develop business solutions that will optimize both of these areas. For those in the sector hoping to maintain productivity indicators, reduce public concern and take control of environmental risks amid global energy and water shortages, such changes are increasingly necessary.

Capital Project Analysis. As demand for commodities rose, there was palpable optimism among miners after a recent period of decline. However, before launching another wave of investment programs, they need to draw conclusions from the mistakes of the past and restore confidence in stakeholders. Organizations that are already trying to develop the necessary potential in the field of capital projects will be able to strengthen their positions in the future, more effectively adjusting supply in response to changing demand.

A new perspective on labor relations, employee requirements and jobs. Due to digitalization and automation, changing the nature of labor activity, a large-scale change of generations in the industry and a decrease in the number of students in mining-related specialties, mining companies will have to revise their personnel strategies. At the same time, they will have to not only take into account the changing nature of labor activity, but also think about how to attract a new generation of workers and adapt jobs for them.

Implementation of socio-cultural diversity and equal opportunities programs. In order to increase the diversity of human resources and their equality, as well as to attract qualified specialists who will help achieve the goals set in the field of digitalization, automation and innovation, mining companies will need to change the entrenched ideas about the industry as a whole. To do this, they will need to cooperate with each other in recruiting personnel from educational institutions and other online platforms, focus on identifying unconscious biases that affect decisions to hire new employees and contribute to inequality in the workplace, as well as introduce more flexible labor practices.

Product Origin Disclosure. As consumer demand for battery minerals grows, so does the demand for information about its origin. Mining companies are becoming an object of intense interest from conscious consumers, who ask questions about the origin of raw materials for various goods, from cell phones to electric vehicles. Accordingly, buyers of such materials, such as automakers and tech giants, require their suppliers to comply with ethical principles. All of these trends are driving the spread of technologies like blockchain, which allow more efficient tracking of the origin of goods.

2017: New market trends. Deloitte score

In order to turn breakthrough technology into new opportunities, the mining company must make a long-term forecast and have the ability to assess new market trends that could affect the demand for individual commodities.

"It was difficult to imagine until 20 years ago that nickel, lithium, cobalt and graphite would be used as an affordable current source for batteries. However, today this is already the reality of our days, as well as an opportunity for growth, especially in light of the spread of electric vehicles, "said Filip Hopvud, head of the Deloitte International Group for the Provision of Services to Mining Enterprises. - Although the mining of rare earth metals on asteroids still looks like a plot from a science fiction novel, in the not so distant future, the market potential of existing technologies may be large-scale. If mining companies want to get ahead of market trends, they should look closely at the technologies being created that could dramatically change the market. "

