CAPE TOWN (miningweekly.com) – The images of large yellow mine trucks flashed across the big screen at this year’s Mining Indaba looked pretty ordinary. But that misperception was quickly cut short when Rio Tinto CE Energy and Minerals Bold Baatar told the full-house audience: "What you're watching are robots on wheels. They’re fully automated driverless trucks,” he said, adding their unassuming emergence beat the current obsession with driverless cars by a good decade, illustrating once again that mining has led human progress for millions of years.
“Since the time of our ancestors here in Africa, the Cradle of Humankind, three-and-a-half million years ago, human progress has been interlinked with mining,” Baatar emphasised.
What’s more, the oldest known mine, which is some 43 000 years of age, is located in neighbouring Swaziland, where ancestors of the San people mined red pigment for rock painting, and in East Africa, people produced steel more than 2 500 years ago, a development that only took place in Europe in the 1700s.
“So, mining has been essential to human progress since the dawn of time,” Mongolian-born Baatar told the Mining Indaba, which is being attended by Creamer Media’s Mining Weekly Online.
The iPhones, buildings, houses, trains, vehicles and the upcoming boom in electric vehicles are linked to mining.
Mining is understood to be an economic bedrock in countries like Chile and Australia, underpinning gross domestic product and tax revenues, and Africa has its own success stories like Botswana, which was one of the poorest countries 50 years ago and now has a mining-linked sovereign wealth fund that benefits education, infrastructure and future generations.
“So, mining can be inclusive and bring on the sustainable development to the host communities in countries that change,” he said.
Common attributes of successful governments are good governance, good resource management and the rule of law.
“However, a key element that can make a difference for mining companies is the level of transparency, accountability, understanding and trust that are required for the partners to thrive,” he said.
“But the challenge is the mining sector is misunderstood where expectations are misaligned.”
He outlined how mining was made up of artisanal miners, who had a role to play, but who brought with them certain consequences; entrepreneurs, who pursued high-risk investment in the short-term; junior minor companies, which had the role of funding and discovering resources; and then the operator mining companies, which were small to large and brought on the operations.
If any of these participants did not behave responsibly, it cast a dark cloud over the whole sector.
For Rio Tinto, the key challenge was the misalignment of expectations, particularly around mineral wealth.
A common cause of misalignment was the calculation of the scale of mineral wealth by multiplying the resource size by the current mineral price.
Using copper as an example, a one-million-tonne resource multiplied by $7 000 becomes referred to as a $7-billion mineral resource.
The flaw of such analysis was that the investment and the costs are completely ignored in the equation.
Using $2-billion as the upfront investment, $1-billion paid in taxes, another $2-billion of operating expenses etcetera, left investors with $2-billion with which to cover debt interest and shareholder returns, which inflation would lower still further.
What should also be kept in mind was that the entire mine ecosystem of supply chain and mining services multiplied economic activity fourfold, with mining services generating more employment than mining itself.
It was important to maximise the local content of the supply chain, which was also a significant source of taxation revenue.
“It is not uncommon for the operators like us to see a very limited return on capital for a number of years,” Baatar calculated.
Returning to the driverless trucks, assuming each carried 250 t of material at the industry-average copper grade of 1%, that material would result in a mere 2.5 t of copper, with 99% of the material carried by the truck – some 247.5 t – having no mineral wealth in it whatsoever.
But the 250 t also has to be crushed and ground into a fine dust that was at times more refined than flour.
Then the copper was separated out of that through flotation, a bubble process not dissimilar from the brewing process.
There is more regrinding, dewatering and thickening and only after the smelting process, does the operating mining company end up with the 2.5 t of copper concentrate.
“So, we go from a massive large truck full to a little two-and-a-half tonnes of copper through a lot of hard work and energy usage,” he said, adding that his simplified example highlighted the central truth about mining: “It costs a lot of money to extract minerals, involves significant financial and execution risk and it is technically difficult work, particularly when done responsibly.”