Mining Automation Dramatically Cuts Costs

Once the territory of science-fiction movies, recent large-scale adoption of automated heavy equipment is allowing mines to greatly reduce their labor costs. Trucks, loaders, boring and drilling machines and more are now available with remote or semi-autonomous capacity.  Other upcoming automation advances, such as fully-automated long-haul trains (which are now being tested), will continue to expand the range of tasks that require few or no workers to be involved.

According to this report by the International Institute for Sustainable Development (Winnipeg), these advances will lead to a reduction of between 30-70% of the workforce, as well as a 10-15% reduction in fuel costs.  Most importantly, these changes can lead to a 15-20% increase in output, which of course should have a positive impact on stock prices and direction.

These numbers are noted as conservative estimates in the 67-page report, which is primarily focused on the broader economic impact of these changes in the industry, as opposed to the improvements to each mine’s efficiency and profitability. Given their estimate that labor accounts for 15% of a typical mine’s expenditures, the ability to reduce that by half or more will improve the bottom line for mines and mining companies that actively pursue automation.

As a specific example, the following excerpt from the report describes the benefit of introducing just autonomous trucks to a mine, showing that real-world savings are already being achieved:

“Rio Tinto announced that the effective utilization of autonomous trucks in the Hope Downs 4 iron ore mine was 14 per cent more productive than in their best human-staffed mine in the Pilbara, and 13 per cent less expensive in terms of loading and hauling costs.”

From this information, it is reasonable to include a corporation’s degree of commitment to automation as a factor in determining the desirability of a mining stock.  Mines that do not join the trend will be left behind as automation inevitably advances.

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Mining Stock Outlook for 2017: Europe vs. the Americas

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