Lean in. Why the mining industry needs to rethink its approach to innovation

I’ve spoken to several executives recently about automation, innovation, new business strategies… in essence, how to mine differently. And, in these conversations, one name came up repeatedly.

A thought leader who is clearly well thought of himself: Peter Bryant.

So, when his PR representative reached out to talk collaboration, I jumped at the opportunity.

Bryant is a business strategist who has worked in the mining industry for over 30 years. He is a managing partner at growth strategy firm Clareo, board chair and co-founder of the Development Partner Institute (DPI), and serves as an advisory board member for the World Economic Forum’s Mining 2050 Initiative.

While his resumé is imposing, I found him to be refreshingly down to earth and open to a good chinwag.

I got the feeling he enjoyed the debate almost as much as I did.

Times they are a-changing

I began by asking Bryant about the biggest changes he has seen in mining company sentiment and strategy during his career.

“If we look at some of the trends and headwinds the industry is facing…

“In terms of trends, there’s an overall mentality in the industry that bigger is better, and that’s caused consolidation into a number of mega miners,” Bryant said between mouthfuls of lunch (it’s hard to coordinate interview times with people on the Pacific coast, OK?)

“Not only have the companies gotten bigger but also the mines and the equipment. It’s all about scale. Strategically, it’s becoming an impediment, not a source of advantage. There are always exceptions, like in the Pilbara. But looking into the future that’s a big challenge for the industry.

“There’s also been a massive decline in innovation and investment in innovation over the last 30 years. Not just at mining companies but also in the supply base which the mining industry courts.

“As a consequence, until recently some companies were paying good dividends but with very poor returns on capital, particularly through the big China upswing.

“As a result of poor returns and some of the headwinds the industry is facing, we’re now seeing a drying up of capital, both specialised and general capital. That means that only the mega miners can get access to capital; there’s none available for the juniors and explorers.

“There’s also a growing anti-mining sentiment from communities, indigenous peoples, from society, investors… it’s been an uphill battle for the industry. It’s not a zero-sum game, but the industry absolutely has not been able to keep up with it.

“The rate of change and demands have outpaced the industry significantly, and I would say the gap has grown between expectation and demand versus industry performance.

“From a strategy perspective, that poses a lot of challenges for the next 30 years in terms of… What resources do we mine? What are the valuable resources? What size are the resources? What does a good mining company look like? What does a valuable mining company look like?”

The last two questions particularly interested me.

Bryant said he always looks for analogues from other industries, for example oil and gas.

“We all know that in 30 years a valuable oil and gas company will not be one that is 100% invested in oil and gas,” he explained. “The big players in that sector know that they need to diversify. If the mining industry follows suit, as is likely, what will that look like?

“Mark Cutifani [CEO of Anglo American] and I founded a non-profit together [DPI]. Mark’s always had the provocation that if we don’t get our stuff together, we won’t be the big, valuable miners in the future. Somebody else will be.

“Doesn’t mean you’re out of business, it just means you’re not the leaders anymore. I know you’ve got a question around that, around future disruption.”

Day of reckoning

I did indeed have a question about disruption.

Nearly 10 years ago, I worked on a series of articles with business strategist George Hemingway examining what the mining company of the future could look like (side note: those articles are as relevant today as they were ten years ago. You can find them here).

We explored disruption in other industries à la Uber, Amazon and Netflix, and hypothesised about how that kind of disruption might look in our sector.

And, more importantly, when it might happen.

During crises are usually when the biggest disruptions and reordering of industries happen, not during prosperous times. These events are triggers, massive disruptive forces that stimulate companies to enter different industries.

I asked Bryant if that day could potentially be upon us?

He thought for a moment, “I think so, yes. A post-COVID world will undoubtably bring some new things, but it will also accelerate the arc of a lot of changes, including technology business models. And the associated pressures and demands will accelerate too.

“Andy Grove, who is the founder of Intel, always used to say, ‘in a crisis bad companies fail, good companies survive, and great companies thrive’. When I work with a company, I always ask them: ‘which one are you?’

“There’s only a small number of very low-cost producers in this industry. The rest are all pretty expensive, and it will be a struggle for them to remain valuable unless they make some dramatic changes.

“This is another problem with scale. Take copper for example, there’s an enormous amount of tier 2 and 3 deposits, in good jurisdictions, easy to access, but they’re technically and economically unfeasible to mine, because of scale. The size of asset that you need to mine is huge, and most of those deposits are gone.