• Integrating digital technologies into everyday life: data (that is, the ability to organize its collection, storage and processing) quickly turns into a competitive advantage. Mining companies should use digital thinking as an integral part of corporate strategy and practice to transform the corporate decision-making mechanism. In order to achieve high results, mining companies must clearly understand how the "digital mine" of the future can transform mining operations, data flows and become the basis for processes that take place in the back office.
• Overcoming barriers to innovation: Mining executives understand that the transformation of the industry requires not only technological innovation, but also new approaches to engaging with stakeholders and identifying the types of raw materials that will be in the highest demand in the future, as well as a new look at the work of the future. However, the need to demonstrate profitability in the short term, combined with the industry's inherent tendency to minimize risks, does not contribute to the development of interaction and is an obstacle to innovation within the industry.
• Future of work: As the concept of a "digital mine" becomes part of reality, the nature of work at both the mine and the back office must change in a very radical way. Although the adoption of digital solutions using robotization, autonomous equipment and artificial intelligence will increase the productivity of mining companies, the industry as a whole can undergo dramatic changes. However, the result will not be total job destruction, but a concerted effort to retain staff in order to use new technologies, as well as a revision of the concept of work itself.
• Fundamental change in perception: Despite the significant contribution of the mining sector to the global economy, the industry's reputation in many countries continues to suffer due to the popularity of the view that the activities of mining companies damage the environment, negatively affect the lives of local communities or are based on the use of illegal working practices abroad. In order to build confidence in relations with employees, investors, local communities, government bodies and public organizations, many leading mining companies are taking all possible measures, such as identifying a clear civic position on corporate social responsibility, voluntarily supporting sustainable development standards and making public shareholder decisions to increase the amount of information disclosed related to the impact of activities on climate change.
• Transforming shareholder relations: Governments in many commodity-rich countries continue to place increased demands on mining companies, seeking to boost local employment, increase tax revenues, meet infrastructure improvements, and ensure the environment. Instead of looking at relationships with local communities in terms of compliance, companies should determine how they can benefit society and provide benefits to different stakeholders.
• Water Management: Finding Lasting Solutions to an Existing Problem: According to the UN, more than 40% of the world's population is currently affected by water shortages, and mining companies must therefore find innovative methods to reduce, reuse and recycle water in regions experiencing water shortages, as well as divert and treat wastewater, preventing the leakage or contamination of clean waters.
• Changing shareholder expectations: Changing the direction of corporate development to meet shareholder demands for short-term returns could hurt mining companies in the long term. Instead, productivity measures should address a range of value creation challenges for different groups, including customers, employees, suppliers and local communities, not just shareholders. The Board of Directors will therefore be able to focus more on long-term strategies, talent pool planning and leadership personnel preparation, providing management with more general corporate goals, including the Company's social activities and business ethics.
• Difficulties in replacing reserves: Limited supply in the industry challenges mining companies to find a flexible approach to replacing reserves that allows them to conduct exploration and development activities that do not require significant long-term investments.
• Focusing boards on business transformation tasks: Board representatives who fail to abandon the old way of thinking will inevitably face challenges in completing new tasks, such as critically evaluating management's actions on corporate strategy, disruptive digital strategies, human resources management, and new risks. Consideration of various development prospects is necessary so that representatives of the boards of directors of mining companies can actually assess the effectiveness of the assumptions adopted in the organization, the validity of new ideas, as well as determine the proportionality of risks.

2018:8 Mining Challenges That Can Be Solved with IT

TAdviser talked with representatives of Russian mining companies and industry experts and found out what tasks the industry faces and how information technology helps to solve these problems.

The main problems of mining are incorrect data on reserves, incorrect development projects, sudden collapses and displacements of rocks, injuries to support personnel in the implementation of control and monitoring functions and incorrect calculations of geological and survey data, which lead to errors in the progress of mining operations, significant production downtime and financial losses and sometimes to human casualties, TAdviser analyst of ACRA Maxim Khudalov listed . To solve these problems, the mining industry, of course, resorts to IT solutions.

Improve geological exploration accuracy and speed

Improving the efficiency and accuracy of geological exploration is one of the hottest tasks and trends in the mining industry. The chief executive officer of Polymetal International Vitaly Nesis in an interview with Vedomosti noted that companies should quickly analyze the prospects for a particular field and be able to weed out non-effective projects. In his opinion, it is precisely because of the lack of skills and opportunities to conduct high-quality geological exploration that companies are guided by data from the Soviet times, which are not always accurate and a situation develops in the industry when "they drill a lot, but find a little."

For example, high-power laser rangefinders help to solve this problem. They make it possible to form a survey picture of the mine (spatial and geometric measurements in the bowels of the earth and in the corresponding areas of its surface with the subsequent display of measurement results on plans, maps and sections during mining and geological exploration) and significantly reduce the number of errors in assessing the actual relief of mining operations. Previously, this process was controlled by a surveyor, whose quality of work strongly depended on understanding the current status of mining, Khudalov explained in a conversation with TAdviser.

The work of the surveyor (one of the specializations of mining engineers) is necessary in order to understand how much and in what time frame on a particular site can be obtained, he explains.

{{quote 'Previously, the work of surveyors was as follows: the surveyor became at one point of the quarry, and the device, which is also called the surveyor, measured how and where the ore body lies, measured the parameters of the mine, section or mine. It was a very long process and also involved constant errors in the data. To obtain data on the underground occurrence of the ore body, it was necessary to first perform blasting operations and only then the surveyor could make his measurements. Now lasers scan the underground part of the deposit without preliminary blasting. This increases the accuracy and speed of work, says the expert.}}

The field development plan and schedule shall be calculated as accurately as possible. Otherwise, the enterprise may be ineffective and face fines from regulatory authorities.

