Technology – The hottest commodity in the mining & metals sector

Since 2020, rising operational costs and growing anxieties about the capacity of critical mineral supply necessary to meet the demand needs of the energy transition have put the efficiency of mining operations in the spotlight. Technology is increasingly becoming a core component of mining & metals sector business strategies as it seeks to meet this demand and improve efficiencies. Technological innovations are occurring across the spectrum of the sector, ranging from the acquisition of decarbonization IP to be commercially scaled, improvements to exploration technology, low or zero-emission mobility and energy systems, recycling, the application of AI to operations, the application of Generative AI to back-office systems and procedures, or the licensing of battery designs for production. Miners and metal producers are looking to maximize efficiencies while minimizing emissions and environmental footprints at the same time that they enter new geographies and supply chains, and seek to retain existing, and attract a broader range of, investors.

Decarbonization technology and decarbonizing operations

Decarbonizing mining & metals operations and end consumption hinges on the availability and commercialization of a wide range of technologies affecting every stage of the value chain that are primarily gained through R&D, acquisition or strategic investment.

In the metals sector, the use of decarbonization technology and inputs has been rolled out by steelmakers looking at reducing or eliminating carbon emissions and, when possible, improving energy efficiency for operations at electric arc furnaces (EAF) or blast furnaces using direct reduced iron and hydrogen. The support for the decarbonization efforts in the steel industry are reflected in H2 Green Steel's successful fund- raisings in the past three years, having raised €6.5 billion in total through a combination of debt, equity and grants. However, for existing operations, the process of decarbonization can be capital-intensive, and participants are therefore looking to existing legal frameworks, such as governmental incentives and the EU Emissions Trading System, to smooth out the capital requirements of the transition process.

For the mining sector, efforts have extended to decarbonizing operations at mine sites, chiefly through the deployment of battery-powered vehicles, including the use of autonomous systems. Efficiency gains to reduce emissions for existing systems are a significant driver of patents and technology commercialization. Advancements for new regenerative or kinetic braking systems for haulage vehicles are a leading example. Additionally, miners are increasingly looking at opportunities to incorporate renewable energy infrastructure into new mines under development or at existing mines. Historically, the incorporation of renewable energy infrastructure into existing projects has been primarily achieved through the use of offtake agreements with external energy project developers or the acquisition of renewable energy assets to incorporate into miners' portfolios and offset emissions. However, for certain remote projects and heavily energy-constrained environments (e.g., South Africa), with the advent of better battery technologies, the development of captive (or "near captive") renewable projects has become increasingly viable.

Software matters

Hardware gets the lion's share of attention, but improving operations using machine learning, Generative AI, better software, and novel programming breakthroughs can provide significant cost savings and efficiency gains for miners. While the mining sector has been experimenting with machine learning for a number of years, recent breakthroughs in Generative AI have refocused the interest of mining majors as to the benefits in exploration and operations that may be available through the deployment of Generative AI across their business model, whether with respect to exploration activities, safety, equipment maintenance and optimization or the optimization of beneficiation processes.

Exploration is one of the clearest applications for machine learning and AI to improve the accuracy and speed with which large volumes of geological data, satellite imagery and historical records can be analyzed to assess mineral deposits. Exploration is the highest-risk stage of the life cycle of any mining project, a process that takes years with high degrees of uncertainty. Improving the quality of data analysis can accelerate the project development process by reducing uncertainty between drilling campaigns used to assess the viability of an orebody for a mine. Additionally, these technologies can assist miners to overcome the structural skills shortage of geologists.

Software and AI are increasingly being deployed in mining operations to expand efficiencies and improve worker safety. "Digital twinning" —the process of creating a virtual model of a mine—enables miners to automate processes, such as ore processing and transportation; create predictive maintenance schedules; simulate emergency scenarios; and track personnel and machinery. Digital twinning not only provides benefits to operational efficiencies and worker safety but also provides opportunities for the reduction of capex requirements of operations, as miners are able to test in-field decisions digitally before such decisions are implemented in the physical environment.

