Creativity and Capitalism, Rio ushers in a new era in mining..

Serendipity is an amazing thing and after writing our piece yesterday on employment and productivity, or need for improvement of same,  in mining we stumbled upon a Rio Tinto media releases from June 8th and 10th on the “Mine of the Future” which goes to the heart of where mining ultimately must go with regard to productivity.  

For some time we have been interested in mine automation ever since among other things we became aware of the scale of development of miners over the next decade but particularly after we tried to reconcile the growth plans of Fortescue Mining between now and 2017 and their ability, in our estimation to attract the requisite number of staff.

Our industry contacts have been telling us for some time now that the cost of employing drivers for mining trucks was getting dangerously close to equilibrating their costs with a more mechanised approach to hauling the coal. Whether it is big conveyor belts, mining truck trains, or driverless trucks it seems that our discussion yesterday about the natural speed limit on mining may be rendered mute by technology within a few years.

Of its “Mine of the Future” strategy Rio Tinto says

With our Mine of the Future™ programme we are demonstrating improvements to mining processes that include unprecedented levels in automation, and remote operations that will revolutionise the way mining has been conducted for more than 100 years.

Mine of the Future™ will help us improve our sustainable development performance in several areas. The programme is designed to create next generation technologies for mining operations that result in greater efficiency, lower production costs, improved health, safety and environmental performance, and more attractive working conditions.

In terms of results they say

We are turning the Mine of the Future™ into reality at a rapid pace. We commissioned the A Pit test mine in late December 2008. This signals the first wave of the Mine of the Future™ breakthrough programme.

A Pit has effectively showcased a number of foundation technologies spanning the Rio Tinto autonomous drill rig platform, with control and supervision able to be provided by our remote operations centre in Perth; and the Komatsu FrontRunner® autonomous haul truck system and semi autonomous smart explosive loading.

Komatsu FrontRunner® consists of a fleet of mining equipment that hauls ore autonomously. Artificial intelligence in the equipment learns the layout of the mine, how to recognise and avoid other vehicles and obstacles, and how to ferry loads rapidly and efficiently from loading face to dump with the least wear and tear, delay and use of fuel.

In addition, A Pit has allowed for the demonstration of a range of subsidiary technologies such as high precision GPS; advanced site wide networking solutions enabling machine control communication; real time safety monitoring of personnel and equipment using proximity detection; and remote expert human support and planning systems. Results from A Pit are being analysed using sophisticated modelling techniques allowing for the learnings to be extrapolated across both the Pilbara and other Rio Tinto operations worldwide. We intend to conclude the A Pit trial by the end of 2010 and develop a Mine of the Future™ technology roll out road map.

Rio also tells us that they have built a really flash operations centre in Perth to manage .

 all aspects of operational control for mining, rail transport, ship loading and associated critical infrastructure (eg power and water) for all Rio Tinto Iron Ore Pilbara operations. 

The OC provides unparalleled levels of control and enables the execution of integrated planning and remote technical support. This helps optimise Rio Tinto Iron Ore’s mining operations end to end, improving our ability to maximise operational productivity while minimising waste.

So capitalism being what it is when companies bump up against constraints on their ability to generate more profits with the available forms of capital and labour they invest in the creation of more labour efficient technology. That ultimately means fewer jobs per unit of production.

But in an economy at full employment these is great news because it increase the non-inflationary speed limit of the economy. However as mining heads toward less “miners” for want of a better term per tonne of production this, by definition, means that the pressure on the rest of the economy is lessened giving the RBA more leeway on its structural bias to tighten.

Rio aren’t the only ones doing this and we’ll blog about some really cool ETF trucks where you can line up 5 in a row and have either 1 driver or fully remote control and self loading and unloading. Ultimately the size and scale of this boom remains both a benefit and a threat to the Australian economy. Given time to adjust any issues are lessened. It’s just a question of whether the RBA will grant us the time. We think they will.

Ohhh and it has to mean that if we can any sort of decent selloff in equities in the next couple of years or if China does suffer its cyclical slowdown then these miners should look good long term buys.

This blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial adviser we are happy to help and if you are an adviser and would like to join our network we are also happy to help.

Please Email the team at Lighthouse at or Greg directly on

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