Application of laser rangefinder in fields increases the speed of relief assessment and allows to observe the progress of geological exploration in real time, - explains Maxim Khudalov.

Laser rangefinders are also aimed at improving the safety and efficiency of work: there is no need to send meters to the edges of quarries, which are a dangerous place, and snow, blasting and fog are no longer an obstacle to shooting.

The use of laser survey results when assessing the current situation in mining areas allows to reduce the error in calculations from the permissible 4% to 1-0.5%, - Khudalov cites.

And according to his calculations, the savings from the use of laser shooting and "big data" technologies to process its results reduce the costs of mining companies by an average of $150,000 annually. Such estimates are correct for large volumes of removed rock mass: even in small mines, this figure averages 3 million m3 per year.

Evraz (coal production in 2016, according to the annual report, amounted to 9.9 million tons) is actively implementing IT solutions aimed at improving the efficiency of production processes and work safety. At KGOK, Evraz introduced the MineShed mining planning system. Laser scanning and the use of 3D models can improve the accuracy of the planning and operation of surveyors, said a representative of TAdviser.

Evraz is also considering the possibilities of veneering autonomous machines in quarries, intelligent analysis of sensor information in mines.

Create an up-to-date field model

Creating the most accurate model of the field is one of the necessary conditions for efficient production of resources. Here, miners resort to big data and simulation modeling technologies.

Big data technology, according to Maxim Khudalov, allows not only to build a more correct model of the deposit development - to obtain timely information about the occurrence of low-quality ores, fractures in the location of ore fumes, interspersed foreign rocks, but also to improve the quality of daily operational exploration.

The company conducts daily explorations, on the basis of which surveyors determine the daily direction of work. The results of this exploration can and should be used to clarify the initial mountain model, because the newly acquired data significantly clarify the nature of the occurrence of the ore body, which will allow more accurate determination of its probable parameters. Previously, this work was carried out sporadically depending on the conscientiousness of the geologists of the enterprise. Today, using big data technologies, this information instantly enters the calculation module of the system, which automatically completes the geological model of the field in real time and can significantly help the company's management quickly respond to changes in geological characteristics of the rock, the analyst explains.

Nornickel Mining and Metallurgical Company has introduced simulation modeling technology. The financial director of the company Sergey Malyshev spoke about it at the bottom of investors in the fall of 2017 . The technology allows you to analyze the possibilities of increasing production in real time. This model is based on three groups of input data: a 3D model of the ore body created using the MicroMine program, a mine mining plan based on the MineSched program, detailed information, including equipment for six mines.

The simulation model of the situation at a particular mine allows you to answer questions in real time about the adjustment of operating modes, route safety, the need for shifts, repairs, etc. As a result, work is carried out under constant control, and the costs of their implementation are reduced, Malyshev noted.

The largest diamond miner in the world (27% of world production) Alrosa also resorts to big data. The company's mines operate a system of automated control of blasting operations (ACS BP) - BlastMaker, a company representative told TAdviser. He explained that the system makes it possible to ensure optimal design of drilling and blasting operations at quarries by collecting, processing and transmitting data on the properties of the rock mass directly from the drilling rig during the drilling of explosive wells.

Training

According to Maxim Khudalov, despite the fact that the industry is gradually moving towards the creation of a "mine without people," where transportation is carried out by dump trucks with drones, and mining is carried out by an excavator controlled from the central office, the training of miners working directly at the industrial facility plays an important role.

The active introduction of industrial simulators in mining makes it possible to significantly speed up the training of employees of mining companies with minimal damage to production. The time and money spent on training employees is paid off by preventing possible errors. Given the power of modern equipment for mining, each error has fatal consequences, adds Khudalov.

Transport equipment monitoring

One of Evraz's key IT strategy programs is mining automation. For example, the Raspadsky section has introduced a monitoring system for mining transport equipment: sensors installed on dump trucks and excavators allow you to control production volumes, movement of vehicles, fuel consumption levels and other parameters. Aerial photography from drones makes it possible to accurately keep records of the volumes of excavated rock mass, a representative of Evraz told TAdviser.

