Collaborative innovation in mining

When I launched The Intelligent Miner in April 2019, a guy called Andy Reynolds reached out to me via Linkedin.

Reynolds is the managing director at Alacris, a consultancy that helps mining companies with the commercial and leadership aspects of innovation partnerships. He is also building a new company – Inspire Resources – which is reimagining the traditional mining model to tackle some of the bigger challenges that the industry, and society, are facing.

We each liked what the other was doing and agreed to stay in touch.

So, when I began building the July article series on business strategy, Reynolds was at the front of my mind. And the timing was apt: Inspire was sponsoring a CIM workshop series on new business models for mining, and he was also preparing to appear on Sheritt’s Bits & Bytes podcast with hosts Nathan Stubina, Cheryl Hart and Jan Smit.

When we finally spoke in person, 18 months after digital introductions, and post-workshop/podcast/COVID, we had much to talk about.

“I’ve talked to many small companies that have trodden the collaborative innovation path with mining companies. I’ve also talked to innovators within the mining companies, and that’s where I got the phrase ‘supply is where we send ideas to die’,” Reynolds said, referring to a candid phrase used in his podcast presentation.

“In a lot of enterprises (it’s not unique to mining), the procurement function has become optimised for ‘groceries’, and it’s very good at that. It’s good when you know the specification of what you want, when there are multiple suppliers on an open market and where you can use competition to drive cost down and stay in control.

“But, when mining companies are working with an innovative company and they want to co-develop a solution, it’s really not optimised for that. In fact, it’s quite the opposite.”

Altering the mining project lifecycle

Reynolds believes that the standard [whisper] archaic project lifecycle used across the mining industry, whereby following the feasibility study the mine design is essentially put away on a shelf, is also holding us back.

There is currently very little room for flexibility which is counterintuitive given how variable ore deposits and markets are.

“Once the design is in the public domain, nobody is willing to change it,” he said. “If you radically change the mine design, investors are going to get spooked.

“The current approach is to invest huge amounts of time and money trying to understand what’s in the ground instead of learning as we go, because economy of scale is so deeply baked into our DNA that it’s the only conceivable way.

“If we were to take a more modular, scale-up approach… create a small-scale operation and design it with options to grow as we learn more about the orebody, and accept or reject those options and change the means of production accordingly, that would be much better.

“The reason we don’t do that, is because we’re still designing on paper.

“Currently, if you want to change the mine design because you’ve learnt something new, you have to spend out for a new feasibility study. We’ve got high costs of change which arise from being pre-digital.

“If you imagine the mine of the future as having digital foundations, you’d be constantly redesigning the plan; it would be your in-house digital twin. If you had the ability to simulate different outcomes, you could pursue a modular strategy with confidence.

“That’s the richness that digitalisation will bring us in due course.”

For the record, I agree with Reynolds.

The limitation I see with current mine designing, is that we’re taking modelling technologies like digital twins and trying to shoehorn them into traditional mine models and processes.

It works to some degree but attempting to make increasingly heterogenous orebodies fit mine plans and business models that evolved to extract more homogenous ones, rather than the other way around, will never deliver optimum results.

With current models, uncertainty is seen as a source of risk, but there is also opportunity if we’re willing to look at new ways of designing and operating mines.

Reynolds concurred: “Eventually, you stress the traditional approach to the point where it’s not the right solution anymore. That’s how we ended up with Inspire Resources being a start-up company, rather than trying to change the existing system.

“We believe there’s a limit to the level of community engagement and integration that can be reasonably expected from the incumbent business model.”

Adding options and value

For me, the key takeaway from Reynolds’ Bits & Bytes presentation was that we don’t need to get rid of traditional business models; we just need to be more flexible and consider ones that will allow different types of innovation to excel. There are plenty already out there.

“There’s no way that the Inspire Resources model is going to displace what’s going on in the industry; that’s not the problem it’s trying to solve,” Reynolds explained. “The problem it’s trying to solve is when community engagement shows up on the wrong side of the value equation for the incumbent industry.

“We don’t see ourselves as disrupting the mining industry. We see ourselves helping it find a better to solution to part of its problem.”

In essence: it’s adding value, not taking it away.

“That’s right,” Reynolds said. “It’s not that the whole system is unfit for purpose, it’s merely that what makes mining procurement good at efficiency and control is an inherent obstacle to innovation. It’s a feature of the system not a bug.

“I hear people talking about mining’s resistance to innovation as if it’s some kind of extraordinary cultural defect, but it’s not. It’s just the consequence of pursuing efficient operations at scale.”

Standing apart from the competition

“The biggest driver for alternative business models is going to be social development,” Reynolds said, when I asked: what’s propelling businesses towards new models?

“It’s going to be hard for mining companies to get there, because many would have to change their constitution to diminish the priority of shareholders in order to be able to do so effectively.

“We’re trying to set Inspire Resources on the path to become a B Corp. To be a B Corp, you have to have in your articles of incorporation, language that explicitly protects the interests of stakeholders other than shareholders and allows directors to make decisions balancing those interests.”

B Corporations (B Corps) are businesses that “meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose”.

The voluntary certification scheme, run by B Lab, aims to create a global economy that uses business as a force for good.

I asked Reynolds if he knows of any companies in the mining space that are B Corps?

“I spoke to B Labs about this,” he said with a chuckle. “They said ‘not only is the answer no, but here’s the list of things that we require applicants to declare any association to’ and it goes something like: international arms trade, drug dealing, child slavery, tax evasion, mining… Mining is actually on that list!

