Cloud Gives Miners a Path to Innovate

by Jonathon Dixon, Global Head of Mining and Resources, Amazon Web Services

Foreword by Thomas Blood:

In a preface to another mining-related post, I had mentioned that until the 1930s, my family owned and operated gold, silver, and copper mines in the United States. What I did not mention is why my family no longer owns and operates those mines. In short, the mines became too expensive to operate and did not yield enough revenue.

I have often wondered if things would have been different if those miners nearly 100 years ago had had access to modern technologies. Would they have found ways to cut costs? Would they have been able to try new approaches in discovery and extraction of the minerals we all depend on? Would they have been better able to manage the impact of price fluctuations in the commodities market, the transportation and distribution of the ore, and their own supply chain?

I like to believe that this is the case.

Mining may not be the first thing that comes to mind when people think about cloud technology, but as the following guest blog shows, mining and the cloud do in fact go together surprisingly well.

Cloud Gives Miners a Path to Innovate with Less Cost and Risk

Jonathon Dixon, Global Head of Mining and Resources, Amazon Web Services

The mining industry is no stranger to technological innovation. It has a long history of adopting new technologies in the quest to get better at mining and to keep people safer. So it’s no surprise that in today’s digital age miners are increasingly looking to the cloud to provide the next advantage.

In a recent post, I talked about how adopting cloud is opening doors for miners to work in new ways and to innovate their internal cultures. Today, I’d like to go deeper to explore how miners are looking to the cloud and going beyond traditional investment models to innovate quickly and at lower cost.

Investing Long Term

Let me start by explaining what a “traditional” investment in the mining world looks like. When mining companies set out to build a new mine or to extract deeper resources from an existing one it is a tremendous undertaking.

A recent podcast from McKinsey captured this well: “The interesting thing about a mine that might be different than almost any other kind of operating asset in other industries is that they take a long time to build. Ten years would be a good expectation from the time that you say, ‘We like what the ore deposit is here, and we want to build something,’ to the time when you ship the first metal or commodity. These things take a long time to get up and running.”¹

That reality means new investments are not undertaken lightly. Costs are closely examined, and so is the payoff at the end, which needs to materialize within an expected timeframe (i.e., five to ten years.)

An Industry Attuned to Cost Efficiencies

Mining companies are not just attuned to costs from an investment perspective. Balancing costs to hedge against market fluctuations is also an important consideration. It’s worth noting that once a mine is operational and its metals or commodities ship out, mining operators have little control over the final price in the commodities market.

This makes miners particularly vulnerable to fluctuations in the market. It also makes them look to cut costs and inefficiencies during downturns, as well as to get more innovative about how they can either decrease costs or increase production (or both).

Lately though, that cost consciousness is fast becoming a source of strength, as the industry rebounds. A recent PwC report noted that in 2017, “The cost-saving strategies of the past few years delivered, [while] margins and cash generating ability improved as well, leading to a sharp increase in profits.”²

In my conversations with miners, I hear about this upswing—their focus is less on cost avoidance and more on decreasing costs by reinvesting in innovation. They also have a renewed interest in technology solutions to help them get there.

Thinking Differently About Innovation

The cloud is particularly interesting to miners because of its potential to deliver results faster and at lower cost than has been achievable under current mining practices and operating models.

Cloud models also provide a vastly different investment strategy—one that allows more investment flexibility without having to be tied down to large-scale, multi-year investment timeframes. For example, miners can lessen their innovation risk and cost by keeping investments small. Pilot projects afford miners the flexible space to experiment and try out new ideas without a heavy upfront investment. They also decrease the sting of failure—if an idea does not work out as intended, years of planning and funding are not derailed. Instead, the company can quickly pivot and either adjust the test or move on to the next idea.

What does that strategy look like in reality? Let me share an example from Woodside Energy, an Australian gas miner. It’s a terrific example of how small investments and innovative practices can lead to big results.

Woodside connected thousands of sensors to Amazon Web Services to analyze, and ultimately forecast, when “foaming” incidents would occur at a natural gas facility. The goal was to prevent such incidents, which have the power to shut down the entire plant. What’s especially interesting is that the project began as a test and took just six weeks to produce results. Yet the results were impressive.

In a Computerworld article, Woodside CTO Shaun Gregory noted, “This had a dramatic impact on the culture of our organization, because we were used to technology evolving in many, many years. Now it was evolving in weeks.”³

Flexibility and Continuous Improvement

At Amazon, we often talk about this model as reflecting “two-door thinking”—we are big believers in building strategies that allow for two options. When one door closes, there is always a way out through the second door. And, more importantly, when results from a pilot project are not compelling or do not deliver as expected, the impact from the experiment is much less when the initial investment has been tightly controlled.

Applied in this fashion, the cloud becomes an engine for lower-cost incubation of new, innovative processes. It provides miners a path to innovate on shorter timelines and to explore methods for driving greater efficiencies, as well as higher productivity in their mining operations.

If you’d like to find out more about how mining companies are adopting the cloud, get in touch with me or meet my team at one of our upcoming events.

Jonathon Dixon

Jonathon is the Global Head of Mining and Resources at Amazon Web Services and is responsible for driving the teams and strategies that are helping mining customers to transform their business through Cloud Computing. Jonathon has held multiple senior cross-functional leadership roles in mining and technology at AWS and Cisco and is passionate about sharing best practices and helping customers future-proof their business by adopting a culture of innovation.

Sources:

1. McKinsey, “Mining for growth.” May 2017. https://www.mckinsey.com/industries/metals-and-mining/our-insights/mining-for-growth.
2. “Mine 2018: Tempting times.” June 2018. https://www.pwc.com/gx/en/industries/energy-utilities-resources/publications/mine.html.
3. Computerworld. “How IoT and cloud are paying off for Woodside.” April 28, 2016. https://www.computerworld.com.au/article/598875/how-iot-cloud-paying-off-woodside/.