Implementation of dispatching system of mining transport equipment using sensors on dump trucks and other mining equipment has begun at the plant. One of the main goals is to increase the efficiency of logistics of motor vehicles in the quarry, the representative added.

Since November 2017, a system of mobile dispatching of vehicles has been introduced, which allows automatic optimal distribution of transport flows depending on various factors: overstocking of coal warehouses, the occurrence of queues at loading/unloading points, prompt replacement of vehicles in the event of their failure, said a TAdviser interlocutor in a mining and metallurgical company.

The system is based on mobile phones, by analogy with taxi solutions, and is used in cases where it is impossible to install stationary standard systems, he explained.

In the fall of 2017, Alrosa equipped 1300 units of general vehicles at production sites with the GLONASS GPS monitoring system. With the new system, the company expects to reduce real vehicle mileage by 10-15% and provide significant fuel savings, a company spokesman told TAdviser.

The automated mining and transport management system - Wenco - solves a wide range of tasks, starting with reporting on operational information from the quarry, high-precision positioning and control of equipment, and ending with information on the technical state of quarry equipment and the advanced system for dispatching production processes in open pits, "said a representative of Alrosa.

In addition, the diamond miner's assets operate a "Mining Complex Monitoring System" designed to monitor the operation of combines and drilling machines used in underground mines.

Safety monitoring

Safety issues are a priority for all mining companies. The Raspadskaya coal company Evraz is actively introducing mobile solutions in this area.

Mobile solutions based on new underground lightweight explosion-proof plates (ARMA) are used there. These solutions allow you to record technological violations, draw up a checklist right in the mines and carry out photo recording of violations. The data is promptly transmitted to the mountain, reporting of violations is automatically sent to management, the company said.

The Mining and Transport Positioning System (SPGT-41), operating at Alrosa industrial facilities, is designed to monitor the position of personnel and in-mine vehicles located in underground mining passages.

The system promptly informs mine and emergency rescue services about the location of transport and personnel. It can be used as a backup emergency alert channel, "a representative of Alrosa explained to TAdviser.

Production Management

The global goal of industrial companies in all sectors of the economy is to reduce operating costs. Mining and metallurgical companies are working to improve efficiency and optimize production processes at all levels. Among the systems that companies implement for this are ERP (Enterprise Resource Planning) and MES (Manufacturing Execution System).

Norilsk Nickel's strategy involves an annual reduction in operating costs by $200 - $300 million from 2020. This program is based, among other things, on the introduction of ERP systems, automation of control systems and the introduction of industrial automation systems. This was stated at the bottom of investors in the fall of 2017 by the financial director of the company Sergey Malyshev. According to him, the modernization of the IT infrastructure is a platform for improving operational efficiency.

The company successfully implemented the SAP ERP pilot project, it has already been put into commercial operation at the Chita site, in 2018 it will be implemented at the Polar branch of the company. Together with cHoneywell, Schneider Electric, Micromine and Geovia, Nornickel implements programs to modernize production systems - the MES layer. As of the beginning of 2018, a pilot of the dispatching system in Norilsk has already been launched, 3D design of mines for one mine has been completed and the program is being deployed to other industrial assets, and a pilot metal balance project has been implemented at the Talnakh enrichment plant.

At the Aikhal GOK Alrosa, as of the beginning of 2018, a pilot project for the implementation of an automated information system for managing production processes of the MES class is being completed. The cost of implementing the system amounted to about 90 million rubles.

It is intended for collection and processing of process data, accounting and analysis of production activities of structural subdivisions in order to improve quality and reliability of information during operational management of mining and processing complex, - said the company representative.

Reduce repair downtime

One of the key tasks that Norilsk Nickel plans to solve with the help of IT projects is to increase the efficiency of repair activities, said Sergey Malyshev.

The company's goal is to reduce operating costs for repairs by up to 15% and reduce unscheduled downtime by 70%. To do this, the company will develop a repair planning system, asset management based on a system for monitoring, collecting and analyzing data on failures, their causes and load level, - said Sergey Malyshev.

Fighting Product Substitution

In Russia, mining companies are cautious about blockchain technology, including because of its uncertain legal status, but it can potentially help companies solve problems such as control over supply data, movement of goods, and simplify the contract control system, says Evgeny Grankin, senior analyst at the Gazprombank Economic Forecasting Center .

