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‘Old’ mining industry digs for new ways

Updated: February 8, 2012 9:30AM



For the gold industry to produce one ounce of gold, it has to move — literally— a ton of dirt.

At the same time, the mining industry is in its biggest “super cycle” since World War II, said Peter Bryant, a senior fellow at Kellogg Innovation Network at Northwestern University’s Kellogg School of Management.

He is also the co-chair of the first-ever Kellogg Innovation Network “super summit” planned for mining industry executives and innovators. Set for Belo Horizonte, Brazil, on April 17-19, the summit “The Mining Company of the Future” will allow the movers and shakers of the mining industry to look at how they can extract resources in a way that is not only less expensive and safer, while also having less of an impact on the environment.

The demand for mined products from growing economies, like those in China and India, is huge, Bryant said. At the same time, mining companies have to worry about countries that contract to purchase minerals for direct export, and the nationalization of mining companies.

In developing countries, mining is important as a major part of their gross domestic product. In addition, when compared to innovative industries like mobile phones and automobiles, innovation in the mining industry has been historicallly slow.

At the summit, Bryant said, 40 to 50 chief executive officers and “senior innovation leaders” will meet in working groups to talk about how to improve current practices, Bryant said.

“Our goal is to act as a catalyst for the creation of a new level of collaboration around some big issues that, if addressed, will unlock enormous value for this industry,” said Robert C. Wolcott, founder and executive director of the Kellogg Innovation Network.

Currently mining practices are too energy intensive, the environmental impact is too great, the easy-to-mine resources are gone, and the physical footprint of today’s mines are too large, Bryant said.

To extract the most value from this super-cycle, the mining industry must look at ways to do it smarter, Bryant said.

“Two things need to change. First, how we mine,” said Bryant.

The way the world’s major mining companies now get products from the earth use too much energy, are unsustainable and are “very labor intensive,” said Bryant, who has worked and consulted in the industry.

The second issue, he said, is to change business models to protect investments in the industry. Countries like China have aggressively purchased rights to resources with guarantees that the product goes to China, tying up resources in a global market.

Nationalization is also a threat, he said. A mining company can spend $1 billion to $3 billion U.S. dollars on exploration and development, “and then the country comes along and nationalizes it,” Bryant said. Or, the country changes the contracts and rent arrangements. Mining companies “need to be using a businesses model that mitigates the threats,” he said.

By getting the big companies to collaborate together, he said, change can come to an industry that is often vilified for its practices, he said.

Change, however, is slow.

“Obviously, whatever we do at the conference, it won’t happen on any scale in the next five to 10 years,” Bryant said.

But in the next two to four years, there are $200 billion to $300 billion in new mining projects on the table, projects that include strip mining, open pit mining, and underground mining.

“All are getting harder and harder to do, going deeper underground, with greater angles,” Bryant said.

“It is an industry fixated with the idea that bigger is better. Now, smaller is better,” Bryant said.

“Smaller” might mean using what he equated to “nanobots” to go into the ground and find the ore vein, instead of moving massive amounts of earth. Such technology is not entirely out of reach, he said.

The results of the Brazil summit could even one day impact the gravel and limestone mining operations of Illinois and those in the Fox Valley, Bryant said.

“We should do away with blasting, strip mining. We shouldn’t have to do all that, or go so deep underground. … We can come up with ways to extract that have less impact. It is about using less energy and doing it in a less-impactful way,” Bryant said.

KIN anticipates that the expedition result will be a collective communique for public release by the members summarizing key insights and action plans. This expedition builds on KIN’s mission to build ongoing special interest groups, in this case for leading members of the mining industry, to champion innovation agendas.

To learn more about the Kellogg Innovation Network, visit online at www.kinglobal.org.

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