Machine learning and AI have provided significant boosts for mine planning and beneficiation and other operations among major miners in recent years—an example being the utilization by BHP, the world's largest mining group, of Microsoft's Azure Machine Learning to increase copper recovery at BHP's Escondida mine. Being able to rapidly review and model throughput with varying qualities of ore smooths financial and operational planning for projects. Deep-tech mining startup Plotlogic uses artificial intelligence technologies to scan terrain in real time, enabling greater accuracy in the extraction of critical minerals. These tools, already used by mining heavyweights including BHP, Vale, South32 and Pilbara Minerals, will be key to helping the mining sector meet rising demand for critical minerals.

Additionally, the impact of digital innovation can be seen in other segments of the value chain, such as commodity trading, which has historically relied on manual processes that are slow, lacking in transparency and often error-prone. The use of blockchain to streamline the commodity trading process provides an example of the application of technology to increase transparency and efficiencies in the commodity trading sector.

Research & development

Despite the growing imperative to decarbonize operations, R&D expenditure does not drive these gains in general. At the sector level, available estimates suggest that miners historically spend less than 3 percent of their EBITDA on R&D, as opposed to 8 percent for materials producers, 30 percent for industrials, and 40 percent for automakers and relevant OEMs. Successful R&D projects are starting to emerge in the market—an example being the development by Rio Tinto and Alcoa of the ELYSIS™ technology to eliminate direct greenhouse gas emissions from the aluminum smelting process while emitting oxygen as a by-product.

Though spending levels are rising slightly, R&D investments in decarbonization technology remain relatively high-risk due to long lead times for commercial application, and associated uncertainty around returns and commercial viability. Consequently, in conjunction with increases in R&D, participants in the mining & metals sector are increasingly forming new partnerships and pursuing VC opportunities to gain access to the technology necessary to meet the demand for critical minerals and their own decarbonization targets.

Venture capital and strategic partnerships

The growing demand for critical minerals needed for the global energy transition and the opportunities for technological innovation in the mining & metals sector to meet that demand, as well as participate in the energy transition, are creating more opportunities for investment and opening the sector to entrepreneurs, investors and downstream participants.

Partnerships are forming between traditional and non-traditional participants in the mining & metals sector—examples including BHP and Rio Tinto's joint invitation for expressions of interest from technology providers, startups and others to help improve tailings dewatering and management performance and the participation of Apple in Rio Tinto and Alcoa's ELYSIS^TM joint venture.

Additionally, in the past five years, mining majors have launched corporate venture capital efforts and turned to VC investment to learn, leverage, partner and, potentially have the option to, acquire technologies and processes from startups in the hopes of commercializing and scaling them for operations elsewhere—the launch by Vale of Vale Ventures being a prime example of such corporate venture capital efforts.

As investors are increasingly attracted to the opportunities presented by the growing demand for critical minerals, mining tech startups are receiving increased attention and valuations. The closure of KoBold Metals' US$200 million funding round in mid-2023 crowned it as an AI "unicorn" worth more than US$1 billion, and has attracted investors such as Breakthrough Energy Ventures (the Bill Gates-backed VC firm), Apollo, Mitsubishi Corporation, BHP and Equinor (to name a few). Another significant fundraising was Brisbane-based Plotlogic's US$28 million round in July 2023. Various climate technology specialists, including US investment firm Galvanize Climate Solutions and SE Ventures, the investment arm of French multinational Schneider Electric, invested in the Australian company, which is already backed by BHP.

Commoditization of IP

As the mining & metals sector undergoes technological and digital transformation, the IP associated with such advancements is quickly becoming an attractive commodity being traded among industry participants, as they pursue efficiencies gains afforded by such advancements in an attempt to redefine their business models. The joint venture between Ivanhoe Electric Inc. and Ma'aden to utilize Ivanhoe Electric's proprietary Typhoon™ surveying technology to explore the significant mineral potential in the Kingdom of Saudi Arabia being an example where technology is driving the opportunity to form a partnership. Such partnerships and opportunities are built on the basis of navigating novel and complex legal issues around ensuring access to, while also protecting the proprietary interest of, the underlying IP.

_{The authors would like to thank Ivanhoe Electric Inc. for the permission to use their photos in this publication.}

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