“So, to me, one of the biggest disruptions will be the rise of small-scale, flexible operations and a different approach to mining. I’m working with several clients on how to access deposits without digging a mine, whether its underground or open pit.

“Increasingly people don’t like the footprint of mining, whether it’s the physical aspects, air quality, pollution, water… It’s becoming increasingly harder to get permission to mine using traditional methods.

“There are a whole bunch of new technologies and concepts out there.

“Will it be the mining companies who bring that to bear, or will it be the disrupters that come into the market…?”

“We need to ask ourselves: which business models and strategies are working, and which aren’t given the challenges we are facing?”

The need to do things differently

To facilitate change of this nature and scale requires visionary leadership; executives who aren’t afraid to ruffle a few feathers and try new things.

“I don’t think many people are really doing different things,” Bryant said truthfully. “There are some exceptions, but I would describe the mining industry as ‘business as usual’.

“Most companies have added innovation to their agendas, and most have heads of innovation. But when you peel it back, the investment is lacking.

“Mining always plays catch-up to other industries versus trying to do something differently.

“On the technology front… I’m so over autonomous haulage.

“They’re not autonomous, those trucks. They’re good for safety, but the value is not captured by the mine. It’s captured by the OEMs. And the systems are very expensive.

“I think the mining industry is a laggard now in this technology, and it won’t get us to the autonomous mine concept that we need to get to.

“On the ESG [environmental social governance] front, Anglo American is the standout – that’s an unbiased opinion, even though Mark and I are friends – I think it’s way ahead of the pack on how its thinking about the community and the environment, and how you act and execute that on the ground.”

More venture capital, please

When it comes to innovation, Bryant believes that, overall, mining companies are still trying to do too much themselves.

There’s too much money going into research that never gets out of research. And there is a severe lack of venture capital, so small, interesting companies stay forever small. They can’t continue to grow and innovate without the right support.

“Mining is the only industry currently where the main players don’t have corporate venture capital funds. That means there’s no support to grow a thriving start-up industry,” he told me. “But, more importantly, it doesn’t signal to major technology companies that mining’s an interesting market.

“Many robotics and AI companies for instance have got generic platforms that are really interesting, but mining isn’t on their target market list, because the industry is not signalling that it’s interesting.”

In addition to his other ventures, Bryant sits on the board of global venture capital fund Chrysalix. The company now has five mining organisations as limited partners which is a massive step in the right direction for mining innovation.

“It’s a big first in the industry,” Bryant said excitedly. “None of them have got their own corporate venture vehicles, but it’s a start. It’s a small but positive signal that things are changing.”

I wondered if the lack of venture capital across the board is causing the industry to play it safe. Are we too afraid of risk because we don’t have the right backing?

“Yes, I think the status quo dominates,” Bryant agreed. “Companies stick to what they know and then make incremental changes. But, with pressure post-COVID, pressure from investors and consumers… Every industry needs to change and rethink how they do things.”

Indeed, investors have become a force for change over the past 12-24 months. They are pushing back on mining companies, particularly around ESG issues. And consumers are doing the same from the other side, demanding responsible sourcing of the metals they purchase.

The mining industry is currently piggy in the middle, rather than leading the way.

“I think what we’re going to see across a broad-based set of commodities is increasing pressure from investors and, downstream, increasing pressure around social and environmental issues,” said Bryant

“To meet those pressures, we need to look for new business models. We need to look at what we’re good at and see how that can be applied elsewhere.

“For example, the mining industry is really good at creating optionality on exploration. Innovation is actually very similar to what we do in exploration. So, why not think about innovation the same way we think about exploration?”

Tailings dams are the prime example of dealing with the consequences of models that are no longer fit for purpose. The problem is, we’re spending too much time and money trying to manage the results, and not enough on redesigning processes and business models to eliminate them altogether.

“More people are going to be interested in doing that if miners don’t get up and do it themselves,” said Bryant. “When people do things differently, you can either dismiss them as being outliers, or take them as early warning signals that disruption is coming your way.

“Big disruption always begins on the periphery, and that’s why everybody tends to ignore or dismiss it.”

Instigating change

It may have gone largely unnoticed thus far, but some companies are making moves in this direction.

For instance, Sumitomo and Mitsubishi have traditionally been joint venture partners in mining, but both companies are now taking an increasing interest in the operational side of the business.

