Rio Tinto’s iron ore boss, Simon Trott, admits he sometimes catches himself out when visiting one of his Pillbara-based mines waving to the haul trucks when they trundle past.
He has to check himself because the driver of the truck these days is more likely to be on a computer server thousands of kilometres away in a high-tech building on the outskirts of Perth.
“If you go somewhere like Dampier (Port) and you’re standing in the stockyard there and you look around you and you’ve got trains, autonomous drones going in, you’ve got all the equipment that’s been which is autonomous, not just remote controlled and you open your mind for some of the possibilities that clearly is going to play an important role,” said Trott, a former wheat farmer turned miner.
Old-world miners like Rio Tinto are at the front line of digital adoption, leading the take-up in Australia. They have the balance sheet heft, the engineering and also the need to find efficiencies in every corner of their business in the never ending effort to lower unit costs.
Rio Tinto has been one of the leaders in rolling out automation in Australia.
In the space of little more than a decade some 85 per cent of its haul truck fleet has automated and in recent years it has rolled this out to giant locomotives that transport thousands of tonnes of iron ore to the ports. The technology has brought about increased reliability, lowered costs, improved turnaround times and, with less on-site human intervention, has dramatically increased safety.
With the big ticket equipment like the giant haul trucks and more than 200 trains now being controlled remotely or driven by an algorithm, Rio is starting to work on other heavy machinery such as automated drills.
Meanwhile, light vehicles used on the mine site, or worker transporters, are the next wave in line for automation – again a move set to boost productivity and reduce the need for workers in remote and tough locations.
The big step change for Rio is to start harvesting all the data now pouring into its Perth operations centre and using artificial intelligence to continually find incremental improvements.
Data ranging from maintenance turnaround, truck movements and route planning is underutilised, with about 20 per cent used in real-time decision making.
“Clearly AI is going to be able to help significantly with that for us to improve the safety and welfare of our people and for us to improve our operating performance,” Trott said.
This could get to a point where Rio’s vast network of trains and trucks are talking to each other to find the optimal delivery times to improve scheduling and untangle transport bottlenecks. There could be a point where trucks can speak directly to the mine or the plant without having human intervention, or in unscheduled interruption the network can continue around it.
Over the past year Rio Tinto has been trialling autonomous water trucks on site to control dust. While the trucks can be deployed remotely and automatically drive to sites, the routes are variable. The trucks still require significant human intervention and site operators requesting them.
As technology evolves Rio predicts a situation whereby the truck can predict where dust is going to be on a mine and move to the area on its own.
It’s still early days but Trott believes AI ultimately has the potential to change the dynamics of mining as much as the promise of green steel in lowering carbon.
“How do you then use data really to connect what’s happening in the ore body through to the customer. I’m sure that is going to help them,” he said.
The technology will continue to impact jobs but in a dynamic way. People won’t be doing dirty and dangerous work but equally there will be demand for highly-skilled tech workers operating in a safe but challenging environment.
Whitehaven rises
In terms of doubt over shareholder support for Whitehaven’s monster coal buyout, Whitehaven chief executive Paul Flynn points to the scoreboard.
Shares in Whitehaven ended almost 12 per cent higher on Wednesday; at one point they were up 15 per cent after it had been named preferred bidder to buy BHP’s met coal assets for $5bn.
The deal comes after London-based hedge fund Bell Rock Capital in recent weeks has amassed just under 5 per cent of the miner’s shares and has been agitating for Whitehaven to return its cash pile to investors rather than chase acquisitions.
The spat has spilled out into the public, Bell Rock accusing the company of destroying value and at times Bell Rock has taken aim at Flynn and his multi-million salary. But Whitehaven is holding firm.
Flynn tells The Australian he feels “very, very comfortable with the proposition we put to shareholders having signed the deal, we are committed. And we will follow through and complete the deal in the June quarter”.
“We’ve got a large body of work to focus our minds on. And based on the reaction I can see in the market I think shareholders are supportive of what we’ve put in place,” he said.
The deal will result in Whitehaven buying the BHP and Mitsubishi jointly owned Daunia and Blackwater metallurgical coal mines in Queensland for $US3.2bn ($5bn) with payments spread out over three years.
BHP structured the deal to include performance payments to ensure it doesn’t lose out on another surge in coal prices in coming years. The deal will be funded through Whitehaven’s cash pile, BHP’s vendor financing and will also use some of the cash flows from Whitehaven’s much bigger business.
The transaction is set to reinvent Whitehaven, better known as a exporter of thermal coal. Now metallurgical coal, a key ingredient used in steelmaking, will represent some 70 per cent of Whitehaven’s revenue, up from 17 per cent currently. And to put it in context, the acquisition represents a doubling of Whitehaven’s size.
Addressing Bell Rock’s demands, Flynn said he had to be mindful of his entire shareholder base in running the company.
“There’s always a range of disparate views. Our job, obviously, is to synthesise that and do the best thing for shareholders as a whole.
“This deal is extremely compelling for our shareholders. We’ve doubled the size of our business. It’s highly earnings-per-share accretive immediately. And we’ve done that without a single extra dollar of equity being contributed by our shareholders,” he said.
“I mean that is quite an extraordinary thing to be able to say.”
In response Bell Rock voiced its concern over the proposed coal buyout and called for a shareholder vote arguing it substantially transformed Whitehaven as a business.
But Flynn is holding firm saying his focus now is on the completion of the deal. And if there is shareholder dissent around the buyout that can be raised at the upcoming annual meeting and even by investors voting down his equity grants.
The Whitehaven boss plans to move ahead by holding a series of briefings with big investors around the transaction.
“To the extent that Bell Rock wants to take up that offer, we will certainly do that,” Flynn said.
The author travelled to the Pilbara as a guest of Rio Tinto
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