Can AI drive the next ‘step-change’ in mining productivity?
This is the key question industry experts explored at the inaugural McKinsey Rewiring Data and AI in Mining Summit in Perth in mid-March. Inspired by the insights and ‘signature moves’ from Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI the summit focused on unlocking new efficiencies and driving sustainable growth through innovation. Below are some of the key themes from the day.
Successful digital transformations are business-led
Technology shouldn’t be implemented for its own sake but align with the business's goals and challenges.
This means aligning leadership around an understanding of where the value is and how AI will enable it. This will be different for each organisation, but should focus on where the technology enables a company to out-compete.
Kate Flanagan, Executive GM IM & Technology at Roy Hill emphasised during her panel that it’s crucial to get every executive aligned with the vision and practical execution of digital initiatives – it won’t work if executives just turn to who has ‘technology’ in their job title.
Leaders must also align on the correct ‘bite-size’ – that is segmenting digital transformations into manageable projects. A common failure of transformations is to start with a collection of unrelated single ‘use-cases’ too niche to demonstrate material impact. Alternatively, attempting an enterprise-wide transformation is eating the elephant in one attempt.
Successful transformations begin somewhere in the middle, focusing on a single domain, with the right balance of end-to-end impact, leadership excitement, and achievable results in a six-to-12-month window.
Chris Ware, GM Digital at Rio Tinto, shared his experience with transforming the mine planning and scheduling domain within the organisation’s Iron Ore Product Group. The complex, in-progress digital program will support planning and scheduling teams to digitally connect strategic the organisation’s 10-year plan to the daily mine schedule, while running thousands of simulations to optimise the overall iron ore operations.
Importantly, while the potential impact from digital is significant, Cris Cunha, Partner at McKinsey and Company emphasised that the mining fundamentals don’t change – that is to “safely and sustainably move maximum dirt at minimum cost”. While committing resources to digital transformations, organisations must remember that higher value pools (e.g., planning, scheduling, short interval control) cannot be forgotten.
Mining needs a new approach to agility and capabilities
Effective and sustained digital transformation requires new capabilities, via upskilling and new talent.
On talent: much of the required talent has not historically had a home in mining, and so demands new practices and approaches. For example, mining companies are often at a geographical disadvantage with headquarters regularly located in historical mining regions (think Denver or Perth), while digital talent pools are deeper in technology-focused cities (like San Francisco). Mining companies must embrace new approaches to attract and retain the required talent like more flexibility in work location, employment conditions, and compensation.
The skills mix is also quickly shifting. Research by McKinsey indicates that approximately 27% of all task-hours in the Australia could be automated by 2030. STEM professionals, managers, and data scientists are therefore expected to make up a much larger component of an organisation, with support skills, administrative and finance occupations less in-demand. Organisations must develop skills and technology roadmaps in parallel.
Another deviation from the traditional mining approach is the move from 'doing agile' to 'being agile'. This involves a fundamental operational shift and adopting an agile mindset across all levels. For example, the future of mining will balance traditional capital allocation with the rapid “fail fast” model of technology firms, to protect shareholder value and enable agility to achieve the full value at stake.
Summit attendees also stressed the importance of prioritising customer experience, otherwise solutions can quickly fall by the wayside and become legacy cost-sinks rather than value-adding tools.
Get the technology and data building blocks in place
Modern mining businesses are awash with data, mostly in disparate databases with limited out-of-the-box interoperability. Extracting and “federating” this data, and using modern platforms is a key step along the digital journey.
In one project presented, a team discovered approximately 40% of available data was structured, but 40% was unstructured in documents or pdfs, and the remaining 20% was not formally captured. While digital tools captured the unstructured data, the gaps presented a clear question; and so the project team brought together a group to solve the detail, which was then built into the model to give clearer direction to others.
The summit highlighted a nuanced approach to the deployment of infrastructure, emphasising a strategic, value-backed adoption rather than a one-size-fits-all solution. Speakers discussed designing cloud strategies specifically tailored to the needs of the mining industry, focusing on cost efficiency, data security, and regulatory compliance.
It was also shared that most players are moving away from traditional original equipment manufacturer (OEM) and legacy coding solutions to open-source platforms like Python, which simply have more practitioners. The use of MLOps frameworks, Gits for version control, GPT solutions such as Microsoft Co-Pilot are all becoming part of the normal ways of working for industry leaders.
Don’t underestimate the scale of change management
To achieve the full value from digital, initiatives and tools must be scaled across the enterprise – for example, a single-site pilot program becomes business-wide standard practice. Leaders need to ask of a project: “what happens if this is wildly successful – can we afford the compute?” and “How will it change our operating model?” Having answers up-front informs the work required.
Scaling successful solutions requires thoughtful design that allows for replication and reuse. The summit showcased examples where digital solutions designed with modular and configurable components could be easily adapted and scaled to different sites or processes, thereby maximising the investment and extending the impact of initial successes.
A universal topic was the importance of factoring in change-management alongside the roll-out of digital initiatives. As Kate Smaje said, “Every dollar you spend on technology is a dollar you need to spend in change management and adoption,” and that in some cases the ratio could be as high as 1:8.
Simply including ‘user-training’ in the roll-out plan is not enough. Daniel Lie, Program Lead at Rio Tinto highlighted the importance of embedding end-users in the digital delivery teams and having clear product owners from inside the operational business as key success factors to user adoption.
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AI presents an opportunity for Australian mining to outcompete on a global scale. But it will take concerted, focused and sustained effort as an industry. As Laurent Kinet, Senior Partner at McKinsey & Company put it, the day showed attendees that competitive topics were in fact opportunities for collaboration that could benefit everyone.