There are already examples of foreign companies in the industry that are testing the use of this technology.

For example, De Beers (the second largest diamond producer in the world after Alrosa) is introducing a blockchain-based system to control the movement of diamonds from the moment they are removed from the bowels to entering jewelry workshops and retail stores. This allows you to track the origin of each individual diamond and the manipulations that were performed on it. Such technology reduces the risks associated with the possible counterfeiting of products or the sale of products of deliberately lower quality, - the expert cites an example.

In the future, as technology develops and industry legislation improves, mining companies will increasingly introduce blockchain into their operations, he is sure.

This will lead to the emergence of new production management opportunities for companies. For example, a company can estimate available mineral reserves with the help of a trusted third company and issue tokens for the available volume of minerals even before they are actually mined. These tokens will be tied to extracted minerals and transferred when they are sold, which will allow tracking the history of their movement and use. Another option could be to sell these tokens in markets long before the actual mining of minerals. This will allow companies to create a market for the sale of their products and hedge against fluctuations in raw materials prices without using instruments from traditional financial markets, says Evgeny Grankin.

2016: Mining trends. Deloitte score

For the first time in years mining , the industry has seen trends towards cautious optimism, driven by rising commodity prices, a slight recovery in markets and lower costs for most mining companies. At the same time, it cannot be said that difficult times for the industry have been left behind, since many problems remain, from threats in the field cyber security to technological changes and environmental issues. Mining companies must make crucial choices about investment directions and their positioning for the coming years. The Mining Deloitte Trends International Network's Ninth Annual Report examines how mining companies can succeed by taking into account the 10 trends that will characterize the industry in 2017 and beyond and translating them into their operations.

Increase productivity through innovation

To succeed in an increasingly complex world driven by new technologies, mining companies are turning to innovation. In recent years, to reduce costs, optimize equipment maintenance and prevent accidents, industry enterprises have been investing in technological innovations such as autonomous trucks, all kinds of sensors and comprehensive analytics. Today, production productivity is actively increasing due to new advances in technological progress. Technologies such as the use of unmanned aerial vehicles, real-time modeling and geocoding allow for production and functional improvements also in real time.

"To achieve a new level of efficiency, companies must not only use new technologies, but also create a culture of innovation in order to master the achievements of scientific progress made not only in the mining industry," says Andrew Lane, head of business at Deloitte power and extractive industry in Africa. "By leveraging innovations developed for sectors such as industrial manufacturing, automotive, and pharmaceuticals, the mining industry can reap the full range of benefits brought by new technologies."

• Increased shareholder returns. In recent years, industry enterprises could not boast of high performance in this area: since 2011, the profit of shareholders of companies has consistently decreased. It is possible to improve the situation only by optimizing investment portfolios, improving merger and acquisition procedures, optimizing costs and making long-term investments.
• Functioning in conditions of interdependence. In order to ensure a large-scale breakthrough, companies need to get rid of "single" thinking and realize the importance of dependence on each other. To achieve this goal, new forms of cooperation can come in handy, including retraining suppliers as partners, interacting with competitors and creating expanded partnerships.
• Digital revolution. Despite a number of obvious advantages of digitalization, mining companies need to understand how to put them into practice. To ensure further prosperity, companies must implement "digital" thinking, as well as digital processes and organizational structure.
• Map threats. As new technologies spread across all sectors of the economy, the mining sector remains vulnerable to cybersecurity threats. Mining companies face a wide range of risks, and against this background, their management is required to strengthen cybersecurity programs.
• Forming a unified view of the industry. Companies and governments will be able to gain advantages by forming a unified view of the state of the mining industry in the public. To do this, they need to find a discussion platform to agree on the opinions of all interested parties and expand cooperation on legislative regulation of industry enterprises.
• Return of "social licence." The return of public confidence in the activities of mining companies is particularly challenging in light of a number of recent catastrophic accidents and the growing general social concern about the environmental impact of industry enterprises. By reducing the environmental impact of their operations, mining companies can regain public confidence in their operations.
• Support for strategic priorities. Despite the resumption of commodity price growth for the first time since 2011 (which saw record profits), industry leaders now understand the importance of applying operational models that can help them meet the challenges facing the industry and respond to market volatility. Companies that optimized their budgets as part of the latest series of cost reductions are now considering aligning their operating models with current realities to meet their strategic goals while maintaining new market positions with lower costs.
• Improving the well-being of workers. Words about the need to increase productivity in recent years are increasingly heard at industry enterprises due to falling prices in the market. At the same time, companies need to understand that productivity is not only driven by cost reduction and process optimization: there is a need to consider issues of mental and physical health for workers and the absence of discrimination.
• An integrated approach to reporting. As governments demand more transparency from companies, industry businesses are working to improve compliance and disclosure practices. They can adapt to radical changes in reporting requirements by standardizing information, presenting enhanced reporting, and revising IT systems to ensure consistency in reporting and preparation.

