Blockchain has the potential to serve as a powerful tool for mining companies looking to improve their environmental, social and governance standards as consumer pressure in this regard continues to grow, the latest report by Fitch Solutions shows.
While blockchain also offers a number of other potential benefits to miners, the technology remains largely untested across the industry and questions remain as to whether it can be successfully applied on a large scale.
“Blockchain may play an important role in mining companies' quest to remain globally competitive through the increasing adoption of technological solutions into their operations over the coming years,” the report says.
It adds that blockchain – a decentralised, secure and automated digital ledger – has been touted as being able to improve various aspects of mining operations, including cyber and physical asset security, cross-border payments and transactions or the streamlining of administrative costs.
“However, we believe the technology's biggest growth potential lies in its ability to help miners improve transparency across mineral supply chains, an increasingly important consideration as the industry becomes more consumer-conscious.”
In this regard, global mining companies such as BHP Billiton and De Beers, as well as other smaller technology players, are already experimenting with or plan to implement blockchain solutions to improve supply chain transparency.
Nevertheless, the report highlights that there are significant challenges to the successful adoption of blockchain in the mining industry in the near future, mainly relating to broader questions surrounding a technology that remains largely unproven in terms of its practical and large-scale applicability.
The report highlights that blockchain will likely receive increasing interest as a cybersecurity tool, at a time when mining operations become more digitalised and thus more vulnerable to hacking.
While 32% of mining companies report having widespread cybersecurity measures, this is generally at the enterprise-level and cybersecurity at mine operations, where machines are becoming increasingly connected, remains underinvested.
Blockchain also offers the potential for mining companies to improve their physical asset risk exposure.
Blockchain technology could be used to identify an existing orebody and subdivide it into cubic metre segments, which would be verified by a trusted on-the-ground third party and recorded or "tokenised" into the blockchain.
At this point, the blockchain could link to a physical tag that would detect if an orebody is tampered with, thus providing an efficient safeguard against illegal mining activity for mining companies operating in less regulated markets.
Further, blockchain could simplify and bring more flexibility to the ore shipping process.