“I think they’re increasingly concerned about how mining’s done,” said Bryant. “Both companies have mining technology arms now, which is odd for a joint venture partner. The parent companies are interested in the ESG performance of their mining assets.”

Today, the impact of events such as tailings dam failures or conflict with local communities are far reaching. Brands like Mitsubishi and Sumitomo are visible across multiple sectors and it’s only natural that they should look to protect their reputation and financial interests, both inside and outside of the mining sector.

“I think we’re also going to see companies like Tesla, for instance, inventing car batteries that don’t contain cobalt. There’s a substitution risk,” added Bryant.

“Or, at some point, those companies might say ‘I just don’t like the way you mine… This is not moving fast enough for me. I’m all about producing responsibly sourced cars. So, I’m going to get more involved in that.’

“Look at Schlumberger. They were looking at buying lithium processing technology and ended up buying a mine as well. So now we’re getting oil services companies in mining.

“Then there’s Black Mountain, an oil and gas company based in Texas. They tried to take over an Australian mining company and ended up taking a 40% interest in it.

“There are people nibbling away at this business.”

Breakthrough Energy Ventures, a fund that is led by Bill Gates and includes investors such as Amazon CEO Jeff Bezos, recently invested in Lilac Solutions, a start-up that is developing lithium extraction technologies and services.

The company’s ion-based extraction process offers an order of magnitude improvement over the traditional evaporation pond method.

“Some people took that move as a signal that those people or companies are interested in mining,” said Bryant, who acts as an advisor to Lilac. “But they’re actually interested in ways to change mining. That’s a different kind of disruption.”

Why do we need more innovation?

The fact of the matter is, at an industry level we underinvest in innovation. Even the most progressive companies are investing, on average, less than 1% of their revenues.

“Compare that to manufacturing where the average is 1.5-2%. Oil’s around 4%, plus the service companies on top of that, and that’s pretty consistent,” explained Bryant.

“Mining companies on the whole are not putting enough money into play. I’m not suggesting we jump to 1.5% or 2%, but at some point, we do need to invest more.

“Companies also need to rethink how they act internally. Because, traditionally, innovation is conducted in a very different way to how mining companies operate. It’s all about iterations, learning and sprints. Everything’s short and fast.

“There are no mammoth projects with big budgets and teams, which is traditionally how innovation’s been done in mining. It doesn’t work, which is why a lot of mining companies shutdown their innovation departments after a few years.”

This is not a case of ‘throw some more money at it’.

Companies need to rethink the process of innovation, build a good portfolio of opportunities and then pursue them, making sure the whole business benefits from the results, not just individual assets.

We need to look at the past and learn from our mistakes.

“It all starts with leadership,” said Bryant. “Then you’ve got to model that behaviour and change processes internally if they impede the very thing you’re trying to do.”

Mining company of the future

I asked Bryant what the mining company of the future could look like, and how different the landscape could be in 10 to 20 years’ time?

“I’d be a rich man if I got this right,” he said with a chuckle. “I would just park big mines. The mining company of the future will have figured out how to mine differently. It’ll be all robots. The scale will be achieved by swarms, and it’ll be a much more flexible environment.

“I always say, because I’m a finance person way back, is the more you can convert your fixed costs to variable costs, the better you’re going to be as a business.

“The mine will also be very connected to the end consumers and the whole value chain. And that flexibility will allow it to respond to market signals almost instantaneously.

“When you do that, you won’t have to create big open pits and underground mines, and you radically reduce the environmental footprint.

“That’s what I think a valuable mining company of the future will look like.”

“On the environmental/social side, I hope DPI achieves its mission, which is for mining companies to be development partners to countries, governments and communities. The economic/social platform created off the back of mining wealth would allow companies to move forward into the future when the mine is done.

“The future mining company will be much more advanced in that soft skill approach.

“I think technology will be the fundamental underpinning. These companies will probably look more like technology companies than traditional mining companies.

“That’s a very brave prediction, isn’t it?”

It is, but, as I told Bryant, unless we make predictions like that… unless we put ideas out there and challenge the norm, change will never happen.

“I see it as an opportunity more than anything,” Bryant said. “The question is whether companies can demonstrate the necessary ambition and vision, back it up with smart investment and smart ways of working, which are different to what’s being done today.

“Were all doing our bit and leaning in, aren’t we?”

We sure are, Peter. We sure are.