2015: Top 10 trends and solutions in the mining sector. Deloitte score

Mining enterprises continue to struggle with difficult market conditions, overcoming difficulties such as price volatility, geopolitical crisis, rising costs, falling ratings and general lack of funding. In order to remain "afloat" in the future, companies need to learn how to more effectively correlate short-term investor expectations and long-term factors that determine the business development strategy. These are the results of the new report "Deloitte Touche Tomatsu Limited" (DTTL) "Development Trends - 2015: the top 10 main problems of the mining industry," published in January 2014.

According to the report, in order to learn strategic planning, mining companies need to conduct a retrospective analysis of their activities: clearly formulate their values ​ ​ and plans for the long term.

Top 10 trends and solutions analyzed in the report.

1. Return to origins: achieve excellence in operational activities. Mining companies should reconsider traditional views on operational processes and costs.

2. Salvation in the form of innovation: not just cost management. Mining companies must overcome traditional conservative tendencies and use innovation in their operations. The formula for success is simple: think globally, test locally, evaluate quickly. It is necessary to respond quickly to the emergence of new technologies and integrate into the innovative environment, preparing in advance for new operating conditions.

3. A new paradigm for energy use: reducing energy costs for project maintenance. Mining companies should consider creating a new approach to resource allocation, including the use of alternative fossil fuels, as well as engaging stakeholders to develop renewable energy deposits.

4. Moderation in the implementation of new projects: find a balance of supply and demand. To avoid the risk of supply shortages in the future, mining companies must find a middle ground between the interests of short-term investors, analysts' forecasts and work on unfinished projects.

5. Mysterious disappearance of funding: the whole market is in a fever. Although there are not many possible solutions, young companies will be able to avert disaster by attracting foreign investors, putting together the strongest resources, exploring alternative funding channels and resorting to private private private investment.

6. Young Fighter School: How to catch a tailwind. In order to benefit from changes in ownership structures, young companies must clean up their assets and consider all options for work in the future: from the creation of a partnership or joint venture to the sale or consolidation.

7. In the search for young talents: the changing realities of the industry require the involvement of a new generation of specialists. To attract qualified personnel, companies need to rely on diversification, mastering new personnel management systems, improving methods of attracting demanded employees, as well as investing targeted training programs.

8. At the peak of geopolitical instability: from chance to pattern. Strategies developed in response to projected risks should include improving transparency of the company's policy, bringing together mining companies to change government industry policy, collecting and analyzing risk information, and working out multiple scenarios at the same time.

9. Interaction with stakeholders: we must try to please everyone. It is necessary to create situations that provide advantages for both parties, look for new channels of communication, take into account the influence of social networks, negotiate with the population, intensify charitable activities, as well as consult with representatives of local communities when planning field closures.

10. Dialogue with the authorities: new ways of interaction. Strategies to address regulatory uncertainties should include working to develop closer contacts with government agencies, actively articulating their position through industry associations and social networks, assessing social impact, participating in policy-making, and effectively using mobile technologies.

Business risks of mining enterprises

2012:10 key strategic business risks in the mining and metallurgical industries. Ernst & Young Data

Resource nationalism remains the main risk for mining and metallurgical companies around the world, maintaining the first position in the risk rating. This is evidenced by the annual research of Ernst & Young in the field of business risks in the mining and metallurgical industries (Business risks facing mining and metals) in 2012-2013 (published in July 2012).