“They said by all means apply, but that they would likely have to convene their Standards Advisory Council to review the application.

“That to me is an irresistible challenge…”

Certifications like B Corp allow businesses to differentiate themselves based on their ethos and ESG credentials. This is important because, in mining, access to markets is going to become increasingly difficult in the future. End users and consumers taking a growing interest in mineral provenance and branding can, and will, sway buying and investment decisions.

It’s an area that mining companies have largely neglected outside of their own sector thus far.

“Branding is going to really matter, and we need to do everything possible to position ourselves at the top of the heap,” said Reynolds. “There’s US$31 trillion of impact capital out there, and if we could detoxify mining for those investors, then we could start to flow some of that capital into community development, with mining as a service.”

The importance of brand value

Making mining companies or brands a visible part of people’s everyday lives and synonymous with societal progress is what will, eventually, secure off-take agreements and, importantly, new, diversified investors.

“Mining companies need to realise that investors are actually their customers, and that customer base that is still willing to buy the investment product that is mining, has dwindled down to a group that is not at the forefront of social impact in the context of the global shifts that are going on,” said Reynolds frankly. “What companies need to do is change their shareholders.”

Of course, this initially sounds crazy. But it’s precisely what Paul Polman did at Unilever, very successfully, when he took over in 2009.

Polman quickly realised that the company’s shareholders were beating everybody up over quarterly results, so Unilever stopped publishing them. The investors who didn’t like that drifted away and were replaced over time with new ones whose values were better aligned with those of the company Polman was trying to create.

“To do that in mining, we’re going to have to repackage investments,” Reynolds said. “That’s what we’re doing with Inspire Resources; we’re unbundling the investment so we can repackage it as a set of products that suits the risk tolerance and appetite of different investor groups.

“I don’t know why miners seem to think that some things are unchangeable. The fact that mining investors are dwindling is a sign of disloyalty you know?”

It’s a sign of the times, I noted.

“It is,” Reynolds countered. “But investors are the people for whom the mining CEOs put on a tie, they are clearly the customer and the customers are walking away. We need to find new markets, new customers who want new things. That’s the biggest obstacle to change in the mining business.

“The companies that are large enough to do something dramatically different, just attract the attention of activist shareholders who prevent them from having imagination and force pressure on activities they consider to be overhead,” he said, with passion. “The finance part of the mining system is not exempt from our review.”

To make this happen, different investment packages will need to be reduced to practice so they’re repeatable and everybody understands them and accepts associated risks.

“There are a lot of steps that would need to be put in place,” Reynolds said. “One area where I think there could be different business models is in the outsourcing of mining process steps.

“There are currently only a few equipment providers that offer services based on performance contracts. For example, Orica provides performance-based blasting services as well as equipment. That’s enabled them to develop all sorts of novel ideas.

“The industry is generally resistant to outsourcing on a risk and reward shared basis. But I think we’ll see it more and more, simply because mining companies won’t be able to master the technological complexity of the solutions that will start to be offered to them.”

Ethical leadership

So, how we can encourage more widespread adoption of new business models and facilitate more innovation?

“It really comes back to leadership and enabling people to take personal risk,” Reynolds said. “I think there’s plenty of scope for better leadership development.

What makes a great leader? I asked.

“It’s changing over time,” said Reynolds. “In the 19th Century, the mentality was command and control. In the 20th Century it was vision and alignment and now, in the 21st Century, it’s about diversity, inclusion and empathy; that is what leadership requires now. It’s enabling collaborative success from diverse teams that are collectively intelligent.”

Reynolds believes there’s a strong link between successful innovation and ethical leadership.

“With ethical leadership you create teams that are based on trust,” he said. “And with that you can create cooperative adaptation capacity; you can handle risk because you can work together to address it. And if you have that adaptation capacity, then you can succeed at innovation.

“That’s my theory. It all starts with ethical leadership, recognising the importance of inclusion and enabling people to take risk.”

From paper to practice

As the conversation drew to a close, I wanted to circle back around to where it began, mine design. And the opportunities that digital technologies are creating for change.

“What digital technology will allow us to do, is to create many more futures,” explained Reynolds. “In 10-years’ time, it would be a poor decision to create a mine with a single design. You should really be redesigning it all the time.

“In order to make that possible, we need a digital platform that can handle change in real time. For Inspire Resources, we’ve ended up with quite a rich definition of this digital platform that goes all the way from concept through design into operations and it remains in place for the lifecycle of the project.

“It’s radically transparent, highly inclusive, and everybody gets to design the mine together in real time. Just like building information modelling (BIM); that can radically change the outcome of a construction project by allowing everyone to design on the same system at the same time. That should happen in mining too.”

I asked Reynolds: how far away are we from this being a reality?

“It’s technically possible now to run an entire mine project lifecycle in software, and to never have to document it,” he said. “However, it would cost an absolute fortune and the process would be brutal, because the digital capabilities are poorly integrated.

“I can see it being a preferred way of doing things in 10 years’ time. And I hope that, at Inspire Resources, we can make it happen in less than five years by assembling a small team of experts and software partners.

“That’s one of the reasons why we started the company; the opportunity to differentiate from what the incumbent industry can do… it’s enormous.”

That, readers, is my closing message.

Both Reynolds and Inspire Resources are different.

Different is good.

Be more like them.