In 2012, the ten major strategic business risks in the mining and metallurgical industries included the following:

1. resource nationalism (1 in 2011)

According to Mike Elliott, head of the Ernst & Young international group for the provision of services to enterprises in the mining and metallurgical industries, today, when the nature of many risks inherent in the activities of mining and metallurgical companies is becoming more complex and their importance is growing, resource nationalism is a more serious problem than a year earlier.

An example of resource nationalism is Chinese politics. In March 2012, the United States, Japan and the European Union filed a complaint with the WTO regarding restrictions on the export of rare metals from the PRC. According to the three countries, the PRC restricts metal sales abroad, thus trying to create a shortage and rise in product prices and thereby violating WTO norms. China claims that barrage duties were introduced in order to prevent the rapid depletion of natural resources^[3] of^[3].

"Resource nationalism retains the first position in the risk rating. In many countries, the state seeks to increase its share of income from subsoil development, no longer limited to taxation instruments, but in some cases introducing requirements that force companies to independently enrich ore, such as bans on the export of raw materials that have not been processed, export duties and restrictions on foreign participation, - notes Elliott. - The ratio of risks and benefits has changed not for the better for companies, which, of course, led to delays and delays in the implementation of projects in a number of regions, and in some cases - to the complete withdrawal of their investments by companies. The scale of the consequences of the situation of uncertainty cannot be underestimated, as well as the damage caused by sudden changes in public policy in countries with rich mineral resources. Mining companies need to continue dialogue with the state. This makes it possible to convey to the state what benefits a particular project brings to the country and the population, and also increases the chances of reaching compromises, thanks to which projects remain beneficial to mining companies themselves, the state and other interested parties. "

2. Lack of qualified personnel

According to Elliott, the problem of lack of qualified personnel, which is acute in Australia and Canada, has become relevant in other countries over the past year - companies carrying out projects in Indonesia, Mongolia, Brazil, Chile, Peru and Mozambique have faced it.

"Against the background of stable commodity prices and favorable long-term forecasts regarding basic non-market factors, the sector recorded a record number of projects for the development of new subsoil plots and expansion of activities in already developed fields," he says. "This level of investment leads to an increase in the need for skilled labor in different regions, and in search of personnel for the construction and operation of new facilities, companies turn to the same global base of specialists."

3. Access to infrastructure facilities

"In the CIS, the risk associated with access to infrastructure facilities occupies a higher position in the ranking. This risk is still the most relevant for many local and foreign mining companies investing in the CIS countries, especially in the development of subsoil plots located in remote areas of the Russian Far East, "said Yevgeny Khrustalev, head of the group for the provision of services to industrial enterprises in the CIS.

4. Rising costs

5. Execution of capital investment projects

6. social responsibility

7. Price and currency volatility

8. wealth management and access to capital

9. Sharing benefits (for the first time in the ranking)

Against the background of the relative well-being of the mining and metallurgical industries, while many other sectors of the global economy are going through a difficult period, companies face a new risk associated with sharing the benefits of resource development.

"A larger share of the profits of mining and metallurgical companies is claimed by a wide range of stakeholders - from the state to ordinary citizens in the person of the local population, from investors and suppliers to the employees of mining and metallurgical companies themselves," says Elliott. - Companies are forced to balance the expectations and needs of numerous stakeholders. Failure to meet expectations or fully understand needs can result in strikes, supply disruptions, shareholder discontent, public unrest, and state policies of resource nationalism. Companies want to derive some benefit by passing on the appropriate part of the risk to stakeholders, but many of the stakeholders claiming to increase their share of the companies' profits are unwilling in return to accept the additional risk. The question before the sector is how to find a balance between conflicting requirements and still transfer some of the risks to stakeholders. "

10. Fraud and corruption

Increase complexity and significance of risks

"Virtually every one of the top ten risks in 2012 took on a more complex nature and became more substantial for mining companies. It is possible that the need to manage them and understand the changing balance between risk and benefit has never been so acute, says Elliott. - During the period of positive market dynamics, the potential benefit justified the adoption of higher risk by companies. While long-term demand forecasts are favorable, prices have already passed their peaks, so mining companies no longer have to rely on rising prices to balance the increased risk. "

See also

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